Earth Notes: EGC: HaaS Lite WP1 D17 Financial Research
D17: Financial Research, Public Report
Deliverable 17, part of Work Package 1.
Summary and Introduction
Summary of current state of play of existing shared-savings and ESCo strategies most relevant to our prime focus on private rental households.
We have spoken to fintech firms and observed what has and has not worked in analogous situations, such as non-domestic (eg) office environments.
We have also drawn on some of our previous work to find out what may make savings persist, lower risks of participants, and some potential novel means of bringing the cashflows from return-hungry sources.
Partial Abstract from HaaS WP1 D12 Technical Architecture Report
The current heating market offers little incentive for fuel providers to reduce carbon emissions. Additionally, end-users face significant barriers to improving their heating efficiency.
By switching to selling heating instead of fuel, fuel usage becomes a cost and utilities are encouraged to provide the heating efficiency technologies that the users cannot afford. The model has been proven to work in other markets such as lighting, with Philips’ flagship "Pay-per-Lux" scheme. OpenTRV hopes to leverage the improved and in-home data available from the smart meter rollout and the IoT boom to provide a way of accurately calculating and sharing savings between the utility and the end-user. [PayPerLux]
Schemes for Futher Investigation
Our current intention is to investigate up to three variants from the technical, customer and financial point of view, though this may change as the project progresses:
- pre-HaaS shared-savings
- two HaaS with different regulatory positions
Example Savings/XaaS Schemes
There are various existing interesting "as a Service" business models running, some of which are in, or could be nudged sideways into, the domestic arena.
Some of these help resolve CAPEX/OPEX split incentive issues, or swap/use an expensive asset for a cash flow stream, such as a landlord paying for heating improvements but a tenant reaping the rewards.
- commercial: replace your boiler with something efficient, keep paying old energy costs, pay off capex out of now-reduced opex costs
- Air Conditioning as a Service in commercial buildings [ACaaS]
- Philips lighting as a service [PayPerLux]
- Time-of-Use (ToU) tariffs can be seen as sharing costs between generators, networks, and consumers
- EV battery leasing: Battery leasing schemes key to pushing electric vehicles into the mainstream, and why it can be bad: Nissan is ending the battery leasing
- data storage, eg Google Drive, Dropbox
- office tools such as word processing with Google Docs, Office 365
- solar rent-a-roof schemes (roof space as a service?)
An Example Scheme for the UK in Heat
To support decoupling: let a utility install something expensive to improve efficiency and cut energy/carbon demand such as insulation or a new boiler and if the household switches supplier (possibly because of a move or a simple supplier switch) the original utility should have a means of recouping the cost (ie passing it on) to the new supplier. The nearest scheme: the Green Deal allowed the debt to be attached to the electricity meter to stay with the property and whoever is occupying it and whatever the supplier/utility.
New Financial Viewpoints and Sources of Finance
There are obvious ways to finance the equipmnent to implement HaaS Lite, including trade or asset finance.
We want to explore some slightly more unusual avenues such as green YieldCos (with securitisation to adjust tenors for example), and other more agile fintech partners.
Note also that a securitisation view may make it possible to incorporate into a portfolio of energy savings measures devices with a significantly longer payback time such as battery storage, maybe too long to stand alone in such a scheme.
Interestingly, for completely automated long-term technical measures such as battery storage, there may continue to be a substantial carbon saving beyond the financial payback, eg if a customer quits the scheme the device may continue to function effectively for a long time.
Not all of our findings will be public at this stage.