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The global energy as a service (EaaS) market size was valued at USD 64.34 billion in 2021. The market is projected to grow from USD 70.46 billion in 2022 to USD 147.56 billion by 2029, exhibiting a CAGR of 11.1% during the forecast period. The global COVID-19 pandemic has been unprecedented and staggering, with energy as a service experiencing lower-than-anticipated demand across all regions compared to pre-pandemic levels. Based on our analysis, the global market exhibited a decline of -7.1% in 2020 compared to 2019.
To deduct the total energy footprint, commercial and industrial building sector consumers are largely investing in energy efficiency and procurement of energy from more sustainable sources. The increasing adoption of these services has been mainly to reduce energy costs and decrease carbon emissions to maintain the ecological balance. Innovative business models provide new opportunities for customers to finance energy-efficient building technologies and measures. These include pay-for-performance contracts, energy savings performance contracts, power purchase agreements, and on-bill financing.
Energy as a Service (EaaS) includes the sale of technology, energy, analytics, access to the grid, and personalized services. The challenge of carbon emissions poses a severe threat to the environment. Decentral energy distribution has been witnessed with the increasing adoption of renewable sources to generate power. Rapid industrialization in developing countries increases the energy demand and causes the depletion of fossil fuels globally. The growing requirement to reduce the dependency on fossil fuels and minimize the carbon emission from burning them has augmented the demand for renewable energy sources, which, in turn, has projected to continue to drive the EaaS market’s progress during the analyzed timeframe.
Halting Activities of New Industrial and Commercial Establishment amid COVID-19 Pandemic to Hamper Market Growth
The outbreak of COVID-19 has considerably impaired all industries. Most countries have witnessed a huge expansion in the number of affected cases since 2020. The pandemic's outcome led to unrest in economies of various fast-growing developing countries. The EaaS market has been immediately affected by the outbreak of this global pandemic. Various nations across regions have observed a substantial decline in commercial and industrial activities, reducing numerous vertical energy demands. The steep decrease in energy intake has resulted in limitations in adopting new technologies across the globe.
Similarly, the countries have also implemented different regulations to check the overall greenhouse gas emissions generated from different sources. The ‘green wave’ caused by the decrease in carbon discharge due to the stopping of operations has given a chance to governments to achieve their goals by deploying more green technologies. Additionally, the encouraging policy frameworks introduced by different administrations, including tax benefits, quality assurance programs, and economic subsidies are also set to encourage energy service models. For instance, in June 2020, Centrica Business Solutions (CBS) launched a new energy as a service bundle, specifically for those looking to invest in energy-saving technologies. The capital-free energy generation product is designed to help businesses ‘build back better’ in response to COVID-19. It offers a bundle to companies that include the design, installation, and financing of on-site power generation, helping them decarbonize and reduce their energy bills without the upfront capital expenditure of equipment.
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Introduction and Expansion of DEG and VPP Market to Propel EaaS Market Growth
The increasing energy demand and measure to control carbon emissions and their ill effects on the environment have made renewable sources a valuable source of energy. With this growing penetration of renewables, the new decentralized energy distribution technologies have also gained pace in the market. Distributed Energy Generation (DEG) technology uses all available energy sources to decrease the production load and integrate new energy sources into the power mix of a nation. The various advantages associated with the deployment of distributed systems include low carbon emissions, connectivity to remote locations, better power security, peak load shaving, better efficiency of the whole working system, and cost benefits to customers and utility. Similarly, a virtual power plant is a similar technology that effectively manages the compiled systems via advanced software. This technology has a stronger presence in North America and European markets.
Growing Peak Energy Demand and Favorable Regulation Framework to Aid Industry Outlook
The growing population and growth initiatives to expand rural electrification have resulted in peak energy demand. The EaaS model shifts the burden of financing, installing, owning, and managing the performance of an energy-producing asset from the end-user to the service provider. Favorable regulatory policies introduced by different authorities to promote low carbon technologies boosted the market’s progress. Additionally, the emergence of new big valued infrastructure projects and the increased rate of urbanization have augmented the power supply-demand from utilities.
Increasing Adoption of Renewables Owing to their Environmental and Economic Advantages to Favor Overall Market Growth
The aim to reduce greenhouse gas (GHG) emissions and increased energy demand are the primary targets of governing bodies in countries across the globe. Following this, the installation of renewable energy sources is set to grow tremendously over the coming decade, which will lead to the expansion of the market. New energy targets launched by various governments to promote the inclination toward sustainable power have positively affected the market size. For instance, Brazil aims to have 42.5% of its primary energy supply to be renewable by the end of 2023. Similarly, according to the carbon brief analysis, the U.K. government aims to have about half of its electricity renewable in 2025. Germany is on its path to accounting for renewables for 65% of its total energy by 2030. China plans to achieve 16% of its energy renewable by 2030. Following the investment and growth in the country, renewable energy is expected to hold a 26% share and surpass the set target.
Increasing Demand for Energy in Various End-user Sectors to Promote Market Growth
Commercial buildings, residential buildings, and industries require a continuous supply of electricity to meet employees' required production and working hours. In the case of mainline failures, the need for backup power systems in data centers has also increased in these sectors, which has driven investments in the market. Automotive vehicles that currently run on fossil fuels are soon expected to be purely dependent on electricity, which will drive the electricity demand. New charging stations and increased production rates will create opportunities for the EaaS market. Similarly, other industries, such as manufacturing, textile, chemical, pharmaceutical, and others, are expected to grow at a healthy rate. The production and working rate from industries, such as the automotive sectors, are expected to expand during the coming years. Further, the construction of new grids and mass storage systems by utilities to utilize the captured energy from renewables also poses an opportunity for the energy as a service market growth.
