The ESCO business model has a particular characteristic. At the risk of one of contracting parties, benefits for both parties are obtained. Despite this peculiar feature, some barriers in the ESCO business model brake a faster development.
We want to share with you the summary i made for my self.
The financial dimension of barriers in the ESCO Business model.
Universal Barriers to MUSH , Commercial and Industrial sectors.
High upfront capital cost.
Uncertainty of savings and perceptions of risk. A matter of confidence and reliability
Budgets do not prioritize energy efficiency: Maximizing energy efficiency is not generally part of the core mission statement of an institution.
Lack of secondary markets.
Municipalities, Universities, Schools, and Hospitals (MUSH) Barriers
Policies that fail to incentivize investments.
Limited capacity and staff resources to pursue energy efficiency.
Commercial Property and Industrial Facility Barriers
High development costs. Protection from risk requires higher overall development costs that in MUSH sector.
Long payback periods vs. corporate focus on short-term profits.
Mortgage lender limitations on external financing of equipment and systems because are considered part of the assets securing the original mortgage.
Limited external financing products available.
Landlord and tenant split incentives problem. The landlord has to pay the buildings´ efficiency upgrading. The tenant is responsible for paying the energy bill.
It makes obvious that the enlargement of real ESCO market has to do with the development of new contracting models tailor made around the needs of each customer. New contracts have to offer specific solutions to specific financial and risk perception problems.