Why the growth of energy service companies is uneven globally

Energy efficiency is one of the most cost-effective tools for enhancing energy security, reducing household energy bills and supporting countries' efforts to reduce emissions. Energy service companies (ESCOs) - firms that develop and implement energy efficiency projects typically financed through verified energy savings - are playing a growing role in delivering energy efficiency improvements across buildings, industry and transport infrastructure worldwide. By integrating project development, financing and performance guarantees, ESCOs can offer a proven way to reduce upfront investment barriers and shift technical and performance risks away from consumers.

As highlighted in the IEA's Energy Efficiency 2025 report, global ESCO investments grew by 10% in 2024, reaching a record USD 42 billion. Over the past five years, the sector's average annual growth has reached 5% - more than double the rate since 2020.

However, this growth remains highly concentrated and uneven. More than 75% of global ESCO investment occurs in just two countries -- the United States and China - where strong policy and institutional frameworks have spearheaded recent growth.

In China, successive Five-Year Plans have provided sustained policy direction, driving project values from about USD 5.9 billion in the early 2010s to over USD 22 billion in 2024. Growth has been sustained by progressively tighter energy efficiency and emissions reduction requirements, alongside formal support for energy performance contracting.

In the United States, which already had one of the most well-established ESCO markets, the Energy Act of 2020 accelerated market growth by requiring federal agencies to implement at least half of identified efficiency measures through performance contracting. This created stable public sector demand for ESCO services and nearly doubled the market compared with pre-2020 levels.

Investment levels in Europe meanwhile experienced a modest contraction in 2024, remaining close to pre-2020 levels. However, some countries are showing renewed dynamism. In Poland, more than 130 energy cooperatives adopted ESCO business models in 2025 - double the previous year. In Italy, where 900 companies are certified as ESCOs, average market revenues increased by over 78% in the past three years.

Overall, ESCO markets scale up where policy frameworks are durable, procurement rules are aligned with performance contracting, and projects are implemented through standardised processes. In markets lacking these conditions, high transaction costs, contractual complexity and policy uncertainty continue to limit demand. These barriers are most visible in smaller scale and residential building projects, where ESCO models based on energy savings are harder to implement.