CaaS, or Cooling as a Service, is a promising solution to the impending energy and climate crisis looming over the cooling industry. At present, the cooling industry is responsible for around 10% of the global energy consumption, and the energy demands of cooling in India alone are expected to grow to 2.2 times the current number by 2027 [1]. Despite being one of the largest electricity consumers, the cooling industry still relies heavily on energy-inefficient systems, which are also prone to releasing greenhouse gases that contribute to global warming and climate change.
According to a report by the IEA [2], the average energy efficiency of cooling systems like air conditioners deployed by end users is less than 50% of the standard options available in the market and less than 33% of the most energy-efficient technologies available. So, why is the cooling industry not switching to more energy-efficient and environment-friendly cooling systems? A high upfront cost and lack of trust in newer technologies are the topmost hindering factors. CaaS or Cooling as a Service addresses the various hurdles that the industry faces in switching to energy-efficient cooling technologies, paving the path for the global deployment of cleaner and greener cooling systems.
What Is Cooling as a Service (CaaS)?
While the lifecycle cost of modern energy-efficient cooling systems is lower than that of traditional cooling systems, the high upfront cost of switching to newer systems acts as a deterrent for most customers. Cooling as a Service (CaaS) is an innovative business model to remove this hurdle by adopting a pay-per-use billing system for cooling units.
In the CaaS model, the customers pay for the units of cooling they consume instead of paying for the physical product or cooling system. On the other hand, the technology provider bears the cost of installation and maintenance of the cooling system, which it recovers gradually through the payments made by the customer.
The CaaS business model is endorsed by the Global Innovation Lab for Climate Finance, and the initiative [3] is being led by the Basel Agency for Sustainable Energy (BASE). It encourages the end users to switch to energy-efficient cooling systems by eliminating installation and product costs and creates more opportunities for cooling technology providers by offering more clients and a flexible business model.
Who Are The Potential End Users Of CaaS
Any industry that utilizes air-conditioning, refrigeration, cold storage or cold chain logistics can be a potential customer or end user of CaaS. Some examples of such industries include agriculture, real estate, food, and healthcare. These end users can search for and approach CaaS providers in their region to avail of the service.
The Environmental Benefits Of CaaS
Encourages customers to switch to modern eco-friendly cooling systems from traditional cooling systems that release greenhouse gases. This shall further the initiative of the Kigali Amendment [4] to the Montreal Protocol to minimize climate change caused by human-generated hydrofluorocarbons (HFCs).
In the CaaS model, the technology provider pays the energy bills for the installed cooling systems while the end-user only pays for the units of cooling consumed. Hence, it encourages technology providers to switch to more energy-efficient cooling technologies.
In the CaaS model, the cooling equipment is always owned by the technology provider, not the customer. Therefore, it encourages the technology provider to opt for modular, reusable, and recyclable equipment parts for higher flexibility, which encourages a circular economy.
The Economic Benefits Of CaaS
For Customers – CaaS offers various economic benefits to the end-users of cooling systems. These include –
No capital expenditure when switching to eco-friendly cooling systems.
Reduced operation expenses due to the pay-per-use model.
No performance risks as the technology provider is responsible for the same.
Savings can be utilized for more investment in the core business.
For Technology Providers – The CaaS model increases the earning potential of cooling technology providers through the following means –
Constant and predictable income streams.
More potential clients who may be willing to pay per cooling unit but were hesitant to pay for cooling equipment.
More opportunities to develop innovative and energy-efficient cooling systems, such as passive cooling systems.
For Investors – Thanks to the CaaS model, banks and investors get the opportunity to invest in green funding and assets generating cashflows.
Key Insights From The CaaS Global E-Summit, 2020
The CaaS Global E-Summit was held in December 2020 to spread awareness regarding the CaaS initiative and to discuss the benefits of this business model. Here are some key takeaways [5] from this summit.
A switch to a service-based model will enable the adoption of energy-efficient cooling systems across different sectors while minimizing industrial waste.
Case studies from different regions across the globe prove the efficiency and immense potential of the CaaS model on an international scale.
CaaS played a crucial role in the vaccine distribution cold chain for the COVID-19 vaccines, and these state-of-the-art cooling technologies can be utilized further for other vaccines and pharmaceuticals.
Conclusion
Numerous industries have reaped the benefits of switching to a service-based model or “servitisation” and it is the right time for the cooling industry to adopt this model as well. Not only is the CaaS model more economically viable for both the end users and technology providers, but it is also highly beneficial for the environment.
Cost has been a major roadblock preventing end users from switching to modern, energy-efficient cooling systems. Cooling as a Service removes this burden and allows the end user to upgrade their cooling systems without a heavy installation or maintenance cost. Moreover, it generates steady revenue streams for cooling technology providers and encourages them to switch to energy-efficient, modular, and reusable components to maximize their earnings. Therefore, CaaS, or Cooling as a Service, creates a win-win scenario for all stakeholders while improving environmental health and encouraging innovation in the cooling industry. Hence, all customers and technology providers must collaborate to proliferate the environmental and economic benefits of the CaaS initiative.
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