ESCO – Suitable for promotion of energy savings in individual households?

Denmark | February 2008 - April 2010

ESCO is an abbreviation of Energy Service Company. There are indications that the traditional ESCO format, as defined by the EU, is not optimal as leverage for energy renovation of the building envelope in single-family houses under the existing framework conditions (2009). The problem is that this particular target group’s interests, needs and concerns are not focused solely on the size of the promised energy savings and financial savings. The main function of the ESCO service is to assist the particular type of client in overcoming or reducing his concerns and risks (in the broad sense) and support the client’s interests. The guarantee element must relate to these.

Qualify the debate on ESCO
The aim of the report has been to qualify the debate about ESCO as a means of improving energy efficiency in single-family houses. The project was based on the assumption that a large number of attractive and cost-effective energy savings projects are not realised primarily because the users find them too difficult. 

The analysis was based on information collected through

  • E-Lab of the Danish Energy Net (umbrella organisation of the Danish energy network companies)
  • an expert workshop
  • a test of two specific energy renovation concepts
  • a market survey of existing commercial renovation offers and research projects on the topic energy renovation of single family houses, based on websites and stakeholder interviews.

Economies of scale
It seems that economies of scale can be achieved without using the traditional ESCO business model. The challenge is to create sufficient demand for energy-efficient renovations and sufficient incentives for providers. Grouping of projects can reduce costs whether initiated by the ESCO or by the customers, a local association or local municipalities. The market survey showed that there is a growing customer interest in energy advice and confirmation of energy wise choices – and a willingness to pay for these services.
The project was carried out by a consortium comprising Lokalenergi (energy consultancy), NRGi Rådgivning (energy company), Danish Technological Institute and Ea Energy Analyses (project manager). In addition, the project was followed and commented by an expert group comprising representatives of Realkredit Denmark (financial institution), Mercury Andelskasse (financial institution), Pro Tec Vinduer (window producer) and Energy Service Denmark (Energitjenesten).

The project was supported by Elforsk, the Danish Energy Association’s programme for research and development within efficient use of energy.