, numerous ESCOs, state energy offices, and others have contributed valuable information on energy-efficiency projects and ESCO industry activity. Review of US ESCO Industry Market Trends iv ABSTRACTThis article summarizes a comprehensive empirical analysis of U.S. energy service company (ESCO) industry trends and performance. We employ two parallel analytical approaches: a comprehensive survey of firms to estimate total industry size and a database of ~1500 ESCO projects, from which we report target markets and typical project characteristics, energy savings and customer economics. We estimate that industry investment for energy-efficiency related services reached US$2 billion in 2000 following a decade of strong growth. ESCO activity is concentrated in states with high economic activity and strong policy support. Typical projects save 150-200 MJ/m 2 /year and are cost-effective with median benefit/cost ratios of 1.6 and 2.1 for institutional and private sector projects. The median simple payback time is 7 years among institutional customers; 3 years is typical in the private sector. Reliance on DSM incentives has decreased since 1995. Preliminary evidence suggests that state enabling policies have boosted the industry in medium-sized states. ESCOs have proven resilient in the face of restructuring and will probably shift toward selling "energy solutions", with energy efficiency part of a package. We conclude that a private sector energy-efficiency services industry that targets large commercial and industrial customers is viable and selfsustaining with appropriate policy support -both financial and non-financial.

The U.S. Energy Services Company (ESCO) industry is often cited as the most successful model for the private sector delivery of energy-efficiency services. This study documents actual performance of the ESCO industry in order to provide policymakers and investors with objective information and customers with a resource for benchmarking proposed projects relative to industry performance. We have assembled a database of nearly 1500 case studies of energyefficiency projects -the most comprehensive data set of the U.S. ESCO industry available. These projects include $2.55B of work completed by 51 ESCOs and span much of the history of this industry.We estimate that the ESCO industry completed $1.8-2.1B of projects in 2000. The industry has grown rapidly over the last decade with revenues increasing at a 24% annualized rate. We summarize and compare project characteristics and costs and analyze energy savings, including the relationship between predicted and actual savings. ESCOs typically invested about $2.30/ft 2 per project in various energy efficiency improvements, although there is large variation in project costs within and across market segments. We find that lighting-only projects report median electricity savings of 47% of targeted equipment consumption; the median for lighting-&-nonlighting projects is 23% of the total electric bill baseline. We examine project economics, including project net benefits, benefit/cost ratio and simple payback time. Median simple payback time is seven years for institutional sector projects and three years in the private sector. We estimate direct economic benefits of $1.62 billion for the 1080 projects in our database with both cost and savings data. The median benefit/cost ratio is 2.1 for 309 private sector projects and 1.6 for 771 institutional sector projects. We discuss the role of policies and programs adopted by state/federal legislatures and agencies that have played an important role in stimulating ESCO activity in various markets. Finally, we estimate the overall size and growth of the energy-efficiency services industry over the last ten years based on a survey of 63 ESCOs.iii Acknowledgements

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We would like to thank the following individuals and organizations that contributed valuable information on energy-efficiency projects and ESCO industry activity: Tatiana