Detailed Analysis of the ESCO Market in Japan: Based on JAESCO Survey

Chiharu Murakoshi, Hidetoshi Nakagami, and Takashi Masuda, Jyukankyo Research Institute

Keywords

Abstract

It has been 7 years since ESCO businesses in Japan started in 1996. Currently, with 24 ESCOs working, the market volume of performance contracts has reached $117 million, and has doubled every year. The ESCO market is growing rapidly, but in a different way than the market in the U.S.A.

Key features of the ESCO market in Japan are the following: (1) Most ESCOs are departments or subsidiaries of large companies; (2) private sector buildings hold the major market share; (3) especially in 2002, the industrial sector market expanded suddenly; and (4) shared savings contracts hold more than one-half of the market. These features indicate that the Japanese market is still developing.

The ESCO business is expected to reduce energy use by 1 million kL oil-equivalent in 2010 under the policy of global climate change mitigation measures. Accordingly, the government has set forth various policies to promote ESCO business.

The Japan Association of Energy Service Companies, which leads ESCO business promotion in Japan, conducted a detailed survey of actual results of ESCO projects over the past two years. In this paper, we describe the detailed analysis of the survey results and the features of ESCO business in Japan, such as type and size of buildings, project cost, contract type, rate of energy savings, guaranteed rate of energy savings, cost reduction, simple payback period, contract years, and the energy-efficiency measures introduced, based on 356 projects which include 124 projects with performance contracts.