An ESCO( Energy Service Company Or Energy Saving Company) 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.
Energy services include a wide range of activities, 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, lighting, etc.)
ESCO project elements
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.
1. Guaranteed Saving Contract Installment plan where installment amount would be paid from the energy saving & reduction in maintenance cost after implementation, installment amount would be lesser than energy saving achieved.
2. Shared Saving Contract Larger size of projects of Govt. & Private sector are carried out through performance contract. Where in financial institute gives loan to ESCO which is recovered by ESCO from the saving in energy and maintenance cost of the customer