‘As a service’ is a familiar pattern in business today, especially in the technology arena. ‘Software as a Service’ is as common as Microsoft Office 365 and companies have been providing services, such as telephony and internet access for decades. But, how can the model be applied to the HVAC market?
It’s not a common approach today, but the benefits of applying ‘As a service’ to HVAC are many – for customers and for equipment and service providers. Notably, an ‘As a service’ approach can help customers sidestep the higher costs of transitioning to more expensive green technologies, thus accelerating the green trend and avoiding pollutants and greenhouse gases.
Heating and Cooling ‘As a Service’
‘Heating as a Service’ (HaaS) and/or ‘Cooling as a Service’ (CaaS) provide all the benefits of the most up-to-date systems
Rather than requiring large capital investment, ‘Heating as a Service’ (HaaS) and/or ‘Cooling as a Service’ (CaaS) provide all the benefits of the most up-to-date systems, in exchange for a monthly fee.
In the case of ‘Heating as a Service’, a service provider charges a recurring fee to lease and maintain the hardware of a heating system. Rather than the customer paying for a fuel input (i.e., for each kWh of fuel used by the system), he or she pays for the heat that is generated, either as a monthly fee or based on usage.
Emphasis on outcomes for the customer
In the world of ‘as a service’, the emphasis is on outcomes for the customer, rather than on inputs. The entire system could be provided by one company or there could be an equipment supplier and a separate service provider.
Risks typically borne by the customer are instead the responsibility of the equipment and/or service provider(s). For example, the equipment supplier manages the financial risk of investing in the equipment and provides the needed maintenance and repairs.
Efficiency, the responsibility of System provider
The system provider must assume responsibility for how efficiently the system performs, the energy costs and even adapting to the customer’s behavior that impacts heat demand.
There is the potential for flexibility in how ‘Heating as a Service’ (HaaS) plans are managed and charged. For example, a customer could choose and adjust usage to specific ‘warm hours’. Alternatively, they could choose ‘consistent comfort’. For lower-income customers, a manageable monthly fee is preferable to a sudden expensive and unbudgeted repair.
‘Cooling as a service’ aids in managing global climate goals
Transitioning to newer, greener technologies requires large capital investments in the latest equipment
‘Cooling as a service’ uses the same basic approach, but offers additional benefits in terms of managing global climate goals. Space cooling consumes 10% of global electricity and refrigerants used in cooling have a large potential to increase global warming.
Transitioning to newer, greener technologies requires large capital investments in the latest equipment. Approaching the challenge using an ‘as a service’ model pushes aside the need for large capital expenditures and offers the same capabilities for an affordable monthly fee.
Pay per unit of cooling consumed
Instead of investing in greener cooling technologies, the customers need only pay per unit of cooling they consume. Because the technology provider owns and operates the system, they are incentivized to minimize the costs, leverage economies of scale, etc. If a technology provider reduces electricity consumption, uses more efficient technologies, and leverages the benefits of preventative maintenance, it’s more money in their pockets.
‘Cooling as a Service’ (CaaS) especially has potential as air conditioning spreads to new areas of the world. Cooling demand is on the verge of accelerating in countries, such as South Africa, India, and Mexico. CaaS can serve these new markets cost-effectively and at a minimum environmental impact.
‘As a service’ model
Customers who have tried out the ‘As a service’ model liked the idea of paying for comfort, rather than a fixed price for fuel. They liked the predictability of the pricing – no surprise repair fees or fluctuating fuel costs.
‘As a service’ plays into the reality that consumers today care more about the experience they get for their money, rather than the details of how the experience is achieved. Many consumers would be happy to leave concerns about HVAC equipment and operation to the specialists. They just want comfort and they are willing to pay a price for it.
