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Finally, EE [energy efficiency] can simply be turned over to the private sector. There are already several dozen for-profit firms known as "energy service companies" (ESCOs) that specialize in designing and installing EE measures. When working independently ESCOs frequently use a shared savings business model. the ESCO rasies its own capital and pays for all of the cost of efficient new equipment in someone's structure, such as a new commercial air chiller in an office building. The chiller lowers thepower bill of the customer for its entire lifetime, compared to the power bill with the old, inefficient chiller. The ESCO signs a contract that allows it to receive and keep most of the difference between the old and new power bill until it earns back all of the capital it spent on the new chiller, plus a profit. After it has been repaid, most of the bill savings reverts to the customer.
Even more than utility programs, ESCOs and their shred-savings model would seem to be an ideal solution to the main EE barriers. Because they spec, install, and provide the capital for an EE measure, the customer sits back and does almost nothing while an experienced firm does all the work and pays for everything out of its pocket. The customer sees only a lower power bill with no capital of its own ever needed.
Unfortunately, the economics of the shared savings model severely limits the markets and technologies ESCOs can install and still earn a profit. In commercial buildings, ESCOs find it difficult to get customers to agree to measures and terms that tap the full EE potential of a customer site. Instead they usually settle for doing the easier measures with rapid paybacks without installing the bigger, longer savings measures. This phenomenon is less of a problem when ESCOs contract with government agencies, who operate under mandates to tap as much of their EE potential as they possibly can. Outside the government sector, however, the for-profit efficiency business can't tap nearly as much efficiency potential as utility or publicly funded programs.