The Efficiency-as-a-Service (EaaS) initiative, led by BASE, is releasing its end-of-project report, encapsulating lessons learned from four years of advancing the “as-a-service” model to accelerate the adoption of sustainable energy solutions in Europe. The EaaS Briefing represent a valuable resource for stakeholders driving the adoption of energy-efficient systems via service-based offerings in the European built environment.
After a first experience with the servitisation business model as part of the Cooling-as-a-Service (CaaS) initiative focused on improving access to sustainable cooling globally, BASE obtained support from the European Union to leverage the as-a-service model to accelerate the transition towards more efficient energy products and systems on the continent.
Energy efficiency represents a key solution to tackle climate change: doubling the pace of efficiency improvements could reduce energy costs by one-third and account for 50% of CO2 emission reductions by 2030. Within the EU, energy efficiency is an indispensable enabler to reaching most objectives of the Fit For 55 package, which aims to reduce net greenhouse gas emissions by at least 55 percent by 2030 across the 27 nations.
The REPowerEU initiative, established to strengthen the union’s energy independence, ranks energy savings as a first priority as it represents the “cheapest, safest and cleanest way to reduce reliance on fossil fuel imports”, underscoring the importance of mainstreaming more efficient solutions to reduce and optimise energy use.
Beyond climate and geopolitical considerations, the profound impact of energy efficiency extends to economic opportunity. Small and Medium-sized Enterprises (SMEs) make up over 99 percent of all enterprises in many European countries and represent a substantial market opportunity for energy efficiency improvements. However, investments in energy efficiency remain largely untapped due to several barriers, including performance uncertainties for modern systems and long returns on investment, a lack of experience in financing energy efficiency, a lack of accessible financing instruments and conflicting investment priorities.
To address these barriers, rebalancing the risks and aligning the financial and non-financial incentives between the end-users, suppliers and investors is of paramount importance.
The EaaS Initiative: 4 years in review
Leveraging an innovative pay-per-use model applied to cleaner energy solutions, the Efficiency-as-a-Service (EaaS) initiative brought forward a unique solution to unlock the adoption of cleaner energy equipment. Funded by the European Commission’s Horizon 2020 programme, and rolled out in partnership with Agoria, Innoenergy and ANESE respectively in Belgium, Spain and the Netherlands, EaaS sought to raise awareness of the various benefits of service-based offerings and engage local stakeholders to adopt this new business approach.
With Efficiency-as-a-Service, end customers pay for the service they receive, rather than purchasing the physical product, therefore avoiding the upfront costs of modern and often more expensive energy-efficient systems. The technology provider instals and maintains the equipment, recovering the costs through periodic payments made by the customer. This fee includes implementation, maintenance, repairs, and potentially running costs such as electricity and water. To give a concrete example, under a heating-as-a-service contract, the client’s fee varies depending on the amount of heating consumed over the given month, or it can be more outcome-based, linked to providing particular temperature requirements. With a state-of-the-art efficient heating system, the end-user can enjoy the same comfort with lower expenses. Under a pay-per-use approach, customers are incentivised to monitor and control their consumption in order to keep costs at reasonable levels. For the providers, the model incentivises optimised operations and performance, calling for thorough maintenance and repairs to extend the useful lifetime of the equipment and producing and retaining as much value as possible. By encouraging resource efficiency in the use phase, the EaaS model represents a strong enabler of the circular economy.
After successful experiences with the servitisation business model in different sectors globally (see Cooling-as-a-Service Initiative and Your Virtual Cold Chain Assistant), its potential to decarbonise buildings in Europe has yet to be explored. To initiate this, BASE brought the model to the West of the continent through different activities under the EaaS Initiative, including most importantly the development of tools to support its adoption and communication around this win-win solution.
The Project Tools
The project objectives being to develop and deploy the model of servitisation to support the transition and accelerate market adoption of energy-efficient solutions by SMEs, it was seen as key to producing tools that could help stakeholders uptake this new selling model. Therefore the project consortium created:
- Standardised contracts for Belgium, the Netherlands and Spain;
- A pricing tool for the simulation and demonstration of financial costs and cash flows for a high-efficiency system-as-a-service in comparison to upfront purchase with customer loan financing, and the legacy use of a low-efficiency system;
- Summarised guidelines of risk mitigation, evaluating the risks potentially occurring in such projects
- and guidelines and best practices for the measurement, reporting and verification (MRV) of energy (MWh) and greenhouse gas (GHG) savings of the solutions.
