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Home > Feature Articles > Alternative Energy Solutions

Energy Savings Company Survey Shows Growth Opportunities, Again

Market data for energy service companies (ESCOs) indicate growth through 2009.

Find green business solutions
oil energy supply and alternative fuel A 2007 survey of the U.S. energy service company (ESCO) industry shows renewed growth for these energy conservation service providers.

The U.S. energy services company (ESCO) industry has long been recognized for its role in delivering energy efficiency and related energy services to customers with large and medium-sized facilities. Recently, utilities, their customers, and state, local, and federal governments have developed renewed interest in energy efficiency to address concerns about:

  • rising fuel and electricity prices,
  • climate change,
  • increasing cost estimates of building new baseload generation,
  • and challenges in siting new power plants and major transmission facilities.

Energy efficiency accounted for almost three quarters of industry revenues, or about $2.5 billion. Customer-sited generation, including renewables, is a growth area for ESCOs (16% of revenues in 2006), with consulting/master planning and other services making up the balance of revenues (11%).

Average annual growth between 2000 and 2004 was only 3%, down from 20% in the 1990s. We attribute this to stalled retail competition, fallout from the Enron bankruptcy, a sunset in the legislation that enables performance contracting in the federal market, and industry consolidation.

Survey results indicate a recovery in 2004–06, with growth again reaching 20% per year. Factors contributing to recent increases in ESCO activity include:

  • customer response to rising energy prices,
  • renewed interest in energy efficiency and climate change,
  • re-authorization of energy savings performance contracts (ESPC) in the federal market,
  • the adoption of aggressive energy savings goals for federal agencies,
  • and the ramping up of public-benefit- and ratepayer-funded energy efficiency and renewable energy programs.

ESCOs project continued growth, at similar rates, for the next two years. The composition of the ESCO industry continues to evolve with significant industry consolidation since 2000; however, a significant number of small, independent ESCOs are still active in local and regional markets.

In 2006, over 80% of ESCO industry investment was among institutional customer facilities: 22% in the federal market, 58% in state/local government, universities, schools and hospitals markets, and 2% among public housing authorities (see Figure ES-2). Private sector investment is split between commercial (9%), industrial (6%) and residential (3%) facilities.

ESCOs can complement and support ratepayer-funded energy efficiency programs in the market sectors where they are active. For example, they can:

  • develop comprehensive projects
  • arrange financing for customers who have difficulties obtaining funding for energy-related capital projects
  • manage performance risks as part of measuring and verifying savings

    The core market in which the ESCO business model has been most successful is in energy-efficiency retrofits to large buildings, primarily owned by institutional clients.

    SOURCE: http://www.naesco.org/



    Edited by Carolyn Allen, owner/editor of California Green Solutions
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