What is an Energy Service Company (ESCO)?
The relentless rise of electric and gas prices resulted from energy crisis since the late 1970s has provoked an integrated manufacturing of Energy Service Company (ESCO)
which mainly provides a broad range of comprehensive energy conservation measures including energy user diagnostic consultation, assessment and improvement for energy conservation,
designs and implementation of energy savings projects, as well as energy savings guarantee, measurement and verification. The ESCO is comprehensively adopted by over forty countries
throughout the world (such as the US, Canada, EU, Japan, Korea, Hong Kong and China), which is generally recognised as the crucial policy for promoting energy conservation and addressing
issues related to global greenhouse effect.
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Broad definition of WTO- Energy Services Company
The ESCO cover a broad range of activities relevant for energy related services including retail sales of oil and electricity, electricity generation, transportation, electricity transmission,
power distribution, water resources, energy conservation and the management of coal, electricity, gas, nuclear energy, petroleum, and renewable energy.
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Definition of Department of Commerce, Ministry of Economic Affairs -Energy Services Company
An ESCO is a company that implements energy-efficiency-related constructions and other technique-related services including designs and implementation, feasibility study, production, installation,
infrastructure, maintenance, verification, authorized operation, and the constructions of software and hardware service for operating renewable energy, energy conservation, enhancing energy efficiency
as well as restraining the peak load of electricity. (code: IG03010).
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The characteristics of ESCO
Amortised cost: |
The cost of improving energy savings is amortised by the savings in energy costs. |
Guaranteed savings: |
The benefit (saving) is guaranteed by adopting the ‘Energy Savings Performance Contracts’ (ESPC). |
Measurement and Verification: |
The energy savings is verified by adequate measurements and verification approaches or procedures. |
Turnkey Project Construction: |
ESCO provides holistic services including energy diagnostic consultation, assessment and improvement, construction design and planning, construction supervision services, funding arrangement, and financial planning. |
Non-property Project financing: |
The finance of the project is assured by an ESCO guarantee that energy savings will be sufficient to cover all the project costs. |
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Promise: Energy Performance Contracting (EPC)
EPC is a turnkey service which provides customers with a comprehensive set of adequate measurement and verification procedures for calculating energy savings and is accompanied with guarantees that the savings produced by a project will be sufficient to finance the full cost of the project. While the budget arrangement of project expenses (partial budget will be paid by the energy user) between the service provider and the customer is agreed upon in advance and documented in the performance contract, the investment recovery period can be shortened.
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The comparison of ESCO and general company
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Service Items |
General company |
ESCO |
1 |
Diagnostic Assessment |
Yes |
Yes |
2 |
Design and planning |
Yes |
Yes |
3 |
System Integration |
None |
Yes |
4 |
Installation and Construction |
Yes |
Yes |
5 |
Maintenance and warranty |
Yes |
Yes |
6 |
Guarantee of the energy saving |
None |
Yes |
7 |
Verification of the energy saving |
None |
Yes |
8 |
Financial planning |
None |
Yes |
9 |
Technical Consultant |
None |
Yes |