Encouraging Electrification through Energy Service Subscriptions
Enabling energy-as-a-service business models (EaaS) for certain consumer energy services could accelerate the transition to an electrified and more decarbonized economy.
Abstract
Energy-as-a-Service (EaaS) is a private business model that enables consumers to subscribe to an energy service (such as lighting), rather than purchasing the equipment necessary to provide that service (such as light fixtures). In the past, EaaS has helped encourage the deployment of low-carbon technologies like energy efficient equipment by eliminating high upfront costs for consumers. In this paper, we assess how the EaaS model can be used to help overcome barriers for electrification of energy end-uses like vehicles and water heaters, which is critical for reducing carbon emissions from transportation and buildings. We explore the potential of two basic hypothetical EaaS business models: a subscription for energy management, which involves optimizing energy usage in order to minimize costs, and a subscription for energy services, which enables consumers to use an energy service such as hot water without purchasing the necessary devices. These business models are possible under two different frameworks, a time-varying pricing variant and a demand-response variant, that allow service companies and customers to benefit from these business models.
Key Findings
- EaaS improves access to low-carbon technologies by removing or reducing high up-front costs for expensive electrical equipment or devices, such as electric vehicles or grid-connected water heaters, by converting the payment into a monthly subscription fee.
- EaaS enables consumers and businesses to take advantage of benefits of electrification through device management, such as providing grid services or saving money on energy expenses, that may not be available to consumers under private ownership.
- A subscription for electric energy services can also mitigate some of the grid-related issues that arise with electrification, such as reducing the need for more peaking capacity.
- An absence of companies in this space could indicate that barriers to entry exist; policy intervention and regulatory changes can help remove some of these potential barriers and enable more EaaS companies to thrive.
