What is Energy-as-a-Service (EaaS) and are you a good candidate for the program?
The emerging business model of Energy-as-a-Service; commonly referred to as EaaS, is a game changer in a company’s quest for new energy savings technology. More and more companies are making the switch from traditional capital purchases of energy technology to the EaaS model. But, is every facility or company a good fit for EaaS and how do you know if your facility is a good candidate for the service? Here are a few questions to consider: Do you have older equipment that requires regular costly maintenance? Is the cost of ownership a concern? Maybe you’ve found it difficult to obtain funds for capital projects or proposed energy projects’ Return on Investment (ROI), Internal Rate of Return (IRR), and payback periods do not meet corporate requirement? Or perhaps you see the value in energy projects, but the decision makers give them lower priority?
EaaS is a good solution to any financial hurdles you run into when it comes to energy saving solutions at your facility or facilities. EaaS allows you to move forward with an energy savings project with no upfront cost. The project will actually pay you with positive cash flow from the energy savings of the project. With a capital purchase, a traditional finance, or lease option the project is now entered onto the company’s balance sheet as an asset and liability. This can show a reduction of cash or even make a negative impact by showing new debt that can take years to depreciate and capture back. Many companies just cannot show new debt on the books for building renovations, but save this for new equipment acquisitions or revenue generating opportunities.
Here at U.S. Energy Recovery, we believe EaaS is the most efficient, cost savings method to achieve your energy saving goals.
EaaS allows you to increase safety and upgrade your facilities LED Lighting, power monitoring, HVLS Fans, battery storage, low-flow plumbing fixtures or any additional energy savings products without any upfront costs. EaaS is a service contract, instead of a financing or leasing agreement. It’s a similar concept to your cable agreement. The cable company provides you with a cable box and the product of cable service. If your cable box or router stops working or needs repairs the cable company will also “service” it’s product or provide repairs to make sure it is operating correctly. All companies enter into some sort of service agreement for a variety of services they need to run a company. Now with the new accounting law changes that went into effect in January of 2019, energy savings products can have the same benefit of a service agreement.
U.S. Energy Recovery’s EaaS program is a turnkey approach that alleviates the common headaches of maintaining facility operations and offers numerous financial benefits. Instead of the normal procurement process of a budget request, now you can show not only that EaaS is a fixed monthly subscription fee, but an operating expense, instead of having to recapture the asset through depreciation. Since ownership is not transferred until an agreed time at the end of the contact, this allows for a more flexible turnkey, no-hassle solution that can be captured monthly rather than the depreciation of an expense over a period of time. This means not only no debt on the books, but you’ll also capture the expense during the time you are paying for it. The energy savings you will generate from the more efficient energy system will be greater than the payment, so this is like a double-dip. You do not need any new capital to cover the payments and you are able to expense the monthly payments as you pay them. For example: Let’s say you are currently spending $12,000 a month on your lighting energy bill. After your project is completed your energy bill drops to $6,000 a month and your EaaS subscription payment is $3,800 a month. This not only allows your new energy savings to cover the EaaS amount but also provides an additional $2,200 a month in positive cash flow back to your bottom line.
U.S. Energy Recovery handles everything for you to include the audit of your facility, product selection, applying for and handling any rebates or incentive from your utility provider, complete project management, recycling of your old materials and the ongoing maintenance and warranty of products that is required with the option for an extended maintenance agreement when the EaaS service agreement comes to an end.
EaaS allows you to update your facility, start saving money, improve worker safety, and meet your sustainability goals without the usual financial hurdles. As a bonus all your maintenance is also included for the length of the service agreement. If you have any questions about EaaS, we’re here to help! Reach out to us to find out if you’re eligible for EaaS and how it can fit in your facility’s plans, call us (800) 834-8737. Thanks for watching.