Is the energy efficiency service market still MUSH?

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Elisa WoodBy Elisa Wood
June 8, 2011

We hear a lot about energy efficiency these days, but who is actually pursuing it?

In recent years most of the big players that install efficiency measures, the energy service companies (ESCos), have found work largely in the MUSH market:  municipal and state governments, universities, schools and hospitals. In fact, a report in June 2010 by Lawrence Berkeley National Laboratory and the National Association of Energy Service Companies found that MUSH made up 70% of the work done by ESCos.

Private businesses, on the other hand, were backing away from making energy efficiency improvements when the report was written. A year has passed. Is the market still MUSH?

I looked at the projects announced by the big players in recent months.  Here’s a sampling of a few.

  • Ameresco struck deals with the Greensboro Housing Authority, Boston Housing Authority, state of Alaska for public university buildings, New York State School District, Penn State University and City of Portland, Maine.
  • Chevron Energy Services is bringing efficiency to East Side Union High School District in San Jose, California; North Carolina Central University; the city of Victoria, Texas; as well as Orange County, California and Santa Monica College.
  • Noresco is working with the state of Hawaii, Fort Worth Naval Air Station, the Allendale County Schools in South Carolina, Capitol Hill and Elkhart County, Indiana.
  • And on and on as I made way down the list of large ESCos.

My very unscientific survey indicated that MUSH still predominates. And that’s not a bad thing. The MUSH market certainly has a lot of room for energy savings. And federal-stimulus dollars and state clean energy funds are available now particularly for government-backed institutions.

Fewer financial incentives are available for businesses. But even when money is offered, small to medium-size businesses are harder to sell on energy efficiency, especially now.  Even if an energy efficiency project offers a quick payback, businesses are reticent to make any initial capital investment. Or in a lot of cases, it’s hard for energy efficiency companies to even get a meeting with busy business people, especially in an economy that has left so many paddling furiously to stay above water.

The state of New York is attempting to crack the business market. One program, funded by the New York State Energy Research and Development Authority (NYSERDA), tries to make it easier for small businesses to analyze building energy usage.

Few best-of-class monitoring technologies exist for the small business market. But the project uses a combination of inexpensive Onset data loggers and NorthWrite’s Energy Expert Plus, an information management software and service that gathers, analyzes and displays data about a building’s energy performance. The monitoring systems feed the information into NorthWrite software, where it is modeled with inputs, such as utility rates, weather and building characteristics.  An analyst studies the report and provides the building manager with recommendations on energy upgrades that will achieve 10% to 15% annual energy savings. Next, NorthWrite connects building managers with NYSERDA-approved contractors that can make the energy improvements.

“What we are providing with NorthWrite MBCx is a service,” said Terrence McManus, NorthWrite’s chief marketing officer. “Building managers could attempt to use these tools independently, but they do not have the time to learn what all the data means. They are already short-handed and responding to tenants needs. This turn-key service makes it easier for them to move forward with energy efficiency measures that provide a quick pay back.”

So that’s one example of an attempt to make it easier for businesses to pursue energy efficiency. I’m guessing there are many similar stories out there. Do you have one? If so, please post it in the comment section here.

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About Elisa Wood

Elisa Wood is the chief editor of She has been writing about energy for more than three decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.


  1. My organization is using EPA’s Portfolio Manager to benchmark our commercial buildings against each other and prioritize our efforts. We have been awarded state grants (via AARA funding) to do some basic lighting upgrades and retro-commissioning.

    Utility rebates have been useful (although not definitive). Lighting and HVAC contractors are well-versed in utility rebates, and prepare the technical sections of the application for us.

  2. Elisa —

    Hate to do the sales response, but I do come at it from a policy perspective. States are developing policy that is driving demand among unconventional uptakers. In New Jersey and New Hampshire, we – not an ESCO, but an EE design-build firm in a similar mold – are seeing a lot of interest in the Pay for Performance incentive model from property management companies, and F500s that are not in the MUSH category.

    Also, under Massachusetts’ Green Communities Act, state EE rebates are incentivizing IOUs to go at biotechs, manufacturers, data centers, and REITs. Moreover, uptake in small business sectors, under direct install programs is so robust in markets with strong incentives and program design that utilities are expanding those programs to cover larger customers, even as high as half-megawatt demand.

    We are also see rapid growth in interest and adoption of new technologies among the retail sector’s fastest-growing businesses, including national retailers, major grocers, and the exploding “fast casual” restaurant chains.

    That is not to say that your MUSH category is not still a major client source for EE service businesses — after all, they are among the most energy-intensive industries in the world. There is still much to be done.

  3. Shirley J. Hansen says:


    We have trouble pentrating the industry market because management does not distinguish between money from a new budget allocation and money already in the budget paying for wasted energy. When management starts spouting ROI, IRR, etc., they are trying to fit energy savings into the regular expenses framework. If we are to make the business case for energy efficiency, we need to understand and be able to convey to them that were talking two different pockets of money. When we use energy efficiency savings to fund our projects, we are redirecting money already in the budget. The ROI crowd is thinking new budget allocations. One reduces operating costs without capex; thus, reducing the production costs. The other places a burden on the budget and actually increases production costs — making the product less competitive.



  4. In our experience, there is no shortage of activity in the private, non-MUSH sector. As a dedicated energy engineering firm we are screaming busy and the majority of our work is for private sector clients. The percieved `shortage’ is a shortage of ESCO activity in the private sector and there are some very good reasons for that.
    We don’t see private sector ESPC’s because they rarely make sense from a value perspective. ESPC contracting is typically aimed at maximizing the value of the contract, not the return to the Owner. The standard ESPC model doesn’t focus on projects with ROI’s of 25%-50% because they are typically not captial intensive enough to cover the risk and transaction costs. In more than twenty years I have never seen an ESPC with a less than 8 year payback. They might exist but they are rare.
    The ESCOs make their money on the markup – the higher the project value, the higher the value of the markup. This is not aligned with the private sector’s desire to maximize ROI.
    Although the MUSH sector might pay lip service to `ROI’ the reality is that ROI is at best a secondary, or lower, motivation. I have to grind my teeth when I see the press release touting ‘XYZ University will save $6 million dollars in energy over the next ten years thanks to a partnership with ABC Services’. The truth is that the University might see 10% of that amount in net positive cash flow (depending on the ESPC guarantee levels and M&V commitments) – the rest is investment and dept service. MUSH like it becaus it is `semi’ off balance sheet funding and is often the only way they think they can access capital (although that is rarely trrue). The private sector understands that and follows a business model that make a lot more sense.

  5. Lydia B says:

    As an ME in DC working for a design firm whose primary clients are non-MUSH, I can second and third what Mark and Joe have said. Plenty of energy efficiency investment in new high-rises and office renovations — everyone is jumping at the opportunity for LEED certification. Since these people never deal with ESCOS, the statistics don’t accurately reflect the actual market though.