Lawrence Berkeley National Laboratory

This article summarizes a comprehensive empirical analysis of U.S. Energy Service Company (ESCO) industry trends and performance. We employ two parallel analytical approaches: a comprehensive survey of firms to estimate total industry size and a database of ~;1500 ESCO projects, from which we report target markets and typical project characteristics, energy savings and customer economics. We estimate that industry investment for energy-efficiency related services reached US $2 billion in 2000 following a decade of strong growth. ESCO activity is concentrated in states with high economic activity and strong policy support. Typical projects save 150-200 MJ/m2/year and are cost-effective with median benefit/cost ratios of 1.6 and 2.1 for institutional and private sector projects. The median simple payback time is 7 years among institutional customers; 3 years is typical in the private sector. Reliance on DSM incentives has decreased since 1995. Preliminary evidence suggests that state enabling policies have boosted the industry in medium-sized states. ESCOs have proven resilient in the face of restructuring and will probably shift toward selling "energy solutions," with energy efficiency part of a package. We conclude that a private sector energy-efficiency services industry that targets large commercial and industrial customers is viable and self-sustaining with appropriate policy support both financial and non-financial.