The U.S. Energy Services Company Market

• Publication date: January 2012

Energy Performance Contracting and Energy Efficiency for the MUSH, Federal, Industrial, Commercial, and Public Building Markets The energy service company (ESCO) market for energy efficiency project installations and services exceeded $5.1 billion in 2011. Driven by public policies that encourage a greater emphasis on energy efficiency to reduce costs and improve operations, this market is expected to continue to grow faster than th...

Energy Performance Contracting and Energy Efficiency for the MUSH, Federal, Industrial, Commercial, and Public Building Markets

The energy service company (ESCO) market for energy efficiency project installations and services exceeded $5.1 billion in 2011. Driven by public policies that encourage a greater emphasis on energy efficiency to reduce costs and improve operations, this market is expected to continue to grow faster than the domestic economy and reach $16 billion in sales by 2020.
The majority of ESCO work is conducted for the municipal, universities, schools, and hospitals (MUSH) market – largely for public entities and institutions at the state or local level – which represents about 73% of all ESCO activity. However, the federal market has been highly active in recent years, driven by a presidential executive order that mandates that all federal agencies must achieve a 30% reduction in energy use by 2015, plus spending authorized by the American Recovery and Reinvestment Act of 2009 (ARRA). While the full impact of this economic stimulus spending has yet to be realized, ARRA has directed billions of dollars into energy efficiency projects at all levels of government and to all geographic regions of the nation.
This Pike Research report describes the continuing evolution of the ESCO market, detailing drivers and barriers to deeper penetration of energy efficiency in the U.S. economy. The study focuses on the role that performance contracting is playing as a vehicle for financing efficiency projects for public entities that face budget and credit limitations, as well as the convergence of new technologies and service offerings into traditional energy conservation projects. Key industry players are profiled in depth and market forecasts extend through 2020.

Key Questions Addressed:

-What is an ESCO, and who are the major competitors in this market?
-How is ESCO market activity divided among major customer segments?
-What are the major policies that drive government use of performance contracts?
-How has the American Recovery and Reinvestment Act of 2009 affected public sector spending for energy efficiency?
-Which technologies are expected to play major roles in future efficiency projects?
-What is the current status of Property Assessed Clean Energy (PACE) financing for commercial efficiency projects?

Who needs this report?

- Energy service companies
-Energy efficiency technology vendors
-Commercial building owners and managers
-Federal, state, and municipal government agencies
-Utilities
-Investor community

