The Energy Department and Lawrence Berkeley National Laboratory today released a new report on the market size, trends and growth projections for America's energy service company (ESCO) industry. The report details steady growth in the energy savings performance-based contracting sector over the past ten years, led by investments from state and local governments, the federal government and K-12 schools. Each year, this industry typically saves customers more than $4 billion in utility bills and enough energy to power nearly 2 million households -- equivalent to cutting over 20 million tons of greenhouse gas emissions.
In the United States, ESCOs primarily use performance-based contracts to provide energy efficiency and other energy-related services to commercial and public buildings, schools, hospitals and universities. These contracts avoid upfront costs to the customer, while guaranteeing long-term cost and energy savings from installed equipment, efficiency controls and other solutions. As President Obama's Climate Action Plan noted, performance contracts drive economic development, utilize private sector innovation and increase efficiency at minimum cost.
"Performance-based contracting is helping communities and businesses across the country make smart, cost-effective investments in building energy efficiency," said Energy Secretary Ernest Moniz. "As the largest energy user, the federal government has a huge opportunity to lead by example, and through performance contracting, agencies are achieving greater energy efficiency that saves taxpayer dollars and curbs the effects of harmful carbon pollution."
The Current Size and Remaining Market Potential of the U.S. Energy Service Company Industry report also recognizes how federal, state and local programs continue to drive energy efficiency performance contracting. In 2011, President Obama challenged federal agencies to enter into $2 billion worth of performance-based contracts within two years. Since then, federal agencies have committed to a pipeline of nearly $2.3 billion -- helping federal facilities nationwide lower greenhouse gas emissions, meet energy and water sustainability goals and reduce costs to taxpayers.
Other key findings from the report include:
- The U.S. ESCO industry grew about 9 percent per year from 2009 to 2011 and is projected to growth at the same pace through 2014.
- By the end of the decade, the ESCO industry could double or almost triple in size from $6 billion in annual revenues in 2013 to $11-15 billion in 2020.
- Performance-based contracts made up about 70 percent of ESCOs' business in 2011.
- Public and institutional markets -- including federal, state and local governments, K-12 schools, healthcare facilities, hospitals, colleges and universities -- accounted for about 84 percent of 2011 industry revenue.
- Total investment potential in facilities typically addressed by the ESCO industry ranges from about $71 billion to $133 billion.
The Energy Department's Federal Energy Management Program provides federal agencies with technical assistance and guidance to help streamline performance-based contracting and strengthen utilization of these services. The Energy Department's Office of Weatherization and Intergovernmental Programs also offers resources, tools and best practices on performance-based contracting for energy savings to help both local and state government agencies meet their energy and climate goals.