Albany, NY -- (SBWIRE) -- 11/14/2016 -- Energy saving and performance contracting (ESPC) is a type of financing for capital improvement in order to fund energy upgrades from the resultant cost reductions. In ESPC, an external Energy Saving Company (ESCO) implements a project to deliver energy efficiency and repay the costs of the project, which also includes the costs of the investment. In some cases, the ESCO implements a renewable energy project and the revenue from the cost savings is used to reimburse the cost of the project. Unless the project delivers energy savings as predicted, the ESCO does not receive its compensation.

Oil & gas restructuring is anticipated to drive market

Restructuring and liberalization of electricity and gas markets is expected to be the major driver for the energy saving and performance contracting market. The measures undertaken by private and public sector industries to mitigate climate change is another driver for the market. Lack of information related to energy efficiency and understanding of opportunities it offers is a restraint to the market. Lack of commercially sustainable and viable project financing within the banking sector due to their limited experience also restraints the market.

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Energy Saving and Performance Contracting Market: Segmentation

The energy saving and performance contracting market can be segmented based on technology as:

Combined Heat and Power (CHP), District heating (DH) refurbishment, and fuel switch
Heating, Ventilation, Air Conditioning (HVAC)
Renewable Energy Sources (RES) utilization
Lighting (indoor and street lighting)
Others (gas distribution, compressed air, reactive power, process unit, and combustion improvement)

The combined heat and power segment has major share followed by the lighting segment.

The energy saving and performance contracting market can be segmented based on business contract models as:

Shared savings contracting model
Guaranteed savings contracting model
Other contracting model

In shared savings contracting model, the ESCO finances, designs, and implements an energy saving project and verifies the energy savings. An agreed percentage of the energy savings is then shared with the customer over a fixed period. In some cases, the ESCO may receive the finances from a third party directly. In guaranteed savings contracting model, the ESCO designs and implements a project and guarantees energy savings. The ESCO covers the shortfall in case the energy savings are less than expected. ESCO may facilitate the finances itself or a third party provides the finances directly to the customer. Other contracting models include the chauffage contract, first-out contract, Build-Own-Operate-Transfer (BOOT) contract, and leasing contract.

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The energy saving and performance contracting market can be segmented based on sector as:

Industry
Public
Tertiary
Residential
Others

The industrial sector has major share followed by the public sector.

Energy Saving and Performance Contracting: Region wise outlook

The guaranteed savings scheme is mostly preferred in developed regions like North America and Europe. Established banking structure and experience with financing of energy-efficiency projects is the major reason for adopting energy saving and performance contracts in these regions. The guaranteed savings concept is difficult to introduce and use in developing markets because it has an investment repayment risk. In Europe, the 'chauffage' contract is frequently used, where ESCO takes the responsibility of energy services such as space heat, lighting, and motive power. The chauffage contracts are 20-30 years long where the ESCO provides all associated maintenance and operation cost.

Energy Saving and Performance Contracting Market: Key Market Players

Some of the key players identified in the energy saving and performance contracting market are:

OSRAM
LUTRON
Crowley Carbon Ltd.
Candelas Ltd.
Veolia
Dalkia

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