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Community Energy Director, Paul McIver, is responsible for developing Energy Services Company (ESCo) opportunities for Vital Energi that will contribute to a low carbon future, and play a pivotal role in the UK’s energy transition and net zero carbon agenda.
We asked Paul some questions about the benefits of an ESCo, how Vital can help with ESCo advice and support or act as the ESCo for your project, and he shares some examples.
What is an ESCo?
An Energy Service Company (ESCo) is the company that owns the assets and is responsible for generating, supplying, and managing energy to homes and properties. They take a project, and efficiently make use of the assets over and above that of distributed systems. By way of competitive fuel procurement, lower running costs, lower capital costs and reduced carbon emissions, end users benefit from competitively priced heat, cooling and hot water delivered directly to their premises. ESCo services can support a range of mixed-use developments, from a regeneration area or a large residential development, to a hospital or multi-unit development of retail outlets.
What are the benefits of an ESCo?
A key benefit is that an ESCo takes on financial risks, therefore minimising risks to clients. They also take the technical and operational risks too, as they optimise and manage the lifecycle of the assets.
Heat, cooling, and hot water is provided directly to properties from low-carbon energy generation equipment often located within the development. This enables consumers to benefit from avoided costs associated with energy supplied via national distribution networks. It also means properties do not require individual boilers, saving space within the property and avoiding any boiler maintenance and lifecycle replacement costs.
What is Vital Energi’s ESCo offering?
With over 30 years’ experience in the design, build, operation and maintenance of district energy projects in the UK, we have proven in-house expertise to deliver the full range of ESCo services with the highest level of customer service. We recognise that heat needs to play a key part in decarbonisation therefore we will adopt and own these assets to get projects off the ground to help achieve our net zero targets. Delivering low-carbon, affordable energy to end-users is an integral part of what we do here at Vital, and so we have dedicated teams that focus on decarbonisation and create new and innovative ways to decarbonise new and existing schemes, helping local authorities, cities and organisations on their journey to net zero.
What are the key considerations people should consider when selecting an ESCo?
ESCo experience is key, so it’s important to find out what kind of experience the business possess in terms of delivery of design, build, operate, maintain, and finance of residential or mixed use developments.
An ESCo that is credible, collaborative, flexible and has integrity, by protecting customers from artificially inflated charges, that works with the procurement process, and takes on the negotiation and adoption of the assets are key considerations too, failure of which can lead to costly legal and delay costs being incurred.
High standards of customer service. This may seem obvious, but ultimately, the customer is left with the ESCo as their quasi-utility provider. There is a general misunderstanding of what a heat network is and what it means to a customer, so the ESCo has an obligation to ensure the customer is educated. This might be by way of literature or face to face meetings. It is essential that high standards of customer service can be evidenced.
An ESCo that commits. As contracts typically last for 25 years or more, the ESCo must maintain their initial levels of commitment to the project for the entire project lifecycle, always keeping the end customer at the heart of all that they do.
How do you procure an ESCo project?
Depending on the organisation procuring an ESCo, public procurement (OJEU), competitive tender, frameworks (such as Fusion 21), or direct award may be utilised to procure the ESCo.
How can an ESCo support social housing providers and developers?
The ESCo should possess the expertise to provide a comprehensive service, encompassing initial feasibility and financial viability studies, provision of finance for projects, system design, installation and commissioning, and project management of associated works. They’ll also be responsible for the ongoing operation and maintenance, and contract energy management.
By working in partnership with local authorities, social housing providers, and developers, an ESCo should be able to provide bespoke, outcome-based solutions that address each town, city, region or developments’ most pressing needs, improving efficiency, driving down costs and reducing CO2 emissions. The ESCo’s activities should be designed to make a real difference to the lives of the customers.
Can an ESCo provide funding towards a scheme?
In simple terms yes. There are various funding options available, from Government backed schemes that usually provide match funding to the ESCo providing a share of the asset value (a capital contribution). Each scheme is evaluated on its own merits to ascertain what, if appropriate, the correct route to funding may be.
Can you share some examples of projects where Vital is the ESCo?
We’re acting as the ESCo on number of projects. Examples include: