Energy-as-a-Service: giving businesses more control, better results

Kimberly Littlefield, Enel X

The ‘as-a-service’ business model has redefined the way we access a multitude of information technology resources. For example, software, file storage, servers – are all commonly available as-a-service. This model enables more dynamic access to applications and resources, allowing businesses to control spend based on need. It simplifies procurement, management and output across an enterprise. In short, ‘X’-as-a-service (XaaS) gives businesses better control over their IT, and it can do the same for energy.

The arrival of cloud technology disrupted software procurement and is key to enabling the XaaS model. Today, the energy industry is undergoing a seismic shift from centralised generation to the use of decentralised – or distributed – energy resources. This is accelerated by digitisation, leveraging cloud-based software and hardware control solutions that increase visibility and intelligence. This new ‘energy cloud’ of assets and the technology connecting them is set to disrupt the traditional one-way business model that has been embedded in the energy industry for many years.

Giving businesses more control

Just like XaaS, Energy-as-a-Service, or EaaS, is fundamentally about giving businesses more control. Given that energy is a major cost item for most industrial and commercial businesses and often disparately managed across a variety of business functions, EaaS offers a unique opportunity to gain transparency, enhance strategy, and make better decisions.

The plethora of choices available to transform your energy portfolio present a growing list of decisions for industrial, commercial and institutional organisations… Beyond simply agreeing to a bespoke tariff for your energy use, you can also choose how your power is generated; use of renewables; the pricing/payment/billing model; financing; onsite/offsite generation; resilience measures; the use of energy management technology and your own distributed assets for generation, demand response or storage, and many other choices.

Outside of the facility, there are other forces at play offering opportunities to improve the bottom line. The rapid uptake of distributed renewable sources is challenging grid operators to manage the intrinsic intermittency of renewable generation. Increasingly, grid operators are valuing new sources of ‘flexibility’ over power generation. Schemes like demand side response (DSR) reward businesses for reducing demand at peak times; major energy users make use of their own assets, often supported by technology, to turn-down or turn-off demand when required.

However, it’s not just technology that is driving change. Regulatory frameworks are changing to support governmental and grid operators’ needs. For example, regulators refine the rules governing DSR schemes to change market behaviour, such as delivering faster response times, longer response durations or to use low-carbon sources of generation. They also review charging schemes that are intended to support the funding of grid improvements.

While it offers new opportunities, this transition to a new, decentralised, technology-driven, low-carbon energy landscape is evidently far more complex than it was before. It’s now more challenging than ever for energy managers to keep up to date with the latest regulatory changes and the proliferation of new technology. For businesses looking to optimise their energy use, the choices can be bewildering.

For most organisations, energy in itself is not a core business competence and implementing an energy strategy that addresses a range of priorities takes knowledge and expertise and a current understanding of regulatory and compliance issues. EaaS leverages outsourced strategic partnership to ensure a holistic approach that puts the business’s needs first.

EaaS in action

Today’s EaaS providers aim to understand your business and from there create and execute a plan aimed at achieving objectives. The plan may be a single or multi-pronged approach depending on considerations like energy maturity, industry benchmarks, and resource capacity. Common components of such a plan may include:

Procurement Advisory: Manage market risk, reduce costs, create more accurate budgets, integrate renewable energy.

Demand Side Response (DSR): Earn revenue and build resilience by adjusting energy consumption at times when the grid system needs support.

Demand Management: Reduce energy spend by strategically reducing energy consumption at times when suppliers calculate costly demand charges (Triad management).

Energy Storage and Microgrids: Improve resiliency and power quality through energy storage and onsite generation.

Utility Bill Management: Reduce time spent managing large volumes of utility bills across an enterprise, avoid late payment fees and access data for reporting and visibility into financial and sustainability performance.

Energy Efficiency: Eliminate unnecessary energy consumption and costs by monitoring and controlling equipment.

Sustainability: Develop a strategy to improve sustainability performance and streamline reporting to regulations and industry standards such as ESOS.

Renewable Energy: Navigate a complex vendor landscape – from purchasing renewable energy from offsite sources or integrating renewable generation assets onsite.

Electric Vehicle Charging: Implement a charging solution infrastructure that ensures minimal impact on finances and operations today, whilst futureproofing for the technology of tomorrow.

Project financing

One of the biggest barriers for any organisation acquiring new technology is the cost-justification for CapEx-funded projects. The ‘as-a-service’ model overcomes the CapEx barrier by enabling services to be paid for as they are used.

Energy-as-a-service providers have been particularly innovative in offering new ways to acquire energy, assets and technologies through ‘funded’ models, power purchase agreements and even efficiency service schemes where the business pays for performance (i.e., a shared savings model).

While financing is at the heart of EaaS with a shift away from capital expenditure, its scope goes beyond cost measures. Other business priorities include sustainability – moving to lower carbon sources of power; quality of supply – to ensure business continuity and reduce risk by adopting measures that improve energy resilience; and operational simplicity.

Better results start here

Energy was once the exclusive domain of the facility manager who minded a single energy cost driver: how much you use. Now, organisations that want to create new opportunities out of their energy spend focus on three ‘cost drivers’: how you buy it, how much you use and when you use it. These cost drivers inherently impact each other and therefore should be managed together. Externalities like climate change dialogues and energy market volatility should also be considered.

For effective results, today’s energy strategies need to be holistic and ideally have board-level backing. The decisions you take will have implications for your operations team whilst enhancing your core business – especially if you are a manufacturing firm looking to bring on new revenue streams by participating in schemes like DSR.

So how do you transition to an EaaS model? The biggest challenge in embarking on any change programme is often winning support from key stakeholders. The realisable value in energy management depends to a large degree on how well aligned and informed your stakeholders are. Assessing your current state; looking at your current energy management successes, comparing them to peers and making a preliminary business case will give you the beginnings of a framework for change.

As EaaS gains ground, major energy users will see the benefits of taking a holistic approach to implementing energy strategy, without the barriers of having to find capital to fund improvements. One of the key benefits of EaaS is increasing visibility into the overall impact of your energy strategy and its business contribution.

Partnering with energy specialists that can offer on-going advice and technology as-a-service, enables businesses to deliver higher cost savings and lower long-term risk while addressing the growing complexity – and opportunities – presented by the new energy cloud.