What is Onsite Energy-as-a-Service (EaaS)?

Energy-as-a-Service (EaaS) is a progressive business model that allows customers to access energy services without depending on services from public grid (i.e. Onsite behind the meter) and without any upfront capital investment. Over recent decades, service-based models have become prevalent in industries traditionally centered on product sales, such as video streaming and subscription clothing services. In the EaaS model, customers benefit from energy solutions without purchasing or managing the equipment directly, typically through a subscription-based service.

EaaS is an innovative pay-for-performance model that enables businesses to achieve on-site energy efficiency without bearing the responsibility of owning, developing, upgrading, maintaining, or funding the equipment upfront. Under this model, the EaaS provider takes on the financial and operational risk, overseeing and financing the energy project from start to finish. The provider recoups their investment through shared savings, receiving a monthly service fee akin to a utility bill, paid by the building owner throughout the EaaS contract.

This approach shifts from traditional asset-focused, centralized power generation to a comprehensive management model for energy assets and services. By integrating clients' resources into a 'smart energy community,' EaaS providers can consolidate assets, ensure predictable energy, and enhance grid infrastructure. This model not only simplifies energy management but also improves grid efficiency and stability, benefiting both individual customers and the broader energy system.

?Benefits of EaaS:

1. No Upfront Capital Investment: EaaS eliminates the need for large initial capital outlays for purchasing and installing energy systems. This is particularly advantageous for businesses with limited capital or those seeking to allocate resources to other strategic initiatives.
2. Immediate Positive Cash Flow and Savings: By shifting to a service-based model, customers often experience immediate positive cash flow. EaaS agreements typically include performance-based pricing, which means customers pay based on the savings achieved rather than upfront costs. This leads to immediate financial benefits and cost reductions.
3. Transfer of Risk to the Energy Service Company: EaaS providers assume the responsibility for managing and maintaining energy systems. This transfers technical and performance risks from the customer to the provider, reducing the customer’s exposure to potential operational issues and associated costs.
4. Scalability Across Multiple Facilities: EaaS systems are highly scalable, making them suitable for organizations with multiple facilities. Providers can easily expand or adjust services to meet the evolving needs of growing businesses or complex energy requirements across various locations.
5. Ongoing Maintenance and Support: EaaS includes comprehensive maintenance and support services. This ensures that energy systems operate efficiently over time without requiring significant effort or resources from the customer.
6. Achieve Sustainability Goals with No Capital Outlay: EaaS supports sustainability goals by incorporating advanced technologies and renewable energy sources. Customers can enhance their environmental performance without needing to invest upfront capital, aligning with their corporate social responsibility (CSR) and environmental, social, and governance (ESG) targets.
7. Reach ESG Targets and Other Environmental Goals: By leveraging EaaS, organizations can meet their ESG objectives and environmental goals more effectively. The integration of energy-efficient technologies and renewable energy solutions helps reduce carbon emissions and supports overall sustainability initiatives and ensure complying with the latest regulations and climate disclosure laws.
8. Off-Balance Sheet Treatment and Technology Flexibility: Unlike an Energy Service Company (ESCO), EaaS allows for upgrades to building infrastructure—such as heating and cooling systems, lighting, solar panels, and EV chargers—to be treated as off-balance sheet items. This enables rapid scalability across entire portfolios without impacting financial statements. EaaS companies are also not tied to specific technologies or suppliers, offering the flexibility to choose the optimal solutions that best fit your needs. By leaving the energy projects to the experts, businesses can focus on their core operations while benefiting from enhanced building resiliency, energy security, and sustainability.
9. Rapid Implementation and Scalability: Energy-as-a-Service’ unique financing model allows companies to quickly implement and scale energy efficiency and renewable energy systems across their entire portfolio. By outsourcing the management, ownership, and maintenance of these assets to an energy management company, organizations can tackle outstanding challenges, such as:

What Does This Mean for Energy Customers?

Energy customers can benefit significantly by participating in an EaaS program. Prior to the adoption of this business model, customers were often required to finance their energy projects or come out of pocket for capital-intensive investments. With the rapid evolution of technology, many projects quickly become obsolete, adding further financial burden.

EaaS mitigates these challenges by eliminating financial risks and the burden of market fluctuations. Customers do not need to assume the financial risks associated with energy investments or technological obsolescence. This allows organizations to swiftly implement new technologies, replace outdated equipment with upgraded systems, and achieve their energy goals without bearing the financial or operational risks.

