Energy Services Company or Energy Savings Company ESCO or ESCo

An energy Services company or energy savings company (acronym: ESCO or ESCo) is a business providing a broad range of comprehensive energy solutions including designs and implementation of energy savings projects, retrofitting,energy conservation, energy infrastructure outsourcing, power generation and energy supply, and risk management.

Genesis of ESCO

The start of the energy savings business can be attributed to the energy crisis of the late 1970s, as entrepreneurs developed ways to combat the rise in energy costs. One of the earliest examples was a company in Texas, Time Energy, which introduced a device to automate the switching of lights and other equipment to regulate energy use. The primary reason that the product did not initially sell was because potential users doubted that the savings would actually materialize. To combat this doubt, the company decided to install the device upfront and ask for a percentage of the savings that was accumulated. The result was the basis for the ESCO model.

Energy Performance Contracts (EPC)

A performance-based procurement method and financial mechanism for equipment/system whereby electricity bill savings that result from the installation of new equipment/systems (reducing energy use) pay for the cost of the project.

• A "Guaranteed Savings" Performance Contract includes language that obligates the contractor, a qualified Energy Servicess Company (ESCO), to take a cut from their payment if the savings fall short of the guarantee.
  
• A "Shared Savings" Performance Contract includes language that obliges the Energy user to make pre-fixed value or percentage payments to the contractor, a qualified Energy Servicess Company (ESCO), of the savings realised by the Energy User until a predetermined time period or a preset amount is achieved.