European Energy Savings and Performance Contracting Growth Opportunities

European Energy Savings and Performance Contracting Growth Opportunities

As the construction industry resumes a level of pre-pandemic operational efficiency and commercial establishments reopen, energy demand from buildings in Europe has surged. For a brief period between 2020 and early 2022, energy efficiency measures did not grow rapidly, despite enabling regulations. This period hampered the achievement of several goals related to energy efficiency. Across Europe, renovation rates for buildings stand at a meager 0.2%, but 3% is needed annually to achieve European Climate goals for 2050. As a result, huge growth opportunity awaits the European energy savings and performance contracting (ESPC) market.

The European ESPC market recorded a 1.4% growth rate in 2021 due to the COVID-19 pandemic. However, the market is likely to expand moderately at 4.4% from 2021 to 2027 in response to renewed focus on energy efficiency and regulations in each country to promote energy savings and improve living conditions.

The European ESPC market covers services such as energy audits; design and engineering; assistance in finance, equipment bidding, and acquisition; installation and commissioning; measurement and verification (M&V); and personnel training.

Energy savings contracts (ESC) contributed two-thirds of the revenue generated through ESPCs in 2021. Although ESC is set to have a higher share of the market in 2027, energy performance contracts (EPC) will register a much better growth rate of 7%. The three major countries—Germany, France, and the UK—accounted for 60% of the market in 2021 and will remain the market leaders throughout 2027. The Benelux region will register the highest growth rate, thanks to tax incentives and a heat pump mandate in Belgium and the Netherlands.

This study segments the market based on building components: lighting and controls; heating, ventilation, and air conditioning (HVAC); building automation systems (BAS); and building fabrics. By vertical market, the study looks into offices, healthcare, education, industrial, retail, hospitality, and government and public buildings.

Frost & Sullivan expects the market to experience increased convergence among allied industries such as facilities management (FM) providers; energy service companies (ESCOs); IT service providers; utilities and demand response enablers; lighting companies; and HVAC companies during the forecast period (2022–2027).

The ESPC market’s growth will revolve around initiatives such as leveraging demand response, exploring new business models, and emphasis on healthy building accreditation from renowned agencies globally.