Performance Contracts Drive Double-Digit Growth in the Energy Management Services Market, States Frost & Sullivan

MOUNTAIN VIEW, Calif., Mar. 6, 2012 /PRNewswire/ -- The simultaneous occurrence of an economic crash, the widespread implementation of regulations for energy efficiency, and an increase in financial incentives has driven the fastest growth for the energy management services (EMS) market revenue in recent history--approximately 29 percent from 2009 to 2010.

New analysis from Frost & Sullivan's (http://www.buildingtechnologies.frost.com) Analysis of the Energy Management Services Market research finds that the North American energy management services market earned revenue of $4.56 billion in 2010 and estimates this to reach $9.44 billion in 2015. This research service focuses on performance contracts and non-performance-based contracts.

If you are interested in more information on this research, please send an email to Britni Myers, Corporate Communications, at [email protected], with your full name, company name, job title, telephone number, company email address, company Web site, city, state and country.

"Volatile energy prices during an economic recession are among the strongest drivers for growth in the energy management services market," said Frost & Sullivan Research Analyst Suzan Riazi. "Building owners challenged by tightened budgets need a better way to manage costs, and comprehensive building retrofits have been proven to generate millions in energy cost savings for customers over the length of their contract."

Public entities governed by federal or state mandates to reduce energy usage and increase renewable energy sources have grown more accepting of performance contracts. Through this contracting method, and with the help of third-party financing, they could meet energy reduction targets and simultaneously address the need for facility upgrades without the challenge of high upfront costs.

"While the uptake of energy management services has been strong among public entities, the private sector remains a challenge for energy service companies (ESCOs)," said Riazi. "Depending on the energy conservation measures involved, a complete building retrofit can cost upwards of $100 million in total contract value and take as long as 15 years to recover costs through generated savings."

Most private entities, such as those in the commercial and industrial sectors, require much faster returns on their investment. Hence, they are less inclined to adopt comprehensive energy management service contracts.

Commercial and industrial clients tend to choose individual energy conservation measures, such as lighting upgrades, with short payback terms rather than integrating complex measures that have long-term benefits. Triple net lease terms, where the building owner assumes the costs for most building upgrades while the tenant reaps the benefits of lower utility bills, further discourage commercial real estate clients.

"In light of these challenges, traditional ESCOs have focused their sales efforts on the public sector, the primary customer segment for performance contracts, which represented more than 75 percent of the total market revenue," said Riazi. "With regard to private entities, ESCOs have focused more on the private higher-education and healthcare vertical markets, which have more long-term goals than maximizing immediate shareholder value."

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Analysis of the Energy Management Services Market

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Contact:
Britni Myers
Corporate Communications – North America
P: 210.477.8481
F: 210.348.1003
E: [email protected]
http://www.frost.com

SOURCE Frost & Sullivan