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INCORPORATING COLD CHAIN
New white paper : Servitisation of the cooling industry By the Basel Agency for Sustainable Energy and the Clean Cooling Collaborative
BASE | CaaS Initiative | CCC
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 more true in light of the latest IPCC report that was 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 ( eg 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 .
This white paper aims to draw attention to the successful application of servitisation in the cooling industry and share on-theground 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
Cooling is an invisible industry essential to our modern society – from the cold chains that safely deliver our food and vaccines to the air conditioners that make our workplaces and homes comfortable , and in some cases habitable .
Forum . 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 .
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 .
Cooling represents the backbone of many industries , and it has become a survival necessity for several regions . As demand grows across the world and is set to triple by 2050 , implementing clean and efficient cooling is key to avoiding a climate catastrophe and a surge in demand from the electrical grid .
Since 2019 , the Cooling as a Service Initiative has worked on key pillars to support the market in adopting the model . Through this journey , the CaaS Initiative has accumulated key lessons , which have been summarised within this paper . These include the tools required to implement the model , the challenges faced by the solution provider , the risks to consider and the benefits that this brings to all stakeholders involved . By shifting the ownership of the equipment from the customer to the provider , the model incentivises the latter to keep innovating , deploying increased energy efficiency and modular designs and limiting the amount of stranded assets – repurposing them when needed to increase their utilisation rate , but also recycling them at their end of life or remarketing them .
While there are challenges related to the shift from a transaction model to a subscription model in the cooling industry , those market players who have invested the time and energy to implement the model are already reaping the benefits of their efforts . They are enjoying increased customer satisfaction , long-term strategic partnerships with customers , higher demand for the latest technologies and increased and predictable revenue streams .
Alternative business models , particularly servitisation , can help to unlock investments in energy-efficient and cleaner technologies while also helping economies to recover faster from the COVID-19 pandemic .
Cooling as a Service is set to revolutionise how cooling is delivered to people . Similarly to how PPAs changed the solar market , CaaS is accelerating across regions and industries , enabling customers to gain access to clean and energy-efficient cooling in a sustainable manner that benefits people , businesses and the planet .
Cooling is only one element of the scope of servitisation . The model is currently being applied in heating , lighting and other systems at an accelerated pace . The CaaS Alliance , today with more than 65 members , is growing into the global SET Alliance which will continue the work of the CaaS Initiative in supporting the market in adopting the model of servitisation in cooling and beyond in a sustainable , circular and accelerated manner .
This is an extract of the white paper that can be downloaded for free at www . caas-initiative . org CLA
10 www . coldlinkafrica . co . za COLD LINK AFRICA • June 2022