As the cost of heating and cooling becomes a larger concern for businesses, interest in Energy Service Companies (ESCOs) is on the rise.

ESCOs are companies that develop, install, and arrange financing for projects designed to increase energy efficiency and reduce maintenance costs over a specific period of time. They do this through a wide range of energy conservation solutions, such as more efficient equipment, more efficient HVAC systems, automated light and temperature controls, and behavior modification of building residents. ESCOs typically also provide training to building managers and engineers on the most efficient uses of the equipment upgrades.

What makes an ESCO distinct is that they carry the cost of the energy saving equipment and their clients incur no up-front costs. The ESCO then receives their fee for equipment and services through a percentage of the monies generated through energy savings over a period of 5-20 years, depending on the terms negotiated in the individual project.

And ultimately, it’s all about the contract. An ESCO may provide energy auditing, design and equipment improvements. Frequently, they have knowledge of federal and local rebate programs and additional funding options to finance a specific project. An ESCO will likely install and maintain the energy efficient equipment, and then measure, monitor, and verify that energy savings is actually occurring. If the increased efficiency promised by the ESCO does not materialize, then the client is under no burden to supplement the ESCO’s losses.

ESCO agreements have been used largely in the public sector and its popularity is on the rise.