The digital economy’s favorite gimmick, the subscription model, has now made its way into the world of physical steel and copper. The commercial Energy as a Service (EaaS) market is projected to double in size, reaching a staggering $55 billion by 2030 according to the latest sector forecasts.
The concept of EaaS is simple on the surface: commercial landlords and data center operators can swap their unpredictable utility bills and aging HVAC units for a fixed, monthly fee. However, behind the 11.4% compound annual growth rate lies a more intricate reality of infrastructure control shifting hands.
For CFOs caught between rising electricity prices and stringent building performance standards, EaaS offers a lifeline. With commercial electricity rates in the U.S. jumping 6.3% in the last year, organizations are seeking ways to reduce their carbon footprint and energy costs. This is where EaaS providers like Ameresco and Siemens step in, taking ownership of solar panels, battery arrays, and microgrids and converting them into operating expenses.
But the real essence of the EaaS model lies in operational and maintenance (O&M) services. Providers not only build the infrastructure but also bear the performance risk. If a solar array underperforms or a battery degrades faster than expected, the provider absorbs the loss, making O&M the second-largest segment of the market.
As the world moves towards meeting global climate targets, investments in building efficiency need to triple by 2030, with EaaS positioned as the vehicle to facilitate this transition. However, the complexity of these systems, incorporating AI-driven demand response and advanced battery storage, comes with hidden costs that are masked behind the subscription model.
North America is at the forefront of this market shift, driven by stringent regulatory Building Performance Standards (BPS) that impose penalties for building emissions violations. Commercial landlords facing the choice of deep retrofitting, paying fines, or signing an EaaS contract are increasingly opting for the latter, leading to a privatization of the power grid.
While the growth of data centers is often cited as a key driver of EaaS, the reality is more about addressing power availability issues than sustainability concerns. Hyperscalers like Microsoft and Google are constructing their power plants to meet their growing energy demands, highlighting the critical role of EaaS providers in ensuring uninterrupted power supply.
Despite the allure of “Zero CapEx,” EaaS ultimately translates to a higher total cost of ownership for organizations, as they become tenants of their own infrastructure. The industry’s reliance on private capital and the creation of a new class of “energy landlords” raise questions about the long-term implications of this $55 billion market.
Ultimately, the promise of abundance through EaaS comes with a significant long-term commitment, highlighting the need for careful consideration of the implications before diving into this subscription-based energy model.
