Energy-as-a-Service: Current Market Demands and Future Growth

Updated on :July 20, 2024

ABSTRACT: 
The current climate crisis with a high level of greenhouse gas emissions has brought a situation where sustainability is getting established as a critical priority. On a global level, households are likely the largest energy consumer and the highest contributor to gas emissions. Clean, affordable energy services are in great demand. Electrical, chemical, mechanical, thermal, nuclear, wind, or solar energy are the different energies used for multiple purposes, including residential, commercial, industrial, governmental, and infrastructure. The demand for energy will only increase, and there is a need to control the patterns of power consumption.

Energy-as-a-Service (EaaS) is a business service initiated to support an energy-positive future. The service strategizes, digitizes, automates, and executes sustainable energy services along with optimizing equipment life cycles, field services, distribution services, maintenance services, consulting and training services, and security services. The service is ideal for large energy users. The EaaS model has brought about a revolution in the field of energy services by addressing the challenges like maintenance backlogs, capital constraints, sustainability targets, and so on. The growing demand for sustainability and renewable energy sources and the awareness of environmental wellness are major factors resulting in the popularity of the EaaS model.

GoodFirms’ survey ‘Energy as a Service: Current Market Demand and Future Growth’ intends to gain insights into the trends, market demand, and growth factors in the EaaS field.

Introduction

Energy remains a crucial aspect of running businesses worldwide. With the rise in digitization and the use of energy-dependent devices, the demand for energy has always been rising. Though optimal energy-efficient devices have been introduced, there is an evident rise in energy consumption worldwide. The rise in energy demand is not just limited to the industrial sector but is also evident in the commercial and residential sectors. With the rising energy consumption comes the rise in the associated costs.

Despite the surge in the use of renewable energy resources, a major share of the generated energy still comes from the burning of fossil fuels. The generation of energy through fossil fuels impacts the environment due to high carbon emissions. The hazardous effects of carbon emissions are alarming and mandate efforts toward creating sustainable and clean energy options. 

Energy-as-a-Service (EaaS) business models have emerged as a solution to the challenges associated with carbon footprint, lack of digitization in the energy sector, and centralized energy distribution. The involvement of distributed energy resources, renewable energy, and smart devices enables the EaaS models to deliver energy while managing the demand side flexibility, improving energy efficiency, and lowering the costs required for the organizations.

Although EaaS models are still new to many industries, with the increasing awareness and deployment of these energy-efficiency models, it has the potential to grow in the future.

GoodFirms’ survey titled ‘Energy-as-a-Service: Current Market Demands and Future Growth’ attempts to give details about the EaaS concept and the current market demands of the technology. The survey also tries to gather insights about the scope of future growth of the EaaS market.

Overview of EaaS: Definition, Market Size, Key Players

What is EaaS?

The last decade has seen advances from the Information technology and Communication technology sectors in developing new business models which are primarily based on services. A similar model has emerged in the Energy sector-the EaaS, which aims to change the traditional way of energy distribution and consumption. 

Energy-as-a-Service is an innovative decentralized business model that allows the service provider to have ownership of the equipment while the consumers pay for the consumed energy that is generated by the equipment. 

The EaaS model works to improve energy efficiency and help consumers control their spending on energy. The new model of energy distribution enables consumers to pay for the services they subscribe to, in contrast to the traditional energy supply networks where consumers have to pay for the number of kWh of electricity they use. 

The services that may be a part of a consumer's subscription may include energy-related advice, installation of energy equipment, and energy management.(1)

How does EaaS work?

One of the most common reasons for disrupted energy supply is grid failures. The grids used for centralized energy generation and distribution have now become worn out. 

The emergence of microgrids is considered a solution for the inconvenience related to traditional grids. Microgrids, capable of working with renewable energy resources like solar and wind energy, make them a favorite in the energy sector. Microgrids have emerged as a great option for ensuring a consistent and sustainable energy supply.

Microgrids generally function on either of the two mechanisms. The first mechanism involves self-financed construction and operation of the microgrid. While the second mechanism consists of appointing a third party for the construction and operation of the microgrid. However, irrespective of the mechanisms chosen for microgrid development, it will incur the burden of operational costs on the host of the microgrids. The Energy-as-a-Service(EaaS) is an alternative to reduce the cost burden on the host of the microgrids.

