The Key Factors Driving the Growth of Energy-as-a-Service

[ Originally published on February 10th 2021 in Utilities Middle East ]

The disruption of 2020 brought the inefficient realities of many industries into sharp focus. For the energy sector, it shone a light on the immediate impact everyday activities have on energy usage levels and the supply chains inability to react to rapidly changing supply and demand requirements in an agile manner. 

Energy-as-a-Service (EaaS) has been gaining significant traction in recent years, and the events of 2020 have only served to further expose the vital need for flexible, tech-driven alternatives. As the name suggests, on an Energy-as-a-Service approach, energy is no longer provided simply as a commodity but offered under a full service model. Providing a technology driven ecosystem of personalized solutions, it allows customers to better understand their energy needs and make better informed decisions. EaaS is a rapidly growing industry forecasted to generate $88.4bn by 2027 and, coupled with the fact that subscription services have never been more in demand with customers, it’s clear this business model is a force to be reckoned with. 

The meteoric rise of EaaS is being supported by a number of converging factors. Divergence from fossil fuels, decentralized power generation, ever-changing consumer behavior, and new technologies entering the market have all made market conditions ripe for EaaS to thrive. These factors have converged to drive energy sales from simple kilowatt-hour transactions to an entire service provision market. 

Customers Demand More

Customer expectations have shifted irreversibly. With tech-driven solutions and digital service models available across the board in most cases, energy consumers expect immediate service and smooth, personalized experiences.

Utilities providers are notorious for their sub-par customer service and the energy sector has been historically averse to adopting new technologies. Largely down to a lack of alternative choice on the market driving change through competition, the status quo is on the cusp of change. As more big tech companies enter the energy sector, consumer trends will naturally give customer-centric, personalized solutions an edge. In fact, customer service is tipped to be the new battleground for market share in utilities. 

Balancing digital and human touch-points will be critical moving forward. Service providers which become synonymous with already providing seamless user experiences on their platform are going to be in a better position to capture market share moving forward. Those that don’t adopt a new approach may find out the hard way that analog interactions and long customer waiting times no longer hold up.

Decentralization Breeds Flexibility

Decentralized energy is perhaps the key driving force for EaaS, as it enables energy production in a cost-effective, sustainable and reliable manner, and meets the specific demands of customers. 

Decentralized energy exemplifies EaaS: democratic and customized. Defined as energy which is generated close to where it is being used, rather than at a large centralized plant, it means that smaller power generation plants can be connected to the grid, empowering businesses, local consumers and communities as a result. The collapse of the cost of solar – which has fallen by almost 90%  in the past decade – has allowed it to flourish as the decentralized power generator of choice amongst commercial and industrial customers. 

In a future where decentralized energy is the established norm, there would be an abundance of commercial and industrial properties with direct control over their energy requirements and generation. This would allow businesses to not only be self-sufficient, but also be able to turn their energy assets into an additional revenue stream, by selling excess capacity back to the grid, where allowed.

The Digitalization Movement

The increase in digitalization and smart metering means that an enormous array of datasets are available for collection, providing the basis for new energy-related services to rapidly develop. For energy consumers, smart logging devices via Internet of Things (IoT) technology can enable continuous monitoring. 

One example of an IoT technology with the potential to make a huge impact in the way we control energy consumption is ‘demand response’. This concept enables commercial and industrial consumers to modulate their own energy consumption through a predetermined algorithm tailored to their energy goals. The peaks in electricity supply or demand can subsequently be met, and energy consumption becomes much more efficient.

EaaS is also being implemented in the world of Electric Vehicles (EV). A subscription service for EV chargers allows businesses to install chargers in their parking lots with no up-front cost. These EV chargers, with embedded software and interconnected to energy monitoring devices of the facility, can prioritize the EV fleet charging, optimizing the available load of the facility without energy disruption. 

These technologies will only continue to evolve and pave the way for a decarbonized and electrified economy through an EaaS model. Low-carbon technologies have to replace the current methods of energy production to fight climate change, but there is still a reluctance to universally adopt them. EaaS challenges the doubts surrounding capital limitations and performance which are held against low-carbon technologies.

The Bottom Line

Overhauling a sector as stubborn as energy is difficult, but EaaS has the potential to do it. By removing the complexity, risk and capital expenditure from the equation, it can provide a system where the benefits are guaranteed by the provider. A decentralized energy-production market gives more access to the consumer, and makes electricity costs more competitive if the demand for large-scale generators falls.

Technological improvements allowed customers to access solutions which can both reduce their energy consumption and their carbon footprint, such as solar rooftop systems and smart devices. As energy consumers demand more in terms of sustainability and cost-effectiveness, EaaS will become more popular and cause utility companies to make a big decision – do they change their model and revolutionize the energy sector, or stagnate and be left lagging behind.

By Daniel Domingues and Tariq Said, Co-Founders of Sirius Energy