In this ESI Africa explainer, we unpack what a Super Energy Services Company (ESCo) is and how it benefits the market.
The Energy Services Company is a vehicle that channels funds into public sector energy efficiency investments.
An ESCo organisation provides a full range of services to energy users to design and implement energy efficiency options.
These services may also include providing or arranging financing.
The services are provided by the ESCo using an Energy Performance Contract (EnPC) approach, under which the payments from the energy user to the ESCo are contingent on achieving pre-specific performance levels.
This EnPC approach is a form of financing capital improvements which allows funding energy efficiency upgrades from cost reductions.
The ESCo market in most African countries is still in its infancy because of various barriers. According to the African Development Bank (AfDB), the Super ESCo model addresses most of these ESCo uptake barriers.
A Super ESCo is a specified, dedicated organisation, often set up as an independent company, created and funded by the government to implement energy efficiency projects through private ESCos and manage part or all of a building energy efficiency retrofit programme for its public-sector buildings (offices, hospitals, schools, street lighting, etc.).
Private ESCos then provide services to energy users to design and implement energy efficiency options.
The Sustainable Energy Fund for Africa (SEFA), run by the AfDB, had in March last year (2023) approved a technical assistance grant of $5.03 million to implement the Africa Super ESCo Acceleration Programme (ASAP) in Rwanda, Senegal and South Africa.
This Super ESCo Acceleration Programme is meant to catalyse private sector investment in energy efficiency by operationalising Super ESCos. This is meant to stimulate the transition towards more sustainable and greener economies.
This grant supports the training of a team to operate the Super ESCos and support private ESCos in the three countries to develop their EnPC services.
The funding will also underwrite the development of harmonised regional certification schemes for ESCos and energy service professionals, including energy auditors, managers and energy savings measurement and verification professionals.
At the time, Saer Diop, Director-General of Senegal’s Agence pour l’Economie et la Maîtrise de l’Energie (AEME), which promotes energy efficiency in the West African country, said: “This innovative programme will enable Senegal to establish its Super ESCo and boost the energy efficiency market for increased energy performance in the public and private sectors.”
The acceleration programme is supposed to pave the way towards implementing downstream energy efficiency investment programmes in which the AfDB, SEFA and other stakeholders will invest.
The SEFA accelerator was set up because the AfDB realised that there was growing interest in the Super ESCO concept.
The first phase of the African Super ESCo Acceleration Programme (ASAP) targeted Rwanda, Senegal, and South Africa. Burkina Faso, Cote d’Ivoire, and Uganda were put on a list to consider for a subsequent programme phase.
Developing the SEFA accelerator in the first three countries will hopefully lead to an estimated 40% reduction in public sector electricity consumption in Rwanda. This should translate to around 18GWh savings a year.
The AfDB estimates that the annual CO2 mitigation potential from just 74 large-scale public buildings operating in Kigali and six secondary cities is approximately 6,000 tCO2e.
In Senegal, reduced energy consumption of 101GWh per year and a greenhouse gas emission reduction of 64,000 tCO2eq per year is expected. This would be using an annual mobilisation of around $20 million in public and private investments through energy efficiency development.
In South Africa, the mobilisation of around $11m of public and private investment into 20 energy efficiency projects over five years is expected to reduce emissions by around 230,000 tCO2eq a year and create about 760 energy efficiency-related jobs in that time.
Kenya this month (April 2024) also got in on the game, with Kenya Power and Lighting Company PLC (KPLC) asking for expressions of interest from international consultancies to provide technical assistance for the operationalisation of a utility-run Super Energy Services Company (ESCo).
The government of Kenya has received financing from the AfDB to operationalise a Super ESCo in Kenya. It intends to apply part of the agreed amount for this grant to payments under the contract for a Technical Assistant (TA) grant to KPLC to structure and build the capacity of a team to operate as the Super ESCo in Kenya.
The services included under this project are to support the KPLC Institute of Energy Studies and Research (IESR) in setting up a Super ESCo business unit, developing bankable energy efficiency projects in Kenya, and consequently, creating the basic conditions for the creation and development of an EE market in Kenya.
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