The EaaS model tends to shift the approach from asset-focused, centralized power generation and distribution to a newer approach toward end-to-end management of a consumer’s energy assets and services.(2

EaaS is a new paradigm that shows a shift towards a decentralized and digitized energy system. The consumers have to pay for the services mostly through a subscription model or a performance-based contract.

Energy-as-a-Service models generally comprise three services: Consulting, System installation, and Energy Management.

1. Energy Consulting

Energy service providers work on advising their consumers to create strategies appropriate for their businesses. It concerns reducing energy costs for the business by creating a sustainable and effective EaaS model. Energy consulting involves assessing the history of energy consumption of a business and forecasting future requirements. 

2. Installation

System installation includes the installation of on-site or off-site equipment and machinery as required for the implementation of the model. The equipment range from renewable energy generation and storage systems to Smart meters, grids, DERs (distributed energy resources), smart devices to monitor energy consumption, and other required machinery necessary for the project. 

3. Energy Management

Energy management is about monitoring the performance of the implemented EaaS model. Energy management comprises solutions for load optimization on the infrastructure and mechanisms for controlling the systems remotely. The deployment of smart devices helps monitor the demand and supply of energy and maintains the project's efficiency.

Market Size and Key Players

Although hampered by the outbreak of the pandemic, the EaaS market is expected to show a considerable improvement in the coming years. The inclination of societies toward renewable and sustainable energy options is considered to be a major driving factor in the adoption of energy-as-a-service models.

The global market size for EaaS accounted for USD 70.46 billion in 2022 and is estimated to reach USD 147.56 billion by the year 2029. The market is projected to grow at a CAGR of 11.1% during the forecast period.

North America is expected to dominate the EaaS market. Moreover, with encouraging government policies, the European market is favorable for the expansion of the EaaS market. 

Owing to the rising demand for renewable energy sources, businesses dealing in renewable energy services have a great scope for growth in the EaaS sector. 

The Energy-as-a-Service model is an emerging technology. While there are giant business firms present in the sector, many new players are also planning to invest in this technology. Companies that are investing in upcoming technologies, such as distributed energy generation, virtual power plants, and offshore wind power, such as EDF Renewables, Centrica, and Veolia, are expected to be leaders in the market. 

Some other major industry players that lead the market in providing equipment to ensure the smooth functioning of the energy production units are ABB, Siemens, Schneider Electric, GE, Ameresco Inc., Enel Spa, ENGIE SA, Honeywell International Inc., Johnson Controls International Plc, Panasonic Corp., and Telefonaktiebolaget LM Ericsson.(3)

Survey and Data Analysis:

GoodFirms’ survey “Energy-as-a-Service: Current Market Demands and Future Growth,” conducted in January 2023, gives an idea about the EaaS concept, factors driving the growth of the EaaS industry, and benefits the organizations can reap upon implementing the model. GoodFirms queried 410 businesses about their energy initiatives, processes, and sustainability goals in energy consumption. The survey focuses on EaaS adoption by organizations and the results obtained from it. The survey also attempts to gain insights into the obstacles businesses can face while deploying the EaaS model. The surveyed businesses revealed interesting facts about their current energy equations. 

Let us analyze the findings in detail: 

Around 39.2% of the respondents hope to adopt an EaaS model in the future.

possibility of collaborating with EaaS company

GoodFirms’ survey reveals that nearly 39.2% of organizations hope to adopt an EaaS model in the future. These organizations are well aware of the benefits they can reap by adopting EaaS models. They are, therefore, willing to collaborate with EaaS companies in the future. However, currently some constraints(financial, operational, management, feasibility, and resource-related issues) prevent them from adopting an EaaS model now.

31.6% of survey respondents are in the initiating process of adopting the EaaS

The focus of organizations toward sustainability, increasing adoption of renewable energy sources, a plea towards clean energy, subsidies by governments for green power generation initiatives, and corporate efforts to reduce carbon footprints are some reasons that persuade businesses to adopt EaaS models. 

22.8% of the respondents appear to be not interested in EaaS models currently

These business models do not feel the need to go for EaaS subscriptions as they are low-energy consumers. Most respondents who denied plans to go for EaaS models commented that their organization has mechanisms in place to reduce the carbon footprints, and EaaS-level transition is not required at current levels. Therefore, they are not planning to adopt the EaaS model for now. This percentage can lower in the future as the demand for such models increases.

