[25] Entrepreneurial business models remain a distant target

The underlying assumptions of on-bill financing are that (1) home-owners and tenants have cost-effective energy-saving opportunities (the ‘energy efficiency gap’), (2) consumers do not have the necessary capital, knowledge or inclination to invest (the ‘finance gap’), and (3) a third party can step in with a standardised product and execute the project to a quality standard.

That’s a lot of ifs for developing a successful program in this field. It will require genuine entrepreneurs to come up with business models that work. Since these business models strongly depend on the entrepreneur’s personality, their replicability in other geographies represents a challenge.

[19] Energy services – promising and challenging

The problem with energy savings (so-called ‘negawatts’), is that they are difficult to measure. Metering technology has improved significantly since 2011, but the problem of the construction of a solid baseline remains. Another challenge is that some investments into energy efficiency, especially in buildings, have long payback times, and both ESCOs and building operators may be reluctant to enter into such long-term contracts.

As a result, a 2017 report from JRC finds that the European ESCO market is falling somewhat short of expectations. The total EU market was estimated at €2.4 billion ESCO revenue in 2015, with a forecasted growth to €2.8 billion in 2024 at a 1.7% compound annual growth rate.