by Fereidoon Sioshansi, PhD, Menlo Energy Economics

The idea behind Energy-as-a-Service (EaaS) is as old as energy. We use energy not because we get a kick out of it but because it provides valuable services we want and need. We fill up the fuel tank in the car to drive to work – in the future we’ll fill up the batteries in our electric vehicles for the same reason.

What has made EaaS attractive of late is the multiple pressures on many customers, particularly in the commercial and industrial (C&I) sector, to meet their energy service needs at low cost while meeting sustainability goals.

As noted in a recent report from Guidehouse Insights, C&I customers facing growing stakeholder pressure and investor requirements to demonstrate alignment with the Paris Agreement goals, are increasingly setting ambitious carbon targets. “These companies – as well as municipalities, universities, schools and hospitals – are looking for partners to help them meet these goals by transferring risk and including guarantees in the contract, simplifying operations, and ensuring a comprehensive and flexible technology.”

“Sustainability is becoming a priority for organisations across commercial and industrial (C&I) segments and municipalities, universities, schools, and hospitals (MUSH) customer segments due to stakeholder pressure and growing investor requirements to demonstrate alignment with Paris Agreement goals. Companies are increasingly setting ambitious carbon targets and looking for partners to help them meet these goals by providing comprehensive technology expertise, advisory and other services, and no-CAPEX low cost financing.”

According to Guidehouse, “In the past two years, players in the market have made significant strides in developing and executing EaaS solutions, expanding into new geographic markets and customer verticals and developing new business models such as white-labeled EaaS platforms.”

Despite the progress, Guidehouse notes that, “The young market is still characterised by low adoption rates and high differentiation between different players. Traditional energy service companies (ESCOs), utilities, EaaS financing and platform providers, and other types of players offering EaaS solutions all participate in the market, serving different customer segments with a variety of technology solutions.”

Guidehouse identifies a few well-known and established players and a number of less known among the top players including Ameresco, Enel X and Engie (visual). It lists several others as “contenders,” including Siemens, Centrica, Metrus, Redaptive, Schneider Electric, Sparkfund and Carbon Lighthouse. It says, “These companies have developed well-rounded EaaS solutions and are positioned to evolve their market offerings to further align with market needs and take on the leaders in the market.”

Why these and not others can certainly be disputed. Guidehouse admits that, “While the report names the top players in the field, it also points out that the relative position of different vendors is likely to shift as contenders refine their solution offerings and take on the leaders.”

It identifies four additional “challengers” including Budderfly, Johnson Controls, Honeywell and Trane Technologies and says, “These are still developing their EaaS offerings and scaling operations but are well-positioned to move up in the rankings based on their technology stack and brand recognition.”

Ultimately, what is clear is that as customers, particularly in the C&I sector, are pressured to prioritise sustainability and low carbon-footprint, they turn to EaaS providers to meet their energy service needs while minimising costs. They increasingly seek firms with technology expertise who can do it all – delivering what they need with little hassle and effort so they can focus on running their businesses.

But what is attracting customers to EaaS now? According to Peter Asmus of Guidehouse, “EaaS offers the customer cleaner and more resilient electricity services with no upfront capital.” Moreover, it essentially shifts the risks associated with project performance to the EaaS provider. Finally, advances in digitalisation, remote monitoring and management and automation using artificial intelligence and machine learning makes it easier for the EaaS provider not only to optimise the performance of the assets but minimise the costs.

Commenting on the topic, the report’s main author Sasha Wedekind said, “The EaaS market is undergoing an exciting transformation, as more vendors and clients are becoming familiar with the EaaS model. We expect the market to scale and continue to evolve in the years to come as new market entrants introduce solutions and current players expand their business.”

With multiple technological options, myriad of energy retailers and service providers to choose from, complex tariffs, increasing environmental pressures and rapid pace of change in regulation, the time has arrived for EaaS to thrive at last.

Acknowledgement

This article was first published in the June 2021 edition of EEnergy Informer and is republished here with permission.