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Energy Blog Energy Service Company – ESCO

Energy Service Company – ESCO

Chris Hurcombe
by Chris Hurcombe February 13, 2013
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An Energy Services Company is a company that will develop, install, and finance energy projects that are designed to improve energy efficiency and reduce on-going operational and associated maintenance costs. These types of contract are known as an Energy Savings Contract or ESCO for short.  Although the concept of ESCO contracts have been around for a number of years it is still an emerging market in the UK and is typically for customers with an estimated project cost of £100,000 pounds or more.

Energy Service Company - Shared Energy Saving Performance Contract

Our Energy Service Company model is based on a Shared Energy Saving Performance Contract (SESPCO) which means that we conduct both a desktop  audit and subsequent site survey to calculate your exact energy usage and patterns along

with your current buildings energy performance.  A high level proposal is then prepared which will calculate any financial savings that could be made, through the implementation of a range of key energy efficiency measures.

The measures available cover all aspects of a building’s performance, including heating, lighting, insulation, waste water heat recovery, and self generating renewable technologies.

For a client, the process requires no capital investment and we provide all the upfront capital to fund the project, and any investment made is recouped over an agreed payback period, based on the energy savings generated.

Our SESPCO Solution – How Does It Work

With our SESPCO solution the savings are shared from the first quarter onwards with the client, as opposed to the client under a normal ESCO model not receiving any energy saving benefits until the investment fund has recouped the capital and interest on any project.

This obviously extends the pay back period for the funder’s but provides the client with immediate visibility of savings to the bottom line.

To date project costs are typically between £250k and £750k of capital expenditure, which although are still significant, this is below the threshold of more traditional schemes operated by some suppliers.  This solution is available for any private or public sector organisations with a combined heating and electricity spend greater than £250k.

Contract Period & Managed Service Fee Agreement

Typically the contracts are for 7-years based on LED Lighting and 10-years where a combination of technologies is in place, such as LED Lighting, Solar PV, Biomass, Air Source & Ground Source Pumps, Voltage Regulator, Infra-red Heating and Hydro.

At the start of the contract stage a fixed quarterly flat fee payment is agreed, unlike a normal ESCO contract where payments are calculated and linked to your energy prices, making it extremely complicated and difficult to keep track of these variable payments.

A SESPCO contract makes it’s easy to understand and offers a fixed managed service fee for the entire length of the contract.

  • For LED Lighting this calculated on 90% of the energy saved and with the added benefit of maintenance for the period of the contract included within the fee.
  • For all other projects the client retains 100% of the energy savings, with the investment fund receiving any RHI payments.
  • Maintenance is included on all projects, which mean no nasty surprises or the need for any variable costs.
  • For solar and biomass projects you have 100% of the energy savings and generation.
  • Energy Service Company, everything is project managed.

Our solution also includes energy management and energy monitoring systems to constantly monitor the usage of your energy and improve the control of energy demand for your building.  The system can also remotely control temperatures, switch lighting systems and even power down electrical equipment.

This is a fully managed service fee agreement and is not a financial loan or lease purchase, the equipment remains the property of the fund that invests and the fund maintains and manages the equipment for the period of the contract through the Energy Service Company.

Energy Service Company – Qualifying Customers & Process

We are now actively seeking any private or public sector organisations with a combined heating and electricity spend greater than £250k.

  • You will need to provide us with copy invoices (energy bills) to verify your profile and total spend
  • We will then present an initial solution presentation to client.
  • We arrange a site survey to establish your energy saving opportunities.
  • After a formal presentation of the survey findings we would ask you to sign a formal letter of intent if you wish to proceed with our offer.
  • The fund approves project and we appoint a third party independent verification specialist, to confirm the survey findings and energy savings with a report to the client and the fund.  This avoids any potential disputes in the future and agrees the baseline of cost savings for the project.
  • We project manage and co-ordinate with the various contractors until completion of the project.
  • Your building is managed and monitored by our team and we become your first point of contact with regards to allocation of maintenance and call outs from contractors.

For more information on our Energy Service Company solution, please contact us to discuss.   For more information on our range of FREE commercial biomass boilers, simply click this link for a product overview.

Or call us to learn more on the Energy Service Company business model and how we can help your business cut costs and reduce energy.