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The diffusion of energy service contracting

Energy service contracts involve the outsourcing of energy-related services to a third party, or contractor. This project aims to identify the factors underpinning successful business models, to identify whether, how and under what conditions such models could diffuse more widely, and to assess their potential for reducing energy demand in order to provide recommendations for public policy.

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Start date: 1 July, 2013 - End date: 1 June, 2015

Many consider that the transition to a sustainable, low carbon economy will require companies to evolve from selling increasing volumes of products (e.g. cars, lights, motors) to efficiently delivering final services to consumers (e.g. mobility, illumination, motive power) at lower energy and environmental cost. For example, rather than simply selling lighting equipment, companies  may offer to provide specified levels of illumination for a client and to take responsibility for the ownership, installation, operation, maintenance, upgrading, replacement and/or disposal of the necessary equipment. Such an arrangement can capitalise on the core strengths of the contractor, achieve cost savings for the client and reduce the energy and emissions required to obtain a given level and quality of illumination.

Contracts with these features are becoming established, but are currently confined to a limited number of sectors, organisations and energy services and typically involve incremental changes to existing arrangements rather than more radical innovations. For many, the full promise of ‘product-service models’ in general and ‘energy service contracting’ in particular has yet to emerge.

The project aims to explain the evolution of ‘energy service’ business models to date, to identify the factors underpinning successful business models, to identify whether, how and under what conditions such models could diffuse more widely, to assess their potential for improving energy efficiency and reducing energy demand and to provide practical recommendations for public policy. The methods include literature reviews, stakeholder interviews, surveys of energy service companies and their clients and case studies of individual energy service contracts.”

Project publications