Funding Net-zero: Clarified and Simplified - Smart Energy Decisions

June 4, 2021 - By Anastasia Beckett, Metrus Energy

Funding Net-zero: Clarified and Simplified

The race to net zero is on with over 25% of S&P 500 companies making commitments to zero out their carbon emissions by 2050. At a high level, companies understand the importance of reducing their direct (Scope 1) and indirect (Scope 2 and 3) emissions. However, the implementation of these increasingly ambitious plans is challenging and requires significant resources to plan and identify carbon-reduction opportunities as well as to secure funding and measure the ongoing impact of projects.

Given the urgency to act on climate, third-party, pay-for-performance solutions like Energy as a Service (EaaS) that integrate technical and financial services are rapidly gaining traction. Guidehouse Insights estimates that the EaaS market is poised for growth, expanding from $2.7 billion in 2021 to $27.2 billion by 2029. With rapid growth comes confusion about the myriad of different as-a-service product offerings as well as what constitutes an EaaS project.

This lack of clarity poses a problem for customers: how do you move forward with a project if you are not sure how to compare offerings and make informed decisions? When there is confusion, decisions are delayed, savings are lost, and greenhouse gas emissions continue unabated. The existing, often piecemeal approach is inefficient for customers and investors and will not be able to scale the market enough to move the needle on climate change.

Looking through the lens of sustainability—which is at the heart of every energy efficiency and renewable energy project—the as-a-service market can be renamed and standardized around sustainable energy. Defining what is and isn’t truly Sustainable Energy as a Service (SEaaS) will simplify offerings, benefit customers, and accelerate the scale and scope of project implementation. Standardizing sustainable energy services agreements requires that providers adhere to the following minimum attributes:

Focus on carbon. Project design and development should aim to maximize reductions in carbon emissions. This means maintaining a strict focus on the financing and implementation of energy efficiency, demand reduction, and renewable energy projects instead of fossil fuel-based solutions.

Set payments based on measured performance. An as-a-service precept is that customer payments vary with project performance and need to be set based on a per unit of project output or utilization. For energy efficiency, this means charging customers for each unit of measured savings, be it a kilowatt-hour of electricity saved or a therm of natural gas saved.

Provide ongoing reporting.  Ongoing reporting should be in an easily digestible format that demonstrates the reduction of carbon emissions from projects in line with disclosure required from CDP and others. Demonstrating that projects' actual savings are in line with expected savings is critical to increasing confidence in SEaaS investments for companies and investors alike. 

Align economic interests with customers. As a third-party owner of energy efficiency and renewable energy assets, the economic returns of SEaaS providers should be based on realized savings generated by the project rather than fees, added margins on equipment, or selling project-related data. 

Any successful long-term plan for carbon emission reductions will need to have energy efficiency at its core. Starting an SEaaS project with efficiency upgrades can be a quick way to make forward progress on climate goals and begin generating the information (e.g., benchmarking data, energy audits, baseline measurements, etc.) needed to make more comprehensive portfolio-wide improvements. SEaaS projects also provide an immediate source of third-party financing sustainability efforts and include ongoing measurement to simplify emissions disclosures. Acting with speed avoids incurring unnecessary costs of delay, both in terms of total dollars saved and in terms of total avoided C02 emissions. 

SEaaS can propel companies and their supply chains to move forward towards their ambitious climate goals.  It is time for us all to get into action.

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As Senior Vice President of Business Development, Anastasia Beckett leads Metrus’ Business Development group, managing all direct-to-customer and channel relationships. She leads the National team of Business Development Managers covering commercial and industrial and MUSH markets.  Prior to joining Metrus, Anastasia was with Tesla where she managed the Commercial & Industrial Energy Sales Team in the Western U.S.  Additionally, she served as a Public Finance banker and financial advisor at Raymond James Finance and KNN Public Finance where she held Series 52 and 63 FINRA licenses. She received a B.S. from San Francisco University.

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