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The Energy Services Company (ESCo) as business model for heat entrepreneurship-A case study of North Karelia, Finland

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  • Suhonen, Niko
  • Okkonen, Lasse

Abstract

Energy Services Companies are widely implemented for improving energy efficiency both in the public sector and industry. The model has also been introduced as a business model for biomass-based heat entrepreneurship. However, the residential sector has been problematic with regard to ESCo adoption and constitutes a minor share of ESCo operations. The barriers, both social and economic, are many. This paper focuses on the application of ESCo as a business model for heat entrepreneurship in Finland. First, we present the ESCo model and a review of the main barriers. Second, we present the modelling with aspects of profitability and risk sharing. Third, we demonstrate the operation in the residential sector by using 26 housing associations as a case study. We simulate the energy investment, profitability of operation, and the sharing of risks between the customer and the ESCo. The results indicate that the ESCo model is challenging in our case area. Low profit levels and the assumed customer's preference for achieving cost savings from the beginning of energy renovation can result in long contract periods tying up the capital. The ESCo model is unattractive in the current business climate, requiring modifications or integration with other maintenance services of housing associations.

Suggested Citation

  • Suhonen, Niko & Okkonen, Lasse, 2013. "The Energy Services Company (ESCo) as business model for heat entrepreneurship-A case study of North Karelia, Finland," Energy Policy, Elsevier, vol. 61(C), pages 783-787.
    • Handle: RePEc:eee:enepol:v:61:y:2013:i:c:p:783-787
    DOI: 10.1016/j.enpol.2013.06.047
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