Clean Vehicle Industry in the United States

Table of Contents

1.      Executive Summary
1.1   The ESCO Market
1.2   ESCO Market Activity

2.      Market Issues
2.1   Defining the ESCO Market
2.2   What is an ESCO?
2.3   Evolution of the ESCO Market: 1973–2010
2.3.1     Creation of the ESCO Industry
2.3.2     Consolidation: 1990-2005
2.3.3     Current ESCO Market Structure
2.3.4     The Super ESPCs
2.3.5     ESCOs in the Army Market
2.4   ESCO Industry Segmentation by Players
2.4.1     NAESCO Member Categories
2.4.1.1     Energy Service Company (ESCO)
2.4.1.2     Energy Service Provider (ESP)
2.4.1.3     Energy Efficiency Contractor (EEC)
2.4.2     Industry Segmentation by Business Model
2.4.2.1     Independent ESCOs
2.4.2.2     Building Equipment Manufacturers
2.4.2.3     Utility Companies
2.4.2.4     Architectural and Engineering Companies
2.4.3     Consolidation Expected to Continue
2.4.3.1     ESCOs Looking for Deals
2.4.3.2     Merger Considerations
2.4.3.3     Acquisition Risk
2.5   Industry Segmentation by Market
2.5.1     MUSH Market Segment
2.5.1.1     Municipalities and State Government
2.5.1.2     K-12 Education
2.5.1.3     Colleges and Universities
2.5.1.4     Hospitals and Healthcare Facilities
2.5.1.5     Correctional Facilities
2.5.1.6     Public Housing Districts
2.5.2     Common Barriers Faced by the MUSH Market Segment
2.5.3     Federal Agencies
2.5.4     Public Housing
2.5.5     Commercial/Industrial
2.6   Contract Mechanisms in the ESCO Industry
2.6.1     Energy Savings Performance Contracts (ESPC)
2.6.2     Utility Energy Service Contracts (UESC)
2.6.3     Power Purchase Agreements (PPA)
2.6.4     Enhanced Use Leases (EUL)
2.7   Federal Market Issues
2.7.1     The Federal Policy Trend
2.7.2     Obama Administration Support for Efficiency Projects
2.7.3     U.S. Climate Policy
2.7.4     ESPC Policy Drivers
2.7.4.1     National Energy Conservation Policy Act (NECPA 1986)
2.7.4.2     DOE Rule on ESPC Use 10 CFR 436 (1991, etc.)
2.7.4.3     Energy Policy Act of 1992 (EPAct 1992)
2.7.4.4     Office of Management and Budget Memorandum M-98-13 (1998)
2.7.4.5     Executive Order 13123 (1999)
2.7.4.6     Energy Policy Act of 2005 (EPAct 2005)
2.7.4.7     Executive Order 13423 (2007)
2.7.4.8     Energy Independence and Security Act of 2007 (EISA 2007)
2.7.4.9     DOE Transformational Energy Action Management Initiative (2007)
2.7.4.10   American Recovery and Reinvestment Act of 2009 (ARRA 2009)
2.7.4.11   Executive Order 13514 (2009)
2.7.4.12   National Defense Authorization Act (NDAA 2011)
2.7.4.13   OMB Memorandum M-98-13 (addendum 2011)
2.7.4.14   Better Buildings Initiative (2011)
2.7.4.15   Other Significant Programs
2.7.5     ESPC Reforms
2.7.6     Increasing Competition for Financing
2.7.7     The 2009 Internal Review
2.7.8     Department of Defense Opportunities
2.7.8.1     The RAND Report on Army/UESC Collaboration
2.7.8.1.1.    Benefits for Army Collaboration
2.7.8.1.2.    Technical Assistance and Information Benefits for Utility Partners
2.7.8.1.3.    Perceived Barriers to Collaboration
2.7.8.1.4.    Recommendations to Overcome Barriers
2.8   Market Impacts of the American Recovery and Reinvestment Act
2.8.1     MUSH Market Impacts of Stimulus
2.8.2     ARRA Implementation Difficulties
2.8.2.1     ESCO Concerns about Spending Lag
2.8.2.2     Inspector General Reviews of EECBG
2.8.2.3     Reports to Congress
2.8.3     Use of QECBs
2.8.3.1     Qualified Projects and Uses
2.8.3.2     How They Work
2.8.3.3     The QECB Experience to Date
2.9   Commercial and Industrial Drivers
2.9.1     Property Assessed Clean Energy (PACE) Bonds
2.9.2     Benefits for Commercial Property Owners
2.9.3     Concerns Quell Momentum
2.9.4     Status of Commercial PACE Programs
2.9.5     PACE Programs in the Works
2.9.6     Legal and Legislative Challenges to FHFA

3.      Technology Issues
3.1   Technology Overview
3.2   Typical Energy Efficiency Technologies
3.2.1     Heating
3.2.2     Cooling
3.2.3     Hot Water
3.2.4     HVAC and Lighting Controls
3.2.5     Ambient Comfort
3.2.6     Lighting
3.2.7     Other Technologies and Practices
3.2.7.1     Commissioning
3.2.7.2     Demand Response
3.2.7.3     Renewable Energy
3.2.7.4     Building Energy Management Systems
3.2.7.5     Energy Procurement
3.3   Technologies on the Horizon
3.4   Proving-Ground Technologies
3.4.1     High-R Windows
3.4.2     Wireless Mesh Sensor Network
3.4.3     Magnetic Bearing Compressors
3.4.4     Variable Refrigerant Flow
3.4.5     Variable-Speed Chiller Controls
3.4.6     Condensing Boilers
3.4.7     Low Ambient/Task Lighting
3.4.8     Integrated Daylight Systems (Digital Addressable Lighting Interface, DALI)
3.4.9     Plug Load Reduction Using End-use Monitoring and Dashboards
3.4.10   Photovoltaics (PV) with Solar Water Heating
3.4.11   Commercial Ground-source Heat Pumps
3.4.12   Chilled Beams
3.4.13   Smart Windows
3.5   Putting New Technologies into Practice
3.5.1     GSA Net Zero Building Challenge
3.6   Lighting Technologies
3.6.1     Future Outlook for LEDs

4.      Key Industry Players
4.1   Energy Service Companies
4.1.1     AECOM Energy
4.1.2     Ameresco
4.1.3     The Benham Companies / SAIC
4.1.4     Burns & McDonnell
4.1.5     Chevron Energy Solutions
4.1.6     Clark Energy Group, LLC
4.1.7     ConEdison Solutions
4.1.8     Constellation NewEnergy
4.1.9     Eaton Corp.
4.1.10   Energy Systems Group
4.1.11   FPL Energy Services
4.1.12   Honeywell Building Solutions
4.1.13   Johnson Controls
4.1.14   Lockheed Martin Systems and Global Solutions
4.1.15   McKinstry
4.1.16   NORESCO / United Technologies Corporation / Carrier
4.1.17   Onsite Energy Corporation
4.1.18   OpTerra Energy Group
4.1.19   Pepco Energy Services, Inc.
4.1.20   Schneider Electric
4.1.21   Siemens
4.1.22   Trane, Inc.
4.1.23   United Energy
4.2   Financial Partners and Advisors
4.2.1     Bostonia Partners, LLC
4.2.2     Cascadia Capital
4.2.3     Clean Energy Fund
4.2.4     Dominion Federal
4.2.5     FMI Capital Advisors
4.2.6     Green Campus Partners
4.2.7     Guggenheim Capital Markets
4.2.8     Hannon Armstrong
4.2.9     United Financial

