The emerging Energy as a Service business model, commonly referred to as EaaS, is a game changer in a company’s quest for new energy saving technology and increased energy efficiency. More and more companies are making the switch from traditional capital purchases of energy technology to the EaaS model.
Many facility decision makers prefer the Energy as a Service model because they don’t have to worry about keeping their energy purchases within strict budgetary guidelines and can instead reap the benefits of increased energy efficiency and improved facilities without stress.
The EaaS financing option allows you to update your facility, start saving money, improve worker safety, and meet your sustainability goals without the traditional financial hurdles and headaches.
But, is every facility or company a good fit for Energy as a Service and how do you know if your facility is a good candidate for the service?
How do you know if Energy as a Service is for you?
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 requirements? Or perhaps you see the value in energy projects, but the decision makers give them lower priority? If you’ve said yes to any of these questions, then Energy as a Service is an ideal financing option for you.
What are the benefits of the EaaS model?
Energy as a Service is a good solution to any financial hurdles you run into when it comes to energy efficiency projects at your facility or facilities. EaaS allows you to move forward with an energy savings project with no upfront costs. The project will actually pay you with positive cash flow from the energy savings of the project. This means you don’t have to worry about incurring debt from your energy efficiency upgrades.
On the other hand, with a capital purchase, a traditional finance, or lease option, the project is entered onto a 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.
Energy as a Service allows you to increase safety and upgrade your facilities with numerous energy saving solutions, including LED Lighting, power monitoring, HVLS fans, energy storage, and solar energy, without any upfront costs.
What is Energy as a Service and how does it work?
U.S. Energy Recovery’s Energy as a Service 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 EaaS is a fixed monthly subscription fee, as well as an operating expense, instead of having to recapture the asset through depreciation.
Energy as a Service 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” its 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 new accounting law changes that went into effect in January of 2019, energy saving products can have the same tax benefits of a service agreement.
Since ownership is not transferred until an agreed time at the end of the contract, 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 LED lighting retrofit project is completed your energy bill drops to $6,000 a month and your Energy as a Service 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.
As an EaaS provider, U.S. Energy Recovery handles everything for you to include the audit of your facility, product selection, applying for and handling any rebates or incentives from your utility provider, complete project management, recycling of your old materials, and the ongoing maintenance and warranty of products that are required. You will have the option for an extended maintenance agreement when the Energy as a Service service agreement comes to an end.
What is the difference between Energy as a Service, Efficiency as a Service, and Lighting as a Service?
You may have also heard of Efficiency as a Service and Lighting as a Service. Efficiency as a Service is the same business model as Energy as a Service – it just goes by another name. Lighting as Service also has the same business model as the other two, but only applies to lighting, not other energy efficient technologies like Energy as a Service and Efficiency as a Service do.
How do you choose the right Energy as a Service company?
There are dozens of companies that provide Energy as a Service financing models for energy products, but the one you choose should have in-depth knowledge of the products and services they are offering instead of acting as a middle man. If you choose to partner with an EaaS provider that knows nothing about the products and services they are offering, you will definitely run into issues down the road.
A true EaaS company will be able to learn about your facility’s entire energy profile and find the best products and services that are tailored to your building. They should find the best opportunities to optimize your energy efficiency through extensive research of your building, not what is the cheapest and easiest for them.
The energy efficiency experts at U.S. Energy Recovery want to help you build a safer and more energy independent facility without having to worry about upfront costs. Some of the energy saving solutions we can help you with include lighting, energy storage, solar energy paired with battery storage, high-volume, low speed (HVLS) fans, power monitoring, electric vehicle charging stations, among other solutions.
We are brand agnostic – we don’t stick to a single product line because it is cheaper for us, we choose products that are best for your facility and align with your goals.
Ready to get started on an Energy as a Service agreement?
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.
Your facility has unique concerns – we know a cookie cutter approach won’t fully optimize your energy savings. Don’t spend another day hoping to become a safer and more sustainable facility…let us help you start the process today with no upfront costs!