Heating and cooling systems account for about 40% of a commercial property’s energy consumption, according to the Small Business Administration. Since every business sector uses energy in some form – whether it’s to perform business functions or operate their buildings’ HVAC systems – efficiently using that energy is important for growth and success.
Further, since many commercial entities now must meet emissions targets, they must replace non-sustainable processes and equipment with others that cause less damage to an already fragile climate.
Unfortunately, adopting low-carbon technologies to curb energy use usually involves purchasing expensive technology, making the transition to sustainability inaccessible to many small businesses. How can more companies be convinced to adopt greener technologies, including their HVAC systems? One solution might be implementing a broader energy-as-a-service model.
What Is Energy as a Service?
Energy-as-a-service describes a business model in which customers pay for an energy service without any upfront capital investment. Like other product-as-a-service models such as the one popular in the software industry, the model involves a subscription-based service that allows customers to enjoy the benefits of a product without purchasing it outright.
When dealing with electricity, service business models provide a customer with energy to operate a device such as a lightbulb in exchange for a recurring fee. The customer benefits from the use of the device while avoiding direct electricity payments and expensive equipment or software upgrades down the line. A similar model could be applied to the use of HVAC equipment, and since the supplier gets the same payment regardless of efficiency, they are more inclined to provide efficient equipment.
“Energy as a service allows building owners to refocus efforts on their core business practices rather than the operation of the building,” National Association of Energy Service Companies’ executive director Timothy Unruh told Propmodo. “And when you go with an energy services provider, they specialize in this, so you get the expertise you may not have had access to. It’s also a turnkey service. So, by shifting the energy upgrades over to a third-party company, you let them take that responsibility from you.”
According to Unruh, EaaS is gaining popularity among schools and hospitals, as well as industrial and commercial facilities, where more business owners are discovering they no longer have to own their equipment. By outsourcing energy upgrades to a vendor, property owners gain access to expertise and are more readily able to afford needed upgrades. Companies that subscribe to EaaS not only save money on their electricity usage, but similar models can provide savings on water, sewage, lighting, and HVAC.
How Does Energy as a Service Work?
EaaS enables a property owner to perform energy upgrades without any upfront capital investment. Instead, the provider pays for not only the new equipment but also a system’s development, design, construction and maintenance.
With EaaS, businesses can overhaul their existing equipment with little investment while spending less on their utility bills. The provider keeps a portion of the money saved in return for providing the service.
When an organization decides to switch to EaaS, they sign a contract dictating how long they must do business with the energy-saving company, how much it will pay, and what happens to the equipment at the contract’s end. The EaaS company then surveys the property to evaluate existing appliances and meter-reading equipment before recommending changes and upgrades that will allow the property to perform the best while conserving the most energy.
The EaaS company then will install the equipment and maintain it over the life of the customer’s contract. Upon the contract’s conclusion, customers can either extend the terms, return the equipment, or purchase it.
Benefits of HVAC Energy Efficiency as a Service
Despite a looming recession, the EaaS market continues to thrive, and it’s expected to be valued at more than $140 billion by 2027. The strength of this sector can be attributed to the mutually beneficial relationship between customers and providers. A few of the ways EaaS can benefit HVAC customers include:
EaaS agreements save customers money since the financing structure requires little-to-no capital invested upfront to install energy-efficient equipment like an HVAC system. Plus, the subscription-based service fee is usually lower than what the customer was paying for utilities.
Organizations that enter EaaS agreements typically take steps closer to sustainability. The financing structure provides access to renewable or otherwise energy-efficient equipment that many customers otherwise would be unable to afford it.
EaaS agreements allow customers to avoid the hassles associated with equipment ownership. The third-party owner, otherwise known as the service provider, is responsible for equipment such as HVAC systems, including maintenance, from the time it’s installed until it’s either removed or purchased. If the equipment fails, it is the provider’s responsibility to repair it.