FAQs

Operation and maintenance account for a larger % of system’s lifecycle cost (for cooling systems it can be up to 90%). The initial investment is only a small fraction. For this reason, the overall cost for the technology provider to deliver the service will be lower for those technologies that have lower operating costs, which are the most efficient ones. Systems that are cheaper to buy upfront but which consume a lot more energy and break down more frequently become more expensive on a pay-per-use approach, as the price charged per output/outcome/usage embeds those costs. The model allows to expose the true costs of equipments through their lifecycle.

The owner of the equipment is either the technology provider, or the finance provider, depending on the financial structure. The owner is responsible for the implementation, operation, maintenance and repair of the system.

Both models offer common benefits to the user, namely, no up-front investment for the end-user and the systems are optimised to maximise efficiency. However, some of their features are fundamentally different; the major of which is how energy savings are treated.EaaS, as developed by BASE, does not tie payments to energy savings. Payments are agreed in advance as a function of actual usage (or output), including operating cost such as electricity (and water consumption for cooling systems). The customer thus has a clear guarantee that he will not be paying more per unit of service consumed than agreed, even if the consumption of electricity is higher than expected.Energy Performance Contracts (EPC) payments on the other hand are dependent on energy savings. There are two major forms of EPC models: 1) the shared savings model in which the customer does not invest but instead pays a share of the energy cost savings to the project developer; 2) The guaranteed savings model in which the customer invests but is guaranteed that a certain amount of energy savings will be met.EPCs, in particular shared savings EPCs, can make it hard to create long-term strategic partnerships between the Energy Savings Companies (ESCOs) and their customers because a periodical negotiation is required to determine the payment based on savings measurements. In this sense, the pricing structure of EaaS is highly transparent and enables such strategic partnerships.

Contracting has many different ways of being agreed to the customer. For example some contracting requests for some upfront investment (CAPEX) from the customer or do not include all costs of operations (electricity, water, repairs, etc). One key differentiation is also on the pricing of contracting vs. EaaS shared to the client. EaaS is charged on a pay-per-performance, pay-per-output approach whereby the incentives of the customer and the provider are aligned. The pricing defined in an EaaS contract aim to solving a specific and concrete problem on the customer side. The provider of EaaS takes the responsibility for the challenges of the customer's task instead of just providing a tool to work with. EaaS starts with understanding how you can make your customers more successful. A successful EaaS offer means enabling your customers achieve their goals by wrapping your product in an innovative business model to deliver value and in a creative revenue model to mitigate risk.

Typical contract durations are between 7 and 15 years (but some can go up to 20 years). Based on discussions with technology providers, potential customers and investors, this timeframe seems to balance out best the interests of all actors and an accessible price. Too short timeframes would significantly increase the price per unit of service, while longer timeframes tend to be perceived as riskier.

The way we define EaaS within the Servetia Initiative, we consider that the technology provider must bear the costs of electricity. Indeed, including electricity in the fixed rate per unit means that the provider is fully responsible for the costs of operating the system, and the customer is not exposed to the performance risk of the equipment. Therefore, it is in the interest of the provider in installing the equipment with the highest efficiency, as well as offering excellent preventive maintenance to optimise the efficiency of the system and thus reduce the cost of providing the service. However it is important to note that the above is a recommendation for best practices but there are alternatives which can be agreed between stakeholders.

A portion of the price per unit of service charged to the client should be indexed to the electricity price, based on a pre-agreed electricity tier. While technology providers are responsible for the performance of the system, they should not bear the risk of increase in electricity prices, nor benefit from decrease in electricity prices.

Measurements are done by several different instruments combined and connected to a monitoring system but typically are done using energy valves, flow and pressure meters, thermostats among others that allow flow, pressure and temperature (△T) measurements (for cooling and heating).

What is included in the service depends on the specific arrangement between the technology provider and the customer. It can be the full system plant, digital tools, remote monitoring, including piping and other smaller components, or it can be limited for example to the core system component (ex: chillers, heat pumps, lights). The delivery point of the service (i.e. up to which point is the technology provider responsible) must be well-defined in the contract.

