Leading energy service companies (ESCOs), like Johnson Controls and Schneider Electric, are best positioned to lead the market for energy-efficiency retrofits, which is worth more than $5 billion in the U.S. alone. These retrofits can have short, compelling payback periods for building owners, and during the next decade they can cut $1 trillion in energy costs for U.S. commercial buildings, according to Lux Research.
“While so-called ‘deep retrofits’ can lead to big savings, they are disruptive to many building systems, so they require sophisticated ESCOs to act as chief integrating partners. As a result, ESCOs are a vital entry point for technology developers aiming to address this market,” says Alex Herceg, Lux research analyst and the lead author of the report titled, “Partnering to Unlock the Trillion Dollar Opportunity in Energy Efficiency Retrofits”. He adds, “So far, equipment companies are well-networked with ESCOs, but materials companies are not; expect this to change in the next three to five years.”
Lux Research analysts examined partnerships of the dominant ESCOs in the U.S., European Union and India to find winning strategies in each market and identify the entry points for other players in the value chain. Among their findings:
- U.S. market is dominated by multinationals. Clients focused on commercial retrofits should target the mature U.S. market in which innovative global ESCOs like Johnson Controls and Schneider Electric exert a much broader partnership reach than their peers.
- Technology partnerships dominate EU. Two large multinational ESCOs, Siemens Building Technologies and Schneider Electric, are busy forming hardware partnerships, enabling them to not just retrofit individual pieces of equipment or components, but deliver building systems integration (BSI).
- Industrial retrofits should eye India. Clients focused on industrial retrofits should target the emerging Indian market, which is driven by IT and telecom retrofit opportunities. Global players like Honeywell have a strong presence in India, but local ESCOs like Intemo Systems are gaining momentum.