Governance variety in the energy service contracting market

There is a surprisingly high variety of actors involved in the supply of energy service contracting arrangements. Based on an empirical record of approximately 2,500 contracting projects in the domain of space heating in Germany, the paper analyses specialisation patterns of contractors. An econometric model is used to test hypotheses derived from transaction cost economics, which contractor type should be expected for which kind of contracting project. According to our results, if physical, site and human asset specificity are high, governance modes are preferred, for which contracting represents a downward integration of business activities along the value-added chain. This includes the supply of contracting by municipal utilities. More specifically, municipal utilities occur as superior suppliers of contracting if combined heat and power is implemented, if the building served is connected to their gas grid and if it is a public building. This pattern could orient the development of contracting activities for utilities reconsidering their strategic position following the liberalisation of the electricity market.