The co-evolutionary relationship between Energy Service Companies and the UK energy system: Implications for a low-carbon transition

Abstract

The Energy Service Company (ESCo) business model is designed to reward businesses by satisfying consumers’ energy needs at less cost and with fewer carbon emissions via energy demand management and/or sustainable supply measures. In contrast, the revenue of the incumbent Energy Utility Company (EUCo) model is coupled with the sale of units of energy, which are predominantly sourced from fossil fuels. The latter is currently dominant in the UK. This paper addresses two questions. First, why has the ESCo model traditionally been confined to niche applications? Second, what role is the ESCo model likely to play in the transition to a low-carbon UK energy system? To answer these, the paper examines the core characteristics of the ESCo model, relative to the EUCo model. The paper then examines how ESCos have co-evolved with the various dimensions of the energy system (i.e. ecosystems, institutions, user practices, technologies and business models) to provide insight into how ESCos might help to shape the future UK energy system. We suggest that institutional and technological changes within the UK energy system could result in a more favourable selection environment for ESCos, consequently enabling the ESCo model to proliferate at the expense of the EUCo model.