Commercial, Industrial, Finance - July 1, 2019 - By William Tokash, Navigant Research
Energy as a Service Solutions Targeted to Fit Customer Segments
Corporate commercial and industrial (C&I) energy and sustainability managers are looking for cost-effective, customized, and comprehensive energy solutions that can guarantee energy savings. These solutions transfer project execution risk without capital expenditures (CAPEX) to meet their company’s sustainability and operational efficiency needs. Meanwhile, energy suppliers and energy management vendors are introducing a broader set of turnkey, portfoliowide, sector-specific technical, financing, and business model options to meet customer energy management needs. These new options transcend the historical, single-site, fee-for-service energy efficiency project approach that required customer CAPEX. A new, broader set of financed distributed energy resources (DER) solution options that extend beyond energy efficiency have emerged to define how energy as a service (EaaS) solutions will be deployed across the C&I customer segment landscape.
The Rise of Portfoliowide, Beyond Energy Efficiency Solutions
Overview of EaaS Solutions, Financing Options, and Business Models
Navigant Research defines EaaS as the management of a customer’s energy portfolio needs—such as portfolio strategy, program management, energy supply, energy use, load management, and asset monitoring—by applying new products, services, technology solutions, and financing and business model innovation across project-based and enterprisewide instruments that avoid customer CAPEX while reducing energy use, spend, and risk.
A full set of EaaS solutions with financing transaction options will be required to address the portfolio energy management needs of C&I customers. Energy storage and smart building analytics and controls will support energy management needs as key enabling technologies of these solutions. These solutions and financing options are the building blocks of new business models that have emerged to better meet C&I energy customer needs for portfoliowide EaaS solution delivery, CAPEX spend avoidance, and risk transfer.
EaaS Solutions and Financing Transaction Options Enable New Business Models
EaaS Overcomes the Customer CAPEX Challenge
C&I customers face scalability challenges in deploying CAPEX for EaaS solutions on individual projects at single sites. As a result, C&I energy users are interested in financed portfoliowide opportunities for broader, scalable energy and cost reduction opportunities. This requires a more sophisticated set of energy efficiency and other DER solutions under financed EaaS delivery models that transcend single site energy efficiency solutions.
Due to variations in building types and customer load profile, there is no one-size-fits-all approach. Vendors are bringing a broader set of sector-specific, fee-for-service, and financing options for EaaS solutions across new financing asset classes and business models for C&I customers. The delivery of these solutions to C&I energy users is driven by factors dependent on the differences in sector building types and operations, availability of solutions, software platform capabilities, and the customer energy management approach across each segment.
Predicting EaaS Opportunities for C&I Energy User Segments
Several factors have emerged that can reasonably predict the propensity for EaaS solution opportunities for C&I properties. These factors depend, in part, on whether the customer operates small commercial properties (hotels, restaurants, retail buildings, and small offices), large commercial properties (grocery stores, healthcare facilities, and larger office buildings), or industrial properties. Other factors depend on the energy management capabilities of the customer and the potential for scalable solutions that can demonstrate energy savings. These factors can be summarized as follows:
Energy Management Factors
- Portfolio energy spend: Does the C&I customer have a significant energy spend across a single site or across their portfolio or properties?
- Sustainability: Has the C&I customer set a public energy or greenhouse gas reduction goal?
- EaaS solution complexity: Can solutions be easily deployed at scale across the segment with low operational impact risks?
- CAPEX spend likelihood: Is the customer likely to deploy CAPEX for non-core operations like energy management?
- Energy management maturity: Does the C&I customer have strong centralized energy management team expertise?
Portfolio Management Factors
- Portfolio size: Does the C&I customer have large sites or a large number of sites?
- Portfolio solutions expertise: Are there proven EaaS solutions specific to the segment that are easy to deploy?
- EaaS solution repeatability: Does the customer have similar operations where solutions can be deployed that do not create operational risks?
- Software platform availability: Is there a proven buildings analytics and controls software platform applicable to the segment that can enable EaaS delivery?
- Financing maturity: Is there more than one financing option beyond energy efficiency available across the customer segment?
William Tokash is a senior research analyst in Navigant Research’s DER Solutions service, where he leads Utility Customer Solutions research coverage. Tokash brings broad-based, leading-edge expertise in the areas of energy as a service, solar PV, energy storage, vehicle electrification, technology assessment, business development, investment analysis, and project finance. He holds a BS in medical technology from Indiana University.
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