Market trends in the U.S. ESCO industry: Results from the NAESCO database project

Abstract

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

Current Size and Remaining Market Potential of the U.S. Energy Service Company Industry

“…28 See also Goldman et al 2000;Goldman et al 2002;Osborn et al 2002;Hopper et al 2005;Goldman et al 2005;and Bharvikar et al 2008. For detailed information about the content, structure and assumptions used in the database, see Larsen et al (2012a).…”

Public and Institutional Markets for ESCO Services: ComparingPrograms, Practices and Prformance

“…We include both costs and benefits in an analysis of 109 Super ESPC projects, comparing net benefits of these financed projects to several alternative scenarios involving congressional appropriations. 5 The MUSH market estimate is based on NAESCO/LBNL database activity projected according to previous research on database representation of industry-wide activity (Goldman et al 2002). 6 Direct benefits -energy cost and non-energy operational savings -are included in our analysis, but not indirect benefits, such as improved building comfort, employee productivity, environmental benefits, etc.…”

“…Our primary source of information on completed ESCO projects is the NAESCO/LBNL database, which was developed to track ESCO industry trends based on project-level data (Goldman et al 2002). The majority of projects in the NAESCO/LBNL database are selfreported by ESCOs as part of their applications for NAESCO's voluntary accreditation program.…”

“…This report, which draws heavily on results from the NAESCO/LBNL database, also serves to update and expand the information published in Goldman et al (2002). We have added several hundred new projects to the NAESCO/LBNL database and conducted interviews with ESCOs active in these markets.…”

“…These new results capture recent industry trends and provide detailed information on practices and performance in individual market segments. Goldman et al (2002) focused on comparisons between the private and public/institutional sectors; this report analyzes segments within the public/institutional markets. It also provides a rich source of information on the actual deployment of energy efficiency services (as opposed to estimates based on market potential studies or energy audits) in various market segments that can be used to support benchmarking by policymakers, program designers, ESCOs, contractors and financial institutions.…”