Emerging Markets and Foreign Opportunity for Energy Efficiency Service Companies

Published on August 18th, 2010 | by


Energy efficiency service companies (ECOs) soon may be venturing abroad to take their businesses into regions where the demand for energy is growing tremendously. The most notable countries in need for energy efficiency technology and services are China, India, and countries in the Middle East. Although China’s solar energy industry is among the world’s largest, they still heavily rely on coal as their main energy resource. Energy reliability is still an issue within these countries and efficiency is a growing concern in the large cities and economic centers.

The International Trade Association’s 2010 Energy Industry Assessment lays out the potential for exporting energy services. Johnson Controls, Rockwell Automation, and Honeywell are among the few U.S. companies to expand their services into international markets. The same green building designs and technologies are needed abroad as in the U.S. but these foreign nations are also putting a lot of focus on district energy. District energy is the connection of many businesses and organizations heating and cooling needs through a network of pipes to a centralized energy source. District energy is most efficient with the centralized energy source being a cogeneration facility or utilizing a renewable such as geothermal power. Cogeneration power stations are more efficient than conventional plants because they are able to capture the heat by-product from the electricity generation and heat or even cool the nearby buildings through absorption chillers.

China just surpassed Japan as the world’s second largest economy and this has direct correlation to the amount of energy they demand. The International District Energy Association estimates that China will invest $360 billion in district energy over the next ten years. The ITA report notes that U.S. companies could tap into at least $8.2 billion of China’s growing district energy market. Moreover, district cooling in the Middle East is expected to reach $20 billion in the next twenty years.

The reason that only three U.S. ECO corporations have ventured abroad is because of the serious barriers to entry into these markets. These obstacles include lack of protection for intellectual property, demands for guarantees on letters of credit, and no cap on financial losses in contractual agreements. For the smaller ECO, the obvious barriers would be the lack of exporting experience and the high possibility of a foreign nation taking advantage of their energy efficiency technologies.

Image Sprengben via Flickr under a CC license.


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