Energy Saving and Performance Contracting Market Trends and Forecast Nov 2016 | Page 3

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Shared savings contracting model

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Guaranteed savings contracting model

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Other contracting model

In shared savings contracting model, the ESCO finances, designs, and implements an energy saving project and verifies
the energy savings. An agreed percentage of the energy savings is then shared with the customer over a fixed period. In
some cases, the ESCO may receive the finances from a third party directly. In guaranteed savings contracting model, the
ESCO designs and implements a project and guarantees energy savings. The ESCO covers the shortfall in case the energy
savings are less than expected. ESCO may facilitate the finances itself or a third party provides the finances directly to the
customer. Other contracting models include the chauffage contract, first-out contract, Build-Own-Operate-Transfer (BOOT)
contract, and leasing contract.
The energy saving and performance contracting market can be segmented based on sector as:
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Industry

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Public

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Tertiary

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Residential

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Others

The industrial sector has major share followed by the public sector.
Energy Saving and Performance Contracting: Region wise outlook
The guaranteed savings scheme is mostly preferred in developed regions like North America and Europe. Established
banking structure and experience with financing of energy-efficiency projects is the major reason for adopting energy
saving and performance contracts in these regions. The guaranteed savin gs concept is difficult to introduce and use in
developing markets because it has an investment repayment risk. In Europe, the ‘chauffage’ contract is frequently used,
where ESCO takes the responsibility of energy services such as space heat, lighting, and motive power. The chauffage
contracts are 20-30 years long where the ESCO provides all associated maintenance and operation cost.