The Standardised Contracts provides legally compliant templates for EaaS agreements tailored to Belgium, the Netherlands, and Spain. They simplify negotiations for EaaS projects by ensuring legal compliance and covering key obligations and terms for each party, setting clear guidelines on dispute resolution and aligning expectations among providers, clients, and financiers. The Pricing Tool is designed to model and compare four scenarios, ranging from high-efficiency systems to low-efficiency legacy equipment. It helps providers, financial partners, and customers analyse the financial impact of adopting EaaS versus traditional purchasing models. The Risk Management Guidelines focus on identifying and mitigating the risks associated with EaaS projects, from pricing and performance uncertainties to credit and contractual risks. The guidelines suggest strategies such as insurance, guarantees, and reinsurance to manage these complexities. Finally, the MRV (Measurement, Reporting, and Verification) methodology enables accurate tracking of energy savings, aligning incentives for all parties. These principles guide the deployment of reliable measurement tools and methodologies, ensuring that energy efficiency is quantified consistently. This transparency helps align incentives, as both providers and clients benefit from optimal performance and long-term sustainability.
Building capacity and spreading the word
Throughout the project, the EaaS consortium conducted extensive stakeholder consultations for the development and improvement of the tools. Capacity-building workshops and webinars were organised to raise awareness and disseminate these deliverables. These events focused on a wide range of topics around servitisation, including financing EaaS and circular business models, contractual frameworks and a regulatory environment needed for “as-a-service” models, and implications for specific technologies and sectors. Many events emphasised international collaboration with sectoral experts from various types of organisations, such as investment firms and providers of sustainable energy solutions.
Additionally, case studies were collected through matchmaking sessions and exchanges with various stakeholders to illustrate how servitisation contributes to customer ambitions towards sustainability. These success stories explore various applications of Efficiency-as-a-Service models, focusing on areas like sustainable lighting, refrigeration, and battery solutions in an array of countries. Key examples include partnerships with companies like Signify for circular lighting, EDF Renewables for electricity storage in industrial settings, and ANEO Retail with Danfoss for energy-efficient refrigeration in the retail sector. These case studies provide a testament of successful EaaS implementations of cleaner and more effective energy systems, yielding financial, operational and environmental benefits for both end-users and suppliers.
These case studies allowed the consortium to explore the different parameters of the servitisation model, from circular economy to fee structures and possible financing mechanisms (such as sale and leaseback, sale of receivables, or SPV) for solution providers.
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Key learnings from the project
Feedback from consulted stakeholders
The EaaS project obtained on-the-ground insights on the different needs SMEs have when it comes to transitioning to sustainable energy systems. In general, the substantial upfront cost required, the growing technical complexity of technologies, requiring higher maintenance skills, and the perceived risk of disappointing return on investment, stand as the major barriers holding back a broader adoption of climate-friendlier energy solutions.
Therefore, the main incentives for using Efficiency-as-a-Service (EaaS) models are both financial and operational: enterprises that are not in a position to allocate important available capital expenditure (CAPEX) to their green transformation can benefit from technologies on a pay-per-use basis, enabling investments in core business projects instead; the maintenance and operational activities are completely outsourced and handled by experts; and the investment risk remains at the providers level, which is in turn financially incentivised to maximise the lifetime output of its product. Additionally, the off-balance sheet nature of servitisation contracts proved of critical importance for businesses.
Among all types of companies, the need for the providers to offer a simple and holistic process when shifting to EaaS was underlined. Customers also often requested examples of similar pilots in the same region or sector to serve as business cases. Clients noted the need to first deploy a singular pilot before procuring more EaaS propositions. In Spain, dissemination of success stories was found to be particularly important as the model remains to this day lesser-known.
In all three markets, the EaaS consortium also found that larger clients, such as important industrial operations, are more inclined to choose EaaS models as the substantial investments they require make such projects more financially interesting for providers, and in turn, for investors. Smaller projects attract significantly less qualifying offers. Often higher running costs under servitisation contracts remains another deterrent for SMEs who tend to prioritise short-term cost savings over convenience and long-term savings. Higher costs are often linked to the current financing landscape for EaaS projects, stemming from the higher perceived risk they represent for financial institutions in comparison to debt financing.
The cultural attachment to asset ownership also remains strong among smaller businesses, further slowing adoption. Last but not least, it was found that energy efficiency upgrades were not often a high business priority for SMEs.