5.      Market Forecasts
5.1   Overview
5.1.1     Reasons for Retrenching
5.1.2     Ratings Woes
5.1.3     Impacts on Market Forecasts
5.2   Energy Costs and Energy Efficiency
5.3   ESCO Market Projections: 2011-2020
5.4   The Federal Market
5.4.1     ESPC in the Pipeline
5.4.2     Better Buildings Initiative
5.4.3     ESCO Revenues by Technology Type
5.4.4     Future Considerations

6.      Company Directory

7.      Acronym and Abbreviation List 

8.      Table of Contents 

9.      Table of Charts and Figures 

10.     Scope of Study, Sources and Methodology, Notes
 

List of Charts and Figures

ESCO Revenue Segmentation by End Use Market, United States: 2011
ESCO Revenues by End Use Market, Aggressive Scenario, United States: 2010-2020
ESCO Revenue Segmentation by End Use Market, United States: 2006-2020
Uses of QECBs Issued: 2010-2011
Regional Use of QECBs to Date: 2011
Commercial Lamp Unit Shipments by Technology, North America: 2011-2021
Average Retail Rates for Electricity by Sector, United States: 2009-2020
ESCO Revenues by End Use Market, Aggressive Scenario, United States: 2010-2020
ESCO Segmentation by End Use Market, United States: 2020
Average Federal ESPC Project Size, by Contract Amount: 2005-2011
Federal ESPCs Awarded and Forecast: 2010-2017
ESCO Revenue Segmentation by End Use Market, United States: 2020
ESCO Revenue Segmentation by Technology or Project Type, Base Scenario: 2020
Federal ESPC Market Share by Contract Size, 2009-2011
Schematic of Energy Performance Contracting
Status of Federal Agency Progress Toward Energy Savings Goals: 2010
Federal Government ESPC Project Investment by Fiscal Year: 1998-2011
Federal Government UESC Investment by Year: FY 1998-2011
Federal Facilities Investment in Energy Efficiency Projects: 2003-2010
Number of Federal ESPCs Awarded by Region: 2009-2011
U.S. Army Engineering and Support Center, Future Investment in ESPC: 2012
Property Assessed Clean Energy (PACE) Financing by State: 2012
GSA New Zero Pilot Locations (Proposed): 2011
Rate of Energy Use, United States: 1980-2035
Projections of Potential Efficiency Improvements

List of Tables

ESCO Major Mergers & Acquisitions: 2004-2012
ESCO Segmentation by End Use Market, United States: 2006-2020
ESCO Revenues, Base Scenario, United States: 2010-2020
ESCO Revenues, Aggressive Scenario, United States: 2010-2020
ESCO Revenues by End Use Market, Aggressive Scenario, United States: 2010-2020
ESCO Revenues by End Use Market, Base Scenario: 2010-2020
ESCO Revenue by Technology or Project Type, Base Scenario: 2006-2020
ESCO Revenue by Technology or Project Type, Aggressive Scenario: 2006-2020
ARRA SEP Funding, as of February 2010
ARRA EECBG Funding, as of February 2010
QECB Bond Volume Issued and Percentage of Total Allocation, by State: 2011
Top Five States, by QECBs Issued, as of February 2011
Qualified Energy Conservation Bonds Issued by Quarter: 2010-2011
Uses of QECBs Issued
Regional Use of QECBs to Date: 2011
Commercial PACE Programs in Effect, United States: March 2011
Type of Commercial PACE Projects Funded: March 2011
Top 10 Ranking of Underutilized Efficiency Technologies
Top 5 Federal Agencies in Terms of ESPC Usage: 2009-2011
Federal UESC Projects, by Year: 1998-2011
Commercial Lamp Unit Shipments by Technology, North America: 2011-2021
Commercial Lamp Revenue by Technology, North America: 2011-2020
Average Retail Rate for Unbundled Power: 2009-2020
Total Federal ESPC Project Investment and Annual Energy Savings
Federal ESPC Contracts Issued, by Region: 2009-2011
Federal ESPCs Awarded, United States: 1998-2017
Average Project Size, United States:  2005-2011
GSA Green Proving Ground Technologies
Lawrence Berkeley National Lab, ESCO Market Survey: 2010