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.
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.
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).
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.
‘No cure, no pay’: The savings in energy costs are used to pay back the capital investment of the project for energy savings constructions. When the investment return period ends, the customers then benefit from the energy savings and pay project expenses to the ESCO.
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.
In an EPC, the ESCO provides a comprehensive set of energy saving services to fit the needs of the customer, including any of the following:
  • The improvement of boilers
  • The improvement of Liquid Chillers
  • Building automation and control systems／Energy Management Control Systems
  • HVAC (heating, ventilation, and air conditioning)
  • The improvement of lightening system
  • Reinforcing energy saving of building shell
  • Hot water and steam distribution system
  • Electric motor and actuator
  • refrigerating system
  • Cogeneration, combined heat and power system
  • Renewable Energy System
  • Power System
The comparison of ESCO and general company
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