Description
Urbanization is contributing to growing energy demand and costs associated with providing cooling in cities. CaaS aims to deploy efficient technologies at scale through a pay-per-service model that enables customers to pay per unit of cooling consumed and eliminates upfront investment in cooling technology. The service provider or financier owns and maintains the cooling equipment, and pays the utility bills, incentivizing the installation of the most energy efficient equipment. To achieve scale, a sale-leaseback model with banks can unlock more financing necessary to meet growing cooling demand. CaaS supports dual benefits projects across mitigation and adaptation – reducing emissions through cleaner cooling technology deployed and addressing underlying climate risks associated with increased heat.
Stage of Implementation
CaaS has already been successfully implemented across a range of applications including buildings and cold-chain storage. The proponents of CaaS, Basel Agency for Sustainable Energy (BASE), launched its first-ever matchmaking event in 2019 in Cape Town to connect South African providers, end-users, and funders of cooling technology. One current application of the CaaS model is in Nigeria where increased temperatures associated with climate change affect food storage capacity and will lead to increased harvest losses, increased food waste, and adverse health outcomes. The social enterprise ColdHubs in Nigeria designs, installs, commissions, and operates solar-powered walk-in cold rooms in produce aggregation centers and outdoor markets. Farmers and retailers pay a fixed price per 20kg crate per day to store their goods inside the cold room and ColdHubs owns all of the equipment with assets on their own balance sheet.
Actors Involved
- Cooling service providers: Under each cooling contract, the provider owns the equipment and is responsible for maintenance, repairs, and utility bill payments. This creates significant incentives for providing the best-in-class efficient technology and preventative maintenance.
- Commercial banks: When the cooling service provider needs recapitalization, for instance to scale multiple cooling contracts, the provider may engage banks in a sale-leaseback approach to unlock further capital. In this model, the bank purchases the equipment and leases it to the provider during the period of the CaaS contract.
- Developing finance Institutions: DFIs or insurance companies can provide grants and guarantees to enable the launch of operational contracts in new markets and customers.
Criteria
- Basic legal and regulatory framework: One of the most important components of the CaaS instrument is the cooling contract itself, which details the different roles and responsibilities of the cooling service provider, financier, and customer. A functioning legal and regulatory framework is necessary to reduce transaction fees and enforce the contract.
- Dedicated policies and strategies for energy efficiency: National policy frameworks can provide the incentives for both customers and service providers to benefit from the installation of energy efficient technologies.
- Availability of local commercial banks: To enable the scale-up of CaaS, it is important to attain the buy-in of local financiers that can provide commercial debt as well as participate in the sale-leaseback models.
Applicable Countries
21 countries indicated urban planning and infrastructure as a priority sector in their NDCs (Burkina Faso, Cameroon, Cabo Verde, Gabon, Gambia, Ghana, Kenya, Lesotho, Malawi, Mauritania, Mauritius, Mozambique, Nigeria, Rwanda, Seychelles, South Africa, South Sudan, Tanzania, Togo, Uganda, Zambia.). The SADC Center for Renewable Energy and Energy Efficiency (SACREEE), a member of the CaaS Alliance, recently launched an Industrial Energy Efficiency Program (SIEEP) which will run through 2018-2023 will involve providing training for bankers, creation of project pipelines, and seed funding. Participating countries in this program may be good candidates for CaaS.
