An Energy Service Company, or ESCO, is a company that offers energy services which may include implementing energy-efficiency projects (and also renewable energy projects) and in many case on a turn-key basis. The three main characteristics of an ESCO are:
- ESCOs guarantee energy savings and/or provision of the same level of energy service at lower cost. 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, or that the same level of energy service is provided for less money.
- The remuneration of ESCOs is directly tied to the energy savings achieved;
- ESCOs can finance, or assist in arranging financing for the operation of an energy system by providing a savings guarantee.
Therefore ESCOs accept some degree of risk for the achievement of improved energy efficiency in a user’s facility and have their payment for the services delivered based (either in whole or at least in part) on the achievement of those energy efficiency improvements.
The typical ESCO project includes the following elements:
- Site survey and preliminary evaluation;
- Investment grade energy audit;
- Identification of possible energy saving and efficiency improving actions;
- Financial presentation and client decision;
- Guarantee of the results by proper contract clauses;
- Project financing;
- Comprehensive engineering and project design and specifications;
- Procurement and installation of equipment; final design and construction;
- Project management, commissioning and acceptance;
- Facility and equipment operation & maintenance for the contract period;
- Purchase of fuel & electricity (to provide heat, comfort, light, etc.);
- Measurement and verifications of the savings results;
- Operation and maintenance.
