Switching on ESCOs: Barriers, challenges and opportunities for the development of Australia's ESCO market

Abstract

Energy service companies (ESCOs) are key players in reducing energy consumption for businesses, recognized globally by the International Energy Agency for their role in promoting energy efficiency. Despite this, the Australian ESCO market remains in its nascent stages. This study aims to gain an understanding of barriers hindering the development of the ESCO market, along with potential actions to support the development of the ESCO market. This study examined previous literature and conducted 54 interviews with operators in the ESCO market and final users within Australia to identify the barriers and drivers to support ESCOs. The study highlights that the main barriers to ESCO market development stem from a lack of trust, complex business models, and lack of information on costs and benefits. However, these challenges can be addressed through drivers like ESCO project investment funds, tax incentives, and performance-based energy contracts, which enhance both financial viability and trust. This study concludes with key policy recommendations to strengthen the ESCO market: developing mechanisms for strategic factor allocation, establishing an accreditation system to enhance market credibility, and prioritizing capacity-building initiatives for long-term sustainability.