Build Magazine July 2015

Build Magazine 35 Addressing the Customer Demands There is an array of market drivers underlying the decision to sign an EPC that reflect specific business pain points for potential new custom- ers, including: • Federal mandates for efficiency in government buildings through executive order • Corporate social responsibility and sustainability commitments • Market pressure for cost man- agement • Demand for power reliability and resiliency • Infrastructure needs due to deferred maintenance The ways in which the barriers to entry and drivers for engagement interact provide key insights into the expectation for growth in the ESCO market. While energy waste in buildings is evident, ESCOs must tailor how the problem, solutions, and associated costs and benefits are framed to appeal to the differing priorities of customers across business segments. This complexity in terms of customer point of view reflects larger dynamics in the mar- ket that shape customer demands for building upgrades and determine the persuasiveness of the ESCO business case. Market Dynamics Shaping ESCO Business Opportunities See Illustration left The following describes the key market dynamics shaping customer perspectives on the opportunity to engage with ESCOs: • Greenhouse gas targets are more commonly drivers for ESCO engagement in the public sector because of binding requirements for emissions reductions associ- ated with legislation or executive mandate. • Budget constraints are under- lying the appeal of the EPC be- in buildings accounts for nearly 40% of the region’s carbon footprint has driven policies to promote energy ef- ficiency improvements as a means of tackling emissions reductions goals. Despite the momentum in climate change policy, the ESCO industry has been unable to solidify broad market development in Europe. European Market Entrance SWOT Assessment See Illustration below Near-term revenue potential for ESCOs stems from opportunities in Germany, France, and the United Kingdom. These markets demon- strate the right combination of public policy and economic conditions to support the ESCO business model. There will be continued demand for energy efficiency retrofits, renewable energy, and building improvements in the United States and Europe as customers grapple with emerging climate change policies, the risks associated with grid reliability and resiliency, and the growing awareness of energy and its influence on the bottom line. ESCOs can continue to support institutional and public-sec- tor customers in the United States and realize sustained, yet moderate growth in revenue. cause of the avoidance of upfront capital, but are also tied to the project backlogs that arise due to deferred maintenance when capital and operating budgets and limited. • Reliability and resiliency are increasing concerns as extreme weather events become more common and grid demands cause intermittent outages. The priority for reliability and resilien- cy is often tied to the proportion of the facility or portfolio that sup- ports mission-critical operations such as in-patient care, data centers, or military operations. • Stakeholder pressures can be an influential driver for engagement in an EPC/ESPC because of the influence that can shift lead- ership through voting or direct budget allocations, for example. • Competitive positioning is a driver for working with ESCOs for customers that perceive building performance, energy efficiency, or sustainability as a differentiator in the market. Opening the Door in Europe The European Union (EU) has led in- ternational markets in climate change commitments and regulations on greenhouse gas emissions. The un- derstanding that energy consumption (Source: Navigant Research) Eco Building