The Evolution of Energy-as-a-Service

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New Navigant Report Puts Schneider Electric at Top of Energy-as-a-Service Leaderboard

Energy is undergoing considerable transition as generation decentralizes and the demand for electricity grows — fueled by the global trends of digitization and decarbonization.

As the pace of change accelerates, organizations face increasing complexities in energy and resource management. They must balance their aspirations to lead competitively and responsibly with the reality of their operational and financial constraints.

Energy-as-a-Service (EaaS) is emerging as an innovative approach to meet both sets of priorities. EaaS provides the benefits of the energy transition while simultaneously reducing the potential cost of entry, enabling more organizations to make progress toward their energy and sustainability goals.

A flexible, responsive model for energy management

EaaS fundamentally changes how organizations think about energy management and procurement. While there is no single definition, EaaS solutions typically utilize a variety of energy elements, ranging from metering systems to microgrids to distributed energy resources (DERs) to waste heat recovery and beyond. Each of these potential components reflect the evolution of energy from rigid and centralized to flexible and responsive. These solutions are adaptable, variable and modular in ways that the centralized management of energy and energy-dispatching technologies are not.

Recent research from Schneider Electric and GreenBiz shows that growth of DERs averages 11% YoY.

Under an EaaS model, organizations partner with solution providers, like Schneider Electric, to actively oversee the company’s energy portfolio and provide upfront capital and long term asset ownership. Typically, the solution provider delivers energy management services with a corresponding performance expectations which reduces risk for end users. These services are customized for each client to achieve predefined outcomes —such as system resilience, meeting sustainability goals — and commonly result in reduced performance risk and decreased capital burden.

A new way to overcome the “ambition gap”

The direct benefit of EaaS is the use of innovative capital structures such as advanced power purchase agreements (PPAs), leases and performance contracts to avoid CAPEX investment. As a result, the energy services agreement protects cash flow and can even generate new revenue streams.

This potential revenue, or savings, can then be deployed against other energy and sustainability projects, which may have previously foundered failed without adequate capital. Organizations may also choose to reinvest the financial upside into other business priorities, such as new equipment, or boosted margin performance.

This “financial enablem” allows organizations to meet and overcome a critical hurdle: the ambition gap created by a desire to achieve more with energy and sustainability while facing an increasing number of constraints. For many organizations, this ambition gap becomes a significant barrier to reaching optimal financial and operational performance. Using EaaS, organizations can proactively shrink the gap and more readily achieve their goals, often with little to no up-front investment or balance sheet liability.

At the edge of energy and innovation

Schneider Electric was named the leading EaaS provider for the commercial and industrial market in a recent report by global research firm Navigant. This recognition is thanks in part to our holistic Active Energy Management (AEM) framework. AEM integrates a broad portfolio of solutions across energy supply, sustainability, DERs and resource efficiency, enabled by a suite of advisory services and software. It allows us to exercise innovation to meet our clients’ needs, providing flexibility in technology, funding source and operational risk.

A recent example of AEM in action: A global steel producer in Europe had the opportunity to realize energy savings by investing in more efficient equipment. However, the company was constrained financially and unable to move forward based on CAPEX alone. Using an EaaS model, Schneider Electric was able to design a waste heat recovery program for the company that resulted in energy savings and carbon reduction without increasing its long-term liabilities. This in turn has allowed the producer to set more aggressive energy and sustainability goals.

Another example, Montgomery County, MD, with over 1 million people, 9,000 employees and 400 buildings has achieved carbon neutrality, but sought more directed efficiency through renewables and microgrids. By working with Schneider Electric to install two advanced microgrids, the county increased resilience, upgraded their aging electrical infrastructure, and enhanced sustainability—all without any upfront capital investment. The two microgrids are expected to reduce greenhouse gas emissions by 6,800 metric tons each year, which translates to removing over 1,400 cars off the road or planting 178,000 trees. This forward-thinking county has offered up a model that could bring microgrid benefits to many other communities nationwide.

By leveraging the EaaS business model, we partnered with Duke Energy Renewables/REC Solar to implement an advanced microgrid solution at our Andover Research & Development Center, which adds resilience, optimizes costs, and increases sustainability to facility operations – with no upfront capital expense. The microgrid consists of multiple distributed energy resources and serves as a “living laboratory” to develop and test IoT-enabled microgrid solutions.

EaaS is still emerging, but Schneider Electric is proud to be leading at the edge. As the energy market advances and organizations need more ways to bridge the ambition gap, we will continue to provide versatile, holistic and digital services that meet their needs.

Click here to read more about the New Navigant Research Leaderboard report.