Evaluating project level investment trends for the U.S. ESCO industry: 1990–2017. (July 2019)

• Record Type: Journal Article
• Authors: Carvallo, Juan Pablo; Murphy, Sean P.; Stuart, Elizabeth; Larsen, Peter H.; Goldman, Charles
• Is Part Of: Energy policy. Volume 130(2019)
• Page Start: 139
• Page End: 161
• Publication Date: 2019-07
• Subjects: Energy service company -- Energy efficiency investment trends -- Savings -- Regression analysis; Energy policy -- Periodicals; Politique énergétique -- Périodiques; Electronic journals; 333.79
• DOI: 10.1016/j.enpol.2019.03.061
• Languages: English
• ISSNs: 0301-4215

Abstract

Abstract: Energy efficiency is widely recognized as a cost-effective strategy to meet energy demand. The U.S. energy service company (ESCO) industry generates significant energy savings and other benefits through installing and maintaining energy efficiency, renewable and other types of projects. In this study, we evaluate factors that may explain trends in the economic performance of U.S. ESCO projects by analyzing project level data for ∼7000 U.S. ESCO industry projects. We find that real project investment levels normalized for floor area have increased over time in ESCO projects across market segments. However, the dollar value of energy savings and other reported benefits have not kept pace with increases in real project investment levels over time. The latter have increased 100%–500% in various market segments from 1990 to 2017. We conduct an econometric analysis to decompose the drivers of these underlying trends. Number of measures and a changing mix of conservation measures are the primary factors that correlate with the long-term increase in project investment levels. However, our analysis is only able to account for less than 50% of the increase in real investment levels. We discuss additional factors, and conclude discussing policy implications and outlining long-term research needs. Highlights: First analysis of U.S. ESCO industry project cost structure and trends. Investment in $/sqf increased between 100% and 500% in the last 3 decades. A Oaxaca-Blinder decomposition explains only 30%–40% of this increase. Types and number of measures installed key factors for increase. Understanding ESCO cost structure is needed for improved policy design.