Abstract
This article is focused on developing an Energy Service Company (ESCO) risk assessment model for use by energy savings certificates (ESC) market regulators. This model enables market regulators to determine the appropriate point in time for ESCOs to sell their certificates with the aim of minimizing risk as well as maximizing economic gain yet remain motivated for reducing the cost of energy efficiency technologies. To this end, the interactions between an ESCO and other parties (such as suppliers) in the market in addition to the principles of the energy efficiency performance contract are taken into consideration. Then, appropriate probability distributions have been fitted to the stochastic variables to be applied in the Net Present Value (NPV) function, based on sampled company data. A case study considers a one MW Organic Rankine Cycle (ORC) implementation in Iran’s petrochemical industry. The finding of this study shows if the ESCO is allowed to sell the certificates during the first seven years as well reduce 30% of the investment cost, the expected Net Present Value over Investment Cost (NPV/I) savings will cover more than one cycle.
Highlights
The energy demands enhancement and environmental concerns of utilizing fossil fuels in recent years have led to a significant increase in investment in energy efficiency projects [1,2,3]
ESCOAlthough business developed that other kinds energy such asthe final energy suppliers not face normally
If the Energy Service Company (ESCO) is supposed to be supported, risk reduction in its business should be considered as the themain timecriterion
Summary
The energy demands enhancement and environmental concerns of utilizing fossil fuels in recent years have led to a significant increase in investment in energy efficiency projects [1,2,3]. Hansen et al reported the history and status of the energy services industry in 49 countries and analyzed the opportunities, barriers and problems in using ESCO as the main executors of energy efficiency projects [4]. The main challenges of ESCO business can be divided into four main categories that affect energy efficiency projects and ESCO business from risk and economic viewpoints, namely: “awareness of the energy savings potential and access to the information”; “access to the efficient technologies”; Appl.
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