EaaS - Energy/Electricity-as-a-Service

“Energy-as-a-Service (EaaS) is an innovative business model that changes the way energy suppliers and consumers interact. Currently, energy providers offer electricity, fuels, and heat to end users. EaaS is a different approach where an energy service provider would offer energy solutions in other ways to end-users: Energy service providers do not simply offer a form of energy, but rather a ‘turn-key energy product’ such as keeping the temperature in a building in a certain temperature range. The offer of such energy service providers includes a wide range of solutions, including energy efficiency, renewable energy provision, and solutions to stabilise electricity grids.”

[Source: European Commission. Joint Research Centre., 2022a. Towards a green & digital future: key requirements for successful twin transitions in the European Union. Publications Office, LU.]

Abstract of Journal article

“Purpose: Like a number of other traditional industries, the energy industry is undergoing a major transformation. With the advent of smart grids, the industry is transforming from a centralized energy system to a distributed energy network, and from the traditional product-based to a service business model. An essential question is “What types of value creation and value capture opportunities emerge at the level of ecosystems as the energy and smart grid industry shifts from the existing product-based business model to a greater service orientation?”

Design: The study utilizes the 4C ecosystemic framework and the XaaS (Everything as a Service) digital service business model typologies, and collects business model case data from 15 EU Horizon 2020 innovation projects. The research uses a two-stage approach that includes interpretive case analysis and action research to analyze and create an ecosystemic business model framework.

Findings: The paper uncovers the following business model typologies for the digitalization of the energy business ecosystem: Connection as a Service (CaaS), Supply as a Service (SaaS), Data as a Service (DaaS), and Energy Application as a Service (EAaaS). Research limitations/Implications: A key outcome is the proposition of the Electricity as a Service (EaaS) concept for the energy sector, proposing a new service business paradigm for the energy ecosystem. One limitation is that the research has a strong regional focus on European cases.

Originality / Value: The study adopts a value-based and service-dominant lens focused on business model research at the ecosystemic level. For the first time, the study introduces the XaaS service business typology, investigating how this well-established ICT (Information and Communication Technology) business framework can enable the digitalization of the energy industry.”

Keywords: business model, business ecosystem, service-dominant logic, value-based strategy, XaaS, SaaS, smart grid, electricity-as-a-service.

[Source: Yi Xu, Xu, Y., Petri Ahokangas, Petri Ahokangas, Ahokangas, P., Emmanuelle Reuter, Reuter, E., 2019. EaaS : electricity as a service?]

“Energy-as-a-Service offers a range of advantages to end-users that have to cope with an increasingly complex energy system. A main advantage of EaaS for end users is that it reduces the need for upfront investments and simplifies the supply of energy. Covering energy-related needs has become increasingly complex, as it involves a wide range of different technologies that have to work together (e.g. power generation, power storage, or energy efficiency optimisation). This increasing complexity calls for an integrated approach to deal with energy installations. EaaS offers a chance to maximise the efficiency of the end use of energy, as energy service companies can accumulate experience, allowing them to implement better performing solutions compared to individual efforts. For example, a specialist in lighting can offer a cost-efficient and ergonomically optimised solution to illuminate a building.”

[Source: European Commission. Joint Research Centre., 2022a. Towards a green & digital future: key requirements for successful twin transitions in the European Union. Publications Office, LU.]

“Most challenges for the roll out of Energy-as-aService are linked to societal and institutional issues. The shift from focusing on cost efficiency to a more holistic approach that also considers the environment is a challenge. End users could be reluctant to give up the ownership of the hardware that is installed on their premises, or to accept new pricing models. Furthermore, as EaaS relies on real-time data collection and analysis, the energyefficiency gains could be negated by the energy consumption of the digital technologies required for the energy service. There are also some institutional challenges, such as the risk of big players dominating the market, as they have the capacity to get expertise in the wide range of technologies that are needed to provide an energy service.”

[Source: European Commission. Joint Research Centre., 2022a. Towards a green & digital future: key requirements for successful twin transitions in the European Union. Publications Office, LU.]

“Energy-as-a-Service could improve energy efficiency and enable the integration of renewable energy technologies. Higher levels of energy efficiency could be realised, if the energy service provider is responsible for rolling out the optimal technologies to and maximising performance at the facilities of a client. EaaS could also lead to new, more democratic forms of energy sourcing, for example by creating energy communities that do not maximise profits but environmental performance. In addition, energy service providers could help with the integration of higher shares of variable renewable energy. They can combine different types of renewable power generation technologies and manage them in a way that is in line with ensuring the stability of energy grids.”

[Source: European Commission. Joint Research Centre., 2022a. Towards a green & digital future: key requirements for successful twin transitions in the European Union. Publications Office, LU.]

Energy-as-a-Service could reduce the risk of energy poverty but will also lead to fundamental changes in how energy-related infrastructure is owned. EaaS could mitigate energy poverty because it is expected to reduce energy costs and contractually fix prices for energy services. It changes a market where utilities benefit from higher energy consumption, into one that rewards the most energy- and costefficient provider. However, the introduction of EaaS will lead to new pricing models and ownership structures to which users will have to adapt. There will also be a shift from having full control over local physical installations, to sharing this control with a central operator. Lastly, customers will become more transparent as they share the consumption data that is necessary to optimise energy services with the energy service providers. Trust and data protection are therefore relevant factors for successful implementation.

[Source: European Commission. Joint Research Centre., 2022a. Towards a green & digital future: key requirements for successful twin transitions in the European Union. Publications Office, LU.]

~~DISCUSSION|Discussion Section - PAGE OWNER: Klaus Kubeczko~~