Heavy Capital Investment for Establishment and Switch to Advanced Grids to Impede Market Growth
Renewable energy sources require a good amount of investment to produce energy. For instance, according to Bloomberg, the renewable energy source collectively drew around USD 2.9 trillion in investments from 2010 to 2019. Solar accounts for only 8% of the global energy generation, and wind accounts for 9%. Therefore, most of the projects are needed to be carried out with support from government firms. Governments also provide only a certain percentage of the total investment, and the rest is dependent on the company itself. The grid upgrading work, which requires the installation of smart equipment at both the customer and utility end, is also costly, which may hamper the EaaS market growth.
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Global Energy Supply Services Segment to Dominate the Market Due to Rapid Urbanization
Based on service type, the market is fragmented into energy optimization & efficiency service, operational & maintenance service, and energy supply services. The energy supply service segment will dominate the market with a 41.74% market share in 2021. The segment’s growth is attributed to the rising population, resulting in an increased number of customers in each region. Energy optimization & efficiency-as-a-service is a pay-for-performance, off-balance sheet financing solution that allows customers to implement energy and water efficiency projects with no upfront capital expenditure. Implementation of these services is economical in the long run as the customer makes service payments based on actual energy savings or other equipment performance metrics, resulting in immediate reduced operating expenses. These factors are expected to drive the segment’s growth.
Growth in Commercial Segment is Backed by Growing Demand for energy
Based on end-user, the global energy as a service market is bifurcated into industrial and commercial. With a significant number of commercial spaces available and high consumption of electricity during 2021, it is expected that the commercial segment is likely to dominate the market during the forecast period.
The commercial sector includes the services provided by an EaaS company to conserve energy or electricity for multiple uses. EaaS companies offer various technical and software solutions through which the company understands the pattern of electricity consumption. The industrial segment holds a significant share in the global market. The industrial sector includes production plants and manufacturing units, which require a constant electricity supply and cannot afford electricity interruptions in energy storage & supply. It hampers their production lines, disrupting business. Therefore, such factors are expected to drive market growth in this segment.
North America Energy as a Service Market Size, 2021 (USD Billion)
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The market has been analyzed geographically across four main regions, including Europe, Asia Pacific, North America, and the Rest of the World. North America is expected to dominate the energy as a service market share during the forecast period, with most of the demand coming from the U.S. The country is a prominent one to have implemented EaaS in various sectors. Especially in the commercial industry, the region has adopted various projects that are expected to increase energy storage efficiency and would help to cut down its operating expenses. Additionally, the region has witnessed noticeable investment in the refining, production, and exploration sectors, which is anticipated to surge the demand for energy as a service model in the coming years.
Furthermore, Europe's market is favored by encouraging government and organizational policy frameworks to deploy green energy solutions and significant installation of power generation technologies in different areas. Currently, Germany, the U.K., and Italy, among others are the key countries contributing substantially to the EaaS market in the region. Besides, increasing investments and plans to expand and fortify the grid infrastructure networks to support the increasing renewable energy installation are anticipated to further propel the industry.
In Asia Pacific, the increasing awareness of clean energy, government-aided financial support, and need to fulfill demand & supply mismatch will supplement the industry outlook. The setup of new industrial gas facilities and building of new domestic & commercial spaces augmented the adoption of these models in the region.
Siemens is Focusing on Acquiring New Contracts through its Subsidiaries to Fortify its Position across the Industry
Companies majorly dealing in the renewable energy service business are expected to generate significant market share in the coming years owing to the rising adoption of renewable sources. The industry has also witnessed a steady involvement of key global and regional players along with several small & medium-scale system integrators.
Companies, such as EDF Renewables, Centrica, Veolia, and others, investing in upcoming technologies, such as distributed energy generation, virtual power plants, and offshore wind power, are expected to lead the market. The other major players in the market, such as ABB, Siemens, Schneider Electric, and GE, are the leaders in providing various equipment installed and required to maintain smooth operations of the production unit. Therefore, these companies acquire a lower percent of share in the service market than other companies that operate in energy production. The other players mentioned include numerous participants operating in the energy service industry and providing various services, ranging from software to hardware equipment. The fragmented market for the industry has seen numerous new technological advancements coming up to keep pace with the top-performing players.
An Infographic Representation of Energy as A Service Market
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The research report offers a qualitative and quantitative in-depth industry analysis of the global market. It further details the adoption of energy as a service across several regions. The report provides a detailed competitive landscape by presenting information on key players and their strategies in the market. Information on trends, drivers, opportunities, threats, and market restraints can further help stakeholders gain valuable insights into the market.
Value (USD Billion)
By Service Type, By End-user, and By Region
By Service Type
Fortune Business Insights says that the global market size was USD 64.34 billion in 2021 and is projected to reach USD 147.56 billion by 2029.
In 2021, the region stood at USD 28.49 billion.
Registering a CAGR of 11.1%, the market is projected to exhibit staggering growth during the forecast period (2022-2029).
The energy supply service segment is anticipated to hold the leading share in this market during the forecast period.
Increasing adoption of renewables owing to their environmental and economic advantages, increasing demand for energy in various end-user sectors, and rising peak energy demand coupled with a favorable policy framework are some of the major factors driving the market growth.
North America dominated the market in terms of share in 2021.
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