Energy management, the immediate scaleable option to counter the crisis, has resulted in an exponential increase in market growth, presenting significant investment opportunities, particularly for venture capitalists in energy service companies.
New analysis from Frost & Sullivan (financialservices.frost.com) European Energy Management Services reveals that the market earned revenues of €14.53 billion in 2008 and estimates this to reach approximately €21 billion by 2013, due to favourable government legislations, growing emphasis on energy security and increasing awareness about the benefits of energy management.
"Concerns over climate change and depleting energy resources have initiated the 'Green' movement with consequent investments in energy efficient technologies," notes Frost & Sullivan Research Analyst Sivapriya Ramakrishnan. "This has led to a number of regulations and climate control measures, setting clear targets to reduce energy consumption."
The cumulative effect of these factors is reflected in market growth with revenues for energy management services expected to grow at a compound annual growth rate (CAGR) of 8.2% over the period 2008 to 2013. Several European governments have rolled out numerous incentives and action plans to counter the issues of climate change and depleting resources for which energy service companies are considered market actors. The European Union has initiated an action plan for energy efficiency for the period 2007 to 2012, which aims at a 20% reduction in energy consumption by 2020. This calls for a sizable investment in energy efficiency in the initial years of the plan with energy service companies playing a crucial role in the achievement of the directive.
A primary concern for the market is limited access to funds for energy management contracts. Despite large energy service companies who are able to self finance their projects, the many small energy service companies that populate the market are crunched for funds in the already unstable financial economic scenario.
Various associations, along with the government, have undertaken several initiatives to enhance the availability of finance for energy service companies and more funds are largely dependant on the recovery of the economy. For instance, the European bank for reconstruction and development (EBRD) provides financial solutions especially for Energy service companies; EETEK Holding PLC. is a direct equity investment company, which concentrates specifically on energy services in Central and Eastern Europe.
"Better access to finance largely depends on the recovery of the economy and presents an opportunity for private investors to step up and provide the much-needed finance for energy service companies," says Ramakrishnan. "Investment from venture capitalists and private equity participants can serve as profitable avenues and considerably enhance opportunities for energy service companies."
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European Energy Management Services / N53B