Energy as a service | EnVisioneering Exchange podcast ep. 22

Guest bio(s)

Sasha Wedekind is a senior research analyst leading Guidehouse Insights’ Building Efficiency and Decarbonization solution. Wedekind specializes in global market analysis and market forecasts for energy efficient building technologies and energy services. Her areas of focus are building decarbonization, energy efficiency, electrification, financed energy services, including EaaS and ESPC, as well as go-to-market strategy and the competitive landscape.

Prior to joining Guidehouse Insights, Wedekind was a research analyst at Academic Impressions, where she was responsible for conducting market research to inform company product strategies. She has also worked as a visiting researcher at the Environmental Law Institute, focusing on issues of natural resource management in countries emerging from civil war, and as an intern at Newmont Mining, performing country risk analysis for global operations.

Episode summary

Sasha Wedekind, Guildehouse Insight Building Efficiency and Decarbonization senior research analyst, joins host John Sheff to discuss energy as a service (EaaS). Their conversation centers on what EaaS is, some of the advantages it offers building owners and energy supply vendors, why it has been gaining in popularity in recent years, and how it may be expanded in the future.

Main points

• Energy-as-a-service (EaaS) is a contracting model for energy efficiency, energy supply, or energy infrastructure upgrades that has gained in popularity in the past 3–5 years.
  • This model allows for upgrades without up-front capital and to be paid for from operational budgets.
• This model allows customers to avoid debt and transfer performance risk to the vendor. Vendor guarantees outcomes such as energy efficiency, supply, and resilience.
• This model also allows for a great diversity in building and business types to take advantage of energy savings.
• While EaaS first emerged in industrial and manufacturing buildings, it has become increasingly used the education and healthcare sectors.
  • Customers come in a wide variety of business sizes, from large, global corporations to small, private business.
• On the energy supply side, there are three different types of contractors:
  1. Small suppliers that entered the market using digital platforms and are now entering more of a sustainability-oriented model.
  2. Traditional suppliers that have done performance contracting and are adding EaaS to expand their customer base.
  3. Utilities that offer energy as a service on top of traditional energy supply.
• Performance contracting is very similar to EaaS in that both models are meant to share the savings between the vendor and the customer, while EaaS is paid for out of operating budget, therefore likely to have a lesser financial impact.
• In the majority of EaaS contracts, energy vendors own a portion of the customer’s energy infrastructure.
  • This aspect of the contract ensures that energy outcomes are as originally agreed upon.
• Perhaps unsurprisingly, utilities have been some of the most successful at implementing EaaS. With their traditional business of energy supply, utilities were ideally situated to offer EaaS.
• Some utilities have partnered to participate in EaaS, such as the Seattle City Lights program, which uses the metered energy efficiency transaction structure. This model creates a partnership between the utility, the building owner, and the tenet. The utility benefits by having a contracted customer, building owners enjoy energy savings without an increase to their energy bill, and tenets enjoy an upgraded building at no additional cost.
  • Ultimately, building owners, not renters, see the energy savings, meaning that building owners lower their operational costs without lowering their income.
• With so much interest in green initiatives, EaaS is likely to be an attractive model to make existing buildings green in cost-effective way.
• Many cities, such as New York City, have passed or will pass building emissions caps; EaaS is one way for building owners to finance the necessary upgrades in order to comply.
• After the COVID-19 pandemic, there has been a lot of concern on improving indoor air quality. While upgrading indoor air quality infrastructure has not yet utilized EaaS, this model could easily be adopted for such upgrades in the future.
  • Where the building itself is not the primary service of a business—such as in healthcare and education—the growing complexity of energy and indoor air management are likely to be outsourced in the future.
• As touched upon previously, an advantage customers have to using the EaaS model is that the vendor takes on greater risk. If circumstances change, as they did with the COVID-19 pandemic, the vendor may have to adapt the building in order to maintain the agreed upon output.
• Innovative EaaS projects layer multiple technologies, such as demand-response, on-site energy supply, EV charging, etc. By not relying on one technology, flexibility is built into the building.
• While many EaaS projects have been as retrofits on existing buildings, expect to see it incorporated in more new buildings in the near future.
• EaaS has a lot of potential to grow—compared to other energy efficiency models, EaaS is relatively new.

Links

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For more information and additional episodes of the EnVisioneering Exchange podcast, visit https://www.danfoss.com/en-us/about-danfoss/insights-for-tomorrow/envisioneering-exchange/