Energy Performance Contracting Market

Market Overview

The Global Energy Performance Contracting Market Size is expected to grow approximately CAGR of 10.8% during the forecast period.

Energy Performance Contracting (EPC) is a method of financing energy efficiency initiatives in buildings or facilities. An energy service company (ESCO) is hired under an EPC agreement to conduct a comprehensive energy audit and find energy-saving possibilities. After that, the ESCO executes energy-saving measures and retrofits in the building or facility, such as upgrading lighting systems, replacing old HVAC systems, and implementing renewable energy systems.

The ESCO guarantees that the energy savings will cover the cost of the retrofit, and the savings are split equally between the ESCO and the building owner or facility manager over the contract term, which usually ranges from 5 to 20 years.  EPC can be used in a variety of buildings or sites, including hospitals, schools, government structures, commercial structures, and industrial plants. It is a tried-and-true method for achieving substantial energy savings and lowering greenhouse gas emissions.

In recent years, the Energy Performance Contracting (EPC) market has expanded as building owners and facility managers increasingly realize the benefits of energy efficiency improvements. Increasing energy costs, government rules and incentives, and the need to reduce greenhouse gas emissions are all driving factors in the EPC market. Furthermore, EPC can help bridge the funding gap for energy efficiency projects by allowing building owners and facility administrators to execute projects with no upfront capital expenditures.

Market Dynamics

Market Drivers 

• Low-risk financing technique that promotes energy efficiency

Market is driving due to low-risk method of financing and providing energy efficiency improvements and renewable projects for companies that lack the necessary funds, technical expertise, and manpower, which is leading the market growth.

• Cost saving

EPC is an appealing financing choice because energy efficiency measures can result in substantial cost savings for commercial and industrial facilities. EPC projects usually have a payback period of 3 to 7 years, after which the facility owner can continue to profit from the generated energy savings.

• Utilizing Energy Efficiency, Enable the Upcoming Transition to Smart and Sustainable Cities

The primary goal of the EPC project is to allow the future transition to smart, sustainable cities and municipalities by utilizing energy efficiency as a key to unlocking the potential of new, emerging technologies and services., due to which market is driving.

• Easy to Implement in Public Lighting

EPC projects in public lighting are considered to be much easier and can serve as a stepping stone toward wider EPC implementation. Predefined operating hours for public lighting, automated or centralized management of operations, relatively easy and simple methods of monitoring energy consumption, and clear and concise specifications on required functional characteristics are some of the key reasons why EPC in public lighting is easier to implement than EPC in buildings.

Market Restraints 

• Complex and Difficult to Implement EPC in Buildings

Market restraints When developing energy efficiency projects, can make the EPC model very complex and, in some instances, difficult to implement. These issues are particularly prevalent in EPC initiatives in the construction industry. Implementation of EPC projects in public lighting, on the other hand, is seen as much easier and can serve as a stepping stone for wider EPC implementation.

EPC in public lighting is easier to implement than EPC in buildings are predefined operating hours, automated or centralized management of operation, relatively easy and simple ways of monitoring energy consumption, and clear and concise specifications on required functional characteristics, due which market growth will be affected.

• Other factors impact EPC Market

Energy performance contracting is frequently regarded as a complicated model for implementing energy efficiency projects. A combination of financing issues, the need for a thorough and detailed analysis of the state of existing facilities or infrastructure, the need for thorough energy audits, legal issues regarding ownership of facilities or infrastructure vs users of that infrastructure, future use of facilities or infrastructure, or external factors affecting the need for energy consumption, such as climate change, etc.

Market Opportunity 

• Creating a Smart City with the Aid of Technology

Energy Performance Contracting (EPC) Market opportunity for market players is remodelling old and inefficient public lighting units with IoT technology and Smart City components will pave the way for a variety of energy and non-energy services and applications, such as public safety, traffic management, EV charging, environmental monitoring, and next-generation cellular communications. (e.g. 5G), which boost the market growth of EPC in future.

• Increasing number of Laws and Policies

The growing number of laws and policies aimed at reducing carbon emissions and encouraging energy efficiency has been a major driver of the EPC market. The EU Energy Performance of Buildings Directive, for example, mandates member states to set minimum energy performance standards for buildings, which has increased market opportunity for EPC services.

