PaaS : PRODUCT as a SERVICE

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GLOSSARY:  PaaS: PRODUCT as a SERVICE

savings efficiency recycling

circular business model   circular business model2

What if instead of buying a light bulb you paid a company to provide you with light? That’s the idea behind product as a service (PaaS)—a business model that could extend to any type of building product and seeks to bring about a circular economy. This is how it works. An owner specifies the desired performance level for a certain system. For lighting this might include illumination level, occupancy responsiveness, and maintenance obligations. Then a service provider chooses and installs a system that meets those specifications. In the lighting example, owners would choose lumens; providers would pick the luminaires. The owner then pays a recurring fee to the service provider, including the price of the baseline energy cost to run the system. If the provider installs equipment or monitoring programs that enable the system to save energy over the baseline, then the energy savings go to the provider. The service provider also has the right to any additional revenue streams, such as incentives from utility demand-response programs or tax breaks for energy efficiency retrofits.

The premise of PaaS works best with systems that might experience large jumps in energy efficiency—like lighting technologies—because service providers earn profit by realizing energy savings. Are such markets are limited? One challenge is training owners to set meaningful performance targets. Few owners know how to express their desires in lumens, and some performance expectations might not have an associated metric. Service providers are incentivized to choose highly efficient systems because they stand to gain from the energy savings.

The set-up also removes the motivation for manufacturers to design for planned obsolescence. Some experts have forecasted that PaaS agreements will save the LED market, which is facing constrained financial growth under the traditional model because the technology’s markedly longer service life means consumers won’t have to buy as many products. Providing companies a revenue over the entire lifecycle of their and providing an additional revenue stream means manufacturers can be rewarded for product durability.

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For more information about other opportunities exist with the buildings we design contact:
ALLEN SCHAFFER, AIA, LEED AP BD+C, WELL AP, LBC AMBASSADOR
ASSOCIATE PRINCIPAL, DIRECTOR OF SUSTAINABLE DESIGN

Thank you to BuildingGreen (Candace Pearson) for providing the above summary.