Energy-as-a-Service: Uberization of the Energy Industry?

Energy-as-a-Service (EaaS) evolved as an energy efficiency method. Yet do you recognize the bigger disruption ahead in the energy industry like those that happened in transport, retail, and consumer electronics? Ownership is becoming outdated! Individuals and businesses are turning to a subscription to avoid the hassle of ownership. And if you see the avalanche, how capable are you capable to manage the change successfully?

Timing

The stage is set for the perfect storm of a breakthrough thanks to:

  • Smart metering.

  • State incentives for the adoption of renewables, energy efficiency, and decarbonization.

  • E-Mobility popularity.

  • Development of batteries and storage technologies.

But don’t take this momentum for granted. Stimulation to reduce energy consumption wasn’t aligned among utilities and energy consumers. Because energy suppliers have had little interest to promote energy efficiency because that would erode their revenues. Yet society at large obviously could have benefited from consuming less energy and switching to cleaner energy.

The pressure from constituents, especially younger ones, concerned by the climate change forced many leading politicians to impose government policies to oblige and stimulate energy firms to offer clean and efficient energy services.

Plus, consumers themselves are pressing energy firms by expressing their desire to consume less and zero-carbon energy.

Meanwhile, economic challenges posed by the COVID-19 pandemic increased the cost pressure to households and commercial and industrial (C&I) consumers to reduce energy bills.

Customer advantages of EaaS

You should communicate the value to the customer to manage the change. It takes to get in the shoes of the energy consumer to win the competition.

How does EaaS look like from the customer’s perspective?

 Here are some of the obvious and hidden benefits for the customer:

·      Reduced utility cost.

·      From capital expenditures (CAPEX) to operational expenditures (OPEX). Customers reduce utility bills without having to pay for the capital cost to introduce a new solution to their home, facility, or business. By moving from CAPEX to OPEX the customers achieve better cash flow.

·      No operations & maintenance hassle and costs. Customers pass the risks to somebody else. Especially the customers in the C&I segment, usually get a performance guarantee, which enables them to focus their time and efforts to evolve, move or expand their core business.

·      Upgraded infrastructure. Enhanced HVAC or lighting provides higher resilience and reliability. Besides when you are upgrading you can get a competent advisory of which equipment is right for your building and microgrid. Usually, customers make the selection between competing offers based on cost comparison or customer reviews because they have little competency in technical matters, and they don’t know what questions to ask. And there are not too many people who understand the technical stuff to suggest you the best solution based on your unique needs and conditions. EaaS may cover such expert advisory.

·      Meeting sustainability and decarbonization goals. Switching to more efficient and clean energy consumption will help to meet regulatory or self-proclaimed sustainability goals.

·      Shift to microgrids. EaaS helps customers to get more and faster to microgrids.

Disruption by the new entrants

The research in 2017 estimates that the EaaS market for the C&I segment to reach as much as $221.1 billion by 2026. Such market growth will attract new entrants and prompt competition among the incumbents. As the power market evolves, expect the following type of players to represent EaaS:

  • Utilities

  • Industrial companies

  • Tech companies

  • Oil & Gas majors

  • Specialist DER providers

  • Telcos

  • Start-ups

The significance of the role of these players in the EaaS market will be determined by interplay various factors such as:

  • Technological developments

  • Economic developments

  • Environmental developments

  • Consumer and societal shifts

  • Political and regulatory responses.

The cost of failing to embrace the EaaS business model will be your inability to adapt to digital and distributed energy resources while losing connection to energy consumers. Then new, and more agile market entrants will erode your current competitive advantage as a major utility company.

Residential segment’s lack of traction

Historically EaaS developed as an energy efficiency solution for C&I and MUSH (municipalities, universities (colleges), schools, and hospitals) clients. The companies lacked the enthusiasm to penetrate the residential market because:

  • Residential customers have a higher risk of defaulting on a contract compared to businesses.

  • Data collection and processing have not been always possible especially in the areas where smart meters are not installed.

  • Lower ROI in acquiring new residential customers. It is easier for the companies to deal with fewer but larger businesses. A large industrial site may consume the energy equivalent of hundreds or thousands of individual households.

On the other hand, it is not yet clear how many residential customers have an interest in energy savings. Residential customers may well settle with paying the amount of energy saving as a fee for improved home comfort, consistent heating and cooling via elimination of air leaks.

Fortunately, smart metering deployment has been dynamic in recent years. So, I am sure that the breakthrough in data collection and understanding residential customer’s behavior will increase the appetite of the energy suppliers to chase the households.

From Energy-as-a-Service to Zero-Carbon-as-a-Service

EaaS will assist households and businesses to achieve energy savings and become environmentally friendly. This will require further alignment of state incentives, regulations, and embedding contractual carbon KPIs. The EaaS enabled demand side-management will lead to greater renewables integration and electrification.

That’s why Prospero Events Group is bringing together key experts from the leading energy companies for the ”Energy-as-a-Service: Future Business Models for Power & Utilities” virtual conference on 25-26 of March 2021. The speaker panel consisting of senior representatives from E.On (Germany), MOL Group (Hungary), TenneT (Netherlands), Engie (France), EDP (Portugal), and Elering (Estonia) will be prompting discussions about renewable energy business models innovation. Energy services market integration by data interoperability. Cooperation between TSO and DSO.

For instance, Hillaire Babin (VP Utilities to industries, District Heating & Cooling Networks, Engie, France) will host a session about including a carbon KPI within the EaaS contract – externalizing the risks & obliging the ESCO to deliver the strategy.

Join this exclusive meeting to get all your questions answered. All. Because more minutes of net interaction you get at a Prospero event than any other energy conference in Europe.

P.S.:

Future EaaS models will incorporate energy management through software or ownership of electric devices like cars or heaters. I am convinced that the first-mover advantage is the key to winning the contest upcoming 5 years.