ESCO: Energy Service Company

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Probably the quickest developing sectors around the gas and oil markets is energy service providers. An energy service company (ESCO) are companies that offers a broad range of energy services which includes designs and execution of energy savings jobs, retrofitting, energy conservation, energy infrastructure outsourcing, power creation and energy sources, and risk assessment. The ultimate end goal of every ESCO is to always produce considerable cost savings in energy prices by producing energy audits and evaluations and effectively making processes more efficient with regards to energy prices.

As stated by the newest data and information out of top energy news websites, moving to 2022 we are poised to see record petroleum prices. The challenge being though is the fact that there are numerous federal governments with their own individual plan that hinders with development in the oil centered energy industry. In Canada we see this prominently among one of its provinces, Alberta, and the government. Tensity between Alberta and the Canadian administration has a long and spotted history. Not to mention the conflict in Ukraine with Russia also driving up energy prices.

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Ever since their beginnings in the 1980s, energy service organizations have evolved and expanded. Since COVID engulfed the world we have seen probably the most radical modifications to this sector while seeking to remain relevant. Through the years we’ve seen the start of the technical energy service companies.

As we have previously noted, the primary goal for energy service companies comes down to lowering expenditures and produce renewable solutions for future years. In the 90’s with deregulation we watched the rise of the energy services companies then things slowed throughout the Obama administration we observed reversals of regulations only to again be deregulated by the current President Donald Trump. Three years in to the Trump presidency we’ve seen a significant wholesale deregulation in the energy market which unmistakably benefits energy service firms.

In 2006 the sector group NAESCO reported energy service providers increased by 22% and boasted $2.6 billion in revenues marking a paramount moment for energy services companies throughout the states. In Canada the popularity of energy services companies also grew significantly mainly in the oil rich province of Alberta.

Each ESCO varies in their own technological field of expertises whereas others include the overall array of services this includes mobile boiler steam services, measurement & regulatory, project planning, integrated solutions, commissioning & startup and more. While there are various distinctive solutions within this vertical, something they all share is an essential tie to the market overall.

One of the more popular energy services is the one of energy management. Energy management businesses are significantly more popular as energy prices increase. Energy consulting firms really focus on one point…budgeting by streamlining process from an energy consumption perspective. Setting a base before starting on any energy savings effort is a crucial component to any energy management service. What this does is it makes a quantifiable starting position in which everything going forward may be assessed with to determine energy savings efficiency. Organizations that use energy management organizations realize the relevance of these reports by these energy service companies and because of this often work directly together. It’s essential to see the usefulness of immediate access to top management when reporting on energy budgets and particularly when negotiating costs.

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Image courtesy of Energy Sector News Site

Field energy service providers providers offer a wide array of providers like meter proving, fugitive emissions detection (FEMP/LDAR), electrical and instrumentation, construction, vegetation management and even software solutions. You don’t have to look very far to see the devastation created by COVID19. Tens of thousands of jobs in the energy sector were lost in the first half of 2020 throughout the US and Canada.

We interviewed an executive with Gralef Energy solutions who had this to say about our post-COVID world.

“The energy sector has witnessed many hits over time and if i am to be truthful, though this virus is devastating and in a wholesale manner, the industry will rebound. Our business for instance has taken the past few months to strategize on how we expect to continue in 2021.”

Energy Service Companies (ESCOs) often utilize performance contracting, meaning that if the venture doesn’t produce ROI, the energy service provider is liable to cover the difference, thus assuring their valued clients of the energy and cost cost savings.

Since its introduction in the 90s, a single U. S. federal government program identified as “Super-ESPC” (ESPC stands for Energy Savings Performance Contracts) has actually been accountable for $2.9B in energy service company contracts. With it being revitalized and improved in late 2008 they’ve granted 16 companies with what’s called Indefinite delivery/indefinite quantity or IDIQ contracts valued at a minimum of $5 billion each on average. The company of energy service can often mean many things but the one commonality regarding them all is the common intent of lessening energy spending and making current systems more efficient.

It is without doubt that we will be seeing a transformation, or an advancement per se, of energy utility providers whereas instead of selling just electricity or gas, utilities providers will begin to sell bundled solutions, which might include service providers utilities have not considered before, services enabled by smart meters and smart home innovation, like home safety, as an example, or monitoring aging adults. In Canada we commonly see energy providers merging with government so they’ll be able to further expand their reach with customers such as the top gas company in Canada called Enbridge, Enbridge has worked vigilantly to increase their providers and products to obtain a greater amount of the energy consumer sector. Essentially as this transpires, energy providers grow to be energy service providers offering a diverse variety of service instead of focusing on just supplying it.

You are likely asking yourself that if this indeed is taking place then wouldn’t that make independent energy service companies obsolescent? That said we wish that 2021 brings much good fortune to the energy sector and we can look backward at 2020 as a year of lessons.