Why establish an Energy Service Company (ESCo)?

Prior to establishing an ESCo, it is necessary to identify what purpose the ESCo will fulfil and whether such a Special purpose vehicle is needed in the circumstances. For more information generally on what ESCOs are, why local authorities may be attracted to them and the difficulties that Local authority ESCos have experienced, see Practice Note: ESCo’s: their role in local authority projects.

For example, a local authority engaging in renewable energy generation, such as from solar PV, may not need a company to undertake this activity. It may often be better to simply build and operate the asset on the local authority’s own balance sheet. The same goes for a local authority selling its power from renewable sources via private wire agreements.

But of the three elements in the energy paradigm (generation, distribution and supply), it is the latter that normally results in the strongest need for the establishment of a separate legal entity. Where a local authority is looking to supply heat, electricity and/or