Abstract for: Modelling a Startup Energy Service Company (ESCO) Using System Dynamics

This paper describes the development of a system dynamics model for exploring and learning about the dynamics of a startup energy service company (ESCO) which business is based on energy performance contracting (EPC). The simulation of that model provides a helpful basis for analysing and explaining the development of key variables, and for accelerating learning on the managerial processes that are critical for the success of the venture. The simulation of the modelled firm produces an overall negative market value added mainly due to long sales cycles, indicating a low probability of success. The model is sensitive to changes in the word-of-mouth contact rate parameter which suggests that effective management or policy interventions should consider initiatives that accelerate word-of-mouth among EPC adopters and prospects. Also, the model simulations point out that a policy to subsidize the interest rate on debt would provide an effective support to this business venture.