Deloitte lists Schneider Electric, Engie and Siemens as market leaders, but warns that digitalisation is lowering the barriers to entry.
As the utility sector continues to undergo major transformation, driven by decarbonisation, decentralisation and digitalisation, a new service-centred business model is set to evolve into a billion-dollar industry.
The energy-as-a-service sector, which refers to the growing sub-market of selling not only kilowatts, but also technology, analytics, and other services, will be worth $221 billion by 2026 , according to a new report by Deloitte.
The market will centre around various elements, such as demand side response, decentralised energy generation, storage and management that are usually sold separately, being offered as a single service, typically for a fixed monthly payment.
Taken from Navigant Research data, the figure encompasses the different slices of the market that could be bundled together, such as demand-side-response, rooftop solar, and energy storage, says co-author of the report Justine Bornstein, who is senior insight manager for energy at Deloitte.
“When you look at decarbonisation, decentralisation, and digitalisation as all constituent bits of spend that could be rolled into a package, the $221 billion figure is actually conservative,” she adds.
Brooklyn Microgrid in New York is one of the first examples of a digital service platform facilitating a marketplace for locally generated, renewable energy. Powered by LO3 Energy’s Exergy platform, the network connects people in Brooklyn who own solar arrays, known as prosumers, with people who want to purchase local solar. There are similar setups in Samsø island in Denmark and in the village of Simris in Sweden.
And although nascent, the market is already emerging. Bloomberg NEF has noted an uptick in investments and partnerships in new areas such as battery storage and virtual power plants, but also in existing capabilities including energy management and microgrids. Deloitte report new investment in distributed energy resources as having seen a five-fold increase since 2004, surging from $46 billion in 2004 to $279 billion in 2017.
Improving the energy performance in buildings, which accounts for 40% of final energy consumption in Europe and 36% of greenhouse gas emissions, represents another area with huge energy-as-a-service opportunity. Using Internet of Things technology, several different systems in a building or a home – heating, lighting, energy storage and generation – will be linked and operated synergistically through a single service platform to reduce energy costs, according to the report.
This sort of provision will lead to arbitrage, says Bornstein, whereby systems to reduce energy use are installed, owned and operated by a company, with the cost savings being split between the customer and the company.