Governmental Push to Improve Efficiency Favoring Global Energy Saving and Performance Contracting Market

Energy savings and performance contracting (ESPC) refers to a neutral approach to reduce energy consumption and water use of a building, and thereby increase the overall operational efficiency. Facilities owners can now preserve their capital budgets by collaborating with energy service company (ESCO) and pay for the upgrades in installments while the energy saving continues. In some cases, the ESCO implement a renewable energy project to the facilities, which have higher return values, although heavy initial investment hesitates the consumers. In the recent past, several local and state governments have implemented ESPC projects in their facilities, and encourage these projects for its long term benefits. However, unless the project delivers energy savings as anticipated, the ESCO are not compensated. According to a recent report by Transparency Market Research (TMR), the global market for energy saving and performance contracting will expand at a healthy growth rate during the forecast period of 2016 to 2024.

What are the factors influencing the growth rate?

Owing to the growing energy requirement across the world, oil and gas industry is thriving, and the TMR report anticipates this factor to reflect on global energy saving and performance contracting market. During the forecast period, several governments are expected to loosen the restrictions on the electricity and gas industry players to fulfill the escalating energy demand. Increased investments by several private and public sector industries on eco-friendly systems is another factor favoring the market, although the lack of information pertaining to the energy efficiency possible from ESPC is expected to curtail the expansion over the course of the forecast period. The lack of commercially feasible project financing within the backing sector across several developing economies is also seen as a restraint over the market.


Which market segments are expected to gain momentum in near future?

The global energy saving and performance contracting market can be segmented on the basis of technology, and business contract model. By technology, the market is divided into combined heat and power (CHP), district heating (DH) refurbishment, and fuel switch, heating, ventilation, and air conditioning (HVAC), renewable energy sources (RES) utilization, lighting, and others including gas distribution, compressed air, reactive power, process unit, and combustion improvement. The report picks out combined heat and power segment as the most lucrative segment in the present global scenario.

By business contract models, the market is segmented into shared savings contracting model, guaranteed savings contracting model, and others. Since ESPC projects are dependent on various factors, guaranteed savings model sometimes result losses for the investors and hence, the segment of shared saving model is most in demand. In this, energy saving and performance contracting is designed, financed, implemented, and verified for over a fixed period to ensure the savings to the customer. In some cases, the energy service company may receive finances from a third party directly.

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