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.


Korea



	Share of activity
Residential	25
Non-Residential 	0
Transport	0
Industry	75
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	Share of activity
Public	15
Private	85
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	Share of contracts
Energy Performance Contract Shared Saving	5
Energy Performance Contract Guaranteed Saving	95
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Insights

An ESCO in Korea has a broader overall scope and is defined as a business that develops, installs, and arranges financing for projects designed to improve energy efficiency. ESCOs guarantee the energy savings and invests in energy saving facilities.

While the majority of ESCO projects focus on delivering energy savings, 23% of ESCO projects include renewables.

Average duration of ESCO projects in Korea: Survey Data

	Share of activity
          Debt borrowed by the client	20
          Debt borrowed by the ESCO	80
        
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Government policy plays a central role in the Korean ESCO market. Capital financing and registration systems administered by the Korean government facilitate majority of ESCO activity and organisation. The new climate change policy is expected to revitalise the ESCO market in Korea by driving demand for enhanced energy savings and CO2 reductions.

The credit rating of both ESCOs and end-users pose a large barrier in obtaining finance for ESCO projects, inhibiting the amount that can be borrowed from financial institutions.