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Follow on Google News | Performance Contracts Drive Growth in the Energy Management Services MarketThe public sector emerges as the strongest adopter of EMS through performance contracts and third-party financing
By: Frost & Sullivan New analysis from Frost & Sullivan’s (http://www.frost.com) If you are interested in more information on this research, please send an email to Britni Myers, Corporate Communications, at britni.myers@ “Volatile energy prices during an economic recession are among the strongest drivers for growth in the energy management services market,” said Frost & Sullivan Research Analyst Suzan Riazi. “Building owners challenged by tightened budgets need a better way to manage costs; and comprehensive building retrofits have been proven to generate millions in energy cost savings for customers over the length of their contract.” Public entities governed by federal or state mandates to reduce energy usage and increase renewable energy sources have grown more accepting of performance contracts. Through this contracting method, and with the help of third-party financing, they could meet energy reduction targets and simultaneously address the need for facility upgrades without the challenge of high upfront costs. “While the uptake of energy management services has been strong among public entities, the private sector remains a challenge for energy service companies (ESCOs),” said Riazi. “Depending on the energy conservation measures involved, a complete building retrofit can cost upwards of $100 million in total contract value and take as long as 15 years to recover costs through generated savings.” Most private entities, such as those in the commercial and industrial sectors, require much faster returns on their investment. Hence, they are less inclined to adopt comprehensive energy management service contracts. Commercial and industrial clients tend to choose individual energy conservation measures, such as lighting upgrades, with short payback terms rather than integrating complex measures that have long-term benefits. Triple net lease terms, where the building owner assumes the costs for most building upgrades while the tenant reaps the benefits of lower utility bills, further discourage commercial real estate clients. “In light of these challenges, traditional ESCOs have focused their sales efforts on the public sector, the primary customer segment for performance contracts, which represented more than 75 percent of the total market revenue,” said Riazi. “With regard to private entities, ESCOs have focused more on the private higher-education and healthcare vertical markets, which have more long-term goals than maximizing immediate shareholder value.” Analysis of the Energy Management Services Market is part of the Building Management Technologies Growth Partnership Services program, which also includes research in the following markets: Integration of Intelligent Buildings with the Smart Grid, Analysis of BAS Protocol Trends and Adoption, and North American Home Automation Markets. All research included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants. About Frost & Sullivan Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com. Analysis of the Energy Management Services Market N9F3-19 Contact: Britni Myers Corporate Communications – North America P: 210.477.8481 F: 210.348.1003 E: britni.myers@ http://www.frost.com # # # Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com. End
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