Energy Service Companies

At the heart of innovative financing models for efficiency

Energy service companies (ESCOs) deliver energy efficiency projects that are financed based on energy savings. Given the need to rapidly and significantly increase financing for energy efficiency, interest in ESCO business models is growing.


Ireland



Insights

There is great potential for ESCOs in Ireland; however, a formal ESCO association to represent the market has yet to be established in Ireland. Dublin alone has over 20,000 commercial and public sector buildings, accounting for 27% of the city’s energy consumption. These buildings spend approximately €298 million annually on energy; a number of ESCOs are well placed to implement energy efficiency projects to reduce this energy spending ( GuarantEE 2017 ). Despite public sector potential, the majority of EPC projects in Ireland operate within the private sector where contracts are negotiated with an individual ESCO and not tendered on the open market.

Overall, the Irish ESCO market is slowly growing. Currently the majority of ESCOs operating in the Irish market are international companies, with small branches in Ireland. In 2014, the development of the Energy Efficiency Fund of EUR 70 million was created in conjunction between government and private investors. The Fund has attracted companies from the construction sector to engage with the EPC model. The addition of these construction firms to the ESCO market reinforces the trend of EPCs in Ireland being executed as a subsidiary of a larger business. The beneficial change is the increase in domestic engagement with the EPC model.

The main area of growth for ESCOs in the Irish market is within the lighting sector; this is a common trend for young ESCO markets that are less familiar with executing EPCs due to simpler contracts where savings are achieved by switching to LED lighting.

The National Energy Efficiency Action Plan
Drivers Barriers

An example of innovative EPC financing in Ireland is Urban Volt, a LED lighting firm (in this instance acting as the ESCO) who partnered with SUSI Partners, a specialist energy efficiency fund. EUR 30 million was made available in funding over a two-year period to Urban Volt to install energy efficiency lighting free of charge for small businesses, which is paid back through the savings achieved. Urban Volt was responsible for bundling these smaller projects to achieve sufficient investment volumes. SUSI Partners would then buy the projects, taking over the credit risk of the customer defaulting. This model frees up cash flow for the ESCO to develop new projects, reduces their credit risk and enables start-ups and smaller firms to access capital (Energy Efficiency Market Report, 2017).