ESCO Model

The initial Energy Service Company (ESCO) started in Europe more than 100 years ago. Over the last ten years, there has been an increased interest within Europe for the provision of energy services. This has been driven by a restructuring of the gas and electricity sectors, and the push to mainstream sustainable forms of energy into the market.

ESCO Model

ESCOs offer energy services, such as:

energy analysis and audits,
energy management,
project design and implementation,
maintenance and operation,
monitoring and evaluation of savings,
property/facility management,
energy and/or equipment supply,
provision of service (space heating/cooling, lighting, etc.).

ESCOs have four fundamental operational features. First, ESCOs guarantee the energy savings and/or the provision of the same level of energy service at a lower cost by implementing an energy efficiency project. A performance guarantee can take several forms. It can revolve around the actual flow of energy savings from a project, can stipulate that the energy savings will be sufficient to repay monthly debt service costs for an efficiency project, or that the same level of energy service will be provided for less money. Second, the remuneration of ESCOs is directly tied to the energy savings achieved. Third, ESCOs typically either finance, or assist in arranging financing for the installation of an energy project they implement by providing a savings guarantee. Last, but not least, ESCOs retain an on-going operational role in measuring and verifying the savings over the financing term.

Under an Energy Performance Contract (EPC), an ESCO develops, implements and finances (or arranges financing for) an energy efficiency project or a renewable energy project, and uses the stream of income from the cost savings, or the renewable energy produced, to repay the costs of the project, including the costs of the investment. In EPC, ESCO remuneration is based on demonstrated performance; a measure of performance is the level of energy or cost savings or the level of energy service. Energy supply contracting (delivery contracting) is focused on the supply of a set of energy services (e.g. heating, lighting, motive power, etc.) mainly via outsourcing the energy supply.

Source: Bertoldi, P and Rezessy, S. 2005. Energy service companies in
Europe. Status report 2005. European Commission, DG JRC, Institute for
Environment and Sustainability, Renewable Energies Unit. EUR 21646 EN.

Total value of ESCO projects

Sources:
Vine E., 2005. An international survey of the energy service company (ESCO)
industry. Energy Policy 33: 691-704.
Ürge-Vorsatz, D. and Koeppel, S. 2007. Case Study on Energy Service
Companies ADEME-WEC workshop on energy efficiency Policies London, June
25-26 2007

REEEP Projects

Following are examples of REEEP-supported projects in connection with ESCO models:

Development of a Sustainable Financing Mechanism for the Implementation of Energy Efficiency Street Lighting Projects in India, State of Madhya Pradesh (Project Partner: Econoler International)
Innovative Financing to Accelerate Solar Water Heating (SWH) (Project Partner: Green Markets International)
Financing Municipal Energy Efficiency in the Commonwealth of Independent States (Project Partner: Alliance to Save Energy)

Guide To Fee-for-Service Solar Water Heating Programs

Guidelines for Financing Municipal Energy Efficiency Projects

Relevant Links

Global:
http://www.weea.org/Publications/Best%20Practices/BriefingPaper-ESCO.pdf
http://www.econolerint.com/en/publications.php

Europe:
http://re.jrc.cec.eu.int/energyefficiency/ (see section publications)
http://dsm.iea.org/ViewTask.aspx?ID=17&Task=10&Sort=1
http://www.tyndall.ac.uk/publications/working_papers/wp81.pdf
http://www.eurocontract.net
http://www.clearcontract.net

North America:
http://www.naesco.org/
http://eetd.lbl.gov/EA/EMP/ee-pubs.html
http://ies.lbl.gov/