Faced with global market disruption and, likely, adjusted business priorities, corporate energy and sustainability leaders require alternative funding mechanisms and project delivery vehicles to get capital projects back on-track. Capital improvements to infrastructure and buildings - from efficiency upgrades to digitization - will be key to build back with resilience following the COVID-19 crisis. But budgets constraints and workforce changes may limit an organization’s capacity to fund and implement these projects, as well as ensure ROI expectations are met.
In the new normal, financial and operational flexibility will be essential for business continuity, and Energy-as-a-Service (EaaS) provides a compelling business model to meet both sets of priorities.
In this Q&A, Senior VP of Schneider Electric Energy and Sustainability Services, James Potach, and Chief Technology Officer of AlphaStruxure, Steve Pullins, explore the dynamics of EaaS and discuss how it can be applied as a strategic lever to fuel a resilient, and green recovery.
James Potach leads Schneider Electric’s global efficiency team helping large utility consumers transform their energy into an asset to increase profitability, modernize facilities, build their brand and fund growth initiatives that they otherwise may not have afforded.
Steve Pullins has over 40 years of energy industry experience in operations, maintenance, engineering, microgrids, and renewables project development. Mr. Pullins has advised several international utility and government organizations on Smart Grid technologies and operations, microgrid development, integrating intelligence, new power generation, and waste to energy issues. He has designed more than 75 micorgrids. Click here to learn more about AlphaStruxure.
Potach: Energy-as-a-Service (EaaS) has been generating a lot of market buzz, but what does it really solve for?
Pullins: EaaS is a funding model for projects ranging from energy supply to establishing more renewables, increasing resilience and providing cost predictability. But it's not limited to just the energy production and energy efficiency assets; it can also span new infrastructure. CapEx is a competitive space within an organization. When you start bringing a long-term energy infrastructure transformation into the equation, that not only impacts this year's CapEx decision, but several decisions to come. There is a certain synergy that comes from offloading that capital requirement onto a firm that's energy ready, like Schneider Electric and AlphaStruxure. A key part of our job is to look at an organization and think: here's how the energy solution can play an important role in making other uses of capital even more successful
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We see a lot of organizations declare sustainability goals, but struggle to reach them in a timely manner. Would an EaaS model help overcome some of those barriers?
We see many organizations, both public and private, set ambitious goals around renewables, reducing greenhouse gases, electrification of transportation, etc. But often, they make the leap from establishing that goal to thinking, for example, “Oh we’ll just go 100% solar and meet our goal that way”. If you have a thousand acres to put solar panels on, you might be able to do that. But the reality is, achieving that goal will require a much more complex solution and risk-taking which few companies have the appetite for. EaaS models make achieving ambitious goals like this much more manageable.
How can EaaS help mitigate some of that risk for organizations?
Previously subsidized renewable energy programs across many states in the U.S. and Canada are increasing rates and volatility, both from a supply side and in delivery charges. An EaaS model that includes long-term service agreements with a performance guarantee introduces an element of predictability which allows a company to plan for the future and better prepare for any risks in the short-term. With behind the meter solutions provided through an EaaS model, you can tell what your rates are going to be from an electric and a thermal perspective 25 years into the future. You would be hard-pressed to do that with traditional utility suppliers. As well, organizations can tap into today’s data-rich environment for predictive analytics and condition monitoring. This adds predictability around the cost of operation and maintenance and helps in stabilizing those long-term operational costs.
Infrastructure projects under an Energy-as-a-Service business model can be huge, often encompassing hundreds of millions of dollars. How does an organization get started, and what does that process look like?
Energy transformations can be messy, and we are in the business of taking that mess off the table for organizations. We don't come in and say, "Oh, here's a solution that we have. You can probably make really good use of this." What we do is we come in and we start with the customer’s objectives. "What are you trying to achieve over the next decade?" and, "Tell us about your business continuity, your reliability and your resilience. Tell us about your cost predictability needs. Tell us about your aspirational goals around sustainability."
“Energy transformations can be messy, and we are in the business of taking that mess off the table for organizations” Click to Tweet
– Steve Pullins, Chief Technology Officer, AlphaStruxure
Side by side with the organization and according to their specific needs, we formulate a range of options that might be financially viable. From the 5 or 6 viable options, we then work through a process to narrow those down to the ones that are most likely to be successful in achieving that customer’s unique goals. From there, we do some comparisons, including financial models. We call that the ‘art of the possible’. It's an exploratory process that brings a customer along the journey of figuring out the best solution.
For the full interview with James and Steve, watch this video.
AlphaStruxure is a joint venture of Schneider Electric and The Carlyle Group created to build digitized, decentralized and decarbonized energy systems. AlphaStruxure designs, builds, owns and operates microgrids – local energy networks that deliver sustainability, reliability, resilience and long-term savings for clients in the commercial, industrial, government, MUSH and infrastructure sectors. Through an Energy as a Service (EaaS) model, AlphaStruxure empowers clients to transform their energy infrastructure with no upfront cost.