6.4% of the organizations have already adopted an EaaS model

The Energy-as-a-Service model is still in its infancy, and businesses are not yet sure of collaborating with EaaS companies. Lack of knowledge about the benefits of the implementation of these models and the industry itself is a major hurdle in the way of expansion of the EaaS models

Driving Factors for the Growth of EaaS

Although the EaaS model is still a novel concept, there are several driving factors that pave the way for the increased adoption of the business model. 

The survey by GoodFirms found insights regarding the factors fueling the growth of the EaaS industry. 

Interestingly, the biggest driving factor for EaaS is the challenges that are faced by organizations with their current energy models and energy supply modes. 

The surveyed businesses reported the issues they face in their current energy supplies and how they are willing to shift to better energy models to mitigate them. 

Below is the detailed analysis with survey revelations: 

Challenges Faced with the Current Energy Supply

challenges faced with current energy supply

Rising Costs

71.6% of the survey respondents see rising costs as a top challenge with their current energy supplier.

Energy accounts for a prominent expense for any business. The rise in the cost of energy creates an adverse impact on a budget of a business. The rise in the fixed expense of a small or midsize business becomes a matter of concern due to its impact on cash flow.

The depleting reserves of fossil fuels and the rising demand and supply gap in the energy sector are major reasons for the rise in energy prices. Due to the recovering global economy after the Covid19 crisis, the year 2021 saw an increase in the prices of crude oil, natural gas, and coal. These spiking prices led to disruptions in the supply chain and rising inflation.

Since EaaS models are characterized by fixed subscription prices or tariffs based on the performance of the model, the organizations’ expenses are immune to the fluctuating energy costs for the subscription period.

Increasing Energy Requirements

58.2% of the surveyees believe that increasing energy requirements is a major concern with their current energy supply.

Energy demands have always been on the rise owing to industrialization. With a slight fall in demand during the pandemic, the energy demand is again increasing. Primary energy demand showed an increase of 5.8% in the year 2021 which exceeded the levels in 2019 by 1.3%.(4)

The rise in energy requirements is a cause for the demand and supply gap and high prices of energy. Rising energy demand even leads to large amounts of the burning of fossil fuels and increases the amount of carbon emissions in the atmosphere.

Energy consumption per Year

GoodFirms’ survey reveals that most organizations have quite an energy demand. Around 80.9% of surveyed businesses mentioned their yearly energy requirements are above 10000kWh.

While 8.3% of businesses require 7501 to 10000kWh per year, 4.5% of organizations have energy requirements of 5001-7500kWh per year. 

Around 2.5% of organizations mentioned their energy requirements to be between 2501 to 5000kWh, whereas only 1.5% of Organizations have energy requirements below 1000kWh.

EaaS, being energy efficient, assists in reducing energy consumption and reducing demand. Also, the application of sustainable energy choices can reduce the carbon footprint despite the rising energy consumption by consumers.

Energy Losses

Energy losses are a challenge for 44.5% of surveyed respondents with their current energy supply.

When energy is transmitted at long distances, the increased temperature within the power lines causes significant power loss in the form of heat. These losses are in the end paid by end users.(5)

Although developed countries face these issues on a minor scale, developing countries have to face severe power losses. The aggregate transmission and distribution losses account for around 19% in India and 16% in Brazil. In countries like Haiti, Iraq, and the Republic of Congo, these losses are about 50%.(6)

While the consumers cannot control transmission losses, energy losses are also evident at the user end. Energy saving has become a priority, and that can be seen from the fact that 47.2% of surveyed organizations in the Goodfirms’ survey reported having an Energy Saving plan.

Energy saving plan

Implementing an energy-as-a-service business model implies on-site energy generation, which reduces transmission losses. Also, the application of sensors and smart devices will help reduce the losses that are caused by the overconsumption of energy.

Environmental Concerns

Environmental concern is a challenge for 37.8% of surveyees with their current energy supply. 

