Spring Thaw Thinking

At their very first strategic planning session in the spring of 1998, the members of the Propane Education & Research Council were unanimous about what needed to be done to create a more sustainable retail market for propane: eliminate the seasonality in propane demand as much as possible. I remember the late Tom Nunan handing me piece of paper on which he had reduced our strategic objective to a simple ratio: “1:1.”

“That’s where we need to go,” he said. Council members went on to explain that selling as much propane in the summer as in the winter would enable both retailers and suppliers to make the financial and contractual commitments for storage, transportation, and supply that are impractical when demand is largely dictated by the unpredictable Mother Nature.

If you plot retail propane consumption on a calendar basis, January through December, what you get is essentially a U-shaped demand curve. That’s the impact of about 6 million homes and thousands of schools, farms, and businesses, primarily in rural America, all using propane for winter space heating. Summer demand is low — outdoor cooking, some irrigation, and a number of comparatively low volume applications, along with a fairly new but growing commercial mowing use. Year-round demand is primarily for cooking and hot water for homes and businesses and for a budding propane autogas market.

The stress such a demand curve puts on the retail industry’s business leaders and workforce, particularly by making it more difficult to get access to a rapidly changing infrastructure, is substantial. In a market for U.S. propane that has gone global in the just last few years, the old business model is increasingly unsustainable, despite the surge in domestic propane production. The winter of 2013-14 is proving that fact beyond a doubt.

Building year-round and off-peak propane demand is essential, but it is neither easy nor universally supported within the industry. PERC’s R&D efforts nonetheless have focused on that objective by supporting development of irrigation, landscaping, combined heat and power, generators, and autogas applications, for example. The PERC research portfolio has other equipment, appliances, and engine-based technologies in the works. Adoption of these technologies will help move retail propane demand closer to that 1:1 ratio. Read more here.