Energy Saving Businesses Booming

A recent report by the Lawrence Berkeley National Laboratory in the United States has shown the expected expansion for energy service companies (ESCOs) to be around 26% annual growth from 2009-2011 with the revenue reaching $7.1 billion. ESCOs are private companies that typically offer energy savings improvements under long-term performance contracts.

Nearly 70% of their business comes from what the industry calls the MUSH market — municipal and state governments, universities, schools and hospitals. These institutions receive US federal stimulus dollars to spend on energy efficiency.

It appears from the report that the MUSH market will remain strong for quite some time. The report recognised around $35 billion worth of potential business is still available for US ESCOs to find from MUSH institutes. The US federal building market, which accounted for 15% of ESCO business in 2008, also continues to offer promise. The US Department of Energy invested $440 million in federal efficiency projects in 2009 and $498 million in 2010. And this is set to continue and improve opportunities for energy saving and efficiency in the US.

State clean energy policies set by the US Government aid the boom in ESCO activity. Massachusetts, Connecticut and Rhode Island, for example, have made energy efficiency a ‘first fuel,’ meaning utility companies must secure all cost-effective energy savings before buying or building electric power. In addition, 18 US states have created energy efficiency standards which must be met and they require that utility companies achieve annual energy savings targets.

“The traditional ESCO business model based on long-term performance contracts has always been a tough sell to private sector customers and the economic downturn further crimped its attractiveness,” the report said.

Monday 28th June 2010

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