Although electrification is considered a major development to reduce carbon emissions, fossil fuels account for around 60.3% of the sources used for electricity generation in the US.(7)

Burning of fossil fuels is one of the major reasons for carbon emissions that is a contributor to global warming. With the growing awareness about the environmental issues associated with burning fossil fuels, businesses are finding ways to make more environmentally friendly choices.

Jon Morgan, CEO, Venture Smarter says, “Increasing concerns about climate change and the need to transition to cleaner energy sources are driving demand for EaaS solutions, and advances in technology are making it possible to provide these services in an increasingly cost-effective and efficient manner.”

The concept of energy-as-a-service revolves around considering more sustainable and clean resources for energy generation in order to reduce the carbon footprint of the consumer. EaaS business models can thus serve as a solution to the environmental concerns associated with the traditional energy supply.

Downtime Due to Maintenance

17.6% of businesses consider downtime caused due to maintenance a challenge for their current energy supply.

An uninterrupted and reliable energy supply ensures the smooth functioning of businesses. A power outage leads to productivity and financial losses for a company. 

Power outages can be a result of worn-out and aging infrastructure and severe weather conditions that damage supply continuity. The downtime required for the maintenance and restoration of the system may be considerably high. The traditional method of using diesel generators for power backup is inefficient and inadequate.

According to the U.S. Department of Energy, power outages in America account for business losses of around USD 150 Billion annually.(8

Under the energy-as-a-service business, the maintenance of the infrastructure is the service provider’s responsibility. It is, therefore, likely that the service provider will make more efforts toward the proper maintenance of the infrastructure, reducing downtime.

Lack of Digitization

14.9% of survey respondents admit that lack of digitization is a challenge with their current energy supply.

With the advent of modern technologies, digitization has touched nearly all industries. Digitization in every sector has led to convenience and faster results. 

The traditional energy supply system lacks digitization which makes it difficult to monitor energy consumption and strategize the energy saving plan. Improving energy efficiency can be achieved with digitization.

The deployment of an EaaS business model can introduce smart devices and sensors that can help assess the energy requirements and strategize the storage of energy and provide energy when the demands are high.  

The above-discussed challenges are top factors that are persuading organizations to shift towards better energy efficiency models such as EaaS. Our survey also queried organizations about what they think will drive EaaS growth further. Below is the survey finding: 

Driving factors for EaaS growth

Growing Inclination Towards Renewable Resources

The growing inclination towards renewable resources is a major factor that will drive the growth of the EaaS industry, asserted 44.5% of survey respondents.

Electrification is touted to be the best alternative to burning fossil fuels. However, the generation of electricity still depends majorly on fossil fuels. In order to reduce carbon emissions, it is necessary to introduce renewables in the energy sector.(9)

Quote Bozuler Rehman

Although electricity generation from renewables comes with its own challenges, government policies, and the deteriorating climate conditions have resulted in the growing inclination towards renewable resources. 

The traditional energy supply models, which have a high share of fossil fuels, need alternatives that are sustainable. Energy-as-a-Service models aim to maximize the use of renewable energy resources to create sustainable energy systems.

Increased Usage of Energy-Dependent Devices

37.6% of survey participants believe that increased usage of energy-dependent devices will further drive the growth of the EaaS model.

The rise of population and industrialization are the major reasons for the increased energy demands.

Growing urbanization has given rise to the use of tremendous amounts of energy-dependent devices. Improved technologies have made it possible to use energy to make lives simpler. The growing industrialization and middle class in developing countries enable the usage of energy-dependent devices for various purposes. 

The increased usage of energy-dependent devices calls for the need for energy-efficient models that are sustainable and clean. EaaS models can serve the purpose to a great extent.

Energy Efficiency

Need for energy efficiency is a driving factor for the growth of the EaaS industry, according to 36.3% of survey participants.

Energy efficiency plays a crucial role in reducing energy costs and combating climate change by reducing carbon emissions. Energy efficiency can also add to the resiliency of the devices. Moreover, it can also be beneficial for people to live healthier and longer lives.

Energy efficiency is one of the cheapest and most immediate methods to reduce the consumption of fossil fuels required for generating energy. Energy efficiency can be achieved right from the generation and distribution of energy to the consumption by electric appliances in households and industries.(10)

The implementation of smart grids, other smart technologies, and distributed energy resources is of great assistance in achieving energy efficiency. EaaS models are well-equipped to improve energy efficiency.

