"ESCOs must be incorporated into the 2035 NDC" Focus on 'Super ESCOs' to grow the market

• Lack of understanding of EPC is a stumbling block. Super ESCOs offer a solution.
• Super ESCOs reduce capital and risk through portfolio effects.
• Strategic roadmaps and EERS integration are necessary for their implementation in Korea.

It has been argued that the role of ESCOs should be included in the 2035 NDC to achieve national greenhouse gas reduction targets (NDCs), and that market growth should be supported, particularly through a 'super ESCO' financial model.

At the 'Global ESCO Seminar' held as part of the Busan Climate Industry International Expo on the 28th of August 2025, Pierre Langlois, co-chairman of the Global ESCO Network, emphasized, "ESCO is the fundamental mechanism for implementing energy efficiency."

Co-chair Langlois pointed out that while most countries, including the United States and Canada, include energy efficiency in their NDCs, few explicitly state energy performance contracts (EPCs) or ESCOs as actual enforcement tools.

He also emphasized that, given that the NDC's goal is to reduce greenhouse gases, fundamental reduction efforts must be accompanied by energy efficiency improvements. In particular, given that EPCs and ESCOs are key tools for improving efficiency, each country must clearly reflect their role in their 2035 NDCs.

He then pointed out that the reason EPC and ESCO are not being fully utilized is because the government does not properly understand their effects and benefits.

EPC is a contractual arrangement that guarantees energy savings. The ESCO designs and constructs energy efficiency projects for buildings or industrial facilities, and the investment is recovered through energy savings. This structure reduces the initial investment burden for the business, while the ESCO generates revenue based on performance.

Co-chairman Langlois proposed a "Super ESCO" as a solution to overcome these limitations. A Super ESCO is an organization established jointly by public and private investors to provide comprehensive EPC services. Instead of individual ESCOs entering into contracts on their own, it bundles multiple projects together, facilitating capital procurement and diversifying risk.

He emphasized that “tailored financial models such as Super ESCO are the key to accelerating market growth.”

Next, Alexander Ablaza, Co-Chair of the Asia Pacific ESCO Industry Association (APEIA), outlined the specific benefits of the Super ESCO model. He explained that this model has four key benefits:

• Enhancing creditworthiness through portfolio-level fund aggregation;
• Facilitating capital raising;
• Expanding market size and enhancing competitiveness; and,
• Mitigating business risks.

He said, “Super ESCOs can strengthen the capabilities of existing private ESCOs, support the establishment of new companies, and transform the market from a single-technology-focused business to a comprehensive efficiency business.”

Indeed, there are numerous examples overseas of super ESCOs driving the expansion of energy efficiency investment. Representative examples include the German Energy Agency, Belgium's Fedesco, London's RE:FIT program, the UAE's Etihad ESCO, Saudi Arabia's Tarshid, Morocco's SIE, and the Philippines' Climargy. These institutions, spanning both the public and private sectors, have facilitated capital procurement and bolstered market confidence, thereby supporting the growth of the ESCO industry.

Co-chairman Ablaza also addressed the potential application of ESCOs to the Korean market. He said, "Korea already has a solid foundation for ESCO development, but a strategic roadmap is needed to determine whether the strategy will be public-led or private-sector-led."

In doing so, he suggested that in order for Korea to successfully introduce Super EBCO, it is necessary to:

• Strengthen efficiency regulations such as the Energy Use Act;
• Set a direction for public and private Super ESCOs;
• Utilize blended finance;
• Expand the role of the Korea Association of ESCO (KAESCO); and,
• Establish consistent links with the national NDC.

The seminar also examined structural problems in the Korean market. Dr. Park Ki-hyun of the Korea Energy Economics Institute cited a complex set of factors as contributing to the domestic market's contraction and weakened competitiveness: insufficient efficiency investment in the public sector, refusal to handle factoring, sluggish implementation of energy assessment improvements, lack of information sharing, rising debt, a shortage of specialized personnel, and a focus on simple equipment replacement projects.

Dr. Park Ki-hyun emphasized, “In the short term, it is desirable to prioritize energy efficiency projects centered on public institutions, and in the long term, to revitalize the market by linking it with the Energy Efficiency Resources Standards (EERS) system.” He added, “Furthermore, supplementary measures on the financial side, such as revitalizing the factoring system, expanding the market led by public institutions, and direct investment of public funds, are also necessary.”

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