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Analysis of Performance Contracting Market in Middle East
Frost & Sullivan, April 2011, Pages: 72
Growing Interest in Green Buildings in the Middle East Drives the Performance Contracting (PC) Market
The PC market in the Gulf Cooperation Council (GCC) countries is expected to grow significantly over the next five years, mainly due to the growth in the infrastructure and increased interest in sustainability. While electricity is subsidized in the GCC countries, end-user concerns are growing over rising energy tariff rates and depleting energy reserves. PC is emerging as the best way to guarantee energy savings and though this embryonic market has very few participants currently, the booming real estate market will continue to bolster growth. “The need for saving energy, growing awareness on environment sustainability, increasing electricity tariffs, and mitigating measures for carbon footprint reduction are considered as strong growth boosters for the PC market in the GCC countries in the next 5 years,” says the analyst of this research service. “With signs of a recovering economy, demand from commercial and industrial sectors is expected to rise due to increase in construction activities of industrial and commercial complexes.”
Performance contracting, being a core business proposition of energy service companies (ESCOs), offers attractive ways and means to conserve energy and pave the way towards sustainability. Developing technology in the field of energy conservation is expected to increase the demand for performance contracting. “However, subsidized electricity makes users ignore energy saving measures; hence energy-efficient investment becomes unattractive,” observes the analyst. “Even though there has been a marginal increase in energy tariff rates by 10 percent over the last 5 years to the non-household user, end users are reluctant about energy efficient investment.”
Nonetheless, success stories of the mature markets such as the U.S., the EU nations, and Asia Pacific countries can be used to boost end-user confidence. Energy-saving measures will enable sustainability, which has become the central theme for global carbon footprint reduction. These avenues can be translated into business opportunity by investment firms/commercial banks by funding energy-efficient projects. Building automation/management system (BAS/BMS) companies are becoming active in setting up PC services as a part of their offering. PC can be bundled as a service with energy-efficient equipment supplies and BAS/BMS companies can bank on their brand name and value chain to establish themselves in the PC market. In addition, strong GCC regional knowhow, high risk appetite with strong cushion toward financial burden, and in-house capabilities to fund energy efficiency projects are some of the key competitive factors in the PC market in the Middle East. “To gain a competitive advantage amongst competitors, it is important for an ESCO to offer one-stop solutions sprawling from engineering design and energy audits to funding the energy-efficient projects,” suggests the analyst. “ESCOs need to aggressively look into energy saving opportunity and demonstrate successful projects.”
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
By Type of Service:
- Installation services
- Commissioning services
- Measurement & Verification services
By Type of Contract:
- Guaranteed saving
- Shared savings
- Design/ Build
By End-user Segment:
- Industrial
- Commercial
By Opportunity Analysis:
- Electricity Net Generation in GCC
- Electricity Net Consumption in GCC
- Potential Energy Saving Market in GCC – Addressable vs. Untapped
This Frost & Sullivan research service titled Analysis of Performance Contracting Market in Middle East focuses on performance contracting by energy service companies in Saudi Arabia, Qatar, the United Arab Emirates, Oman, Bahrain, and Kuwait. In this research, Frost & Sullivan's expert analysts thoroughly examine the following application segments: commercial buildings (offices and retail), residential buildings (apartment and palaces), hospitality buildings (hotels/resorts and hospitals), infrastructure (airports, seaports, railway stations, roads/highways/bridges), educational buildings (universities/colleges, schools), industrial buildings (factories, warehouses), and Government buildings and others (ministries, military/defense and entertainment/leisure complexes, mosques).
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