Cost-control

27.8% of surveyees said that cost-control initiatives would boost the growth of the EaaS industry.

Along with the demand for energy, the cost of energy has also been increasing. Energy has always been a fixed expense line item for businesses. With the rising energy costs, businesses have witnessed energy expenses getting out of their control. 

Increased expenses hamper the cash flow of a company and must therefore be avoided. Cost control associated with a crucial factor like energy could be beneficial to a company in various aspects. With no upfront costs and a revenue model that can suit a particular business, the EaaS model can be helpful to a business when it comes to cost control.

Increased efficiency through the deployment of an EaaS model also adds to cost control. 

Enhanced Digitization

19.6% of surveyees think that enhanced digitization is a driving factor behind the growth of the EaaS industry.

Industry 4.0 is all about automation and digitization. The use of technologies like artificial intelligence and machine learning has spread across industries. 

The traditional energy supply models lack digitization which reduces their efficiency. Enhanced digitization in the energy sector will promote the sector to move towards more sustainable options and enable decentralization.

Smart technologies like AI, ML, and the Internet of Things can contribute to improving the efficiency of energy models to a great extent. Adopting these technologies can help businesses to make data-driven decisions.

According to Borris Jabes, CEO and Co-founder of Census, “By utilizing advanced technologies such as advanced analytics and artificial intelligence to optimize energy consumption and reduce waste, companies can access a low-cost, clean energy supply with minimal impact on the environment.”

Energy-as-a-Service is a great solution to introduce digitization in the energy sector.

Benefits of Adopting EaaS

The efficient implementation of an EaaS model has the potential to overcome several challenges associated with traditional energy supply technologies. 

No Upfront Costs

With the worn-out infrastructure and issues of energy efficiency associated with the traditional energy supply, businesses are in search of technologies that can assist them in the generation of energy on-site and improve the storage of energy. However,  not all companies can afford the cost of installing the infrastructure required for the process.

Energy-as-a-Service model helps businesses adopt an energy-efficient service with no upfront cost required from the business owners. The service providers of the EaaS models generally secure third-party funding to pay the project costs. EaaS offering is designed to be an off-balance sheet financing solution.(11)

While implementing an EaaS project, the business owners need not pay any upfront costs for the equipment installed, whereas the ownership of the equipment stays with the service provider. The businesses have to pay only for the service received.

Increased Savings

The concept of EaaS works to generate savings for the consumer. Implementing an EaaS model for the organization helps them to achieve various goals ranging from improving energy efficiency to reducing the carbon footprint. 

Since the customer does not need to have any capital for the upfront costs, they can build a sophisticated and energy-efficient model, which in itself helps them create a way to generate savings.

The energy experts from the service provider study the energy consumption patterns and diagnose the areas of waste. Monitoring the energy consumption and tracking areas where optimization is possible leads to saving on energy consumption and consequently on expenses.(12

When a company opts for Energy management services, the revenue model through which the customers pay to the energy service provider (ESP) would be either Subscription based or performance-based.

Subscription-based Model

Subscription based model works on a fixed monthly fee in the contract. The subscription cost is decided upon considering the price and quantity risk. In this case, the ESP will make a profit when the total amount of electricity consumed by the customer is lower than the subscription fee. The ESPs, therefore, make efforts to keep energy consumption optimized by identifying the areas of cost saving.

Performance-based Model

In this case, the contract includes a fixed amount of share of the savings. The cost-saving share might either be split based on a defined percentage or a fixed amount of cost for the consumer. (13)

In case the cost-savings are less than the defined amount in the contract, the ESP has to make up for providing the savings to the consumer. In either of the revenue models, savings for an organization after implementing the EaaS model are guaranteed.

EaaS models will save money

Subscriptions have entered almost all markets. Since subscriptions can help companies plan their expenses and are usually priced at low rates, they have become a favorite across industries. Subscription plans are generally customized as per the customer requirements and help to create a consistent customer base for the ESPs.

Which is better revenue model?

Although both the revenue models have their own advantages and disadvantages, 81.6 surveyees believe that Subscription based mode is better than the Performance-based model.

Data-Driven Output

With the advances in technology, the employment of sensors and smart devices has risen in every sector. The EaaS models are designed to have infrastructure like communication systems, advanced metering devices, and other smart devices in place. 

