Estimating customer electricity savings from projects installed by the U.S. ESCO industry

Abstract

Executive SummaryThe U.S. energy service company (ESCO) industry has a well-established track record of delivering substantial energy and dollar savings in the public and institutional facilities sector, typically through the use of energy savings performance contracts (ESPC) (Larsen et al. 2012;Goldman et al. 2005;Hopper et al. 2005, Stuart et al. 2013. This ~$6.4 billion industry, which is expected to grow significantly over the next five years, may play an important role in achieving demand-side energy efficiency under local/state/federal environmental policy goals. To date, there has been little or no research in the public domain to estimate electricity savings for the entire U.S. ESCO industry. Estimating these savings levels is a foundational step in order to determine total avoided greenhouse gas (GHG) emissions from demand-side energy efficiency measures installed by U.S. ESCOs.We introduce a method to estimate the total amount of electricity saved by projects implemented by the U.S. ESCO industry using the Lawrence Berkeley National Laboratory (LBNL) /National Association of Energy Service Companies (NAESCO) database of projects and LBNL's biennial industry survey. We report two metrics: incremental electricity savings and savings from ESCO projects that are active in a given year (e.g., 2012).Overall, we estimate that in 2012 active U.S. ESCO industry projects generated about 34 TWh of electricity savings-15 TWh of these electricity savings were for MUSH market customers who did not rely on utility customer-funded energy efficiency programs (see Figure 1). This analysis shows that almost two-thirds of 2012 electricity savings in municipal, local and state government facilities, universities/colleges, K-12 schools, and healthcare facilities (i.e., the so-called "MUSH" market) were not supported by a utility customer-funded energy efficiency program.

U.S. Energy Service Company (ESCO) Industry: Recent Market Trends

“…Expectations that natural gas prices will remain low, and will be significantly less volatile than they were a few years ago, may reduce this perceived benefit of performance contracts for some/many customers. Larsen et al (2012b) and Carvallo et al (2015) report that ESCOs have been installing increasingly comprehensive projects that have a rising share of project savings coming from fossil fuels (as opposed to electricity)-primarily natural gas. The Energy Information Administration (EIA) reports that the U.S. average natural gas retail price for commercial customers rose dramatically from about $6.…”

“…In 2012, ESCO-implemented projects in the United States that were still in the contract performance period delivered a total of about 34 TWh of electricity savings. Energy savings from all sources totaled approximately 224 million MMBtu or about 1% of total annual energy consumption in U.S. commercial buildings (Carvallo et al 2015).…”