In June 2020, Agoria together with 3 consortium partners ANESE, BASE and INNOENERGY launched a three year project funded by the European Union H2020 programme on efficient equipment as a service (eEaaS). The project aims to develop and deploy the « Product-as-a-Service” (PaaS) model to accelerate the market adoption of energy-efficient solutions in SMEs.
PaaS, also referred to as “pay-per-use”, is a use oriented product-service system in which the provider remains the owner of the product or equipment and is responsible for delivering a highly efficient and quality service to the user. The provider maintains the system, covers the operational costs of running the equipment, and the end customer pays for the service he receives rather than the physical product or infrastructure that delivers the service.
"PaaS offers many advantages to both technology providers and customers alike."
In a competitive economy where manufacturers struggle in valorising the quality of their premium products, PaaS offers a way to regain in competitiveness by lifting the barrier related to the unwillingness or inability of potential customers to invest in highly efficient yet more capital intensive technologies. New market opportunities arise as PaaS allows to tap into markets that are otherwise difficult to access - such as SMEs - which have many competing investment needs to grow their business and give priority to core business investments with shorter payback time. PaaS further enables providers to build stronger and more durable relationships with their customers, streamline their revenue streams, gain in predictability thereby reinforcing their resilience in times of crisis.
From a customer perspective, PaaS offers the opportunity to access highly efficient technologies through their operational expenditures, thereby freeing the capital expenditure needed for priority investments. Customers further benefit from high quality services fully tailored to their needs and are unburdened from the operation and maintenance of the equipment which are carried out at optimum level reducing the total cost of ownership.
Deployment of PaaS will furthermore accelerate the leap towards Industry 4.0 by accelerating developments and fostering innovation in digital technologies. As the equipment provider remains the owner of the equipment and bares the responsibility of its operational and maintenance costs and risk failures, improving equipment performance, maintenance efficiency, data gathering (volume, quality and data type) and access to information will be critical. Technologies such as sensor systems, predictive analytics, remote communications, consumption monitoring and conditional based monitoring to name a few will therefore play a pivotal role in the future of PaaS systems.
What will the eEaaS project deliver?
Although PaaS is not new and is already present in sectors such as software and photocopying, the concept is considered as nascent in the energy efficiency sector, particularly with respect to energy efficient equipment. Switching from a product based system to a fully service based system comes with a number of challenges, notably financial, contractual, organisational and mindset related. The eEaaS project will develop tools and create the necessary support framework to overcome some of these challenges:
- A financial strategy that allows for the capitalisation of the technology provider and access competitive financing conditions:
experience has shown that a potential bottleneck for this type of model is the lack of liquidity, and/or capacity to access competitive financing for the technology providers. Providers need access to competitive loans, and banks (lenders) request the providers (borrowers) to provide collateral to secure the repayment of the loan.
- An eEaaS standardised contract that provides a balanced agreement between a customer and a provider, establishes and allocates properly the risks between the parties:
a common finding is that clients, technology providers and financial institutions are not used to negotiating eEaaS contracts. Having a standardised contract available offers a clear and transparent framework for negotiations between key actors.
- Guidelines and recommendations that will help the providers take into account the accounting and fiscal aspects
when signing a servitisation contract and requesting a recapitalisation support according to the proposed financial structure.
- Guidelines on potential risk mitigation instruments
that could be incorporated into the eEaaS model and that can strengthen the investment proposition for the provider and the financial entities.
- An Excel tool to facilitate the economic analysis and pricing structure of an energy efficiency projectwhen offered under servitisation:
technology providers need support to pricing correctly the servitisation. The providers have developed expertise in pricing the supply and installation of their equipment but the servitisation model deals with additional aspects such as maintenance, monitoring, financial and insurance costs, amongst others.
- Establishing Communities of practice:
PaaS can be a challenging process. In order to promote the uptake of the model, the most engaged technology providers will be identified and guided to use the mechanisms. Agoria will further engage with key stakeholders to raise awareness and facilitate the integration of eEaaS as a new business opportunity.
- Build a pipeline of energy efficiency investments
that will serve as demonstration projects to attract the interest of key stakeholders. The aim is to bring the developed mechanisms to the market and to roll out the eEaaS model in Belgium. Investment roundtables and matchmaking events between technology providers and SMEs, and technology providers and financial entities will be organised.
The shift towards a service based society is well on its way and many predict that ownership will at some point become something of the past. A few frontrunner manufacturing companies have embarked in the PaaS journey in the recent years. Convinced of the opportunities such a model creates, our ambition at Agoria, through the eEaaS project and also other services such as the Circular Economy Learning Networks, is to prepare the framework and equip companies that wish to pursue or engage in this path.
Are you curious to know more?
Join our webinar "Equipment-as-a-Service, take the benefits: from challenges to opportunities" in which we will explore the latest trends and discuss on their opportunities and challenges. We also invite those that are interested in the eEaaS project to get in touch with us.