North American Energy Saving and Performance Contracting Growth Opportunities

This research service analyzes the North American energy saving and performance contracting (ESPC) market. The ESPC market covers services such as energy audits; design and engineering; assistance in finance, equipment bidding, and acquisition; installation and commissioning; measurement and verification (M&V); and personnel training. Frost & Sullivan segments the ESPC market into energy saving contracting (ESC) and energy performance contracting (EPC). These segments relate to the provision of energy and operational services to organizations to reduce energy consumption through greater efficiency of building system operations and/or load reduction. The critical difference between the segments is EPC ensures energy performance and reduces risk in energy management, while ESC does not include a performance-related component. The North American ESPC market historically achieves over a 5% annual growth rate. However, it only recorded a 4.0% growth rate in 2020 due to the COVID-19 pandemic. The overall ESPC market is likely to expand moderately during the forecast period due to the renewed US administration under President Biden. The three strategic imperatives that impact the North American ESPC market are disruptive technologies, industry convergence, and transformative mega trends. Digital sensor networks and advanced analytics-supported operational control and integration platforms enable better energy efficiencies. Frost & Sullivan expects operators to leverage these technologies to drive further benefits such as predictive maintenance and AI-based control in the next five to eight years. The ESPC markets nature encourages convergence as providers look to provide customers with comprehensive solutions. As a result, we will see further convergence of allied industries such as facilities management (FM) providers; energy service companies (ESCOs); lighting companies; and heating, ventilation, and air conditioning (HVAC) companies in the next five years. The COVID-19 pandemics large-scale impact is evident across industries, especially in the short-term revenue growth drop due to project uncertainties. Although the pandemic has slowed ESPC revenue growth, capital budget pressures can push customers toward solutions such as EPC to transfer risks while maintaining operating expenditure (OpEx) levels in the next five years. Key drivers in the North American ESPC market include insufficient capital funding, especially in the post-COVID-19 scenario; high operations and maintenance (O&M) costs for older buildings; and rising electricity prices. Growth restraints include the pandemics macroeconomic impact, poor project execution and contract complexities, and awarding contracts to ESCOs with the lowest upfront costs. In the mid to long term, growth opportunities in the market include increasing customer base in the industrial and commercial vertical, integrating indoor air quality (IAQ) systems in centralized building automation systems, and partnering with FM companies. Author: Melvin Leong