U.S. ESCO Industry: Industry Size and Recent Market Trends

This study is the latest in a series of LBNL research into U.S. ESCO industry characteristics and market trends. The research is based on interviews with ESCO industry executives conducted during the fall of 2019 and the first half of 2020. Nearly all companies that identified themselves as ESCOs were contacted as part of this project.

We find that after a period of little growth (2011-2014), industry revenues reached an estimated $6 billion in 2018, or a 3.4% annual average growth rate from 2015-2018. ESCOs primarily serve the public an institutional sectors (e.g., federal, state, and local governments; university and colleges; and K-12 schools). In 2018, project investments by public and institutional organizations accounted for over 90% of industry revenue, which is consistent with previous industry studies. ESCO activity in the Middle Atlantic, East North Central, and Pacific regions in the U.S. delivered the highest share of revenue in 2018, which is also consistent with earlier research. ESCOs reported that a majority of their customers use energy savings performance contracts (ESPCs) primarily for facility capital improvement needs and resilience rather than utility savings. In addition, the importance of non-energy benefits (e.g., water savings, avoided operations and maintenance costs, and avoided capital costs) accounted for in the project savings guarantee reportedly increased in all markets during 2016-2018 compared to previous time periods.

The study found that the ESCO industry faces several key challenges, including: (1) increasing project development times due to more complex projects and other factors; (2) difficulty finding qualified subcontractors in some regions, including minority- women- and disadvantaged population-owned small business enterprises; and (3) difficulty accessing project documents and quickly fulfilling customer requests to justify project payments several years into the performance period of a project.