How does “X-as-a-Service” accelerate energy transition?
Technological advancements and Digitizations have revolutionized how the energy business work, and it led to increased servitization of many energy businesses, one of them is “X-as-a-Service” – a collective name for the model in which customers pay for a service or an outcome rather than purchasing the product in its entirety or part. It is emerging as a new product strategy, mainly when the capital costs are high, or there is the possibility of longer customer lock-in.
In this model, the XaaS provider enters into a service performance contract with a contractor who designs, installs, maintains, and monitors the XaaS provider’s services. The XaaS provider will then enter into a service agreement with the customer, who will make periodic payments for the use of the service. This payment will be used to run the business by the XaaS provider, with a portion going toward the contractor’s payment. As a result, the model saves the end user money on asset acquisition. As a result, there are no upfront capital costs. XaaS providers can also use data analytics to ensure intelligent and improved asset utilization.
A few models are used broadly across the energy and extended value chain.
In this model, the customer receives energy services in exchange for a monthly payment. Businesses are looking for sustainable energy, and many want to avoid incurring capital. Here, the energy-as-a-service model becomes a savior, offering to pay only the operating cost.
Increased adoption of the Internet of things, sensors and controls for data collection, advanced analytics to identify usage patterns of the businesses and weather prediction, cloud platforms to manage data, automation & blockchain for secured payments have led to improved service delivery.
Cooling as a service accelerates the scale-up of clean cooling technology by lowering upfront equipment costs and aligning incentives for the most efficient operations and maintenance. This model is currently being used as a potential solution in African and Asian emerging economies.
In the CaaS model, the tech provider sells the equipment to the bank, which leases it while providing the necessary service to its customers. In addition, the key stakeholders involved at all stages provide adequate financial assurance, making this model even more appealing.
End-users mainly demand lighting-as-a-service from commercial, municipal, and industrial sectors. This model relieves the user of any upfront cost and less engagement of personal resources by the client as the Light supplier does the maintenance and monitoring.
It also provides an opportunity for the client to have modern lighting technology solutions (Intelligent LED light systems or Daylight and shading technology) at the cost of a light supplier, thus significantly lowering energy costs. In addition, these light suppliers provide additional benefits in reducing carbon emissions, healthier lighting, upholding legal requirements for clients, and recycling lights. The payment for the lighting service is made on a subscription basis.
Energy Storage-as-a-service (ESTaaS)
To ensure the client’s power reliability, it combines an advanced battery storage system, a control and monitoring system, and a service agreement between the parties involved. In this case, the client does not need to invest in installation capital to reap the benefits of the energy storage system, and the operation of the storage system by a third party eliminates the client’s operational and maintenance concerns. These agreements can be set up as a cost-sharing model or a fixed monthly payment over the contract.
Energy storage as a service provides numerous benefits to customers, including peak shaving, participation in ancillary market services, demand response, and energy arbitrage, to name a few.
Energy Efficiency-as-a-service (EEaaS)
Energy efficiency as a service (EEaaS) attracts large energy incumbents and value chain players in the building management value chain because it is an off-balance-sheet financial solution in which users pay for performance.
The customer and energy service agreement (ESA) providers agree on one of the structures. Customers pay for these services through realized savings, which ESA providers develop, finance, and operate. In addition, the ESA provider may subcontract some works to ESCOs per project requirements. As a result, energy efficiency as a service has many benefits to customers, such as zero cost, savings from day one, performance improvements, and reduced carbon emissions.
EV Charging-as-a-service (EVCaaS)
EV Charging as a Service (CaaS) is a product that provides a risk-free way to install and manage an electric vehicle (EV) charging station. Companies can use EV Charging as a Service to charge their electric vehicle fleet instead of owning charging stations.
EV Charging as a Service (EV CaaS) is a service that allows users to save time, money, and energy that would otherwise be spent on project planning, installing EV Chargers, EV Charging software, and all associated EVSE. Instead, a third party (EV CaaS provider) will handle the entire process, including 24/7 maintenance and other services based on the subscription plan.
Virtual Power Plant-as-a-Service (VPPaaS)
This model involves companies aggregating distributed energy resources, such as rooftop solar panels and electric vehicle batteries, and using them to create a virtual power plant that can generate electricity on demand. The customer pays a monthly fee for the virtual power plant, and the company is responsible for managing and operating it.
Renewable Energy-as-a-Service (REaaS)
This model involves companies providing renewable energy, such as solar or wind power, to customers on a subscription basis. The customer pays a monthly fee for the use of renewable energy, and the company is responsible for maintaining and operating renewable energy systems.
Demand Response-as-a-Service (DRaaS)
This model involves companies providing customer demand response services, such as helping them reduce their electricity usage during peak demand to avoid high electricity prices. The customer pays a monthly fee for the demand response services, and the company is responsible for implementing and managing the demand response programs.
Battery as a Service (BaaS)
It involves a company providing batteries and related services, such as installation and maintenance, to customers on a subscription or pay-per-use basis. This model can help customers store excess energy generated from renewable sources, such as solar panels, for later use. It can also provide backup power during outages or other emergencies.
Solar as a Service (SaaS)
It involves a company providing solar panels and related services, such as installation and maintenance, to customers on a subscription or pay-per-use basis. This model can help customers generate their electricity from renewable sources, such as the sun, and reduce their reliance on traditional fossil fuel-based power sources.
Fuel as a Service (FaaS)
It involves a company providing fuel, such as natural gas or hydrogen, and related services, such as delivery and storage, to customers on a subscription or pay-per-use basis. This model can give customers access to cleaner and more sustainable fuel sources and help them reduce their carbon emissions.
Carbon as a Service (CaaS)
It involves a company providing carbon credits and related services, such as offsetting emissions, to customers on a subscription or pay-per-use basis. This model can help customers offset their carbon emissions and achieve carbon neutrality, which is becoming increasingly important for companies and individuals looking to reduce their environmental impact.
The energy industry will see a massive acceleration in the adoption of servitization. XaaS will require transformations in various sectors to rely on XaaS functions. The XaaS model aims to increase customer value by allowing customers to transition from high CAPEX to a more predictable operational expense. This can also increase the adoption and deployment of capital-intensive technologies, allowing for a faster energy transition.