The use of smart devices, along with the application of IoT, makes the collection of real-time data convenient. Monitoring and analyzing real-time data at the consumer end allows information to flow 24 hours a day, giving an idea about the internal and external factors. 

Information collected from the sensors allows us to monitor and analyze energy consumption that can assess the need for energy storage to use in times of necessity. Optimized energy consumption can help achieve energy efficiency.(14)

Operational and Maintenance Savings

Adopting an EaaS model can be beneficial to organizations in terms of increasing energy efficiency. While the installation of sophisticated infrastructure is costly, maintaining this equipment also involves risks and capital expenditure. However, in most cases, along with the ownership of the infrastructure, maintenance is also the responsibility of the service provider.

The EaaS service provider pays for the timely maintenance of the equipment generating savings for the consumer. Although the level of services varies from the type of subscribed services and customers, appointing a third-party service provider to manage the operations can reduce the risk of unexpected downtime. Moreover, installing more efficient equipment with continuous monitoring and preventive maintenance is a great way to mitigate the risks of downtime.(15)

Obstacles to The Expansion of the EaaS Market

The Energy-as-a-Service model has tremendous benefits to offer. However, it is still new to several industries. With the less number of case studies of the model and fairly low success rates reported, customer hesitancy to invest in this novel technology is a major obstacle to the expansion of the EaaS market.

Surveyees dont have need

55.7% of the survey respondents wish to adopt the EaaS model. However, they do not feel it is needed for their business currently.

Businesses may be reluctant to adopt new technology due to the risk associated with investing in new technology. However, with the rise in the number of EaaS projects, businesses will be in a position to evaluate the need for the model for their business.

The survey by GoodFirms’ reveals that 41.2% of businesses believe that the current EaaS models are costlier than the traditional methods of getting energy.

The costs that are required for adopting the EaaS model depend on the size of the project and the services opted for by the organizations.

EaaS models are more costly

The prices involved in adopting an EaaS model may be high currently due to the less number of service providers in the market, which prevent small businesses from subscribing to the service.

81.5% of the respondents feel that EaaS models are more significant to larger organizations

Respondents think EaaS models are relevant for large models only

Currently, the EaaS providers prefer to finance projects that cost more than USD 1 Million. Also, the EaaS models are more beneficial for customers who own the space or if they have long-term leases. (16)

EaaS models, therefore, become more relevant for large-scale businesses that have room for on-site Distributed Energy Resources and have a high annual electricity spend. 

37.4% of the surveyees are concerned about security, which stops them from adopting the EaaS model

Surveyees concerned about security

The Energy-as-a-Service model involves the application of advanced technologies like AI, ML, and IoT. These technologies enable the interaction between smart devices that allow the exchange of data over a network. Data exchange leads to the risk of security threats which stops businesses from adopting the EaaS model.

Implementation Complexities: 

The EaaS model is characterized by data-driven decisions. Data collected from various devices is crucial to the EaaS systems to improve energy efficiency and savings generated by the deployed systems.

To collect relevant and essential data, an EaaS solution requires advanced smart devices, IoT devices, and sensors throughout the host organization. The data collected through these devices is of immense importance for deciding on the subscription fee and energy management techniques. The installation of such a large number of devices can become complex and tedious, especially when the environments of the model deployed are large.

Furthermore, the humongous amounts of data collected by IoT devices require an efficient and well-managed analytics platform that can handle the processing and representation of the data. 

Agreement Complexities:

Despite the fact that there are various sources and types of energy available, few companies have in-house experts in the energy sector who help the business explore options available to them. The energy-as-a-service model revolves around the partnership that businesses can have with experts outside the organization and create strategies suitable for them. However, the EaaS agreement is a complex factor of the business model. While the traditional energy supply systems are simple to understand, and the user pays for the kWh of energy consumed, the EaaS model has many aspects to consider to decide the tariffs. 

Various aspects like the performance guarantee, the ownership of the equipment, technical requirements for the subscribed services, data privacy and security of the consumer, termination of the contract, and ownership of the equipment after termination can increase the hesitancy of the consumers to adopt the EaaS business model. 

It is necessary that the service providers educate the stakeholders about the structure of the contract to persuade them into signing long-term service contracts.

