An Energy Service Company (ESCO), or Energy Services Provider (ESP) is a business that develops, installs, and finances projects designed to improve the energy efficiency and maintenance costs for facilities. The ESCO acts as project developer for a wide range of tasks and assumes the technical and performance risk associated with the project.
- GUARANTEED PERFORMANCE: The ESCO installs equipment that it guarantees will generates savings for the payback period of the loan. If a piece of equipment fails during the payback period of the project, the ESCO is responsible for replacing it.
- PARTICIPATION: When negotiated with the ESCO during initial contract negotiations, owners participate in final equipment and subcontractor selection.
- RESPONSIBILITY: The ESCO is obligated to pay in the event of an energy savings shortfall, and must guarantee the energy savings. If actual savings are lower than guaranteed in any given year, the company reimburses the owner for the shortfall.
- VERIFICATION: Annual energy savings verification is conducted per the International Performance Measurement & Verification Protocol (IPMVP).
- ACCOUNTABILITY: The ESCO serves as a single point of accountability.
- FINANCING: Attractive, low‐interest financing options are available and can be arranged by the ESCO.
- COST CERTAINTY: Project cost is guaranteed.
- LOWER UTILITY COSTS: Lower energy consumption and peak electricity demand translate to lower utility bills
Usually, the service offered by an ESCO integrates all energy services for all of the phases of the project through a single contract. Furthermore, the ESCO, grounding its benefits in energy savings, offers a guarantee of obtaining rational solutions consistent with the customer needs. Thus hiring an ESCO enables customers to renew their technology and improve competitiveness and productive assets.
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