Service Contracts and Energy Service Agreements (ESAs):

Energy-as-a-Service (EaaS) typically involves entering into service contracts with EaaS providers, which include components such as performance guarantees, maintenance, and support. These contracts are often structured as monthly or annual subscriptions, shifting the responsibility of managing and maintaining energy systems from the customer to the provider.

A specific implementation of the EaaS model is the Energy Service Agreement (ESA). Under an ESA, the service company undertakes energy efficiency upgrades with financing provided through the customer's energy savings. The service company supplies and retains ownership of the efficiency upgrade equipment, charging customers for services over an extended period. Throughout the contract, the customer pays a reduced utility bill along with an ESA payment, which together amount to less than the original utility bill for the specific energy service. This setup enables customers to benefit from upgraded technology and energy savings without the upfront capital expenditure, while the service company is compensated through the ongoing savings realized from the efficiency improvements.

Integration with Microgrids and District Energy Systems:

EaaS can be effectively applied to microgrids and district energy systems, enhancing energy management and sustainability.

Microgrids are localized energy systems that generate, distribute, and manage electricity, operating either independently or alongside the main grid. They integrate a mix of renewable energy technologies like solar panels, wind turbines, and bioenergy plants, complemented by traditional generators such as natural gas or diesel units for backup power. By producing electricity close to the point of use, microgrids minimize energy losses associated with long-distance transmission, enhancing overall system efficiency and reliability. Microgrids often incorporate energy storage systems and advanced controls, which further boost their resilience and efficiency. They are deployed in various settings, including universities, cities, industrial parks, and data centers. Data centers, in particular, benefit from microgrids' ability to ensure continuous power, provide energy redundancy, and repurpose waste heat for improved thermal efficiency.

District energy systems provide centralized heating, cooling, and sometimes electricity to multiple buildings. Integrating district energy systems with EaaS allows for the deployment and maintenance of advanced technologies, such as combined heat and power (CHP) systems, which improve energy efficiency by utilizing waste heat for additional energy needs. This approach enhances sustainability and reduces carbon emissions while meeting modern energy demands.

The combination of microgrids and district energy systems provides a forward-thinking solution for managing energy needs, supporting both environmental and economic goals. EaaS facilitates the integration of these systems by providing the necessary infrastructure and support without requiring significant upfront capital, thus enabling businesses and organizations to leverage advanced energy solutions effectively.

Contact Us

As a leading force in the energy sector, we are proud to be one of the largest providers of district energy in the U.S., delivering reliable and efficient solutions to municipalities, hotels, hospitals, residential complexes, data centers, and commercial properties nationwide. Our expertise in the thermal energy industry is recognized for driving sustainability while ensuring operational excellence.

We are committed to reducing our carbon footprint while remaining technology-agnostic. We assess a wide range of technologies, including solar, battery storage, geothermal, gas-powered turbines, hydrogen systems, and advanced heating and cooling and microgrid solutions. As advocates for cogeneration (CHP) systems, we focus on their superior efficiency and sustainability benefits and the integration of microgrids and district energy.

In addition to financing, upgrading, designing, building, and arranging financing for projects that save energy, reduce energy costs, and decrease operations and maintenance costs, we act as project developers for a comprehensive range of energy conservation measures (ECMs). We assume the technical and performance risks associated with these projects. Our Energy-as-a-Service (EaaS) solutions allow us to handle your energy infrastructure while freeing up your capital to reinvest in core business activities. Whether you are looking to explore your energy price options, develop an energy risk strategy, or want help exploring energy technologies through an EaaS model, we provide strategic financial and operational expertise, enabling you to optimize resources while we manage your energy needs effectively.

If you'd like to discuss how we can help you achieve your energy goals or explore our range of services further, please don’t hesitate to contact me directly. I look forward to the opportunity to collaborate and help you navigate the future of energy and evaluate the integration of microgrids with district energy systems.

About the Author

The author is Growth Strategist with over 25 years of expertise in originating commercial and operational strategies for multi-million and billion-dollar developments and organizational turnarounds. A champion of sustainability and commercial development, he has a proven track record in leading margin-growth-focused capital projects, M&As, and operational optimization.

Originally from Canada, the author has been residing in Texas for over 15 years and has lived in North and South America, Europe, Middle East and Africa. His global experience has equipped him with a deep understanding of diverse markets and cultures, further enhancing his strategic insight. The author has recently joined the Cordia commercial leadership team as the Senior Director of Growth for the West & Midwest Region.

Disclaimer:?

The views expressed in this article are solely those of the author and do not necessarily represent the views of the company the author is affiliated with.