In my last articles, I looked at the importance of KISS (Keeping it Simple, Stupid) in scaling novel sustainability solutions, and how the UK Building and Energy market was now ripe for disruption by specialist energy service businesses.
In this article, I will focus on a novel energy business model approach called ‘Comfort as a Service’ (CaaS) and one of leading exponents of this in the UK, Sero Technologies Ltd.
Keep the customer happy
In the future, but also happening right now, residents will arrive in their new or retrofitted buildings with everything already set up and customized to their comfort requirements. For happy customers, keep it simple.
What customers really care about in their home is comfort- which is a combination of specific things like the right temperature and the right humidity levels, but also increasingly includes things like a sense that they are doing the right thing by the environment, and also a sense of reassurance and service that means they do not need to stress about things breaking down such as boilers- or in this case heat pumps, batteries, PV arrays, smart water tanks, and EV chargers.
Residents will have the option of paying a monthly energy or ‘comfort fee’ which is lower than what they currently pay for in regards electricity and gas.
For large private rented sector (PRS) players- this ‘comfort’ price could be combined as part of an extended ‘rent plus comfort’ charge offer to tenants. Residents will only have to decide on a few personal preferences- whether they want to set different temperature levels in different rooms and at what levels, and whether they are happy to reduce or increase load at certain times, that might help them further reduce their costs.
The rest is managed by the system integrator who works as a partner to the large social or private landlord. (It might sound a little bit more complicated than the current system of just buying kilowatt hours, but it is hardly complex when we have all got used to buying from a broad range of mobile phone packages and suppliers).
The System Integrator
The System Integrator manages a broad range of complexity behind the scenes, designing the installation and choice of technologies for a particular home and energy use. It helps procure, install and commission the right technology, and then operates and optimises the running of the system. It can also optimize the use of different assets according to what half hourly energy tariffs might be. All of this whilst providing data, transparency and reporting to tenants and large landlords on energy and carbon use.
Behind the simplicity of what the tenant sees in the Comfort as a Service lies a major logistical and data management challenge. The supplier needs the skills to customize the solution to the particular building and tenant, select the optimized economic and technological solution from a trusted range of suppliers, and control and run various energy and storage assets to optimize the outcome according to weather, customer use and grid parameters.
Leading companies in this space
One of the leading UK innovators in this space is Sero Technologies whose two founders James Williams and Andy Sutton brought together their respective expertise from the energy and building sectors.
The company has a full suite of digital tools that allows it to work with large private and social landlords (including 26 Regional Social Landlords). This enables the landlords to integrate the latest efficient building design, fabric and on-site energy generation, optimization and management technologies into their new build and retrofit plans.
Sero then ‘on-boards’ tenants of these large landlords onto a simple customer-facing Comfort as a Service model that provides cheaper overall energy costs whilst optimizing comfort within the home.
As a customer what is there not to like? You feel more comfortable and pay lower energy costs than you used to.
Behind the scenes a raft of different technologies are managed to provide flexibility and optimized energy sourcing and supply that allow the economic model to work for Sero. The company has managed to scale rapidly with the support of material grant and investment funding. Earlier this year its VC backers Legal and General Capital and Hodge Bank invested a further £6m to extend its original £5.5m Series A round 2022.
Market opportunity and attractive investor returns
The players that can crack the techno-economic challenge of domestic retrofits and develop a scalable model will have a huge market to go for and will deliver a big carbon impact.
For the investor, exposure to these system integrator companies will provide scalable long term recurring revenues based on a platform model. It will also avoid having to pick which of the specific component technology companies will emerge as the winners in this particular race.
If this approach works for customers and therefore for forward looking investors, we can finally look forward to a decade of positive disruption and kiss goodbye to the lethargy of the current incumbents that have delayed change for too long.