Energy as a Service: Sustainability Solution
Energy as a Service (EaaS) is an effective, turnkey solution for organizations seeking to improve the energy efficiency of their facilities — whether to upgrade equipment, reduce energy costs, meet decarbonization goals, or improve operational resilience – without impacting their CapEx budget.
What is Energy as a Service?
Energy as a Service is a pay-for-performance model in which customers benefit from sustainable-energy solutions without having to pay for energy efficiency upgrades or own the equipment. The ‘as a service’ business model allows customers to receive the benefits of a service without owning the assets that deliver it. By eliminating the cost of ownership, the as-a-service model enables organizations to access technologies, services, and physical assets that would otherwise be prohibitively expensive to acquire, install, and maintain.
The EaaS model is especially well-suited to large facilities with above-average energy demands, including hospitals, universities and manufacturing plants, where the cost to retrofit aging equipment can be a significant barrier to needed upgrades.
Metrus Energy pioneered the Energy as a Service model over 14 years ago, and today Guidehouse estimates that the EaaS industry will grow to $27B by 2029. Through EaaS, Metrus installs, maintains, and monitors energy-efficient upgrades to a customer’s buildings, funded entirely through energy savings and with zero upfront cost to the customer. The customer avoids capital outlays for equipment, infrastructure, and maintenance and pays only for ongoing service at an agreed-upon rate.
Energy Efficiency as a Service
Because Energy as a Service is often focused primarily on the installation of equipment and technologies that reduce energy demand, it is sometimes referred to as Energy Efficiency as a Service or Efficiency as a Service. Energy as a Service tends to describe a business model that can encompass energy conservation measures (ECMs) as well as energy generation and management services. Metrus often uses the term Sustainable Energy as a Service to emphasize how our model is committed to a clean energy, net zero future.
How does the Energy as a Service Business Model Work?
The business model for Energy as a Service is designed to remove the barriers that have traditionally made an efficiency retrofit a daunting undertaking — e.g., how to finance the project, how to plan and manage implementation, how to maintain the new equipment and ensure optimal performance, etc.
The EaaS business model is completely off-balance-sheet: Metrus funds 100% of the cost to upgrade the customer’s equipment. No upfront cost or debt is incurred.
Metrus manages the retrofit from beginning to end, working with an Energy Services Company (ESCO) partner to install, maintain, and monitor the equipment over the contract period. Metrus owns the equipment and reports regularly on the project’s energy savings and GHG reductions.
Before equipment is installed, Metrus establishes the customer’s baseline energy consumption and calculates the potential savings. Once the project is completed, a measurement and verification (M&V) analysis is done to compare actual savings vs. baseline energy use.
The customer pays Metrus a charge per unit of energy saved that is set below its baseline utility price, which immediately reduces operating expenses and creates positive cash flow. The customer pays only for realized savings; if the project savings are lower than projected, Metrus is paid less.
Metrus owns the equipment and ensures its reliability and performance over the life of the contract, which usually runs 5-15 years. When the contract ends, the customer can purchase the equipment at fair market value, extend the contract, or — in rare cases — return the equipment. Typically the customer will purchase the equipment so that they can receive 100% of the project savings after the contract ends.
To determine the potential energy savings a customer might realize through Energy as a Service, Metrus first conducts a free energy audit. The audit is done remotely by our team of engineers and looks at the customer’s energy utilization and infrastructure to identify the improvements that will have the biggest, fastest impact on their energy costs and sustainability goals. The audit will yield a preliminary project scope and financial analysis, including projected savings, that will illustrate the benefits that Energy as a Service can deliver, with no upfront cost.
Potential upgrades that the audit might reveal include:
- LED lighting improvements
- Building envelope modifications
- Water conservation opportunities
- Transformer upgrades
- Boiler improvements
- HVAC equipment upgrades
- Chiller plant improvements
- Energy management system upgrades
Benefits of Energy as a Service
Customers receive a wide range of benefits from Energy as a Service. These include:
No upfront cost
The equipment and systems are installed at no cost to the customer.
Off-balance sheet financing
Because the customer is not purchasing the equipment they avoid adding debt to their books or having to recapture the asset through depreciation.
Lower monthly energy costs
An EaaS project is cash flow-positive right out of the gate and remains so for the duration of the contract. It also ensures predictable monthly payments. Metrus is continually alert to and leverages incentives offered by utilities and regulatory agencies.
Metrus installs state-of-the-art equipment, which ensures maximum energy efficiency, accelerates decarbonization, and promotes sustainability. Energy as a Service can also integrate on-site renewables, energy storage systems, and EV charging stations.
Energy as a Service is a pay-for-performance (P4P) model, which places the project risk on the Metrus as the EaaS provider. The customer only pays for savings achieved; if the project savings are lower than expected, Metrus is paid less.
Metrus is responsible for ensuring the installed equipment runs at peak efficiency, which provides the customer with the peace of mind of knowing their systems will not fail as a result of deferred maintenance.
Metrus’ Sustainable Energy Services Agreement can accommodate the addition of other equipment upgrades and sites during the contract term in order to maximize project benefits.
Why is Energy as a Service Important?
Reducing energy use as a way to save money and protect the environment has always been a virtuous goal. But climate change has radically changed the stakes, making aggressive decarbonization imperative. Energy as a Service offers distinct advantages as a strategy for achieving decarbonization goals. These include:
Because it eliminates CapEx barriers and the complexities of project planning, implementation, and monitoring, Energy as a Service makes retrofit projects happen faster, accelerating progress toward meeting sustainability targets.
By strategically bundling efficiency technologies and equipment to create the most cost-effective payback scenario, EaaS encourages customers to scale up their project scope for maximum decarbonization impact.
While technologies for generating, transmitting, and converting power have become more efficient and environmentally friendly, energy demand constantly grows. Energy as a Service is an effective way to ensure that energy is used as efficiently as possible through the installation of high-efficiency lighting, HVAC, building management systems, and other measures. Combining best-in-class efficiency upgrades with energy from clean/renewable sources is the most effective way for organizations to decarbonize and achieve their sustainability goals.
Own the solution, not the equipment, with Energy as a Service
Using less energy saves money, reduces carbon emissions, improves operational resilience, and leads to a sustainable energy future. While these benefits may be self-evident, the path to implementing energy-saving measures remains unclear to many organizations; questions around finance, project scope, logistics, maintenance, and performance monitoring can derail or delay the best of intentions.
Energy as a Service removes the barriers to an energy efficiency retrofit. Working with Metrus Energy enables customers to enjoy all the benefits of new equipment with no upfront cost, no implementation headaches, and no performance risk. The upgrades generate immediate savings in energy costs and accelerate decarbonization and progress toward meeting sustainability targets. By providing a solution that eliminates the hassles of ownership, Metrus allows customers to stay focused on their core business, secure in the knowledge that, through EaaS, they are moving quickly and impactfully to decarbonize and improve the performance of their energy infrastructure.
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