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Estimating customer electricity and fuel savings from projects installed by the US ESCO industry

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Abstract

The US energy service company (ESCO) industry has a well-established track record of delivering substantial energy and dollar savings in the public and institutional facilities sector, typically through the use of energy savings performance contracts (ESPC). The ESCO industry has the opportunity to play an important role in achieving demand-side energy efficiency under the US Environmental Protection Agency’s (EPA) proposed Clean Power Plan. The EPA considered demand-side energy efficiency as a compliance strategy for proposed greenhouse gas (GHG) emissions standards under section 111 (d) of the Clean Air Act. To date, there has been little or no research in the public domain to estimate electricity or fuel savings for the entire US ESCO industry. Estimating these savings levels is a foundational step in order to determine total avoided GHG emissions from demand-side energy efficiency measures installed by US ESCOs. We find that on average, 66 % of total energy savings are in the form of electricity, but that in more comprehensive projects, almost 50 % of savings are produced from fuel resources. Overall, we estimate that active US ESCO industry projects generated about 34 TWh of electricity savings in 2012. About 15 TWh of these electricity savings were for municipal, local, and state government facilities; universities/colleges; K-12 schools; and healthcare (MUSH) facilities customers who did not rely on utility customer-funded energy efficiency programs. We extend the electricity analysis to estimate total energy savings and find that the US ESCO industry saved ∼224 million MMBtu in 2012 or ∼1 % of the total US commercial building energy consumption.

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Notes

  1. According to the LBNL/NAESCO database, the shared savings mechanism was used in only 1.5 % of projects developed from 2003 to 2012. We keep the definition broad, so it may apply to other jurisdictions where shared savings have a more prominent role in industry activity.

  2. In this paper, the term “energy,” by itself, is used to refer to the sum of electricity and fuel savings.

  3. Utility customer-funded efficiency programs include all energy conservation measures financed, developed, installed, and/or monitored by utilities to their customers as part of state and local energy efficiency mandates.

  4. We exclude ESCO projects that did not report installation costs. Savings and costs for these projects correspond to approximately 8 % of savings and costs for the whole database, respectively.

  5. See Appendix A for a more detailed explanation of other key assumptions in our approach.

  6. State government performance contract programs use ESPCs to finance and develop energy efficiency projects. For more details, see Bharvirkar et al. (2008).

  7. We report the share of ESCO projects participating in utility customer-funded EE programs based on electricity savings, although this calculation could also be expressed in terms of project installation costs, number of projects, or other metrics.

  8. Given that an increasing number of states have adopted policies that support large-scale utility customer-funded efficiency, it is possible that our 10-year average may understate the extent to which ESCOs (and their customers) utilize incentives in efficiency projects. However, we opted for a multi-year approach primarily because of sample size considerations.

  9. The mean measure lifetime corresponds to the useful life of the Energy and Environment Conservation Measure (EECM) that best characterizes the project. We group projects into one of six possible retrofit strategies depending on the EECMs implemented: lighting, minor HVAC, major HVAC, distributed generation, non-energy, and other.

  10. We selected a sample of projects that had reported actual and/or guaranteed electricity savings and non-zero investment costs. Consequently, our sample for this analysis is 2547 projects (or about half of the 5250 projects currently in the LBNL/NAESCO database).

  11. We estimate the electricity savings for projects active in a given year in the MUSH market for the entire ESCO industry based on the ratio of savings from projects in the LBNL/NAESCO database (e.g., for 2012, 3451 GWh in Table 5 and 2501 GWh in Table 6).

  12. US ESCO industry project savings include fuel and electricity.

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Acknowledgments

The authors are grateful for the comments of the two anonymous reviewers. The authors would also like to thank the following colleagues for providing constructive comments and suggestions on an earlier draft of this paper: Donald Gilligan (NAESCO); Clay Nesler (Johnson Controls); Dave Birr (Synchronous Energy Solutions); Jeff Genzer (Duncan, Weinberg, Genzer, and Pembroke); Timothy Unruh (DOE-FEMP); Steve Nadel (ACEEE); Alice Dasek and Ira Birnbaum (DOE-WIP); and Ed Vine, Phil Coleman, Steve Schiller, and Lisa Schwartz (LBNL). We are also grateful to Dana Robson for her editorial assistance. Any remaining errors are ours.

The work described in this article was funded by the US Department of Energy Office of Energy Efficiency and Renewable Energy, Weatherization and Intergovernmental Programs under Contract No. DE-AC02-05CH11231.

Author information

Authors and Affiliations

  1. Ernest Orlando Lawrence Berkeley National Laboratory, 1 Cyclotron Road, MS 90R4000, Berkeley, CA, 94720-8136, USA

    Juan Pablo Carvallo, Peter H. Larsen & Charles A. Goldman

  2. Renewable and Appropriate Energy Laboratory, University of California, Berkeley, CA, 94720-3050, USA

    Juan Pablo Carvallo

  3. Energy and Resources Group, University of California, Berkeley, CA, 94720-3050, USA

    Juan Pablo Carvallo

  4. Management Science and Engineering Department, School of Engineering, Stanford University, Stanford, CA, 94305, USA

    Peter H. Larsen

Authors
  1. Juan Pablo Carvallo
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Correspondence to Juan Pablo Carvallo.

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Highlights

• We provide the first assessment of aggregate savings for the US ESCO industry as a whole.

• We estimate that ESCO projects achieved 34 TWh of electricity savings and 224 million MBTu of total energy savings in 2012. In recent years, annual electricity and energy savings from US ESCO projects have been stable.

• Fifty percent of reported savings come from fuel resources in ESCO projects that installed 10 measures or more.

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Carvallo, J.P., Larsen, P.H. & Goldman, C.A. Estimating customer electricity and fuel savings from projects installed by the US ESCO industry. Energy Efficiency 8, 1251–1261 (2015). https://doi.org/10.1007/s12053-015-9405-8

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