What is an ESCO?

ESCO is the abbreviation of "Energy Service Company", which is a business that designs, installs, maintains, and finances retrofit and upgrade projects to improve the energy efficiency of buildings and facilities. Services provided by an ESCO are usually contracted through a performance-based contracting.

Through performance-based contracting, energy user (customer) can implement energy efficiency projects that pay for themselves through the energy savings, and in many cases require no other financial investment. After entering into an agreement with an energy user, the ESCO will identify and evaluate energy-saving opportunities and then recommend a package of improvements. The customer initially does not need to pay for the capital investment in the energy efficiency retrofits project but he/she will pay the investment through the cost saving resulting from the energy efficiency improvements under the project. In other words, the ESCO supplies the project funding, this relieves the customer of paying up-front capital costs.

Most performance-based energy efficiency projects have included the maintenance cost of the energy efficient equipment over the life of the contract. Therefore, during the life of the contract, the customer receives the benefit of reduced energy cost, as well as reduced maintenance cost.

Development of ESCO

The U.S. has the longest history of ESCO business worldwide. The Department of Energy (DOE) of the U.S. government has established a Federal Energy Management Program (FEMP) for promoting the related works. In addition to the government efforts, independent organizations have been developed for providing ESCO related information and support to the public. National Association of Energy Service Companies (NAESCO) is one of the well-established national trade organizations that promotes energy efficient services, technologies and products in the U.S. It also operates an accreditation program for establishing a recognized standard in the ESCO industry.

ESCO business does exist in Hong Kong in the way provided by individual building services contractors. Building owners (customers) will have to sign an agreement with the contractors through the use of performance-based contracting.

Further information

For more detailed information regarding the ESCO business, please refer to the official website of the This web page has hyperlinks which may transfer you to third-party website.National Association of Energy Service Companies (NAESCO).

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