Global Energy as a Service (EaaS) Market (by Service Type, End-User, & Region): Insights and Forecast with Potential Impact of COVID-19 (2022-2026)
EaaS is a solution for increasing market acceptance of advanced, low-carbon technologies. Customers can pay for an energy service using the energy as a service business model without any prior capital commitment. EaaS providers are responsible for managing and monitoring the energy supply, minimising clients' operational expenses, and increasing profitability.
Rather than simply delivering power, the EaaS model provides clients with a variety of energy-related services. The consumer benefits from avoiding direct electricity payments, costly updates for electrical equipment or software, or device administration while still enjoying the benefits of the gadget. Governments across the world are adopting significant initiatives and regulations to raise awareness about the benefits of utilizing renewable energy, which has resulted in a growth in renewable energy demand and driven the total energy as a service industry. The global energy as a service market is expected to reach US$72.62 billion in 2023, growing at a CAGR of 8.95% during the forecast period.
- By Service Type: In terms of service type, the report provides the bifurcation of the global energy as a service market into three segments: Energy Supply Services, Operational and Maintenance Services, and Energy Efficiency & Optimization Services. The energy supply services segment accounted for the largest share in the global energy as a service market owing to the rapid rise of distributed energy generation sources such as solar, wind, fuel cells, and heat and power, which in turn, has enhanced the demand for energy supply services.
- By End User: The report further provided the segmentation on the basis of end user of the energy as a service market: Commercial and Industrial. Commercial sector is expected to grow at the highest CAGR owing to the rise in demand for optimization of energy consumption in the commercial sector to reduce energy bills and support sustainable environmental growth.
According to this report, the global energy as a service market is divided into five regions: Asia Pacific, North America, Europe, Latin America, and Middle East & Africa. The countries covered in Asia Pacific region are China, India, Japan, South Korea, Australia, and the Rest of the Asia Pacific, while North America includes the US, Canada, and Mexico. Moreover, Germany, France, the UK, Italy, Spain, and the Rest of Europe are included in the Europe region.
The Asia Pacific dominated the market with maximum share of the global market. Asia is also expected to grow at the highest CAGR in the forecasted years owing to increased investments in smart energy infrastructure, renewable energy, and increasing urbanization across the region. Within North America, the US dominates the energy as a service market. The US energy as a service market is segmented into three service types: Energy Supply Services, Operational and Maintenance Services, and Energy Efficiency & Optimization Services. The US energy as a service market is further segmented based on end-user: Commercial and Industrial. The US energy efficiency and optimization services market is expected to grow at the highest CAGR owing to the increase in the installation of the smart grid and smart meters.
Top Impacting Factors:
- Increasing Renewable Energy Generation
- Proliferation of Electric Vehicles
- Increasing Investment in Clean Energy and Energy Efficiency
- Rapid Growth in Distributed Energy Resources
- High Integration and Deployment Cost
- Cybersecurity Vulnerabilities
- Internet of Energy
- Increasing Use of Smart Grid
- Advanced Engineering in Renewables
- Increasing Use of Blockchain
- Driver: Increasing Renewable Energy Generation
Renewable energy helps to safeguard the environment by emitting little to no harmful pollutants. Therefore, more emphasis is being focused on renewable and non-green energy sources for eco-friendly energy management, thermal conservation, and reducing CO2 emissions. On the other hand, corporations have increasingly been looking for sustainable or renewable resources of energy. Additionally, public spending on renewable energy is also increasing, which has further led to an increase in renewable energy generation. Therefore, the growing dependence on renewable energy sources has positively impacted the adoption of the EaaS model and is likely to drive the growth of the global energy as a service market during the forecast period.
- Challenge: High Integration and Deployment Cost
EaaS solution requires the deployment of advanced IoT devices and equipment for tracking energy consumption and usage patterns. This data is later used by service providers for setting energy tariffs and suggesting energy management techniques. However, the installation of these devices can be a cumbersome process, especially in the case of existing large commercial or industrial environments. A major challenge in the implementation of the EaaS model is the installation of renewable energy systems and battery storage systems at the end-user premises. These systems are installed to minimize the dependence on power grids and reduce electricity bills. Although the deployment of these systems would result in savings for users in the long run, the initial cost of their deployment can be considerably high and may discourage customers from opting for an EaaS solution. This is likely to impede the growth of the market during the forecast period.
- Trend: Increasing Use of Smart Grid
Smart Grid is an Electrical Grid with Automation, Communication, and IT systems that can monitor power flows from points of generation to points of consumption (even down to appliances level) and control the power flow or curtail the load to match generation in real-time or near real-time. In the smart grid, the energy consumer (typically called a prosumer), not only utilizes energy but also generates and provides electricity back to the grid. Also, a smart grid entails technology applications that allow easier integration and higher penetration of renewable energy. Moreover, the smart grid is essential for accelerating the development and widespread usage of plug-in hybrid electric vehicles (PHEVs) and their potential use as storage for the grid. Hence, it is expected that the smart grid installation would increase in the coming years, which in turn, escalate the growth of the EaaS market.
The COVID-19 Analysis:
The COVID-19 outbreak had an adverse effect on the energy as a service market. Industries that predominantly depend on renewable energy sources for operations were forced to function partially or shut down completely due to the rising number of cases. This impacted the renewable energy demand and affect the overall energy as a service market. In the post-COVID era, it is expected that the energy-as-a-service model would grow in importance to be a part of the smart energy community of its ability to reduce energy costs.
The energy investments in the initial stages of the pandemic have reduced significantly. Companies were already struggling to keep up with fixed costs and trying to survive the impact of COVID-19, any commitment to such huge capital investment is either put off, canceled, or delayed. Thus, the impact on the EaaS market was high in 2020. However, in 2021, annual global energy investment is set to rise to US$1.9 trillion, rebounding nearly 10% from 2020 and bringing the total volume of investment back towards pre-crisis levels.
Analysis of Key Players:
The global energy as a service market is highly fragmented. Several well-established players are looking to adopt different product strategies such as launching new products to stay competitive in the overall market. A wide spectrum of stakeholders can benefit from EaaS because of the physical, digital and communication infrastructure required. Major electrical companies and manufacturers of industrial equipment are already creating energy-as-a-service products. The same goes for businesses in the telecommunications, technology, and oil & gas sectors, all of which offer unique advantages. The key players in the global energy as a service market are:
- Honeywell International Inc.
- Enel S.p.A (Enel X)
- Johnson Controls International PLC
- Veolia Environment S.A.
- Centrica plc
- Siemens AG
- General Electric Company (GE)
- Electricité de France S.A. (EDF Renewables)
- ABB Group
- Schneider Electric SE
- Edison International (Edison Energy, LLC)
- AltaGas Ltd. (WGL Energy)
Most industry players are working to position themselves as a leader in the EaaS field, proving high-efficiency, low-emission power generation products and services that enable customers to increase their power resilience and lower energy costs & carbon emissions. The industry witnesses rising numbers of EaaS agreements formed by oil and gas customers for high reliability, more environmentally friendly power solutions for their operations. Other strategies opted by market players are mergers & acquisitions. For instance, in June 2022, Schneider Electric announced collaborating with Hitachi Energy to provide greater customer value and accelerate the energy transition. Also, in November 2021, ENGIE, alongside with the company’s partner Crédit Agricole Assurances, signed an agreement to acquire Eolia, a renewable company in Spain. With 0.9 GW of operating assets and 1.2 GW of renewable projects pipeline, this acquisition would add to ENGIE's scale in the Iberian Peninsula.