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Decarbonization as a Service

DATE: July 2021

With a growing number of companies committing to net zero carbon goals, there is a commensurate need for strategies and actions that will allow companies to meet these ambitious targets. One new tool is “Decarbonization as a Service” (DcaaS). 

DcaaS expands upon similar models for renewable energy and energy efficiency projects and merely extends this concept into other types of energy infrastructure, such as for electric vehicles, fuel cells, and microgrids. Common to all of these variants are a few basic elements:

  • The infrastructure upgrade is provided on a turn-key basis, bundling the multitude of services needed for the system to function over the life of the system, from initial siting and permitting, to design and construction, to financing and maintenance.
  • DcaaS contracts include the entirety of the equipment needed, such as for the electric vehicles as well as charging infrastructure.
  • Payments in DcaaS contracts are tied to usage, such as per kWh or hour of service, which allows the costs to be treated as operating, rather than capital, expenses under Generally Acceptable Accounting Principle (GAAP) rules.
  • The contracts cover a long-term, making the per usage fee economical, and often cheaper than the business as usual expense for the more carbon-intensive legacy system.

The benefits of a DcaaS contract are multiple. For one, the end user does not have to deal with multiple contractors often required for implementation, such as siting, engineering, construction, and maintenance.  For facility managers overseeing hundreds if not thousands of sites, having one contractor across the sites, jurisdictions, and utility territories is far preferable, if not a pre-requisite, compared to managing multiple vendors.     

As critically, by structuring the fee as an operating cost, companies can expand the service quickly across their footprint, without being limited by capital budgets. The value of moving enmasse extends beyond just allowing companies to meet aggressive carbon reduction timelines. The quickened pace can ensure companies’ ability to capitalize on fleeting or time constrained incentives, capture economic benefits sooner, and keep facilities’ configurations, equipment, and maintenance needs uniform, rather than patchy while upgrades ensue across their footprint.

Going forward, there are several applications where DcaaS models are likely to expand quickly:

  1. Continuation in the model’s use for alternative fuel fleets and infrastructure needed for last mile delivery. With brick and mortar locations increasingly also serving as online distribution hubs, last mile delivery is expanding rapidly, particularly in urban areas.  Another use of this model will be in meeting new air emission limits, such as being imposed by the South Coast Air Quality Management District (AQMD), which will further accelerate adoption of alternative fuel trucking serving distribution hubs concentrated in these nonattainment areas.
  2. Support for microgrid applications capable of providing more stable and reliable power to key nodes, such as distribution centers. Several surveys, such as one conducted by S&C Electric, have found reliability is markedly worsening, with upwards of 44% of respondents to their recent survey claiming to have lost power monthly - a significant upward trend from previous years (https://www.utilitydive.com/news/Power-consumers-blame-renewables-for-2020-outages-reliability-declines/597611/). With the need for reliability, the falling costs of renewables and battery storage, and growing interest among capital providers in supporting sustainability, microgrids are one area poised for explosive growth, particularly at the meso-scale capable of serving clusters of critical infrastructure. These assets could also receive significant public subsidies when paired with an environmental justice mission, such as supporting senior housing, health facilities or other public infrastructure, in addition to meeting retailers’ energy needs.

We expect use of DcaaS contracts to expand quickly since they allow companies to advance projects that reduce carbon and vehicle emissions, strengthen energy resiliency, lower operating costs, and meet ESG commitments.  

Working with a trusted partner in the environmental and energy field, such as APTIM, can reduce risks that come with DcaaS contracts. APTIM brings together expertise in compliance and permitting, solid waste management and solutions, and leading-edge energy and transportation infrastructure integration. APTIM also can help evaluate opportunities for DcaaS services and can serve as the systems integrator for implementation, bringing together design, construction, maintenance, and financing under one contract vehicle.