Building an ESCO Market from the Ground Up: From UNDP Advisory to Renovating Buildings in Melaka

Energy Performance Contracting looks straightforward on paper: an ESCO invests in energy-saving measures in a client's building, and gets paid from the guaranteed energy savings. The reality - as anyone who has actually signed one of these contracts knows - is that the model only works when four things line up: bankable building portfolios, a workable contract template, a client that trusts measurement and verification, and a financier that understands the risk profile. In Malaysia I have spent nearly two decades on both sides of that equation.

The policy side: UNDP/GEF and the Energy Commission

Between 2000 and 2018 I worked repeatedly on the enabling environment for ESCOs in Malaysia - starting with a Danced-funded survey of ESCOs and a strategy for ESCO development in 2000, moving into the Capacity Building in the Energy Commission on EE/DSM programme (2002-2006) as Chief Technical Advisor, and later returning as EE Transaction Services Advisor to the UNDP/GEF Building Sector Energy Efficiency Project's Energy Performance Contracting Fund in 2017-2018.

The EPC Fund was intended to demonstrate a workable financing route for EPC projects in Malaysia. My role was due-diligence review of project documentation and loan applications, review of the fund's operations, and marketing and pipeline development. That kind of transaction advisory work is where most ESCO markets stall in practice: not because there are no buildings and no measures, but because the credit committee cannot see how to price the risk.

The implementation side: Danish Energy Efficiency Partners

The best way to understand what a working ESCO needs is to run one. In the mid-2010s I led the preparation of the business plan for Danish Energy Efficiency Partners - an ESCO established in Denmark and Malaysia. We obtained equity funding from the Danish Climate Investment Fund and commercial banks, structured the vehicle, and prepared and entered Energy Performance Contracts with clients. That work forced me to answer questions that policy work rarely does: how do we price a 10-year performance guarantee, who carries the measurement risk, and what does the balance sheet look like if a client defaults?

Delivering deep renovations of state government buildings in Melaka

In parallel, in 2014 I served as team leader for the Execution of Energy Efficiency in State Government Buildings project in Melaka, Malaysia, financed with support from the Danish Investment Fund for Developing Countries (IFU). We conducted investment-grade energy audits and GHG reduction assessments across nine state government buildings, prepared implementation plans including feasibility studies, finance plans and contracting modalities for EPC, and specified the actual measures - chiller replacements, solar thermal, insulation, pump replacements and LED lighting - that the buildings needed.

That project matters because it took Malaysian ESCO conversations out of the seminar room and into a real portfolio of public buildings. Nine buildings, real audits, real measures, real contracting modality - that is what a functioning ESCO market looks like at the beginning.

What actually unlocks an ESCO market

• A standardised EPC contract template that legal teams on both sides recognise
• Measurement and verification protocols aligned with IPMVP so savings claims are defensible
• A public building portfolio that acts as the anchor demand - not one-off pilots
• A financing product that matches EPC cash flows (typically 5-10 years), often via a dedicated fund
• At least one ESCO with a real balance sheet - not just consulting companies rebranded as ESCOs

How this shows up in current work

The same playbook is now being applied on a much larger scale in Türkiye's Energy Efficiency in Public Buildings 1 & 2 projects - combined loan of USD 500 million, targeting around 1,000 renovated buildings - where I have advised on ESCO guidelines, EPC contracts and measurement and verification. The instruments have grown; the underlying market-development logic is the same one we built in Malaysia twenty years ago.

ESCOs are not a policy fashion. They are a way of turning building physics into a bankable revenue stream - and that only happens when policy, finance and delivery are designed together.