Report Analyzes the Energy Service Company (ESCO) Industry, 1990-2008

Report Analyzes the Energy Service Company (ESCO) Industry, 1990-2008

July 12, 2012

The Energy Service Company (ESCO) industry is analyzed in a new report from the Environmental Energy Technologies Division of Lawrence Berkeley National Laboratory (Berkeley Lab).

The authors of the study conceived it as a snapshot of the ESCO industry prior to the economic slowdown and the introduction of federal stimulus funding mandated by enactment of the American Recovery and Reinvestment Act of 2009 (ARRA). It uses two parallel analytic approaches to characterize ESCO industry and market trends in the United States: (1) a “top-down” approach involving a survey of individual ESCOs to estimate aggregate industry activity and (2) a “bottom-up” analysis of a large database of projects (representing more than $8 billion in project investment) that reports market trends including installed energy efficiency retrofit strategies, project installation costs and savings, project payback times, and benefit-cost ratios over time.

Berkeley Lab’s ESCO Project Database, funded by the Department of Energy, is the largest database of ESCO project information in the world with more than 4,000 projects. It includes information on project installation costs, savings, measures installed, facility physical characteristics, market segment, and location.

This project-level analysis found that:

  • 2,484 ESCO projects in the database generated ~$4.0 billion ($2009) in net, direct economic benefits to their customers;
  • The ESCO project database includes about 20% of all U.S. ESCO market activity from 1990-2008; assuming the net benefits per project are comparable for ESCO projects that are not included in the database, this would suggest that the ESCO industry has generated ~$23 billion in net direct economic benefits for customers at projects installed between 1990 and 2008;
  • Nearly 85% of all public and institutional projects met or exceeded the guaranteed level of savings;
  • A typical ESCO project generated $1.5 dollars of direct benefits for every dollar of customer investment;
  • The industry is responding to customer demand by installing more comprehensive and complex measures—including onsite generation and measures to address deferred maintenance—but this evolution has significant implications for customer project economics, especially at K-12 schools; and
  • The median simple payback time has increased from 1.9 to 3.2 years in private sector projects since the early-to-mid 1990s and from 5.2 to 10.5 years in public sector projects for the same time period.

For more information about the Electricity Markets and Policy group, including access to publications, please visit their web site.

"Evolution of the U.S. Energy Service Company Industry: Market Size and Project Performance from 1990-2008," by Peter Larsen, Charles Goldman and Andrew Satchwell. Download the report and summary presentation here.