Energy-as-a-Service Market Trends

Market Driver - Governments Worldwide Focusing on Reducing Greenhouse Gas Emissions

With growing concerns about global warming and climate change, governments worldwide have been actively working towards reduction of greenhouse gas emissions. To curb emissions from energy sector, many countries have implemented stringent regulations and incentives for deployment of clean and renewable energy. This focus on lowering carbon footprint has created a strong driver for the growth of energy-as-a-service market.

Energy-as-a-service providers offer innovative solutions along with long term service level agreements covering maintenance and optimization. This allows customers to reduce upfront investment costs, achieve greater energy efficiency through performance-based contracts and meet their sustainability objectives to reduce greenhouse gas footprint.

Governments have also been supporting such emerging clean energy service models through various incentives. Overall, the strong regulatory emphasis on decarbonization of energy systems worldwide has been a key driver propelling the demand for cost effective and customizable energy-as-a-service offerings helping customers lower emissions.

Market Driver - Increasing Demand for Backup Power Solutions and Energy Optimization

With growing reliance on digital technologies and internet across various industry verticals, the need for reliable power supply and optimized energy usage has increased manifold. At the same time, rising energy costs have been pressurizing commercial and industrial facilities to better manage consumption. This has driven huge demand for flexible and scalable backup power solutions along with energy optimization services.

Energy-as-a-service providers now offer standby power through mobile generator fleets, micro-grids, fuel cell installations etc. as per customer needs during outages along with 24/7 monitoring. Their long-term service contracts take care of regular maintenance, testing, fuel management and ensure uninterrupted backup support as required.

By outsourcing backup power and energy management requirements, organizations can focus on their core business without worrying about associated Capex or resource allocation challenges. The pay-per-use service models have become hugely attractive as they provide 100% assured continuity of power supply at a predictable operational expenditure. Overall, the critical needs of backup power provisioning and optimization has become an important driver propelling the growth of energy-as-a-service market.

Market Challenge - Lack of Investments in Implementing Renewable Energy Infrastructure and Smart Grid Technologies

One of the key challenges faced by the energy-as-a-service market is the lack of sizable investments in implementing renewable energy infrastructure and smart grid technologies. The upfront capital costs required for setting up large-scale renewable energy-as-a-service projects and upgrading aging power grids have remained prohibitively high for many utilities and energy companies.

The high perception of technology risk associated with newer solutions has further deterred investments. Several projects looking to deploy smart meters, distributed energy resources, electric vehicle charging infrastructure, and energy storage solutions have faced delays or cuts in funding.

Investments in modernizing energy-as-a-service systems have to be increased substantially through productive public-private partnerships and innovative financing models. Otherwise, the energy-as-a-service market may find it difficult to accelerate the clean energy transition and realize its full growth potential.

Market Opportunity - Increasing Number of Electric Vehicles

One significant opportunity for the energy-as-a-service market is presented by the increasing adoption of electric vehicles globally. Major automakers have announced aggressive targets and timelines for phasing out internal combustion engines over the next decade and increasingly offering electric models. Several governments are also providing purchase incentives and setting regulations to mandate a certain percentage of new vehicle sales be electric.

As more electric vehicles hit the roads, it will drive the need for a vast network of public EV charging stations to be established, especially for those without private parking. This creates opportunities for energy-as-a-service companies to deploy and manage these charging assets.

The electricity used for charging EVs can further be combined with technologies like vehicle-to-grid to help balance the intermittency of renewable power sources on the grid. This transforms electric vehicles into distributed energy storage resources and accelerates the energy transition.