By Kirstin Crothers
Energy as a Service (EaaS) is a business model where the provider not only supplies electricity, but also related services: from consultancy to system installation, from monitoring software to owning the physical assets. It is often talked about as the next big thing for energy retailers, with the potential to transform the market, benefit customers and boost the deployment of low-carbon technologies.
Challenges and considerations in embracing EaaS
Successful implementation of EaaS will require careful integration, consumer consent, and an alignment of technology and tariffs.
In a 2022 report ARENA defined EaaS as:
- The customer receives a guaranteed outcome. A customer will pay a fee for a particular outcome or ‘energy service’. This contrasts with traditional energy services where a customer pays for a unit of energy, such as a kWh. Examples of services include; heating, lighting, vehicle charging, and mobility
- The offering shifts CAPEX costs to OPEX costs. EaaS removes the up-front cost of energy assets, such as solar and batteries, for the customer. Suppliers finance up-front costs, recovering these through an ongoing, predictable, fee
- The offering, to some extent, shifts demand management from customer to supplier. A supplier takes on the responsibilities and risks of energy demand. In the lesser extent, this is done by optimising DER import versus export. More complex models also include demand optimisation of equipment (e.g. heat pumps, pool pumps, HVAC)
All these characteristics incentivise suppliers to optimise energy production and use. This breaks the traditional incentive to increase the volume of energy production and use. The optimisation of energy usage will organically promote increased demand flexibility and DER.
EaaS as an enabler of the transition
Flow Power’s Jacob Mahoney says EaaS represents a great opportunity to move the energy transition forward by offering a “simple way for users to benefit from smart energy solutions like batteries for the home or smart EV charging”.
Energy Queensland General Manager Retail Opportunities, Yatra Forudi agrees with this assessment, saying, “in the race to net zero, EaaS provides a reasonable option for energy consumers and prosumers to improve their energy efficiency.”
Mahoney explains one of the more obvious applications: providing an energy plan that benefits EV owners. He says that incentivising smart control of EV charging at the home can help stabilise the grid and reduce carbon emissions. He is enthusiastic about EaaS’s potential to stabilise the grid, “If all EVs registered in Victoria (9,560 in CY 2022) charged during the day, rather than when people get home from work, 70 MW could be shaved off peak demand.”
As the uptake of EVs continues, he sees huge potential in moving energy from fully charged vehicles back into the home or grid; plans could be developed that prioritise day-time charging of EVs at home, in return for a fixed monthly discount to consumers existing energy charges.
Interoperability and stakeholder co-operation
As we work to integrate both grid-connected and distributed energy resources in the NEM, Forudi says “Interoperability is a joint initiative” and that it is preferable for the roll out of EaaS to be collaborative and facilitate outcomes that work both at the grid and the consumer end.
Forudi notes that the EaaS model in Australia is still evolving and that careful assessments will be useful to understand what makes sense in the NEM. EaaS isn’t a services model that is “100% plug and play” and cannot be easily moved from one jurisdiction to another without taking local conditions into account. She envisages EaaS as a bespoke service providing households and businesses with a two-way partnership, and suggests that stakeholders think holistically – how will it work in the grid; at the meter; and behind the meter.
“Australia will require best of breed EaaS models to complement all stakeholders across our geographically extensive and diverse energy landscape. EaaS systems need to consider the whole ecosystem: customers, regulators, the market operator and the energy market participants.”
Energy UK’s Daisy Cross agrees, saying “the real benefits of EaaS come into play when it becomes a sophisticated, network-led initiative.”
The role of technology and tariffs
Cross describes the UK as being in the early adopter phase of EaaS, and says catalysts need to be in place before its benefits can be fully realised. She defines these as:
- Technology – eg widespread rollout of smart meters which will support the take-up of EVs, solar panels, and heat pumps (customers with low carbon technologies in their home or business stand to gain most if they also have a smart meter)
- Time of use tariffs. The UK is about to introduce a programme to settle electricity on a half-hourly (more regular) basis which will allow real time prices to be fed into supply
In the EaaS model, customers do not have to purchase the technology, which means that consumers who cannot afford solar panel are not locked out of the benefits of low-cost renewable energy. The ARENA report actually identifies “Customers who are capital constrained” as a specific target market for EaaS.
But Cross warns that, while the majority of GB customers like and would recommend their smart meter, there has been some inertia in the uptake of smart meters. She says best results come when a customer actively engages with smart and related products, and it is very important to get to the bottom of why they don’t want to engage
Third party control of energy intensive devices
There are some potential downsides for consumers signing up to an EaaS electricity plan. The EaaS model revolves around a customer handing over control of their solar and home battery systems to a retailer in return for a fixed monthly or annual charge. Mahoney says customers will likely have to give up some autonomy over the things like charging of their vehicle, cautioning, “depending on how the agreement is structured, they may not receive the true cost benefit of their optimised charging model”.
Mahoney describes the path to third party control as “a little murkier” when is comes to other energy-intensive home appliances such as washing machines.
The backlash against smart meters in the early 2010s provides a sober reminder that consumers are not keen to cede control, especially if there is no perceived benefit. At a time when electricity prices are increasing, it may be difficult to convince consumers that EaaS will ultimately save them money.
Existing alternatives to EaaS models
While it may not have the pricing simplicity associated with an EaaS plan, a customer on a ‘time of use’ energy plan may receive the true cost savings from optimising their at-home charging and shifting their washing machine usage from the early evening to the middle of the day. Through careful planning, such a customer could make significant savings and substantially reduce their carbon footprint.
There will be more work put into refining EaaS plans, and there are existing retail models that already provide these incentives while providing further benefit for load management.
EaaS provides a pathway to incentivising households to invest in technology that will aid the transition to renewables in Australia. But as Mahoney says, “EaaS is not a silver bullet.”.
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