ESCO market will pass $8 billion by 2020, Navigant predicts

Energy service companies (ESCOs) grew from a bit player a decade or so ago to a major driving influence in the market to retrofit existing buildings with more energy-efficient technologies. They handle the whole thing – not just lighting and building automation systems, mechanicals, building envelope and the rest of it, but their ace is in handling the financing, with special focus on energy performance contracts. As such they’ve become an ally of some electrical distributors, reps and manufacturers and a thorn in the sides of others.

A report announced today by Navigant Research  says the ESCO market in the United States has gone through a difficult period in recent years as customers have grown concerned about the impact of energy performance contracts on their financial positions. Many of the resources that drove their ascendance, including utility rebates and other policy measures, have been exhausted in some markets.  As a result, Navigant finds that ESCO market activity has slowed considerably, but according to their new report, growth in the U.S. ESCO market is set to resume.

Annual revenue for U.S. ESCOs will grow from $4.9 billion in 2013 to almost $8.3 billion in 2020, the study concludes.

“Over the past two years, ESCOs have found it difficult to attract customers and convert backlog into revenue,” says Eric Bloom, senior research analyst with Navigant Research.  “The difficulties imposed on key customer segments, such as municipalities, by weak economic conditions across the United States have constrained demand.  Over the next 7 years, though, growth is expected to resume as energy efficiency measures take effect across a broad swath of the economy.”

The federal sector, for example, which has long been an important part of the ESCO market, will undergo significant growth, thanks to a number of supportive measures including the 2011 Better Buildings Initiative, which aims to provide $2 billion of energy performance contracts in the federal sector by the end of 2013.  Other sectors, such as commercial and industrial firms and public housing, will also start to expand once broader economic conditions improve, according to the report.

Navigant’s summary, with links for purchasing the full report