WHAT IS ENERGY AS A SERVICE?
Change is surging through the energy sector. A shift to a new Energy-as-a-Service (EaaS) business model is transforming the market, benefitting customers and boosting the deployment of low-carbon technologies. The energy production sector is one of the most affected by digital transformation. Electricity is what connects us today and will make us travel tomorrow. In the fight against climate change, it is therefore important to ensure that the steady increase in electricity consumption is matched by a greater share of production from renewable sources.
compared to fossil fuels, renewable energy sources still have high installation and maintenance costs and lower reliability: the focus of governments and markets is therefore on finding solutions that can integrate and make energy production, distribution and storage systems more efficient.
Energy as a Service is an innovative business model in which the company not only provides electricity but also related services: from consultancy to system installation, from monitoring software to consumption control software.
As the transition to a CO2-free system is driving companies, organisations, public administrations and consumers to look for new ways to use and manage their electricity consumption, an energy service provider monetises the value created by the digitisation of the energy sector.
The Energy-as-a-Service approach shifts from asset-focussed, centralised power generation and the sale of it to passive consumers. Instead, it offers end-to-end management of a customer’s energy assets and services.
Energy as a Service is a new paradigm moving towards a decentralised, digitised and electrified energy system. Smart technologies make it possible to integrate different sources of supply and to modify consumption autonomously in real-time. The needs of the consumer, industrial and commercial segments are changing.
The ways in which energy is supplied are changing with the integration and automation of systems. In short, the digital transformation of the energy sector is a particularly complex process, but one with undoubted advantages in terms of both cost reduction and environmental sustainability.
Energy as a Service opportunity, therefore, encourage renters to activate solutions that reduce costs through more efficient consumption. These models enhance energy generation through renewable sources without significant investment by end consumers. In the future, consumers and businesses will not just pay their bills for heating and lighting their homes and facilities.
The growing need to reduce the reliance on fossil fuels and decrease the carbon footprint could also propel the energy as a service market, in the upcoming years. A rapid rate of urbanization could play a key role in fueling the growth in the energy as a service market in future.
Solar and wind energy continue to be prime choices for investment. More than 37% of the total investment within the renewable energy sector in 2016 was directed toward solar and wind energy projects across the globe, according to the FS-UNEP estimate; these wind energies accounted for 47% of the total investment in 2016. Global Wind Energy Council (GWEC) estimates that the total installed capacity of wind energy across the globe is likely to reach 792GW by 2020 increasing from 497GW in 2016, adding an average of 72GW per annum.
Three main factors are contributing to the development of EaaS: technological advances in electricity generation; improved energy storage capacity; the spread of smart devices and smart city development.
Research into renewables is lowering the cost of installing climate-neutral systems. Photovoltaic, wind and marine energy sources are becoming reliable sources and their share of energy is gaining in importance. The combination of large batteries allows energy to be stored during periods of lower demand and released during peak demand.
The internet of things and cloud computing are some of the innovations that make it possible to integrate renewable and traditional energy, collect and measure large amounts of data and automate complicated supply processes.
In addition to technological development and the increased focus on sustainability in the fight against climate change, the development of EaaS is also driven by the pandemic, which has dramatically increased the cost of energy production.
EAAS involves a pool of highly-synchronised smart assets that are interconnected to provide a service/s. In an EAAS platform, a digital layer is employed that coordinates and distributes both energy and information in real-time. This allows the EAAS partner of a consumer to enhance energy efficiency by enabling the trade of interactive products and services.
The key contribution of EaaS models to power sector transformation
ADVANTAGES OF EAAS
Energy as a Service is a new paradigm moving towards a decentralised, digitised and electrified energy system. Smart technologies make it possible to integrate different sources of supply and to modify consumption autonomously in real-time. The needs of the consumer, industrial and commercial segments are changing. The ways in which energy is supplied are changing with the integration and automation of systems. In short, the digital transformation of the energy sector is a particularly complex process, but one with undoubted advantages in terms of both cost reduction and environmental sustainability.
One of the most interesting new features of Energy as a Service is the arrival in the energy sector (which has historically posed high barriers to entry) of new players able to provide a wide range of innovative services.
The integrated approach of the EaaS model can provide greater support to customers who want to install renewable energy or storage systems. For example, a number of solutions are emerging for those who do not want to install technologies in their homes (such as renting photovoltaic panels) that allow customers to keep their contracts even when they move to a new address.
Energy as a Service opportunity, therefore, encourages renters to activate solutions that reduce costs through more efficient consumption. These models enhance energy generation through renewable sources without significant investment by end consumers.
The role of electricity and its suppliers will change dramatically in the coming period, with new companies entering the market to provide new types of services.
Revenue streams for Energy-as-a Service models
How an Energy-as-a-Service contract works
The digitalisation of the power sector is encouraging energy-related services. Energy experts can study energy consumption data to decide what kind of services should be offered for reducing electricity bills. They can also decide the pool of distributed renewable generation technologies that can be used to supply power to a consumer who is ready to shift to self-consumption.
EAAS is unlocking the benefits attached to the adoption of renewable energy sources. It can also control the demand side of the power sector. The use of data analysis and automation will allow the optimisation of power consumption with targeted load shedding.
The effective utilisation of the EAAS concept, however, demands intensive digitalisation. Consumers will have to switch to smart electric devices that allow sharing real-time power consumption data. The use of real-time information and data analysis enables automation and other energy-related services.
An EAAS platform will need the trust of distribution system operators that transfer energy from the source of generation to the end consumer. Traditionally, the distribution system operators respond to changing power demand, by reinforcing the power infrastructure. However, with EAAS platforms wasteful expenditure can be avoided if the conventional practice of network reinforcement is substituted by meeting peak demand through stored energy.
While the power sector is on verge of a transformation, EAAS is a necessary concept that is enabling consumers to embrace pocket-friendly, and environmentally-appropriate power consumption practices.