The decision to list energy efficiency specialist eEnergy last month on junior market AIM reflects the belief of the group’s chief executive Harvey Sinclair that the time is right.
The entrepreneur says a tipping point has been reached when it comes to demand for sustainable energy from both corporates and public entities alike, and specifically the Energy-as-a-Service model (EaaS) model.
This entails taking the ‘as-a-service-model’ that has been successfully applied in areas such as technology to banking, and therefore taking away the investment concerns in shifting to a more sustainable approach, something that worries many finance leaders.
“Any building owner or tenant tends to see there being a big barrier to entry in getting energy efficiency projects off the ground. What EaaS does is transfer the risk of the project away from the client, whether that’s taking away the upfront financial risk, or the perceived technology specification risk or the delivery risk. It allows an organisation to move to an energy reduction strategy without deploying capital,” he says.
“Businesses are very used to buying technology or services via a subscription model without paying upfront for the technology itself. In the same way that solar as an industry expanded as a result of the simple hire purchase agreement which provided power to the customer via a simple pay as you go model, the energy efficiency is firmly in that adoption phase, albeit at a very early stage,” he adds.
The model works through customers paying monthly from savings that are unlocked. “A surplus of cash savings is created at the end of every first month, so that for the life of the contract the contractor releases surplus cash to the organisation, in addition to giving the carbon reduction that’s set out at the beginning of the contract,” says Sinclair, who has been involved in various ventures associated with LED technology including ELight.
That business, set up in 2013, launched the model for reducing energy costs for schools and businesses that morphed into eEnergy in December, prior to flotation. Sinclair says so far nearly 1,000 projects have been completed in five years, growing at 15-20 projects a month, and he adds that the group expects to deliver £10m of sales this year.
Having raised capital through eEnergy’s listing, the company’s approach is to grow rapidly by acquiring other EaaS providers, with an ambition of securing 2,000 customers within the next three years in the core lighting-as-a-service (LaaS) market. “We want to be dominant in the LaaS space before moving into the energy management space, which includes energy consultancy, procurement and monitoring,” says Sinclair.
“We want to switch companies to green energy, manage their energy supply, using technology. The third string is to move them into the renewable generation, so solar and battery storage, with EV charging plugged on,so the customer can come off the grid partially, and get some supply independence and go further into the green sustainability cycle,” he adds.
Sinclair believes the time has come for companies to instinctly push to become more sustainable. “We have to assume that legislation will get tighter, forcing companies to take energy efficiency more seriously. We think increasing regulation and increasing sustainability targets and fines will accelerate the move to energy saving solutions.
“The business model we’ve got is about six years old, but we’re early in the adoption curve and I think it’s a case of getting scale fast enough and making sure we open up channels of communication with finance directors that are not taking energy efficiency seriously enough.
“We believe energy efficiency should be profitable for businesses. This is not a case of nice to do, or something companies should be doing for sustainability goals. Energy efficiency can release profitability in companies, and as a by-product can release carbon from the environment, which is a sustainable objective most companies should have,” he says.
But Sinclair recognises that timing, especially when entering a market, is often the difference between success or failure. “Making sure you get your timing right in the market is the lesson we’ve learned. We probably entered the market in EaaSs two to three years too early, and its only really now in the last 24 months that we’ve seen the tipping point,” he says.
That tipping point Sinclair attributes to decreasing energy costs, improved technology around LED lighting and a growing sustainability-conscious environment. “There is the challenge of any new business model being at the tipping point where it becomes the norm, but I challenge any IT directors or FDs to propose that a business should invest in their own servers. In that case, what seemed like an overnight transition took a long time,” he adds.
Some finance directors are wary of an approach that may appear to be a form of leasing or are simply not ready for change, says Sinclair. He says there is often scepticism around the scale of savings to be made, if it will be cashflow positive and if it can be delivered cheaper internally.
Sinclair insists that’s not the case. “They may be locked into the high running costs of their existing lighting solution. But to change to LED lighting they either need to invest their own capital which is usually not available or usually in demand for another project, and therefore it is usually not a priority to invest in energy,” he says.
“Our point to finance directors is that as you’re already paying for this, doing nothing shouldn’t be an option. You should be morally and socially obliged to consider all forms of energy reduction strategy because that is now a mandated responsibility for business owners,” he says.