[86] Could efficiency pay for the energy transition?

The reasons why EU citizens cannot invest in energy efficiency investment opportunities with a good financial return are similar to the reasons why the ESCO market does not develop as fast as expected [19].

This is another market failure since citizens will be highly interested to earn a 10% interest rate while society needs these energy savings for a cost-effective energy transition.

Metering technology is advancing fast [4, 61], energy management systems are being put in place and solutions for peer-to-peer transactions are emerging. This gives hope that the future may significantly differ from the past.

[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.