ESCO MODEL

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The ESCO (Energy Services Company) model is a business model used to finance and implement energy efficiency and sustainable energy projects. This model is often used for renewable energy projects such as solar installations. Below is a summary of the basic principles of the ESCO model and how it works:

  1. Contract: The business or institution identifies the need to improve energy efficiency or install renewable energy facilities. It then enters into a contract with an ESCO company. This contract sets out the scope, duration, financing, and energy saving targets of the project.
  2. Financing the Project: The ESCO company undertakes the financing of the project. This allows them to cover the investment costs and bring the project to life. Usually this financing is covered by revenues from the long-term energy savings of the project.
  3. Implementation and Operation: The ESCO company designs, installs, and operates the project. In the case of solar installations, solar panels are installed, and energy production begins.
  4. Energy Saving: When projects are completed, energy savings begin. The business or institution pays the ESCO company depending on the amount of energy saved.
  5. Shared Savings: The ESCO company receives a share as energy savings are achieved. This share is contractual and still saves on energy costs for the business or institution.
  6. Contract Duration: ESCO contracts typically involve long-term commitments, so the energy revenues saved are paid to the ESCO company over time. After the contract ends, the business or institution owns all of the energy savings.

The ESCO model makes it easier for businesses or institutions to access renewable energy projects and helps them overcome financing problems. It also incentivizes them to achieve energy efficiency improvement targets and reduce environmental impacts. This model is particularly useful for long-term projects such as solar installations.