Airports, hospitals and homes set to embrace cooling as a service

The development of Cooing as a Service (CaaS) businesses models for agriculture and the cold chain is also being seen in a wide variety of sectors such as industrial and commercial use, according to experts.

The claims have been made by Basel Agency for Sustainable Energy (BASE). The group is a leading NGO in sustainable energy finance that has been working in collaboration with the Kigali Cooling Efficiency Program (K-CEP) to standardise the tools required for businesses around the worlds and across industries to adopt and deploy CaaS.

CaaS is a term used to describe a concept where cooling functions are provided on a per-use basis as opposed to a client or end-user purchasing an air conditioning technology or other solution outright. The approach is widely used in the computing and software sectors and could see companies providing cooling technologies, servicing and the related energy demands under a single cost package.

Dimitris Karamitsos, a senior business developer specialist focused on energy efficiency for BASE, said that this 'servitisation' approach in the cooling sector was now being considered for a wide number of  industry needs.

CaaS is being applied in the real estate sector as well as in the agricultural, cold chain industries and more broadly today in the built environment.

He noted that a major focus for implementing CaaS models has been to support the real-estate/commercial sectors. It has more recently begun to be used for pilots look at more affordable and sustainable refrigeration in the agriculture sector and wider cold chain – particularly in developing economies.

Earlier this year, a cooperation agreement was signed by BASE and the Airport Council International of the LAC region to implement the ‘as a service’ model at scale to meet the cooling needs of airports.

Mr Karamitsos, “It’s about having the airports implementing energy efficient cooling technologies that are state of the art and removing the hassle of having to buy the technologies themselves.

“This means not having the upfront investment hurdle, which at that scale – we are talking several million dollars for such equipment.”

Keeping pace with innovation

Other potential benefits of adopting a CaaS approach that gave been identified by Karamitsos include having industry experts also take responsibility to ensure systems are up to date with major environmental and efficiency regulations.

“Today end-users (including hotel owners, hospitals, supermarkets,  airports and more) typically choose technologies that they know how to operate and for which all costs of operations are well documented. These are not necessarily the latest and most efficient technologies."

Mr Karamitsos added that if these building operators were to look at a completely new, innovative chiller system, they currently have to face concerns about the unknown costs and challenges of introducing a new type of system effectively, while limiting the possibilities of breakdowns that can impact on their business.

He added that if building operators were to look at a completely new, innovative chiller system, they would currently have to face concerns about the unknown costs and challenges of introducing a new type of system effectively, while limiting the possibilities of breakdowns which could impact their business.

Another benefit of the cooling sector moving to service models is to prioritise the need for consistent product innovation.

Service suppliers operating CaaS packages at a single fixed cost per unit would directly profit from providing more energy efficient technologies that cost less to run.

Mr. Karamitsos said, “Through the servitisation model, technology providers implement the solutions they trust best for their customers directly into their service operations. The latter brings R&D innovation much closer to the market. Hence, for instance, if a solution provider has a new component being released that enables higher efficiency, they can take the action to directly implement it into their systems. The customer thus directly benefits from state of the art solutions, while the technology provider can also increase its operating margins and accelerate the ROI of their R&D investments.”

Financial support

In the present cooling market, BASE said it calculated that more than US$50 million worth of cooling assets were provided via the CaaS model – a figure that excludes district cooling plants.

Rapid growth is expected in the market over the next three years. BASE estimates that this figure will increase to at least US$300 million worth of assets. Similarly to Power Purchase Agreements (PPAs), which enabled the rapid uptake of Solar photovoltaics (PV) by allowing customers to purchase kWhs of solar energy instead of having to invest in the products themselves, CaaS is expected to mirror this, becoming be the model of choice for businesses all over the world.

Implementation Support 

A focus is needed to help companies understand the potential benefits of switching from being a technology to full-service provider, as well assisting them to adapt their business models sufficiently in order to realise these growth prospects for CaaS, according to BASE.

To support the latter,  the organisation recently introduced new tools  which include offering contract templates and economic modelling to support service-based cooling.

Mr Karamitsos said that the release of the tools, such as a CaaS contract, were intended to help industry bridge the gap in moving to a service-based business model, which otherwise can be challenging for organisations. Implementing innovative business models always requires time, trials, investments and includes business risks which corporates often are reluctant to go through.

BASE is among the organisations supporting businesses around their challenges in implementing CaaS, while also providing network opportunities for viable financial partners and market opportunities.

The future for cooling specialists

Mr Karamitsos said that the CaaS market would be open both to technology providers already experienced in providing chillers and refrigeration systems, as well as  utilities specialists that would previously just provide energy.BASE has held conversations with utilities companies which showed multinational groups were interested in entering the CaaS market.  This would mimic the approach already seen in different European markets of energy providers offering an all-in-one heat as a service contracts to homeowners.

Mr Karamitsos said that this possible shift in the market could see utilities companies purchasing cooling technology from manufacturers to provide as part a holistic service where a single price is paid for installation, heating, energy use and servicing.

The rise of utilities groups offering CaaS packages would not necessarily undermine income from technology providers however.

He added, “At the end of the day, the advantage of the model means the utility company will need to run and maintain these solutions efficiently so they operate sustainably, deliver value to the end customer and generate revenues for the business. Furthermore, it strongly incentivises solution providers to design their systems in a modular fashion, enabling re-use, upgrades and recycling of components, promoting a circular economy”.