Skip to main content

The ESCO business model has been saving consumers energy, money and carbon for decades, at the same time offering healthy returns for companies. The market is now worth $29 billion, mostly concentrated in China, the USA and Europe. It’s a simple idea – deploy energy saving solutions (mostly technology) and use the cashflow that is generated to pay back the capital expenditure (capex) and make some profit. Whilst developing countries, especially in Africa, have only recently opened up the market (watch out for our forthcoming mapping of African ESCOs in partnership with the Basel Agency for Sustainable Energy), there have been some energy and carbon-busting success stories from the ‘global south’, notably through the efforts of EESL in India, which started with a focus on LEDs and now covers air-conditioners, solar PV, motors and more.

This simple idea (cashflow from energy savings) can also be applied to the delta between what consumers pay for energy from the grid and how much they would pay if they owned or leased energy generation assets. And as energy starts to flow more dynamically ‘on-site, on-road, on-grid’ this cashflow opportunity can be applied to the delta between generation costs and the pump (i.e. switching from oil to renewably powered vehicles). AND, as consumers adopt opportunities to become prosumers, there is an additional cashflow opportunity to feed into the grid – which can help with balancing as grids struggle with peak demand, extreme weather disruptions and ongoing investment challenges. The icing on the cake (or is it the cake itself!) is faster, cheaper emissions reductions.

After years of picking the low hanging energy efficiency fruit and doing hard labour in the hustle of the finance industry, the best ESCOs are going mainstream, with flotations on major exchanges such as London and New York and billion-dollar market capitalisations. In a world awash with pledges from big banks and other financial institutions to go ‘net zero by 2050’, many could be aligning with ‘real zero by 2030’ through genuine collaboration with ESCOs, especially to give a helping hand to scale the market in developing countries and regions. That is why, through Integrate to Zero, we are inviting proposals to use philanthropic grant funding to leverage private finance into the ESCO market in Africa. Through this venture we are also aiming to help Africa leapfrog technologically by inviting proposals for integrated energy systems approaches. A new energy future, in which electricity flows dynamically, is already visible in places like California, European cities and China, however such systems are yet to surface in Africa (watch this space for discovery work in 2023 from our partners at The Ashden Foundation). All parties to the UNFCCC have agreed to the need for technology transfer, but as William Gibson said, ‘The future is already here. It’s just not evenly distributed’. This must change to make the energy transition more just and inclusive.

As the world grapples with volatile and high energy prices, as governments struggle to balance the books, and as the impacts of climate change confront us, we can find agency and urgency in well-established business models such as ESCOs and we can apply them to technically proven and economically beneficial solutions such as PV, storage, EVs, smart metering and the electrification of cooking, water, heating and cooling. The time for real zero is now.

Integrate to Zero is supported by the Climate Energy Collaboration Group

Dan Hamza

Chief Energy Officer at Integrate to Zero, Energy Lead at the Climate Emergency Collaboration Group and Advisor to the Energy Transition Council Rapid response Facility