"We believe that the financing products that ESCOs provide will be a major tool going forward to put projects in place and improve energy efficiency, helping to avoid significant costs to taxpayers while also providing long-term energy and operation cost savings."
Q. What is the state of the EPC market in America?
The U.S. energy savings performance contracts (ESPC) market has experienced fairly steady growth since the 1990s and according to a recent report by Lawrence Berkeley National Laboratory, market penetration estimates provided by energy service companies (ESCOs) and industry experts indicate that the industry could more than double in size from ~$5.3 billion in 2011 to ~$11-15 billion by 2020.
Q. What other contract forms are being developed in the U.S. and does ESCO activity vary a lot across neighbouring states?
Currently in the U.S., ESPCs processed at the federal, state and local level vary. Each state in the U.S. has its own contracting process and the federal government has a separate contracting process. The Federal Energy Management Program (FEMP), in coordination with other Energy Department offices and federal agencies, is working to standardize federal procedures and contracting language to further encourage the use of performance-based contracts. These coordination and process improvements will help to remove existing barriers between financers and the ESCOs, as well as the ESCOs and their customers, and this will help drive down government transaction costs, increase private financing, and inform the larger procurement effort.
Q. How is legislation helping in the development of the market? What key lessons can be learned from the evolution of the ESCO industry in the US
Legislation was critical in the authorization and development of the federal ESPC marketplace. Since then, continued growth of the U.S. federal ESCO market has been driven by the active engagement of the executive branch of government, most recently in the form of a Presidential Performance Contracting Challenge. In 2011, President Obama challenged federal agencies to enter into $2 billion worth of performance-based contracts within two years. This led federal agencies to develop a pipeline of nearly $2.3 billion. The challenge was recently extended through 2016 and agencies are currently working with FEMP to expand the project pipeline. Additionally, DOE is launching a “Performance Contracting Accelerator” as part of the President’s Better Buildings Challenge, whereby sixteen states, cities and school districts will enter into $1.2 billion worth of performance-based contracts.
Q. When it comes to picking vendors for the DOE Qualified list, what does the qualifying procedure entail? What key factors do you look for?
The Qualification Review Board (QRB) evaluates applications for the DOE Qualified List. On the basis of statements of qualifications received and any other relevant information, the QRB selects firms for inclusion if:
- The firm has provided ESPC services, or services that saved energy or reduced utility costs for not less than two clients, and the firm possesses the appropriate project experience to successfully implement the technologies that it proposes to provide.
- Previous project clients provide ratings that are "fair" or better.
- The firm, or any principal of the firm, has neither been insolvent nor declared bankruptcy within the last five years.
- The firm, or any principal of the firm, is not on the list of parties excluded from procurement programs (in other words, has not been debarred by the Federal Government) under 48 CFR part 9, subpart 9.4.
- There is no adverse information that warrants the conclusion that the firm is not qualified to perform energy savings performance contracting.
Q. Some countries have been successful in developing energy efficiency without ESCOs. Would this have been possible in the US?
The ESCO industry has been essential for the development of the U.S. market and in moving towards a more efficient state. We believe that the financing products that ESCOs provide will be a major tool going forward to put projects in place and improve energy efficiency, helping to avoid significant costs to taxpayers while also providing long-term energy and operation cost savings.
If you’d like to hear his views on the “Innovations and expansions in the US ESCO market”, join his presentation during the Innovation Showcase session on Thursday 23 January, 14:00 - 14:15. Click here to to book your pass!