Energy efficiency management - ESCOs or utilities?

 Introduction

The present background of energy efficiency models can be categorized into three groups. First, that group comprises different manufacturers and marketers that sell energy-efficient products (Vinea et al., 1999). It is the basic form of energy efficiency. The second model is known as the Energy Service Companies (ESCO) industry. They include companies that offer energy services either from the demand or supply side but are not directly connected to a utility (even though utilities can be used to create ESCOs) (Vinea et al., 1999). From the supply side, they can supply energy to consumers (and the energy can be the one they created or bought from others). From the demand side, they can install or redesign buildings and other facilities in order to reduce overall energy use and finance fees (Vinea et al., 1999). The third model seems to be rare, and it involves utilities that offer for-profit energy efficiency services. The utilities are mostly regulated, offering low-risk investment and more sustainability in return than the ESCOs (Vinea et al., 1999).

Thus, questions have been raised as to who should perform an energy audit and survey. Performing an energy audit and survey is necessary to understand how people make use of energy, when they use it, and what they use it for. With such understanding, companies can better design innovative energy systems and tools that will be used to effectively reduce energy consumption, save costs in the process, and ensure efficient utilization of energy.

ESCOs or utilities?

In reality, who performs an energy audit and consumer survey is determined by who is available in a given economy.This is because in a regulated system, utilities are likely to handle all energy supply, while ESCOs exist more in a deregulated energy market. However, if a system where both models are applied is to be discussed, the decision will be based on their potential.

Using ESCOs does provide good opportunities because they indulge in numerous innovative programs for energy efficiency (Andy, 2008). As such, they invest heavily in research and development aimed at understanding the what, how, and when questions related to energy usage. Additionally, they see the efficiency of energy systems as a competitive advantage because consumers will patronize them for having the ability to enhance their energy efficiency and reduce overall energy costs. However, not all the ESCOs are willing to indulge in such innovation due to the associated cost, fear of failure, and other pressure from competing brands (Andy, 2008). Thus, this limits the overall ability of ESCOs to audit energy performance and effectively conduct surveys on the same ground.

In the case of utilities, they have the advantage of huge investment from government, and government can easily implement new policies that can be used to conduct energy efficiency audits and surveys without the need for utilities to invest in such processes. However, the majority of the utilities are not even interested in such performance because they fear expected losses from such innovation (Diana et al., 2007; California Energy Commission, 2005; Edwards et al., 1999; Elliott, 2002; Howards, 2005).

As such, it can be seen that they both have their rights and wrongs. However, ESCOs are best preferred because they support such practices, while utilities don’t support them for fear of losing out on financial returns. The best option, however, will be a combination of both, with utilities providing the necessary financial requirements and ESCOs bringing their expertise in energy audit and survey to ensure a positive outcome from the entire process.

Energy audit and survey motivators

Prior to the advent of ESCOs, energy audits and surveys were conducted primarily for the purpose of calculating bills for consumers (Diana et al., 2007; California Energy Commission, 2005; Edwards et al., 1999; Elliott, 2002; Howards, 2005).Through such surveys, utilities determine how consumers utilize energy and then affect their bills based on such calculations and estimations.

However, the present drivers of energy audits and surveys have changed. Through the automated metering (prepaid) systems, utilities no longer need to conduct audits and surveys in order to determine usage. The major driver presently seems to be understanding factors that influence usage and how efficiency can be enacted (Edwards et al., 1999; Elliott, 2002; Howards, 2005). Energy audits are now used to understand how consumers use energy, what they use it for, and when they use it most (peak time). Information gathered from such surveys is then used to supply more energy during peak times (in order to reduce overall stress on distributing plants), and they also use such information for innovation purposes by understanding materials that cause high energy usage and innovating them to reduce overall energy consumption (Howards, 2005).

Response to the increased need for energy efficiency

As a response to the increased need for energy efficiency, it is likely that the ESCOs and utilities will embark on a mutually beneficial partnership to establish new standards. Such a partnership will entail utilities providing necessary funding while ESCOs provide needed expertise. The end result will be advanced innovation through research and an overall increase in energy efficient products, installation, and utilization. Basically, this is the best approach, as it will enhance the overall efficiency of energy systems.

References

Andy, F., (2008). ESCOs and Utilities: Shaping the Future of the Energy Efficiency Business. Available at: http://www.greenbiz.com/news/2008/04/13/escos-and-utilities-shaping-future-energy-efficiency-business [Accessed on: 15th-11-2014].

California Energy Commission (2005). Summary of Energy Services Companies. Summary of Responses. CEC-400-2005-001.

Diana, Ü. Sonja, K. Chunyu, L. Benigna, K., Gireesh, G., N., and Gamze, C., (2007). An Assessment of on Energy Service Companies (ESCOs) Worldwide. Available at: http://89.206.150.89/documents/esco_synthesis.pdf [Accessed on: 15^th-11-2014].

Edwards, C., Adelaar, M., Cooper, K. (1999). Residential Sector Climate Change Foundation Sector. Online at: www.sheltair.com/library/Residential%20Foundation%20Paper.pdf

Elliott, R.N. (2002). Vendors as Industrial Energy Service Providers. White paper by the American Council for an Energy-Efficient Economy. ESC (Energy Services Coalition). Introduction to Energy Service Contracting. Online at: http://www.conae.gob.mx/work/sites/CONAE/resources/ LocalContent/1796/1/images/1_esc_pc_in_usa.pdf.  

Howard, D.L. (2005). Republic Of Korea Reduction of Financing Barriers for Energy Savings Performance Contracts. National Renewable Energy Laboratory: Technical Report NREL/TP-710-38630

Vinea, E., Nakagamib, H., and Murakoshib, C., (1999). The evolution of the US energy service company (ESCO) industry: from ESCO to Super ESCO. Available at: www.elsevier.com/locate/energy/ESCO%20-%20Super%20ESCO%20w-Murakoshi%20-%20ENERGY%201999.pdf [Accessed on: 15^th-11-2014].