Yes there is no limit in the combination of technologies which can be offered as a service to the customer. In fact it is highly beneficial to combine efficient solutions in a single offer (such as heating, powered by solar with storage systems); this allows to develop a systemic efficiency approach and an overall higher value delivery to the customer. One of the key advantage of the model is that it enables system thinking, in which a solution provider can include other components such as energy storage in the solution offered to the user. The technology provider has the incentive to install such components in case this reduces the lifetime cost of the plant, because it will make the service more cost-effective. It might even be that agreements with the utilities combined with thermal storage provide for additional revenue generation, resulting potentials in a reduction of the service price to the user.

There are several ways to minimise the risk of low service consumption due to exceptionally low occupancy. Various arrangements can be met, including the setting of a minimum fee per month (take or pay arrangement), which should be lower than the expected average demand of the building. For examples and questions related to the latter, feel free to reach out to the Servetia team.

In order to ensure that the contract is off-balance sheet for the customer under the International IFRS16 accounting regulations, the recipient of the EaaS service must be able to characterise the agreement as a service arrangement rather than an embedded lease.The new IFRS16 have evolved over the years and make it complex for a contract to be considered a service agreement rather than a lease. In the EaaS contract there is no equipment, there is an output from the installation of the equipment, and this is a fundamentally different proposition. The contracts must address country-specific accounting issues and address key aspects such as supervisory control and ownership of the equipment, the net present value of the contract compared to the value of the equipment, and the end of term conditions.It is important to clearly separate the equipment delivering the output service from the building integrated systems that may already be owned by the building owner, making it difficult to demonstrate control by the service provider. The standardised EaaS contract developed within the Servetia program allows for this.

In principle the model of EaaS applies to any type of facility. However, transactional costs are higher for smaller projects (residential vs. commercial / industrial) so it is required to use financial structures that adapt to that need, such as pooling a series of projects that make it more attractive to the investors. The actual minimum ticket size of an investment will depend on the investors’ criteria, but by bundling projects it is possible to cover a number of smaller investments with a single investment vehicle by reaching a larger total investment. Within the Servetia program the team focuses on projects within the Commercial and Industrial sector with investment requirements of at least 300’000 CHF to demonstrate the value of the approach and scale the model.

The tools the program provide include standardised contract, pricing model (economic and financial), risk matrices, as well as marketing material.

As a provider, if you jon th program the team of Servetia will share its knowledge on the model, provide support in transitioning to the model, the activities in Switzerland, as well as include you in upcoming tenders.
As a client, if your project fits the Servetia scope (in size and type of technology), the team will study your needs and requirements, complete an economical and financial analysis, support in building a tender, in analysing the offers received and more.
As a financier, the Servetia team will connect you with green investments as well as align your financial services to the opportunities being analysed.

Reach out to the Servetia team via the website or on info@servetia-initiative.org. Share information on your needs (location, technology type, size of system, age of system at use, efficiency levels, current expenses on energy use and maintenance & repair and any other information which could be valuable for the analysis). The Servetia team is happy to sign an NDA to share valuable information. Once the team gets in touch and the scope is confirmed of interest, an MoU is signed which clearly defines the next steps in the collaboration.

If you are interested in joining the program, you need to connect with the team asap on info@servetia-initiative.org or via the web-portal. The initiative is active until Mach 2025.

Yes, we have performed several in-depth analysis of the EaaS model compared to BAU. One includes the analysis completed with the Global Innovation Lab for Climate Finance and BASE from the EaaS model applied on cooling called Cooling as a Service. You can find the study on The Lab website or on the BASE website. End-users do save on operating costs because the total cost of ownership of more efficient systems is lower compared to systems that are less expensive to purchase but consume more energy while operating due to technology limitations and improper maintenance. In the EaaS model, the equipment remains under the ownership of the technical provider, and the operation and maintenance of the system is optimised. This leads to lower energy consumption and, avoided corrective maintenance, and slower equipment performance degradation, and hence improved equipment life-cycle cost. It is a win-win for both the equipment provider and the business owner, while reducing the impact on the environment.

These risks exists and it is important to define contracts which transparently lay out how such risks are edged. However, traditional sales approaches are more so exposed to such risks. In an EaaS model, as soon as markets pick up (such as the re-opening of markets after COVID), consumptions of clients ramp up again quite rapidly to “normal” levels whereas for traditional sales these take much more time to ramp up. The Servetia team can share more information on the latter upon request.