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Energy-as-a-Service Model Offers Convenience and Affordability to Residential Customers

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Karen Marcus's picture
Freelance Researcher and Writer Final Draft Communications, LLC

In addition to serving as an Energy Central Community Manager, Karen Marcus has nearly 25 years of experience as a content developer within the energy and technology industries. She has worked...

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In January 2018 I published an article about the Energy-as-a-Service (EaaS) model and how it can be used by companies to maximize efficiency and reduce costs. I wrote, “Like other as-a-service models — such as Software-as-a-Service (SaaS) and Infrastructure-as-a-Service (IaaS) — EaaS removes management headaches while delivering a consistent, reliable experience.”

All of that is still true, but now energy providers are thinking more about how this model can be deployed with residential customers. Instead of comparing the EaaS model to SaaS and IaaS, these providers are likening it to Netflix, Blue Apron, Amazon Prime, and other subscription services customers are familiar with. Another subscription-based plan this model can be compared to is a mobile one in which the customer chooses between options for unlimited calling, texting, and data per month. Residential customers can benefit from this model, deriving a predictable monthly bill, and affordable access to distributed energy resources.

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How It Works

According to U.K.-based Current, “Energy as a Service does away with charging customers for how much energy they use, focusing instead on how they use energy. Rather than paying for the number of kilowatt hours you consume, you will instead select a tariff such as ‘Comfort’ where you could pay a monthly subscription at a competitive fixed price rather than a cost per kilowatt hour.”

In an article about rate design’s future, Navigant states, “Service plans would be…tailored to differing customer risk and convenience preferences.” For example, the page describing the plans offered by electricity retailer Amigo Energy looks very similar to what consumers might find for other subscription services, from online software to clothing to wine delivery. From Amigo Energy customers can get an Assurance plan, a Nights Free plan (no charges from 9:00 PM until 7:00 AM), or a Green Energy plan (up to 100 percent renewable-energy credits).

The Role of New Technology

EaaS plans take into consideration new technologies from smart devices to energy-efficient appliances. Navigant quotes Tucson Electric Senior Director Dallas Dukes as stating, “If the utility can provide…customers with newer, more efficient equipment…in return for something akin to on-bill financing…the utility can recover its investment and…customers can realize the increased convenience and comfort associated with these investments.”  

Smart meters and sensors also play a significant role in this model. When a customer selects a payment tier, the devices can automatically detect usage and make adjustments appropriate to that level. Navigant states, “While similar to present day flat bill rates, an [EaaS plan] can unlock much more when combined with advanced analysis of customer interval load data and smart devices.”

EaaS Challenges

One potential challenge with EaaS for utilities is that customers aren’t incentivized to cut down on their energy use during peak hours as they are with time-of-use (TOU) programs, which charge more depending on customers use energy. Another is that such programs are highly challenging to develop and implement. According to Navigant, “Proper subscription pricing…will require advanced analytics, cross-functional coordination, and measurement and verification of customer product offerings.”

On the other side of the coin, many customers want their utility to offer a flat-rate pricing option. Given the growing importance of customer satisfaction to utilities, creating an EaaS program might be worth the effort. Navigant states, “Targeting customer preference and needs based on behavioral data rather than kilowatt-hour transactions empowers utilities to focus on increased customer choice, comfort, and convenience with a focus on high-value outcomes.”

Does your utility offer EaaS to residential customers? What has the response been, and what lessons have you learned? Please share in the comments.

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Matt Chester's picture
Matt Chester on Aug 5, 2019

On the other side of the coin, many customers want their utility to offer a flat-rate pricing option. Given the growing importance of customer satisfaction to utilities, creating an EaaS program might be worth the effort. 

I'm curious how the economics shake out for the utilities if they get all customers to switch to an EaaS model vs. if they offer the option and only some utilize it. Would it be better to have a diversity in their customer base or be able to go all in with one or the other?

Karen Marcus's picture
Karen Marcus on Aug 21, 2019

That's a great question, Matt. The Navigant article states, "Offering some of the utility’s customers an [EaaS] option gives the utility a portfolio-diversification benefit with respect to revenue recovery." I believe that's the general view, at least for the time being. 

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