Public and Institutional Markets for ESCO Services: Comparing Programs, Practices and Performance

Throughout the U.S. energy services company (ESCO) industry's history, public and institutional sector customers have provided the greatest opportunities for ESCOs to develop projects. Generally speaking, these facilities are large, possess aging infrastructure, and have limited capital budgets for improvements. The convergence of these factors with strong enabling policy support makes performance contracting an attractive and viable option for these customers. Yet despite these shared characteristics and drivers, there is surprising variety of experience among public/institutional customers and projects. This collaborative study examines the public/institutional markets in detail by comparing the overarching models and project performance in the federal government and the "MUSH" markets – municipal agencies (state/local government), universities/colleges, K-12 schools, and hospitals – that have traditionally played host to much of the ESCO industry's activity. Results are drawn from a database of 1634 completed projects held in partnership by the National Association of Energy Services Companies and Lawrence Berkeley National Laboratory (the NAESCO/LBNL database), including 129 federal Super Energy Savings Performance Contracts (ESPC) provided by the Federal Energy Management Program (FEMP) (Strajnic and Nealon 2003). Project data results are supplemented by interviews with ESCOs. Special focus is given to the federal government in this report. In recent years, it has become a key source of ESCO industry growth, largely due to two "alternative financing" mechanisms – ESPC and Utility Energy Services Contracts (UESC) – that overcome barriers to project development. To characterize this diverse market segment, we compare 660 UESC projects from FEMP's database, managed by Pacific Northwest National Laboratory (PNNL), to 165 ESPC projects included in the NAESCO/LBNL database. This side-by-side analysis examines project deployment, costs, savings and simple payback time.