ESCO model in practice
As the steadily growing number of projects delivered under the ESCO model shows, more and more companies are looking for ways to implement energy upgrades without burdening their investment budgets. One of the most interesting solutions of this kind is the ESCO model (Energy Saving Company) - a form of cooperation in which an external partner designs, finances, implements, and maintains an energy-efficient investment, while the Client repays it from the savings generated. This enables companies to carry out an energy transition without committing their own capital (CAPEX) and while transferring the risk of not achieving the expected results to the ESCO company.
What is the ESCO model?
The ESCO model is an approach to implementing energy-efficiency projects in which the contractor - the ESCO company - takes responsibility for the design, financing, implementation, servicing, and maintenance of the installation. In practice, this means that a company using this form of cooperation can modernise its energy infrastructure without using internal funds. The investment is repaid from the savings generated by the project.
This approach is particularly valued by industrial companies that need quick modernisation but have limited investment capacity or long budgeting procedures. Working with an ESCO partner, such as DB Energy, makes it possible to start a project almost immediately, without the need to secure funds in the investment plan.
ESCO - a way to achieve green transformation with zero upfront investment
Read the articleStages of an ESCO project
Each ESCO project is comprehensive and includes several key stages that ensure predictable outcomes and investment security:
Audit and savings potential analysis
The first step is an assessment of the current state: measuring energy consumption, evaluating the efficiency of technological processes, and identifying energy loss points. The audit determines the cost-reduction potential and identifies possible investment measures.
Technical concept development and financial modelling
Based on the collected data, a technical concept is created together with a financial analysis showing the project’s energy effects for the industrial facility and the estimated savings. The analysis also presents implementation options within the ESCO model, taking into account the client’s preference for contract duration (5–15 years).
Financing and contract signing
The ESCO company - e.g., DB Energy - arranges the project financing, which means the Client does not need to search for external sources or negotiate terms with financial institutions. The project can be accounted for off-balance-sheet, meaning it does not affect the company’s debt level.
Project execution
At this stage, equipment is purchased and installed, systems are modernised, and energy management solutions are implemented. The ESCO partner is responsible for the entire process - from logistics to technical supervision - and the Client cooperates with only one entity.
Maintenance and performance monitoring
After commissioning the installation, the ESCO company provides operational and maintenance services as well as continuous monitoring of operating parameters. Actual performance data confirm the achieved savings, and payments are calculated in accordance with the contract.
How is an ESCO project settled?
In the ESCO model, payments are based on results, not costs. The Client pays the ESCO company only after verified savings are achieved. Depending on the agreement, this may be a fixed fee (e.g., monthly/quarterly) or a percentage of the generated savings. Part of the savings remains with the Client, while the rest serves as remuneration for the ESCO company for financing, delivering, and maintaining the project.
In practice, this means that from the Client’s perspective, the investment begins generating positive cash flows in the first year of operation. After the contract ends, all further savings belong fully to the Client.
Impact of the ESCO model on a company’s financial balance sheet
One of the greatest advantages of the ESCO model is its balance-sheet neutrality. The investment is not recorded as debt, which means it does not worsen the company’s financial ratios or limit its borrowing capacity.
Unlike projects financed from internal funds or delivered by a general contractor, the ESCO model enables project launch without taking on financial liabilities (such as loans or leasing) that would burden the balance sheet. It is also important to note that the ESCO model provides an additional benefit compared with traditional financing (investment loan/leasing) — the lack of required own contribution. This is particularly important for companies with extensive modernisation needs that must maintain financial liquidity.
ESCO model and risk management
Cooperation with an ESCO company such as DB Energy is not only about financing — it is primarily about risk transfer. Investment projects involve numerous risks that, if realised, can significantly reduce profitability. Under the ESCO model, the Client can transfer selected risk factors to the ESCO partner, which in traditional investment models would burden the company.
The ESCO model protects against:
- subcontractor management risks - the Client works with only one partner, eliminating the need to coordinate multiple suppliers and resolve responsibility disputes,
- design errors – the ESCO company is responsible for technology selection and technical design,
- installation failures – the ESCO company ensures full servicing and supervision throughout the contract,
- liquidity risks – the Client does not commit own funds during project execution, and after commissioning participates in savings without jeopardising liquidity,
- covenant breach risks – the investment can be kept off-balance-sheet, meaning Clients avoid breaching covenants in other financial agreements.
This approach provides the Client with comprehensive protection - both technical and financial - while simplifying the entire investment process.
Why is the ESCO model gaining popularity in Polish industry?
Polish industry is increasingly adopting the ESCO model as a tool for implementing energy-efficiency and decarbonisation strategies. For many companies, it is the only way to modernise outdated infrastructure amid rising energy costs and limited investment budgets.
Compared to traditional financing methods, ESCO combines technological benefits with financial security. Full project delivery and the absence of own-capital requirements allow companies to focus on core operations while reducing energy consumption and CO2 emissions.
The ESCO financing model is based on the ESCO company designing, implementing, and financing measures aimed at improving the Client’s energy efficiency, and then recovering the investment through the resulting energy savings. In Europe, this financing model is still relatively underused, even though it represents an attractive alternative to traditional methods of financing energy projects.
Currently, the European ESCO market is estimated at around USD 4–5 billion (PLN 16–20 billion), while global ESCO investments reach USD 38 billion. In countries such as Germany, Turkey, Slovakia, and the Czech Republic, the ESCO market is developing more dynamically than in Poland. Legislative changes and growing awareness of the benefits of this model will be key drivers of growth both in Poland and worldwide. By 2032, the market is expected to expand to nearly USD 60 billion.
Summary
The ESCO model combines technological modernisation, energy efficiency, and financial security. It enables companies to carry out projects without investing their own funds, minimises risks, and provides measurable savings.
With this approach, industrial companies can respond faster to changing market conditions, improve financial performance, and pursue sustainable development goals. Working with an experienced partner such as DB Energy not only reduces energy costs but also ensures full control over the modernisation process - from audit to installation maintenance.
