Are you a business that wants to offer energy saving solutions to clients, saving them money and reducing their impact on the environment?

If so, you may have heard of ESCOs (Energy Services Companies) that do just this, providing a wide range of energy efficiency services to domestic and commercial customers, from designing energy saving systems, to sourcing and implementing green assets and technologies, to retrofitting homes and offices, and much more.

ESCOs can be thought of as energy-focused business consultants. In essence, they are hired by customers to improve their energy efficiency, which can include replacing aging, inefficient equipment with solar, combined heat and power (CHP), wind, or other sustainable technologies that reduce greenhouse gas emissions as well as energy costs. In many cases, these savings can be substantial, running into tens of thousands or millions of pounds.

But ESCOs can also assist with the management and auditing of existing energy systems to identify areas where improvements can be made. They can also help to implement rating and efficiency programmes, as well as methods to reduce energy waste.

But paying for these changes often requires significant investment which is where financing comes in.

ESCO financing is a type of financial arrangement that uses the energy performance of a facility or building as collateral to secure a loan. The loan is used to finance the energy efficient upgrades needed, such as increasing the insulation, replacing old windows and doors, or improving the heating, ventilation, and air conditioning (HVAC) system. The savings resulting from these energy upgrades are used to pay off the loan, resulting in a net zero cost to the owner.

Due to this, ESCO financing is becoming increasingly popular as facility and building owners look for ways to improve their energy use and reduce operational costs. Investing in energy-efficiency upgrades not only saves money, but also improves comfort and occupant health, whilst reducing the impact on the environment. In addition, the upgrades may qualify for tax deductions and other incentives.

ESCO financing is a convenient way for many businesses and institutions to become more energy efficient without the upfront cost of purchasing equipment. With the loan being paid off through the energy savings, it can also be an attractive option for organisations who have limited access to capital. It also allows the business to use their resources for other priorities.

The most common ESCO financing model is a shared savings agreement. This involves the ESCO designing, installing, and managing the energy-efficiency upgrades, then sharing in the savings with the facility owner. The savings are usually shared for 10 to 12 years, after which time the facility owner takes full control of the equipment and the incentives.

Other ESCO financing models are also available, such as performance-based financing, which involves the ESCO being paid a portion of the savings from the energy efficiency in return for installing and managing the equipment and providing monitoring and maintenance services.

But no matter which model is chosen, ESCO financing can offer a convenient way for businesses and institutions to save money on energy costs and become more energy efficient.

ESCO financing also means investment in green technologies and large scale renewable systems becomes feasible for businesses, however, it is important to work with an experienced financing partner that understands the specific needs of the organisation and has the knowledge and resources to design and implement the best green finance solutions.

Sustainable Energy Finance (SEF) are FCA authorised and regulated ESCO financing, green project, and energy efficiency asset finance specialists that work with project developers and businesses to source and arrange the green financing they need, from less than £2 million to more than £100 million.

They understand the risks and challenges faced by ESCOs and green project developers, as well as the securities needed to secure funding, and as expert independent brokers manage the entire funding process for their clients, from fact finding, to structuring agreements, to sourcing lenders, to completing all the required documentation, and securing the financing.

They provide green finance solutions for projects and businesses around the world – including non-CAPEX and off-balance sheet arrangements – and never charge their clients a fee; instead they receive an introduction payment from a lender if a client chooses to enter a finance agreement with them.

In addition, they have access to a unique panel of green lenders across the globe (particularly in the UK and Europe). This includes a network of private capital providers such as venture capitalists, private equity funds, High-Net-Worth-Individuals (HNWIs), family offices, and institutional investors, all of whom have extensive experience providing funding solutions for green projects and energy saving initiatives.

These lenders can offer 100% finance with terms of up to 25 years that enable ESCOs to kickstart Power Purchase Agreements (PPAs) or Energy Services Agreements (ESAs) with multiple customers.

This enables ESCOs to offer their clients energy efficiency systems and solutions including:

• Solar
• Retrofitting Building Management Systems (BMS)
• LED lighting and controls
• Electric Vehicle (EV), biomethane, and hydrogen infrastructure
• Biomass boilers
• Combined Heat and Power (CHP)