Microgrid Knowledge – Transfer the Risk with Energy as a Service

Energy as a service (EaaS) agreements allow energy customers to transfer the risks associated with owning energy assets, and focus on their core mission. It is also an attractive option for businesses with capital constraints. Louis Maltezos, executive vice president at Ameresco, discusses this route with Microgrid Knowledge.

What is energy as a service (EaaS), and how does it differ to an energy performance contract?

Louis Maltezos: EaaS is an offering where energy related infrastructure improvements or technologies are delivered to an end customer, under a long-term service agreement, with no capital provided by that customer. The service provider assumes the risk of ownership related to the equipment, and the requirements of the contract are usually specified as outcomes or key performance indicators. Payment to the EaaS provider is contingent on achievement of the set outcomes.

Under an energy performance contract, there are typically two contracts going on; one with the energy performance contractor for implementation of the project and guarantee of energy savings, plus a separate contract for financing that is typically with a third party. Under an EaaS, on the other hand, there is only one contract: the EaaS service agreement between the customer and the ESCO. This makes EaaS particularly attractive for customers that are capital constrained, as debt can be kept off the balance sheet. EaaS is also suitable if you want to focus on core business and let someone else invest in, operate and maintain your energy systems. Ownership risk is shifted to the EaaS provider, and payment is based on performance. This is an added incentive for the EaaS provider to use the best technology.

The COVID-19 situation appears to be causing customers to re-think their interest in investing in long-term energy assets. Anecdotally, I have seen an increased interest in EaaS over the last six to nine months. Customers are attracted to the idea of locking in an energy cost, paying for improvements out of savings, and transferring the risk of energy operations.

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Microgrid Knowledge
By: Yasmin Ali