New report: Barriers, challenges and opportunities for the development of Australia's energy service company (ESCO) market
- A2EP
- Feb 26
- 2 min read
Updated: Mar 4
26 February 2025
In a paper published in the journal, Energy Policy, Associate Professor Andrea Trianni and Dr A S M Monjural Hasan from UTS and A2EP's Jarrod Leak have explored how we can boost the development of an energy services company market in Australia and its importance for the clean energy transition.
Energy service companies (ESCOs) play a crucial role in delivering services aimed at reducing energy consumption for businesses and offering benefits beyond energy savings. Globally, ESCOs are acknowledged by the International Energy Agency as pivotal contributors to the promotion of energy efficiency. However, the ESCO market in Australia is still in its infant stages.
This report aims to gain an understanding of ESCO models and barriers hindering the development of the ESCO market, along with potential actions to support the development of the ESCO market in Australia. Starting with a review of major experiences of international ESCO markets, it explores the main offerings, technologies and services offered, and business models and best practices from around the world. The focus is then shifted towards the Australian context. We interviewed industry experts within ESCOs and end-users in the Australian market with the aim of identifying barriers, major challenges and potential higher priority actions to catalyse the growth of the ESCO market in the region.
What is an energy service company (ESCO)?
Energy service companies offer a range of energy solutions that can include development, design, implementation and project financing for energy efficiency projects that save energy and reduce costs and emissions at the customer's facility, as well as power generation and energy supply. So rather than the end user having to seek out the solutions, find an equipment supplier, financing etc, they enter into agreement to be provided with energy services and the ESCO works out the best, most efficient way to supply them.
ESCOs assume the technical and performance risks associated with a project and are different to other energy efficiency solution providers in that they use performance-based contracting. Usually the ESCO's compensation is directly linked to the actual energy saving.