Future of EaaS

Owing to the many benefits offered by Energy-as-a-Service, it has a future to grow. With the changing customer demands and growing environmental concerns, EaaS models are a great choice.

EaaS models work to make the energy industry decentralized, digitalized, and decarbonized. The growth of energy-efficient models ensures clean and sustainable energy options for consumers.

Karl Robinson

Expansion of the Distributed Energy Resources

The Energy-as-a-Service models are still in their infancy and have the potential to grow to a great extent. Due to the requirement for a wide range of physical, digital, and communications infrastructure, several industry players can venture into the market.

One such player that has a crucial role in the EaaS market is the Distributed Energy Resources market. The term DER covers a set of technologies located close to the customer. 

The future growth of the EaaS market will eventually lead to the growth of the DER market, as the technologies behind the meter are quite relevant to the energy services industry. With the growing importance of energy-efficient models and sustainability, DER has the potential to contribute to the EaaS market.

Distributed energy resources will largely promote the energy asset installation services provided by ESPs.(17)

The global Distributed Energy Resources Generation market, which was valued at USD 246.4 Billion in the year 2020, is expected to grow at a CAGR of 14.2% to be valued at USD 919.6 billion by the year 2030.(18)

Emergence of ESaaS

Energy storage has become a critical part of the energy service industry, which has led to the emergence of Energy Storage-as-a-Service (ESaaS).

With the growing demand for increased power management services and cost-effective battery backup in case of power outages, the need for energy storage equipment has grown equally. With the convenience of using this equipment without any upfront costs and low operational and maintenance costs, ESaaS models are becoming popular in the industry and promoting the growth of the market.

Usage of stored energy, when needed, is a cheaper, more energy-efficient, and more sustainable option with low to no carbon emissions. The ESaaS model has the potential to grow and attract financing due to the convenience it provides.(19)

The global SaaS market was valued at USD 1.3 Billion in the year 2020 and is expected to grow at a CAGR of 10.7% over the forecast period from 2021 to 2028.(20)

Customer-Centric Models

With technological developments and advanced digital services, customer expectations have changed irreversibly. The entry of big companies in the EaaS market will enable the rise of customer-centric and personalized solutions for consumers on a large scale. 

A personalized experience can help businesses engage consumers. Energy service providers need to focus on remote customer support and automated and personalized customer services. 

According to Jeremy Dawes, CEO of Jezweb, “The future of Energy-as-a-Service will be focused on providing personalized energy services tailored to the individual needs of consumers.”

Keeping customers at the center of the model is good for the customer as well as the system. Consumers will be benefited from increased efficiency and lower expenses, and the service providers will benefit from system-friendly behaviors.(21)

Shift Towards Renewable Energy Resources

One of the biggest challenges that businesses face today is meeting the low-carbon and zero-emission energy. The use of renewable resources for energy generation is the most effective way to reach the sustainability charges.

The integration of renewable resources with EaaS models is the future of the EaaS market. The energy-as-a-service technologies are capable of solving the issues associated with the accessibility of renewable energy. The involvement of DERs that use renewable resources for the generation of energy and storage equipment that can store the excess energy and use it when the demand for energy is high are the major reasons for the adoption of renewable energy resources.(22)

Jason Berkowitz, CEO of Break The Web says, “Companies are increasingly looking for ways to reduce their carbon footprint and energy consumption, and EaaS is an attractive option for businesses looking to do so.”

