Comparison between conventional and ESCO financial schemes
Aomori Bank. News Release of 28 January, 2015. http://www.a-bank.jp/contents/information/news/2015/012801/012801.html
Upgrading to Cost-effective, Energy-efficient Street Lighting through an ESCO model
An ESCO model includes a scheme whereby a reduction in energy expenses compensates costs to install energy saving equipment/facilities. Adopting this business model, Hirosaki City commissioned a local electronic company association to replace the streetlights with LEDs and maintain them for ten years. The commission fee to the local electronic company association was JPY 340 million for ten years.
Before the projects, neighborhood associations owned the streetlights while the city government provided a subsidy, which was 7% of the annual electricity fee, for electricity and some repairs to neighborhood associations. Thus, neighborhood associations had to pay for the rest of repairs. In this ESCO project, however, neighborhood associations granted the ownership to the city for free. Utilizing the ESCO scheme, the city converted all 17,800 streetlights to energy-efficient LEDs.
- Transferring the ownership of street lights from neighborhood associations to the city government
- Entrusting management of street lights to a private company association for more energy-efficiency.
By this ESCO scheme, the city government successfully reduced a considerable amount of energy cost while ensuring safety and security on the streets. The ESCO business makes it possible to maintain the same quality of service while contributing to savings and energy conservation.