The ESCO Concept

In general, enterprises participating in conservation agreements implement and finance the conservation investments themselves. Occasionally, lack of resources required implementing the measures or the higher cost-effectiveness expected by companies of energy-saving investments than of other investments place obstacles on implementation of conservation measures that are economically viable. Particularly in such cases, an alternative way of implementing the energy-saving investment is to outsource it as a total service package from a third party (so-called ESCO model).

Under the ESCO model, total responsibility for either implementation, effecting of the saving, organising the funding or all the above can be undertaken by a company specialising in energy conservation, a so-called ESCO company (Energy Service Company). In such cases, the investment is repaid by the savings produced by the measures during the agreement term, so that it does not tie up the company’s investment resources or its human resources to the same degree. The ESCO option is suitable most typically for implementation of conservation investments with a 2-6 year repayment term.

The ESCO model has been publicised in Finland for some years. Several companies offering ESCO services operate in Finland. However, the model has still not become as widely used as anticipated on the basis of experiences abroad, although the feedback on completed ESCO projects has been positive.

In order to speed up ESCO activity, MTI has awarded investment subsidies to ESCO projects during 2002-2006, treating them as so-called new technology model projects. In such cases, the subsidy may have been greater than in previously processed customary conservation investments of companies participating in the conservation agreement scheme.

ESCO projects have also been launched without MTI support, but the Motiva project register does not necessarily contain full records of these. Awareness of the ESCO model has increased, tools have been developed to promote the service, and future expectations are hopeful.

Some of subsidised investment projects ESCO projects

In 2006, investment subsidies were awarded to eleven ESCO projects (total 1.82 million euros) signing up to the Agreement Scheme.

With the exception of a single large project in the energy sector in 2003, all subsidised ESCO projects during the agreement term have concerned industrial and municipal sector projects. The number of subsidised projects has varied very little over the years. In 2006, however, both the number of ESCO projects and the subsidies granted to them were clearly higher than the corresponding average figures in previous years.

The majority, almost 80%, of subsidies awarded to ESCO projects between 2002-2006 has been for industry, with 27 projects launched and a total of about 3.7 million euros awarded in subsidies. The corresponding number of projects launched in the municipal sector was 11, with a total subsidy of 0.33 million euros. In the energy sector, only one district heating sector ESCO investment project was launched, with subsidies of 0.64 million euros awarded; however, its share of total subsidies granted to the district heating sector in 2002-2006 amounted to more than 70%.