Key Findings

  • Energy-as-a-Service is an innovative business model that enables the service provider to keep ownership of the equipment while the consumers pay for the consumed energy.
  • Following the advances in the IT and telecommunication industries, EaaS is an attempt in the energy sector to introduce a service-based business model.
  • While adopting the EaaS model, consumers do not require any major upfront costs for the installation of the infrastructure.
  • An EaaS model's subscription consists of three major services: Energy Consulting, Installation, and Energy management.
  • GoodFirms’ survey reveals that about 39.2% of the surveyed organizations are hopeful of collaborating with an EaaS company in the future, while 31.6% of the organizations are in the initiating stage of adopting an EaaS model.
  • 71.6% of surveyees confirmed that rising costs are a challenge for them with their current energy supply.
  • Rising energy requirements are challenging, according to 58.2% of surveyed organizations for their current energy supply, while 44.5% of surveyees feel energy losses are a major challenge.
  • 44.5% of survey respondents believe that the growing inclination towards renewable energy resources is a major driving factor for the growth of the EaaS industry.
  • According to 37.6% of respondents, increased usage of energy-dependent devices is a driving factor for the growth of the EaaS industry, while 36.3% of surveyees feel that the need for energy efficiency drives the growth of the industry.
  • The adoption of the EaaS model ensures increased savings for the consumers,
  • 63.3% of survey respondents are sure that opting for an EaaS subscription will save them energy. 
  • EaaS companies’ profits depend on the energy savings they can bring to their customers.
  • 81.6% of the surveyed businesses assert that the subscription-based model is better than the performance-based model.
  • 81.5% of surveyees feel that EaaS models are more relevant to larger organizations.
  • The growth in the EaaS market will promote growth in the Distributed energy resources market and Energy Storage-as-a-Service market.

Conclusion

The Energy-as-a-Service business models work with a combination of various aspects. It works based on the analysis of real-time data of energy consumption and demand-side flexibility. Monitoring the real-time data and demand side flexibility can be achieved with the interaction of components like distributed energy resources, energy storage equipment, smart devices, and advanced metering systems. Powered with modern technology like artificial intelligence, machine learning, and IoT, this system generates real-time information and fulfills energy requirements efficiently.

Digitization is an integral aspect of the EaaS business model that improves energy efficiency and maintains demand-side flexibility. Energy efficient business models promote the implementation of renewable energy resources to reduce the carbon footprint of the customer and create sustainable energy resources. 

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The maturity of the EaaS market will be responsible for the growth of the Distributed Energy Resources market and the Energy Storage-as-a-Service market. The fact that the revenue models of EaaS subscriptions are entirely dependent on the savings generated for the organizations motivates the service providers to work towards improving energy efficiency and reducing energy losses. 

Although the EaaS models are a novel concept for many industries, with the tremendous amounts of benefits they offer, the industry has the potential to grow in the near future as industries evaluate the need for energy services for their organizations.

We sincerely thank our Research Partners for their valuable insights. 

References: 

  1. https://media.rff.org/documents/IB_19-09_EaaS.pdf
  2. https://www2.deloitte.com/uk/en/pages/energy-and-resources/articles/energy-as-a-service.html
  3. https://www.fortunebusinessinsights.com/industry-reports/energy-as-a-service-market-10120
  4. https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html
  5. https://fuergy.com/blog/7-problems-and-challenges-of-a-power-grid
  6. https://nationalinterest.org/blog/buzz/power-grid-problems-how-people-are-wasting-energy-103862
  7. https://www.eia.gov/tools/faqs/faq.php?id=427&t=3
  8. https://www.energy.gov/ne/articles/department-energy-report-explores-us-advanced-small-modular-reactors-boost-grid
  9. https://www.forbes.com/sites/bernardmarr/2022/02/11/the-3-biggest-future-trends-and-challenges-in-the-energy-sector/?sh=1b9c877527b7
  10. https://www.energy.gov/eere/energy-efficiency
  11. https://aceee.org/sites/default/files/eo-energy-as-service.pdf
  12. https://www.iotacommunications.com/blog/energy-as-a-service-business-model/
  13. https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/Jul/IRENA_Energy-as-a-Service_2020.pdf
  14. https://www2.deloitte.com/uk/en/pages/energy-and-resources/articles/energy-as-a-service.html
  15. https://aceee.org/sites/default/files/eo-energy-as-service.pdf
  16. https://www.aceee.org/sites/default/files/eo-energy-as-service.pdf
  17. https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/energy-resources/deloitte-uk-energy-as-a-service-report-2019.pdf
  18. https://www.alliedmarketresearch.com/distributed-energy-generation-market-A13784
  19. https://www.forbes.com/sites/pikeresearch/2019/12/06/the-rising-popularity-of-energy-storage-as-a-service/?sh=2e48f31ca3a7
  20. https://www.grandviewresearch.com/industry-analysis/energy-storage-as-a-service-market-report
  21. https://www.sf1.services/files/docs/1545958464_elia-vision-paper-2018-front-spreads-back.pdf
  22. https://www.enertika.com/en/2022/01/10/what-is-energy-as-a-service/

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