Energy services industry bolstered by rising prices and government urging for efficiency: Frost & Sullivan

Palo Alto, CA, Mar. 1, 2006 — The federal government has announced a re-compete on all its energy projects. This makes all qualifying Energy Service Companies (ESCOs) eligible for federal work and presents huge growth potential, says Frost & Sullivan, a consulting company.

Rising fuel prices are starting to hit customers’ pocket books and they are turning to ESCOs to manage their energy issues and cut costs, says the firm. Also, they say, as end-users have typically not budgeted for energy management, their infrastructures are beginning to age, becoming inefficient and expensive. ESCOs are being utilized to upgrade infrastructures, which improves efficiency and cuts costs.

Frost & Sullivan finds that the U.S. Energy Service Companies Market earned revenues of $2.1 billion in 2005 and estimates this to reach nearly $3 billion in 2012 due to a projected increase in government issued energy mandates and a continuing need to upgrade end users’ inefficient energy infrastructures.

“The energy services industry is viable and growing. Rising fuel prices, government pushes on energy efficiency and advancements in technology are bringing the need for energy services to the fronts of end-users’ minds,” says Frost & Sullivan consulting analyst Devin Castleton.

Educating end-users about the benefits and necessity of energy management continues to be a challenge for much of the industry. “ESCOs continue to struggle to penetrate certain market segments, namely the commercial and industrial market. This lack of education is resulting in ESCOs losing potential projects to no-decisions rather than to competitors simply because the customer isn’t fully aware of the benefits ESCOs can offer and the money they can save them,” notes Castleton.

ESCOs need to continue to deliver guaranteed performance, said Frost & Sullivan. Generally ESCOs’ estimates of savings are reasonably accurate. As ESCOs have assumed project performance risk and met savings estimates, their ability to sell products and services and arrange financing for their end-users increases, said the consulting firm.

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