What is Servitisation?

Servitisation is a concept where the customers pay for the services instead of buying the equipment, for example, air conditioning.

Explaining Servitisation

Under the Servitisation model, a customer pays a fixed amount per unit of service consumed by him and the ownership of the equipment is held by the technology provider. It means the provider is responsible for all operation costs. This model greatly incentivises the owner of the equipment owner as through proper maintenance, the provider can minimize operating costs. When the ownership of the equipment is with service providers they are also encouraged to rethink the development of modular systems.

Servitisation is being adapted across many industries. Some of the examples are- Xerox, which is a printing company, offers ‘pay-per-copy’, and SunEdison allows customers to purchase solar energy instead of investing in the panels.

How Servitisation will help in achieving goals of low carbon-economy?

The demand for energy is increasing rapidly and the global energy consumption is expected to be almost twice by 2050. A report by the International Energy Agency highlights that end-use energy efficiency can alone result in 35% of the cumulative CO2 savings which is required to meet the climate goals of the Paris Agreement.

Many energy-efficient technologies are present and being deployed but there are various barriers like performance risk, high up-front costs, etc.

The servitisation model overcomes all these barriers and paves an effective way to increase investments in energy-efficiency required for achieving the Paris Agreement goals of low-carbon economy, in addition, to help the economy in recovering faster from the COVID-19 pandemic.

Servitisation for Cooling

The Economist Intelligence Unit has estimated that the cooling markets will expand to $170 billion from $135 billion annually by the year 2030. Air conditioning alone accounts for 10% of global electricity consumption so if inefficient systems are not replaced, demand will triple in the next 30 years.

In order to handle this problem, Basel Agency for Sustainable Energy (BASE) has launched the Cooling as a Service (CaaS) Initiative in association with the Kigali Cooling Efficiency Program (K-CEP) in the year 2018. The initiative is aimed at mainstreaming the pay-per-use model across the world in order to increase the adoption of sustainable cooling solutions. CaaS model was supported by the Global Innovation Lab for Climate Finance and it regarded it as one of the most innovative tools for climate finance.

Established in the year 2001, BASE is a non-profit Swiss Organisation and a specialized partner of the UN Environment program.