By Thabang Byl, Buildings Segment Lead at Schneider Electric
22 August 2024,
In a time when South African businesses, property owners and managers are transitioning buildings from energy-intensive entities to managed environments, the resultant capital outlay remains a stumbling block for many.
The upfront cost can often seem daunting and downright prohibitively expensive which in turn is marring organisations steps towards an energy posture that is both sustainable and future-proofed.
Fortunately, there are solutions; one way to overcome the reluctance stemming from initial investment is to reframe it as services rather than rather than capital expenses. This opens doors to alternative, if you will, financing models such as subscription-based as-a-service approach, which eliminates the need for significant upfront costs.
A compelling as-a-service option is energy-as-a-service (EaaS). Akin to software-as-a-service (SaaS), subscription-based energy offers a cost-effective way for companies to meet their energy transition strategies.
One of the longstanding models within EaaS is the shared savings approach, which is particularly compelling in financing energy efficiency projects like installing Building Management Systems (BMS) and resultant hardware such as lighting retrofits. Here, an energy services company funds the project and bills the customer based on the savings achieved, allowing for immediate positive cash flow from day one.
The solar industry, too, has adopted the EaaS model to overcome the high installation costs associated with commercial solar projects. Through leases or Power Purchase Agreements (PPAs), businesses can adopt solar solutions without upfront capital, paying overtime or purchasing the generated power at a fixed rate.
Furthermore, commercial energy storage systems, such as battery storage, are invaluable for energy management but come with high installation costs. Renewable energy companies are now offering battery-storage-as-a-service, allowing commercial users to integrate these systems into solar projects or rent them directly, avoiding large initial investments.
EaaS extends to various energy technologies designed to enhance building efficiency and reduce costs. From IoT devices that optimise HVAC systems to systems that adjust energy consumption based on market data, these technologies promise significant savings.
However, its design, installation, and maintenance costs can be prohibitive. The EaaS model enables commercial and industrial users to access these technologies on a subscription basis, offsetting costs with the savings they generate.
EaaS presents numerous benefits for businesses aiming to optimise energy usage, cut costs, and achieve sustainability:
- No Upfront Capital Investment - EaaS eliminates the need for initial capital investment, easing the financial burden on businesses.
- Shift from CapEx to OpEx allows for more manageable and predictable budgeting.
- Risk transfer - the service provider assumes the risk of system performance and maintenance.
- Scalability - EaaS solutions can be scaled across multiple facilities.
- Expertise and management: Providers bring specialised knowledge in energy management, ensuring efficient system operation.
- Customised Solutions - tailored strategies meet the specific energy needs of each property.
- Long-Term Savings - businesses enjoy reduced energy consumption and operational costs over time.