Nevertheless, in Belgium the servitisation model is gaining increased interest amongst SMEs for particular assets including Light-as-a-Service, Solar PV and charging stations for electric vehicles. In the Netherlands, cooling, compressed air and battery solutions also represent technologies for which the model is gaining momentum.
The team also observed an increasing interest in the servitisation model within the public sector, where the main incentives lie in the potential to accelerate the circularity of the built environment and operational outsourcing rather than in financial aspects.
On the provider’s side, the readiness to engage in servitisation models varies, and appetite is mostly driven by the need to differentiate from the competition both in terms of quality of services and of pricing, as well as by the perspective to increase income through recurring revenues. However, capacity-building on the communication of clients’ benefits emerged as strongly needed as gaining interest from customers has been in some cases pointed out as a difficulty by sales departments.
If energy service companies (ESCO’s) are well-equipped to offer EaaS and usually engage with larger clients, they do not systematically display a willingness to cater for smaller-sized projects, as more risks would imply more risk assessment and mitigation efforts.
Overall, standardised contracts proved key to reducing the complexity of the model and easing the adoption of the model.
Favouring factors vs. Inhibiting factors
The success of EaaS model adoption depends on several factors affecting the different stakeholders involved.
Typically, the model presents a particularly interesting solution for businesses facing capital constraints, such as approaching their debt ceilings, as retrofits under EaaS require no investments and remain off-balance. Businesses also demonstrated particular interest in applying the as-a-service model for systems that are not part of their primary business operations, yet remain essential (e.g., heating and cooling systems in hotels or healthcare facilities), therefore preferring outsourcing such technical tasks to specialised professionals.
Sector-specific factors can also affect the value of EaaS for potential uptakers. For example, industries with volatile consumption patterns (e.g., refrigeration in food processing) demonstrate the need for the flexibility the model can provide. On top of that, businesses facing increasingly strict environmental regulations can greatly benefit from the quick compliance that the installation of a new system under an as-a-service contract can provide.
Finally, on the financial side, it was found that EaaS contracts act as collateral for providers, facilitating financing through third parties without relying heavily on their own balance sheets. Furthermore, established second-hand markets for EaaS equipment (e.g., car-sharing or solar PPA agreements), enabling providers to refurbish and resell their products, add an additional layer of risk mitigation for investments. The existence of second-hand markets is also essential to allow for an accurate calculation of the residual value of provided assets, key to building financiers’ trust.
Among key inhibiting factors, challenges come mainly from the difference EaaS entails compared to the traditional selling model on various aspects and the perceived risk of energy efficient and renewable energy technologies. Legal complexities arise from the asset ownership, as in some countries incorporation into a property can lead to ownership transfer to the building owner, complicating the provider’s retention of rights. Regarding accounting, it was realised that compliance with certain regulations remains complex and clarity is required to avoid any misinterpretation that could lead EaaS contracts being classified as embedded leases. As mentioned above, it is also important to address the typical client’s preference for ownership that is often linked to shareholder expectations and company valuation metrics.
Finally, it appears uniquely important to create robust EaaS project pipelines to attract financial institutions’ interest and propel the growth of the market.
To conclude, mainstreaming the EaaS model has a vast potential to accelerate the energy transition, but efforts must be sustained on various fronts. Engaging the public sector can be of critical importance as it represents a massive market for EaaS adoption. On top of leading by example, administrations can act as catalysts to develop the enabling environment through policies and regulations. Raising awareness of the model among financiers is also key to improving access to capital for such projects. Effectively mitigating the risks involved, potentially via insurances or guarantee funds, constitutes another key element to tackle. Finally, integrating the model into EU frameworks and strengthening the circularity principles in EaaS contracts represent additional aspects to explore for service-based offerings to thrive.
All in all, the EaaS initiative has been a pivotal driver in promoting servitisation within the European energy industry, providing valuable lessons for transforming markets and industries in Belgium, the Netherlands, and Spain.
Based on the success of EaaS, and to pursue the objectives of the project globally, the Servitisation for Energy Transition (SET) Alliance was established in 2022. This initiative aims to expand the use of servitisation models and contribute to reducing carbon emissions and environmental impact in the built environment across all sectors and the five continents.
To go more in-depth into the learnings from the project explore the key points for customers, providers, and investors to consider when transitioning to EaaS, access the full EaaS Briefing here.
