A method to estimate the size and remaining market potential of the U.S. ESCO (energy service company) industry

Abstract

a b s t r a c tThis study presents a method to estimate the market investment potential for ESPC (energy-saving performance contracts) and annual blended energy savings remaining in buildings typically addressed by U.S. ESCOs (energy service companies). We define ESCOs as companies for whom performance-based contracting is a core business activity. The market potential analysis incorporates market penetration estimates provided by industry experts in late 2012, data on U.S. building stock typically addressed by ESCOs, and typical project investment costs from a database of 4000 þ projects. ESCO industry revenue growth significantly outpaced U.S. GDP (gross domestic product) growth during 2009e2011. We estimate that the remaining investment potential in facilities typically addressed by the ESCO industry ranges from~$71 to $133 billion. Our analysis includes ESCO industry size and growth projections drawing on information from interviews with ESCO executives conducted in late 2012. The U.S. ESCO industry could grow in size from $6 billion in 2013 to~$7.5 billion by 2014, but this growth is contingent on enabling policies. The U.S. ESCO industry is similar in size to the ESCO industries in Germany, France, and China. Our estimation approach could be adapted for other countries with the caveat that ESCO industry definitions and revenue reporting practices vary across countries.Published by Elsevier Ltd.

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“… Descriptive analysis was commonly used in studies aiming at identifying the problems and measures of EPC industry and project development. Data in these studies were always analyzed by calculating the mean value and standard deviation, providing strong supports to the statements or arguments (e.g., [21,[55][56][57][58]).  Statistical analysis was useful for carrying out deeper data analysis compared with the descriptive analysis.…”

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“…(9) is derived from Eq. (8). For a specific year t, a P (t) stands for the drift coefficient of energy price, and s P (t) stands for the volatility parameter of energy price.…”

“…After the contract ends, all additional cost savings accrue to the owner. According to Stuart et al [8], EPC has currently grown at more than 20% per year, driven by increasing and fluctuating energy prices, federal and state energy savings mandates, the continued lack of capital and maintenance budgets for federal facilities, and growing awareness of the need for largescale action to limit greenhouse gas emissions. Making an appropriate investment decision could not only help the ESCO explore maximum energy efficiency potentials, but also assist in binding the winewin partnership between the owner and the ESCO.…”

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“…Among these costs, the R&D cost g M consists of cash investment and effort investment [41], and the cash investment proportional of g M is β. The carbon emission reduction per unit product is e. However, the manufacturer can also outsource the carbon emission reduction directly to ESCO E (Mode E) or retailer R (Mode R) [6][7][8]. The investment costs in Modes E and R are 0.5k E e 2 + c E eq and 0.5k R e 2 + c R eq, respectively.…”