ESCO's: What the Future Holds

In the last of his series of blogs for Clean Energy News on local authority Energy Services Companies (ESCOs), Stephen Cirell considers what the future might hold for a local authority enegy company.


As indicated before in this series, there are a number of different examples of local authority energy services companies around the country. These stretch from those that simply manage a single asset or service, such as Aberdeen City Council ESCO (which runs the district heating network), through more complex examples, such as Thamesway, set up by Woking BC (which has fitted solar PV and is also involved in heating), through to the two companies with full electricity supply licences in Nottingham and Bristol City Councils.

But the direction of travel for local authority ESCOs is clear. Whilst they have increasingly been seen as an effective way to act to help the local community, the business community and the Council itself to reduce energy costs, it is now clear that they could go so much further.

The following is an example of how I believe local authority ESCOs will develop. It is simply a matter of linking together the various different strands of policy at local level: energy costs in the Council itself; energy costs for consumers and businesses; the need to for more energy efficiency work, such as that undertaken via ECO; the need for more renewable energy generated at local level, by the Council, community and business; the need for a greater influence over the distribution of energy at local level and demand side response. All these come together in the type of ESCO described below:

This example is a wholly owned company, providing:

• Advice to the public on all aspects of climate change, low carbon and renewables;

• Advice to community groups in the area, wanting help and assistance on projects;

• Advice to local businesses on projects, for commercial fees;

• Significant generation capacity from a range of renewable energy projects, but including wind energy, solar PV, and biomass boilers, leading to significant income from Government financial incentives (where applicable) and sale of the power to consumers. This would provide maximum use and exploitation of the Council’s assets, with both land based and roof based solar PV, wind turbines and biomass boilers for heating;

• Maintenance and support of all renewable energy facilities and employing teams to undertake that work;

• On the heating front comprehensive district heating networks widely available and individual biomass boilers in all properties where not;

• Ownership and operation of a biomass supply chain, including woodlands, a process centre and specialist transport. A futuristic look at where supplies of wood are coming from, including investment in new commercial forestry;

• A construction arm, employing the latest techniques in environmental construction, whether BREAAM, Code for Sustainable Homes or whatever. Activity in building new Council / social housing to best standards; also ability to fit biomass boilers and other equipment for the public in the area;

• Significant involvement in the concept known as ‘allowable solutions’, whereby Council green energy projects (such as heat networks) can be invested in by others subject to the Merton rule or other legal requirements;

• An active role in education, via schools but more widely too, in combination with a powerful communications strategy to win over public views; • The communications strategy being an on going role for the ESCO, seeking to inform and educate, be trusted, to explain key issues and to create local opportunities. This will influence the culture of the area and start the long process of behaviour change, which is at the root of problems on energy at all levels;

• Involvement in a training centre, providing skills training on all relevant technologies, in conjunction with local colleges;

• Be the supplier of electricity and heat on a retail basis to local people and on a national basis. The benefit of an ESCO is that discounts can be provided for those local to facilities and for loyalty;

• All surpluses to be re-invested in further green projects in the area and attracting wider investment, for example energy efficiency retrofit work which is so hard to fund otherwise;

• The company is involved in innovation and the creation of new solutions to the energy crisis, by way of research and development; a research arm would undertake this, in conjunction with Governmental and other bodies, such as local Universities;

• Possibly to establish a local electricity hub, to further enable renewable energy projects to go forwards in areas of poor grid connection opportunities;

•The company to create a strong and sustainable ‘brand’ of local energy provision, to replace inefficient national arrangements with effective distributed generation.

It is this more holistic approach to the wider aims of the green economy that will finally close the circle of completeness for ESCOs. It should never just be about building a single asset to make some money or running energy efficiency programmes in isolation. The goal is to join up all of those things to capture economies of scale and to achieve both income generation and wider social benefit for the area of the authority. So there is the challenge for the next five years. Which local authority is up for it?

Stephen Cirell is an independent consultant on the green agenda specialising in local government and the public sector. He is author of A Guide to Solar PV Projects for Local Government and the Public Sector, the second edition of which was published in 2015.