How to finance your energy renovation using the ESCO model

A lot private and public organizations want to energy renovate because of the lasting advantages of making your organization’s lighting more energy friendly. But the energy renovation process often gets stuck when it comes to the financing of the new and energy saving lighting solution. However, there is a solution to this problem and this solution is called ESCO.

There are many good reasons for implementing an energy renovation of the lighting in your organization. Not only can an energy renovation in terms of lighting minimize your energy costs and thereby enhance the economic situation of your organization. It can also boost your organization’s CSR profile by reducing the energy consumption of the entire organization. Thereby, the energy renovation can help your organization communicate responsibility in relation to energy policy and to the environment.

Even though of these huge advantages of energy renovating your current lighting, many organizations tend to stall the energy renovation process due to the problematic issue arising when considering starting the process: how to finance the energy renovation project. In other words, financing tends to be the main obstacle for most companies considering making the organization’s lighting more energy friendly. And this with good reason because it can indeed seem like an immense and expensive project to implement for many organizations. Especially, because your investment is not paid back until several after years after implementing the new lighting solution.

However, there exists a business model that can help many of the organizations facing financial issues in relation to the energy renovation project. Using this business model, you don’t have to stall, postpone or quit the idea of making your organization greener and energy friendly. The business model in question is called ESCO.

Now let’s take a closer look at the ESCO model’s bright financing method that has enabled a lot of companies to implement a successful energy renovation.

The ESCO model

The ESCO model has already been the kick starter in a lot of previous energy renovations and this model can with advantage work as a starting point if you are considering to energy renovate your organization.

The abbreviation ESCO stands for Energy Service Company. ESCO is a financial contract between a so-called ESCO company and a company using energy. An ESCO company is a company using the energy renovation as an investment and finance the energy spending company’s energy renovation until the point when the energy spending company can pay back the ESCO company. The point of the ESCO solution is that the company getting the energy renovation uses the extra money in surplus due to the reduction in energy cost to pay back the ESCO company for the energy renovation over time.

Let’s break the ESCO process into three steps:

  • From the company using the energy’s perspective: When the ESCO process starts, the company using energy does not have to pay the ESCO company right away for the energy renovation.

  • From the ESCO company’s perspective: The ESCO company consider the energy renovation to be an investment and this company is financing the energy renovation.

  • The financing solution: Usually, after a couple of years the ESCO company, initially paying for the energy renovation of the energy spending company, gets the expenses for the project covered. The expenses are covered by the reduction in energy costs that the company using energy is achieving when implementing the new and cost minimizing lighting solution.

Until now the energy spending company is usually a public organization but the model can also be used by private organizations using a high amount of energy. As previously mentioned, for many organizations the ESCO model can be an optimal solution to kick-starting the energy renovation process leading to a massive reduction in energy costs.

Energy renovation with LED

An obvious solution when wanting to make the organization more energy friendly is implementing a LED lighting solution. When installing LED lighting you will achieve two extraordinary benefits:

  • Massive energy savings on up to 75% compared to traditional light sources as well as a similar reduction in the CO2 emission of your company.

  • Almost an elimination of maintenance costs due to the long lifetime of LED light.

How can we help you?

Lumega is nominated as an ESCO partner. We can, therefore, help you with a financing solution which guarantees you energy savings from the moment you implement our LED lighting. You can read much more about the advantages of choosing LED and an ESCO solution with Lumega here.

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