As the energy efficiency and retrofit market in UAE grows rapidly, the identification of potential opportunities in the MENA region has become crucial for all Energy Savings Companies (ESCOs). The fundamental factors driving the ESCO market and energy savings are, improved performance or efficiency of existing equipment in the facility and decreased operating hours to achieve the same or higher level of output.
The UAE ESCO market, under the supreme guidance of Ministry of Energy (MoE) and Etihad Energy Services (Super ESCO), is spear heading towards achieving the targets set in the “UAE Energy Strategy 2050”, which is one of the first unified energy strategy in the country that is based on supply and demand. The strategy that is aiming at increasing the contribution of clean energy in the total energy mix from 25 per cent to 50 per cent by 2050 and reducing carbon footprint of power generation by 70 percent, seeks to increase consumption efficiency of individuals and corporates by 40 percent.
Hence, some of the key trends in the UAE ESCO market based on a recent survey carried out by Regulatory & Supervisory Bureau (RSB) Dubai for 25 ESCOs are as follows –
Primary business & performance
The primary business function of registered companies is mainly categorized as, 38% pure ESCOs, 25% Facility Management Companies and 28% Product Manufacturers & Retailers.
There is also an increasing section of MEP/Construction Contractors (nearly 5%) getting involved in energy savings projects.
Two-thirds of the ESCOs are satisfied with their overall business performance and 45% have confirmed completion of 3 or less contracts since the time they started their ESCO business model.
ESCO project financing
With 57% of the UAE ESCOs having been in the business for less than 5 years, 75% of the ESCOs are capable of financing projects on their own.
Also, 60% report that it takes about 12 – 24 months to win a contract with only 3 ESCOs reporting signing of contract within 6 months.
Most of the ESCOs have their headquarters in the emirate of Dubai with only 5 having physical teams located in other emirates and almost 50% preferring to open branches in the next 3 years in the emirates of Ras Al Khaimah and Abu Dhabi.
When it comes to expanding business overseas in the MENA region, about 45 – 49% UAE ESCOs plan to open branches in Saudi Arabia as top preference, followed by Egypt and Oman.
Client willingness to participate in energy savings initiatives owing to the complexity of the contract.
Lack of project finance and government support in terms of tenders.
To overcome the barriers, it is recommended that regulators provide incentives or give penalties to building owners depending upon their conformance with the contract.
Local regulators can also support by providing insurance for savings and standardized building benchmarking.
In conclusion, 60% ESCOs reported that the UAE ESCO market in the next 3 years shows good potential with the minimum contract size ranging from AED 6 million, for continuous operation, to AED 12 million.
Source:  UAE Ministry of Energy Official website
 MENA RetrofitTech Summit 2019, Le Méridien Hotel, Dubai, UAE