Catalysing the energy service market: The role of intermediaries

Abstract

The UK market for energy service contracts is expanding, owing in part to the emergence of intermediaries for those contracts in different parts of the public sector. These intermediaries combine a legal framework for establishing contracts with an organisational framework that facilitates contract negotiation and execution. This paper examines the nature and operation of these intermediaries in more detail, including their achievements to date and their similarities and differences. It uses ideas from transaction cost economics to develop a theoretical model of the contracting decision and shows how intermediary organisations can lower the transaction costs incurred by both clients and contractors, thereby increasing the viability of contracting. The paper argues that intermediaries can play an important role in expanding the market for energy service contracts, and hence in delivering cost-effective energy efficiency improvements throughout the public sector.