An ESCO, or Energy Service Company, is a business that develops, installs, and arranges financing for projects designed to improve the energy efficiency and maintenance costs for facilities over a seven to twenty year time period. ESCOs generally act as project developers for a wide range of tasks and assume the technical and performance risk associated with the project. (NAESCO)
I like to describe an ESCO as a company like a bank but with engineers. It's as if you got a loan from your bank to improve your house, but that the bank also did all the improvements for you, and shouldered any cost over-runs.
Self Energy UK, one of the newer ESCOs in this country, has a nice graphic on their website, which shows how the ESCO keeps a share of the energy savings for a period.
(I'm using this without permission and am happy to take it down. Please email me: escoblogger@gmail.com)
Some other explanations of ESCOs:
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