An energy service company (ESCO) is a business that develops, installs and arranges financing for projects that are designed to improve the energy efficiency and maintenance costs for a facility over a seven- to 20-year period.
“ESCOs provide a turnkey project that delivers energy efficiency, cogeneration capabilities and renewable-energy technologies,” said Donald Gilligan, president of the National Association of Energy Services Companies (NAESCO), Washington, D.C. Services provided by the ESCO include energy audits, the development and engineering of construction specifications, construction management and the development of the project’s financial package. In a typical ESCO project, these services are bundled into the project’s cost and are repaid though the dollar savings generated.
“An ESCO will measure the electrical and heating systems’ energy usage per various building parameters to find trouble spots where usage is excessive or not responsive to the customer’s needs,” said Jack Parchesky, senior application specialist, Onset Computer Corp., Bourne, Mass.
An ESCO also commissions the project, ensuring that all of the energy systems work to specifications and requirements. Finally, if requested, the ESCO will provide long-term maintenance and will verify the project’s energy savings.
An ESCO project improves a building’s energy management by studying its energy performance and identifying potential energy-conservation opportunities (ECO) or measures (ECM).
“The data is analyzed from both technical and financial feasibility perspectives, including occupant behavior and the building owner’s commitment to energy savings and management, including effectively using more efficient technologies, optimizing controls and instrumentation, and even training occupants to better manage their immediate environments,” said Jerry Spaulding, business unit manager for Eaton Corp., Cleveland.
ESCOs and electrical contractors
There are places and times that the jobs of the ESCO and the electrical contractor overlap. According to Gilligan, electrical contractors typically work as the subcontractor.
“The electrical contractor might help to develop the overall project, provide input into the energy audits, or might help to design the lighting system,” he said.
Spaulding said some of the ECOs or ECMs found in an energy audit will require facility infrastructure upgrades.
“In those situations, the ESCO will certainly work with the electrical contractor to plan and install the new energy-related systems,” he said.
The major difference between ESCOs and electrical contractors, Parchesky said, is that contractors usually don’t have the equipment required to perform the long-term measurements that enable them to make energy consumption recommendations to the building owner.
There are ways, however, for electrical contractors to move into the field and to work with an ESCO or even become an ESCO. To work with an ESCO, the contractor has to be well versed with the electrical equipment technologies—such as variable frequency drives, high-efficiency transformers and demand-response technologies—that fulfill the facility’s ECO or ECM requirement, Spaulding said.
“Working with an ESCO is relatively easy,” Parchesky said, adding that the contractor can leverage its expertise to assist the ESCO in determining the best energy-efficient solutions. “The EC has probably worked in more buildings and has experience and expertise to share with the ESCO.”
Gilligan said the contractor that wants to work with ESCOs must be willing to organize its business approach in a way that fits ESCO projects.
“For example, most of the lighting work on an ESCO project is done at night, so the contractor needs to be willing to forego some premiums,” he said.
Contractors also need to coordinate the product delivery and crew organization with the ESCO and must thoroughly understand the competitive pricing market for ESCO projects in their area.
Becoming an ESCO is tougher.
“The contractor would need to be willing to take on the financial responsibilities of being an ESCO and arrange the financing for projects that improve energy efficiency,” he said.
In addition, many of the systems involved in improving energy efficiency (outside of lighting, HVAC and their controls) are building envelopes, doors and roofs, and industrial process systems; ECs are not normally involved with these systems.
Gilligan said, to successfully become an ESCO, the EC must be willing to develop a project from scratch.
“ESCOs typically work for a year or more with the customer to develop a project even before the design/build phase begins,” he said.
Other risks the contractor would have to be willing to take include guaranteeing the energy savings produced by the project and developing a balance sheet that can support that guarantee. However, if the contractor doesn’t overreach in its initial forays into the field and doesn’t overbid its capabilities or underbid its price structure, it can participate in a growing market being driven by the need to implement widespread energy-efficiency projects.
BREMER, a freelance writer based in Solomons, Md., contributes frequently to ELECTRICAL CONTRACTOR. She can be reached at 410.394.6966 and firstname.lastname@example.org.