ESCO model is implemented in accordance with the Plan and the Program of energy efficiency adopted by the Local government (LGU) as their obligation under the Law. In accordance with the Program LGU implements energy efficiency measures and in this respect must appoint a person or legal entity responsible for energy management and implementation of the Program.
Public lighting generates most of the electricity costs, particularly in smaller local governments and therefore has a special place in the planning and implementation of energy efficiency. Due to outdated and inefficient public lighting, local government must undergo the reconstruction or modernization of public lighting.
Due to the lack of funds in their budgets and the current restrictions on debt, local governments are generally not able to independently invest in new energy-efficient public lighting. However, the local government, for the purpose of modernization / reconstruction of public lighting, can use non-refundable grant from domestic and EU funds and modernize / reconstruct public lighting pursuant to ESCO model.
It is provided by the Energy Efficiency Act and further by Government Resolution on Contracting and Implementation of Energy Service in Public Sector.
Financing the implementation of energy service means that the local government does not need to have or plan any funds in the budget, but they plan only the item “consumed electricity for public lighting”, just as before, which is separated into ”electricity costs” and ”energy service costs”. Therefore, funds for electricty are planned in the budget just as before, and new reduced electricity consumption is paid from it and the rest are savings which are paid to energy service provider.
ESCO company invests its own funds and carries out the reconstruction of public lighting by implementing energy efficiency measures.
ESCO company guarantees by the contract in advance the achievement of energy savings. The savings are verified according to the International Protocol and further by imposed Rules and system for monitoring, measurement and verification of energy savings.
The fee is paid to the ESCO company only up to the amount of verified savings.