Growing Energy Efficiency Investment: Global Analysis of Energy Service Companies
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Energy efficiency is not a top priority for most individuals or corporations despite its multiple benefits. Energy service companies (ESCOs) deliver energy efficiency projects that are financed based on energy savings. Given the need to rapidly and significantly increase financing for energy efficiency, interest in ESCO business models is growing. Prior to this research there was an existing literature gap concerning the global status of the ESCO market. The objective of Growing Energy Efficiency Investment: Global Analysis of Energy Service Companies is to increase investment in energy efficiency via ESCOs by eliminating the existing literature gap surrounding global ESCO market status. Included in this report is a global overview of the ESCO market, country level market analysis, country specific ESCO policy recommendations and the methodology for replicating the entire analysis and policy recommendation process. A five-step approach is used to build theory for increasing investment in the ESCO industry. This methodology is appropriate because it yields an ESCO information resource that provides actionable recommendations for ESCOs to create market-driven demand for energy services. The methodology is a cyclical process to ensure measurable progress is made. Tracking the implementation of recommended policy in conjunction with ESCO market investment levels will confirm or denied the theory built by this research. Overall the market maturity indicator scores of country-level ESCO markets are diverse. The most mature ESCO markets include the United States, Germany, China, and Japan. The least mature ESCO markets, of those surveyed, include Chile, Spain and Greece. Although every ESCO market is unique, there are solutions that benefit a majority of markets. ESCOs should be viewed as a market-based instrument. They form in response to government policy that values energy efficiency as a positive externality. ESCOs have benefited from climate change campaigns such as Paris Climate Accord, the involvement of third-party financing, and the creation of an online ESCO project database (Bertoldi 2006). The presence of ESCO associations, financing options, measurement and verification protocols, and information campaigns ensure the existence of an ESCO market (Ellis 2010). Once an ESCO industry is established the energy industry and power sector should have its subsidies removed and privatized to encourage competition over energy use to prioritize energy efficiency (Vine 2005). While the global ESCO market size of USD 30.9 billion seems large, it is only a fraction of the total USD 1.3 trillion investment in energy efficiency required to reach the IEA’s Efficient World Scenario and better align with Paris Agreement climate targets. The existing investment growth rate is a positive as the global ESCO market has grown at a rate of 8% since 2015. However, much greater energy efficiency investment is needed in the coming years.