Market Scope

Segmental Analysis

Segment by Type

• Energy-Saving Effect

Segment involves identifying and implementing energy-efficient methods to decrease a building's or facility's energy consumption

• Project Procurement

It involves the purchase of equipment and materials needed to carry out the energy-saving measures found in the energy audit. This could entail purchasing lighting fittings, insulation materials, and energy-efficient HVAC systems.

• Benefit Sharing

The contractor and the customer share the energy savings realized through the implementation of energy-efficient measures, the distribution of benefits can be based on a predetermined percentage or a fixed sum.

• Operation Service

Services for the operation and maintenance of energy-efficient devices placed in a building or facility. The contractor may be in charge of ensuring that the systems are operating properly and performing routine upkeep and repairs.

• Equipment Rental

The contractor may rent the equipment to the customer, who can use it to reduce their energy usage and save money.

Segment by Application

• Hospital

Hospital energy efficiency initiatives include energy assessments, medical equipment upgrades, and building automation.
School

Another application segment that can profit from EPC is education. Lighting improvements can result in energy savings.

• Business District

Business districts are made up of a collection of commercial buildings that use a lot of energy for lighting. EPC can help reduce energy costs and improve the total energy efficiency of these buildings, resulting in a more sustainable business district.

• Factory

EPC can help increase factory energy efficiency by upgrading lighting systems, motors, and other equipment, resulting in cost savings and a more sustainable manufacturing process.

Regional Analysis

The Global Energy Performance Contracting Market is segmented by region as North America, Europe, Asia Pacific, Latin America, and Middle East and Africa.

EUROPE 

• EPC market impact in EU 

The market for EPC in Europe has been outlined. The findings portray a very diverse picture of the maturity of national EPC markets across EU nations, as well as future growth projections. The study also finds several barriers to growth in the EU EPC market, as well as policy recommendations. The perception of EPC project complexity, administrative, and transaction costs is seen as a barrier to stronger EPC market growth, and standardisation of preparatory procedures and analysis, as well as standardisation of contract documentation, which is one of Smart EPC's objectives, can help overcome this barrier. Low energy prices as a structural barrier to further development of EPC projects have been shattered by massive energy prices.

• Growing market for EPC services is the private sector

France and Italy are Europe's biggest EPC markets, accounting for nearly 70% of the total market. The United Kingdom, Spain, and the Netherlands are also important EPC marketplaces. With local governments and public institutions accounting for more than 60% of the overall market, the public sector is Europe's largest consumer of EPC services. A growing market for EPC services is the private sector, which includes business and industrial buildings.

Through various initiatives and policies, such as the Energy Efficiency Directive and the European Green Deal, the European Union has been supporting energy-efficient buildings and energy management.

Asia Pacific 

From 2020 to 2025, the Asian EPC market is anticipated to grow at a CAGR of around 11.2%. According to the study, this growth can be attributed to a variety of factors, including increased government support for energy efficiency measures, rising energy costs, and the need to reduce greenhouse gas emissions.

Due to the country's commitment to reducing carbon emissions and increasing energy efficiency, China is Asia's largest market for EPC. India, Japan, South Korea, and Singapore are among the other nations in the region with expanding EPC markets.
Rapid growth in industrialization and urbanization

he market is being propelled by rising demand for energy-efficient solutions across a wide range of end-use sectors, including commercial buildings, healthcare, and education. The Asia Pacific region is expected to be the fastest-growing market, due to the region's rapid industrialization and urbanization.

Key Players

1. HUAKONG
2. iStars-Cloud Technology Co.,Ltd.
3. Da Guan Environmental Protection
4. Shuangliang Group
5. SeatoneGroup
6. Beijng ZKYJ Energy Saving Equipment Co., Ltd.
7. Colorado Energy Office
8. Johnson Controls
9. COOLEAD

Recent Developments

In March 2023- The African Development Bank (AfDB), through its Sustainable Energy Fund for Africa (SEFA), has authorized $5 million in grant funding for the implementation of the Africa Super Energy Service Companies (ESCO) acceleration program - a vehicle to improve energy financing for public sector programs.