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Annex 4.5 ESCO Model (Energy Service Company)

Energy Service Company or ESCO is a company format whose business is to achieve energy savings. In this way, the ESCO makes the investments and recovers them with a fraction of the economic savings that the user produces. This business model is envisaged with a great development potential because under this framework, ESCO is the owner and responsible for the equipment and the electrical production. In this way the consumer practically does not take risks of investment or operation.

There are 2 variants of the ESCO model, one corresponds to which the company ESCO supplies the energy and therefore the customer buys the energy at a price lower than the one bought in the network and the other variant corresponds to the model in which the income of the ESCO is based on the energy savings achieved by the consumer. The latter is widely used in contracts of companies that perform energy efficiency, but is less frequent in the contracts of generation companies. The ESCO power supply business model is the one that has taken the most force and is described briefly below.

Under the ESCO model of energy supply a long-term energy supply contract (10 to 15 years) is established for a price per kWh determined between the ESCO Company and the consumer. At the same time, ESCO is responsible for the investments, studies, installation and maintenance of the generation equipment. In this way, ESCO acts as an intermediary between the consumer and the design, construction, supplier and operation and maintenance companies and assumes all investment risk. The consumer, owner of the building where the generation project will be built/installed, should only pay energy to the ESCO.