The Effect of Energy Service Companies on Energy Use in Selected Developing Countries: A Synthetic Control Approach

Abstract

This study investigates the empirical effect of the service provided by the energy service companies (ESCOs) on the total energy use in thirteen developing countries by employing a transparent and data-driven statistical methodology, the synthetic control method (SCM). This methodology compares the post-treatment total energy use of a treated country, a country that has initiated ESCO activities, with the trajectory of total energy use for a synthetic control unit, a combination of economies being similar to the treated country with the exception of no ESCO activities initiated. The SCM can account for the potential heterogeneity regarding the effect of ESCO activities in various countries. In these thirteen countries, we find that the ESCOs exert a strong energy-saving effect in Colombia, Ghana, Kenya and South Africa; while a robust energy-using effect is found in Chile. No significant energy using or saving effects are found in the rest of treated countries.