ESCO financing — an overview

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This note discusses the “ESCO” financing model of implementing energy efficiency projects.

The concept of an energy services company, or ESCO, is a very broad one. However, it is possible to set out some characteristics which are common to all these companies:

  • ESCOs provide various services to their customers with a view to enhancing their energy efficiency. An ESCO’s remuneration for these services is calculated by reference to the level of savings that it achieves;
  • as a related point, an ESCO will provide a guarantee to its customers in respect of the service levels to be applied or the cost savings which the ESCO project will achieve; and
  • a project structured using the ESCO model is capable of being financed by third party funders.

ESCOs therefore provide an efficient, flexible and bankable method for customers to leverage the technical and performance management skills of energy specialists in order to enhance their energy efficiency…

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