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Servitisation of the cooling industry: Cooling as a Service (CaaS) White Paper

This white paper aims to draw attention to the successful application of servitisation in the cooling industry and share on-the-ground insights from the Cooling as a Service (CaaS) Initiative launched and implemented by the Swiss not-for-profit organisation BASE – Basel Agency for Sustainable Energy with the financial support of the philanthropic organisation Clean Cooling Collaborative, formerly known as K-CEP (the Kigali Cooling Efficiency Program). The aim of this initiative was to develop, test and scale-up the adoption of the pay-per-use CaaS subscription business model around the world.

Background

The dramatic increase in direct and indirect carbon emissions from the use of refrigeration and air conditioning across sectors and regions creates an urgent need to shift from power-hungry equipment to efficient cooling technologies that rely on cleaner refrigerants. This is all the truer in light of the latest IPCC report released in August 2021.

The standard business model of selling cooling equipment does not encourage deploying commercially available, clean and energy-efficient systems due to numerous demand-side barriers. However, alternative business models, particularly servitisation, can help to unlock investments in energy-efficient and cleaner technologies (e.g., using natural or low global warming potential (GWP) refrigerants), while also helping economies to recover faster from the COVID-19 pandemic thanks to reduced operational costs.

Project Information

This white paper aims to draw attention to the suc- cessful application of servitisation in the cooling industry and share on-the-ground insights from the Cooling as a Service (CaaS) Initiative launched and implemented by the Swiss not-for-profit organisation BASE – Basel Agency for Sustainable Energy with the financial support of the philanthropic organisation Clean Cooling Collaborative, formerly known as K-CEP (the Kigali Cooling Efficiency Program).

The aim of this initiative was to develop, test and scale-up the adoption of the pay-per-use CaaS subscription business model around the world. The initiative has been hailed as a success by technology providers seeking to implement the model, investment funds and banks seeking to create green portfolios, and international organisations like the World Green Building Council getting involved to engage users. The model has received awards from organisations such as the Global Innovation Lab for Climate Finance and the Keeling Curve Prize and has been referenced in publications from the likes of the Economist Intelligence Unit and the World Economic Forum.

What does servitisation mean?

The servitisation business model has been shown to align the interests of businesses, people and the planet. The model shifts the upfront investment as well as the project performance risk from the user to the service provider, which is often better placed to shoulder these. It drives efficiency by enabling the service provider to maximise its profits by selecting the most efficient technology and optimising operational efficiency throughout the lifecycle of the asset. The provider also has the flexibility to reallocate equipment as needed, thus maximising the use of embedded resources. The model also incentivises the provider to repurpose, re-market or recycle the asset (or part of it), therefore playing a key role in the circular economy.

 

Implementing the CaaS Model

Several pioneering companies, including ColdHubs and KoolBox, both in Nigeria, Energy Partners in South Africa, Kaer in Singapore, MGM Innova Group in Colombia, SokoFresh in Kenya and Oorja in India, have successfully implemented the model in sectors ranging from commercial air conditioning and industrial refrigeration to cold storage for medical and agricultural supply chains.

These companies have shown that the key challenges and risks related to the implementation of the CaaS model can be overcome. These include, but are not limited to, entirely transforming the corporate culture towards a service mindset, improving the modularity of the technology, using artificial intelligence to improve the service offering, bundling projects, leveraging innovative financial structures and risk mitigation mechanisms and creating diversified portfolios.

Key stakeholders’ interest in the CaaS business model has risen significantly over the past few years. More than 65 members have joined the CaaS Alliance and are actively seeking to integrate the model into their operations. Just as power purchase agreements have revolutionised the solar industry, servitisation is a game changer for the cooling industry, which is shifting to a subscription-model-based industry.

Download the full white paper here

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