Commercial Energy as a Service Market

Utilities are increasingly offering integrated solutions that combine energy procurement, efficiency improvements, and load balancing to adapt to changing market needs. They also provide long-term agreements such as energy service performance contracts (ESPCs), utility energy savings contracts (USPCs), and power purchase agreements (PPAs), many of which operate on pay-for-service or performance-based models where costs are offset by energy savings. These contracts help utilities secure stable, long-term revenue streams. As a result, utilities are shifting from traditional energy supply roles to service-oriented energy as a service providers, using solar panels, battery storage systems, and energy management systems. This shift enhances customer engagement, creates new revenue opportunities, and strengthens utilities’ roles in the evolving energy ecosystem while supporting growing demand for electrification and sustainability.

Although the energy as a service model offers operational efficiency, energy savings, and access to advanced technologies without upfront investment, the recurring service fees can become significant over the contract period. Costs typically include service charges, maintenance fees, and performance guarantees, with some agreements also incorporating escalation clauses or inflation-linked adjustments. For customers, particularly small- and medium-sized enterprises, it is important to fully understand pricing structures, including any hidden costs or early termination penalties, to ensure long-term affordability. In addition, long-term dependence on a single EaaS provider may limit flexibility to switch to more cost-competitive alternatives. Ongoing energy price volatility and regulatory changes further complicate the evaluation of long-term cost effectiveness.

EaaS is delivering technology-driven solutions that help balance energy demand and consumption while enabling greater use of renewable energy in the commercial sector, making it an attractive area for investment. For example, in 2023, Siemens entered the US distributed energy market through a joint venture to build, own, and operate solar panels, battery systems, and microgrids, offering EaaS solutions to commercial, industrial, and non-profit customers. These local energy systems are provided with no upfront capital cost and operate efficiently with advanced control, especially in areas where older grids struggle. EaaS is crucial today and will continue to play a vital role in the future by alleviating pressure on centralized energy assets. Technology-enabled demand response at the local level adds flexibility, helping to smooth energy demand and integrate variable renewable sources. According to the International Energy Agency (IEA), renewable energy use in power, heat, and transport is expected to grow nearly 60% between 2024 and 2030, with the share of renewables in electricity rising from 30% in 2023 to 46% in 2030, mostly driven by solar and wind. This rapid expansion also has a spillover effect, supporting the decarbonization of sectors that use electricity for industrial processes, building heating, and electric vehicle charging. The expansion of decentralized and renewable energy solutions will drive EaaS market growth by enhancing grid resilience, efficiency, and the integration of renewables. This will allow providers to offer flexible, cost-effective services, further supporting market growth and sustainability.

Outsourcing energy management to an EaaS provider can reduce a customer’s control over their energy systems. Customers who prefer hands-on management may find this approach less appealing. Relying heavily on a third-party provider can create dependency, reduce bargaining power, and potentially increase costs over time. This combination of limited control and reliance may make some customers hesitant to adopt EaaS solutions, slowing market growth. To address these concerns, providers should offer transparent pricing, flexible service options, and maintain strong customer engagement.