The development of a competitive and sustainable market for energy performance contracting (EPC) projects supplied by energy service companies (ESCO) may contribute to realising the existent potential of energy savings. Nevertheless, in different countries, like Portugal, this market is still immature and remains far below its promised potential. Different from the existent research that assumes factors operate independently and focusses on how to remove barriers to the adoption of EPC, this study provides insights into how delayed impacts from interdependent policies affect the business processes of an energy service business venture. To understand the relationships beneath the dynamics of those small and developing ESCO markets in the European Union (EU), a system dynamics model of an ESCO venture was developed. The model simulation provides a powerful tool to improve understanding and accelerate learning of the policies that critically impact venture performance. The base case simulation shows an unattractive market value added (MVA) and a high probability of a firm’s failure. The demand simulation is quite sensitive to the word-of-mouth (WOM) parameter, and simultaneous initiatives to positively intensify it with incentive public policies such as low interest rate and demonstration projects significantly increased the MVA, reduced the probability of the firm’s failure, and consequently increased the widespread adoption of EPC.

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Business simulation,Energy efficiency,Energy policy,Energy service company (ESCO),System dynamics

• Chemical Sciences - Natural Sciences
• Earth and related Environmental Sciences - Natural Sciences
• Other Natural Sciences - Natural Sciences
• Environmental Engineering - Engineering and Technology
• Social and Economic Geography - Social Sciences