The energy-services market in North America has seen a slight uptick from its 2012 low point, but still has not reached its 2011 peak, a study conducted by BSRIA, the UK-based test, instruments, research, and consultancy organization providing specialist construction and building services, says.
The energy-performance-contracting (EPC) market in particular experienced dramatic growth from 2008 to 2011, helped by a financial stimulus from the Obama administration. However, the EPC market declined in 2012 when funding was nearing its end.
The total energy-services market, including EPC, energy retrofit, and energy procurement, was valued at U.S. $9.42 billion in 2013.
“The industry is expecting a positive outlook in the short term,” BSRIA said in a press release. “Following the energy-retrofit and EPC market’s decline in 2012, there were signs of recovery in 2013, and the momentum is likely to be maintained. The energy-procurement market looks set to be a stable market with steady growth, given that we do not expect any more states to deregulate their electricity markets for the foreseeable future.”
The EPC-and-energy-retrofit market is expected to reach U.S. $9.3 billion in 2016, while the energy-procurement market is expected to reach U.S. $1.4 billion.
BSRIA noted the following trends:
- Facilities managers are facing pressure to reduce energy and operational expenses while also facing cuts in yearly budgets. This dilemma has driven the adoption of EPC in the public sector, as it can turn energy savings into a source of funding for facility improvements. Accordingly, EPC now includes both energy- and non-energy-related upgrades. The scope of EPC has expanded beyond buildings to city infrastructure, such as street lighting, water conservation, and advanced metering.
- On-site generation and renewables have become a focus the last two years. This is a result of incentives from governments and utilities that make generation from renewables more viable financially. The fall in natural-gas prices resulting from the availability of shale gas has made the economics of combined heat and power, or cogeneration, more attractive to end users.
- More innovative financing options are available. This is expected to have a positive effect on EPC-market growth. Other financing options, such as the Property Assessed Clean Energy (PACE) program, on-bill financing, and energy-services agreements, are available. There also is an insurance product that serves as a backstop to energy-saving guarantees provided to end users. BSRIA expects this to bring in smaller energy-service companies (ESCOs) to compete with large ESCOs.
- Energy retrofits are occurring primarily in the private sector. Private-sector clients still are looking to reduce their energy bills and maintenance costs and promote a green image for their property. There also is a trend of corporate tenants demanding LEED-certified or energy-efficient properties when leasing.
- Improved understanding and trust through better education and promotion of services to clients is key to faster growth in the overall energy-services market.
- The lack of individuals with the skill set needed for EPC projects is a major obstacle. EPC projects require technical knowledge of energy efficiency, excellence in project management, expertise in financing and risk management, and up-to-date information on available incentive schemes.
- The EPC market no longer is limited to large players.
- Some public organizations are combining resources to form larger projects to reduce administrative costs and increase their bargaining power.
- There is a movement toward bundling procurement and building-retrofit work, even though this typically is not the most economical method in the end.
Generally, the energy-services market is divided into companies that perform energy-retrofit and EPC work and those that perform energy procurement. The energy-retrofit-and-EPC market is divided into national and local players. Competition in the EPC market has increased, with an influx of small and medium-sized local players. Also, declining workloads in the traditional contracting market have motivated mechanical and electrical contractors to enter the market.
Although there are more than 20 accredited ESCOs under the National Association of Energy Service Companies (NAESCO) and many more under the U.S. Department of Energy, study participants recalled only a few of the more active ones. However, the larger players reported they are facing increased competition from local and regional players.
The market is highly fragmented, with large players clearly dominant in specific market sectors, although most players operate in both the commercial and industrial sectors. Schneider Electric has the leading position in the industrial sector, while Ecova is dominant in the commercial sector, BSRIA said.
The following organizations and companies contributed to the study: ABM, Amerex, Consumer Energy Solutions, DTZ Americas, Econoler, Ecova, Energy Advantage, Energy Services Association of Canada, Fellon McCord, Johnson Controls Inc., NAESCO, Schneider Electric/Summit Global, Siemens, Tradition Energy, Trane, and UGI Performance.
To purchase the study, "Energy Services in North America 2014," go to https://www.bsria.co.uk/market-intelligence/market-reports/publication/energy-services-in-north-america-2014/