1Q 2023

The Inflation Reduction Act Supports ESPC and EaaS Markets

The Inflation Reduction Act (IRA) supports unprecedented investment in clean energy. It provides a variety of incentives for energy efficiency, onsite renewable generation, and energy flexibility technologies in public and commercial buildings, including hard-to-decarbonize industries. The act supports decarbonization markets through direct funding; tax credits, such as the Investment Tax Credit (ITC), Production Tax Credit (PTC), and the 179D tax deduction; and funding for broader market initiatives, such as development of emerging technologies and stretch codes. Energy services markets, specifically energy service companies (ESCOs) and energy as a service (EaaS) providers, are expected to benefit significantly from the new regulation, leading to higher than anticipated revenues in the coming decade.

This report discusses aspects of the IRA relevant to energy savings performance contracts (ESPC) and EaaS projects and considers implications for market growth over the next decade. It reviews critical questions that will impact market growth trajectory, such as the impact on customer sentiment, and new prevailing wage and apprenticeship requirements. Based on this analysis, the report presents two potential market forecast scenarios that stakeholders might see play out because of the IRA.

Pages 10
Tables | Charts | Figures 3
  • What are the provisions of the IRA relevant to ESPC and EaaS markets?
  • How will the IRA impact different market verticals?
  • How is the IRA expected to impact ESPC market growth?
  • How is the IRA expected to impact EaaS market growth?
  • What factors are going to influence market growth trajectory?
  • ESCOs
  • EaaS providers
  • OEMs and contractors
  • Policy makers
  • Investors




The IRA Supports Unprecedented Investment in Energy Efficiency and Renewable Energy

Public Buildings Are Expected to Benefit the Most for Energy Efficiency

Benefits to Energy Efficiency in Commercial Buildings Are Limited

Renewable Energy Infrastructure Incentives Will Improve Project Economics Across Market Segments

Energy Services Market Is Expected to Grow More Rapidly, Exact Impact Depends on Multiple Factors

Exact Impact on Market Growth Will Depend on Customer Sentiment

Will Customers Choose to Pay for More Projects via CAPEX as Opposed to Energy Services Contracts?

Will Customers Postpone Projects Since Incentives Are More Certain?

Will Incentives Attract New Customers or Just Encourage Typical Buyers?

How Quickly Can Vendors Work within Their Own Organizations and with Contractors to Meet Prevailing Wage and Apprenticeship Requirements?

Market Forecast Scenarios

Energy Service Providers Should Plan to Take Advantage of Incentives

  • Forecast Scenarios Relative to Baseline Forecast, USA: 2023-2032
  • ESPC and EaaS Revenue by Scenario, USA: 2023-2032
  • Summary of Energy Efficiency and Renewable Energy Incentives by Segment
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