Energy Service Companies (ESCOs) Growing into New U.S. and European Markets

Business is expanding for energy service companies, or ESCOs, in both the U.S. and Europe. Opportunities are developing outside of the public sector, the industry’s long-time base. Now private building owners are increasingly pursuing energy retrofits too.

That’s the word from a new Navigant Research report that forecasts an $11.5 billion ESCO market by 2024, up from $6.3 billion in 2024. (Separately, the Lawrence Berkeley National Laboratory pegged the U.S. ESCO market at $5 billion in 2011.)

ESCOs in the U.S. have traditionally thrived by serving the federal government and the MUSH market — municipalities, utilities, schools and hospitals.

But Navigant says that private building owners, too,  are now making energy efficiency improvements to address climate change policies, reduce risk of power outages, and improve operational economics.  They are drawn to new ESCO business models that help private sector customers overcome the upfront capital hurdle to investment.

“In facing long-term business planning, ESCOs are challenged to grow their business in this mature marketplace, which has been dominated by business in the public and institutional segments,” said Casey Talon, senior research analyst with Navigant Research. “The evolution of this market is contingent on the continued support and development of the traditional customer base, but also the repositioning of offerings to appeal to a broader audience, namely in the private sector and Europe.”

Navigant sees Europe as new international market for the largest U.S. ESCOs. The research firm cited recent successes of some vendors in Europe, important developments on the regulatory and policy front, and lessons learned from early market failures in Europe.

Still the market for ESCOs in Europe remains modest compared with the U.S, growing from  $2.7 billion in 2015  to $3.1 billion in 2024, according to the report.

Companies named as key players in the report include Honeywell, Johnson Controls, Schneider Electric, Siemens, Trane, ConEdison Solutions, Constellation, NextEra Energy, Pepco Energy Services, AECOM, Lockheed Martin, McKinstry, Ameresco, Metrus Energy, Noesis and SCIenergy.

More details about the report are available here.

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