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What is an ESCO?

What is an ESCO?

By Vanessa Peng

When thinking about investing in energy efficiency projects at your facility, the top concern is probably how to fit the upgrades into your budget. One way to guarantee you get the appropriate energy efficiency improvements and receive energy savings is through an ESCO.

What is an ESCO? What does ESCO stand for?

ESCO stands for Energy Service Company.

What does an ESCO do?

An ESCO helps facilities find ways to improve their energy efficiency through energy conservation measures and energy-saving opportunities. They often act as project developers and implement Energy Savings Performance Contracting (ESPC). 

An Energy Service Company will provide energy services to commercial facilities through consulting, financial products, and equipment installation. Some of their service offerings may include an energy efficiency retrofit, a renewable energy installation, and an energy management program.  

Energy Service Companies ESCOS guarantee your energy cost savings and will assume financial risks. An ESCO’s compensation is fully or partially linked to the promised performance of the energy efficiency projects implemented.

What is an EPC?

EPC stands for Energy Performance Contracting. It relates to the contract between the facility and the Energy Service Company. The contract details the energy efficiency improvement projects and efficiency measures the ESCO will provide and how the energy cost savings will be guaranteed, monitored, and validated. The contract is sometimes referred to as the Energy Savings Performance Contract or ESPC. 

How much does an EPC cost?

The cost of an EPC depends on what type of energy savings performance contract the customer has with the ESCO. There are three main types of EPC:

  • Shared savings. Under a shared savings contract, the investment is entirely absorbed by the Energy Service Company.
  • Guaranteed savings. In this type of contract, the client assumes the entire investment. The ESCO guarantees energy savings and if the actual savings don’t cover the investment, the ESCO will usually pay the difference. If the actual savings are more than the guaranteed amount, then the customer will have to pay the Energy Service Company a percentage of the savings.
  • Mixed savings. This contract is a mix of the shared and guaranteed savings contracts.

A typical range of an EPC is 8 to 20 years and can sometimes require a large initial capital investment.

What is the difference between an ESCO and an EPC?

The ESCO is the company providing the energy efficiency services and measures, while the EPC is the contract between the ESCO and the customer.

While an Energy Service Company is a great choice for a facility, it does have its drawbacks. An ESCO will offer low-cost and easy-to-implement energy efficiency projects in order to maximize profits. Traditionally, ESCOs will design and implement an EPC that favors their business and not their customers. These long term contracts will provide financial returns and additional benefits for the years to come but you are locked in and it’s nearly impossible to get out of one.

You may want to consider partnering with an energy efficient solutions company like U.S. Energy Recovery. Unlike ESCOs, we aren’t driven by our profits, but instead by your energy savings and your specific needs and goals.

Our typical contract is a maximum of seven years and is often shorter, as opposed to a long term one with an ESCO. We can also offer turnkey packages on dozens of energy efficiency measures and solutions. Our packages include an energy audit, energy saving product selection, project management, installation, rebates and incentives management, and warranty management.

Our offerings can also be financed without any upfront costs through our Energy as a Service model. You can learn more about how Energy as a Service works here.

We can monitor and verify your energy savings through solutions like power monitoring. Power monitoring devices can show you your energy consumption on individual devices within your building and help you with preventative maintenance. Take a deeper dive into power monitoring here.

When you partner with us, we help you apply and obtain rebates from your utility provider. This is another way you can verify your energy savings. Utilities offer incentives based on the amount of kilowatts and kilowatts per hour reduced from your energy saving project, so in that way your rebate is essentially a third party verifying your savings.

Connect with us so we can help you find the areas of your building that could use energy efficiency improvements, the solutions that can solve your energy-wasting problems, and how we can get them implemented in your facility with no upfront costs!

Find out how energy efficiency solutions can save you money, among other benefits.