The U.S. ESCO Industry: Recent Trends, Current Size and Remaining Market Potential

This report analyzes recent and future trends in the energy service company (ESCO) industry including market size, project and customer characteristics, growth, and an estimate of remaining market potential. The research draws on information from interviews with ESCO executives conducted in late 2012. For the purpose of characterizing the industry, the research team defines ESCOs strictly as energy service companies for whom performance contracting is a key business activity. Results indicate that aggregate revenue growth rates for U.S. ESCOs significantly outpaced U.S. GDP growth during the 3 years 2009 to 2011, despite the recession. Based on historical trends, the industry could more than double in size from approximately $6 billion in 2013 to $11–$15 billion by 2020. Performance-based contracts made up about 70 percent of the industry’s 2011 revenue. Public and institutional markets accounted for 84 percent of 2011 industry revenue. About 8 percent of 2011 industry revenue came from private commercial customers, a slight increase over the 2008 share. ESCOs provided estimates of the total building floor area in each customer segment that had received performance-based energy efficiency retrofits since 2003. Market penetration was highest in K-12 schools (42% penetration) and lowest in the private commercial buildings sector (9% penetration). Based on the market penetration estimates, typical project investment costs from a database of more than 4,000 projects, and data on buildings typically addressed by ESCOs, the research team estimated that the remaining market potential in facilities typically addressed by ESCOs ranges from about $70 to $130 billion.