Energy service collaborations—it is a question of trust

Energy services have been highlighted both in European Union directives and in academic literature as an important tool to increase energy efficiency. Performance-based energy services, i.e., outsourcing energy management in performance-based remuneration contracts, is said to overcome many of the barriers that have been used to explain the energy efficiency gap. Energy service companies (ESCOs) help organizations to implement energy-efficient solutions in order to reduce energy costs. By combining science and technology studies (STS) analysis and economics in an interview study of firms, the paper contributes insights on the relational nature of energy service collaborations. The objective of the study is to describe how knowledge and incentives affect trust between partners in performance-remunerated energy service collaborations. Performance-based remuneration is one aspect that makes energy service contracts complex. On the one hand, risk is recognized as an important barrier to energy efficiency. Since remuneration to ESCOs is based on energy savings, they also share the financial and technical project risk with their clients. On the other hand, performance-based remuneration can create a lack of trust. Performance is measured in calculations made by the ESCO, calculations that demand expertise that client firms do not possess. ESCOs are consulted for their knowledge on energy efficiency and therefore an imbalance of knowledge is in the nature of energy service collaborations. The paper concludes that if the initial doubt is overcome, long-term collaborations can be advantageous for both parties, since this builds trust and generates long-term profits.