Making sense of “Energy-as-a-Service” contracting options to balance risks and value

When pursuing investments in energy asset projects, from heat pumps to biomass boilers, industrial companies often face significant upfront costs. As energy transition advisors, we see many projects stall because their CAPEX needs compete against other strategic priorities. Additional barriers include the complexity of deploying solutions at scale, reluctance to assume certain operational risks, and strict investment criteria that can exclude otherwise attractive opportunities.

To overcome such barriers, in addition to exploring incentive channels, companies are increasingly adopting innovative contracting models to unlock investment in energy assets. Some turn to external partners via various as-a-service structures to finance, build, and operate assets, so their company pays only for the services delivered. This reduces capital mobilisation and transfers part of the operational risk to the third-party.

Making informed decisions in the noisy “as a service” market

At the same time, the energy "as a service” (aaS) market has become increasingly crowded. The proliferation of providers and approaches makes it difficult to compare solutions and offerings.

Structuring agreements requires calibrating a wide range of contractual parameters to ensure they meet operational, financial, and strategic requirements while maintaining a balanced allocation of risk and reward and an acceptable transaction cost.

As the market becomes noisier and more complex, recurring questions emerge:

• How to ensure developers are not capturing an unbalanced share of the value?
• How to avoid locking into narrow, single-technology solutions that leave broader optimisation potential untapped?
• How to confidently define the best trade-off between what to outsource and what to retain in-house?

These concerns highlight a growing need: industrial companies are calling for a clear, unbiased view of the landscape to navigate competing offers and contracting models that balance risk and reward to their own profile. Without it, companies risk leaving significant value on the table when choosing how to contract and finance their energy transition projects.

Exploring portfolio approaches to benefit from economies of scale

In many cases, high transaction costs can be a limiting factor when asset investments are pursued individually on a site-by-site or provider-by-provider basis.

As outlined in the project example below, we observe that some companies are actively exploring shifting from isolated project transactions to portfolio-level approaches that aggregate multiple sites and, sometimes, multiple technologies into a single investment vehicle. This allows companies to achieve economies of scale, attract investors, and leverage public subsidies, whilst maintaining control over key strategic decisions and outsourcing only the right parts of their operations.

Further, bundling projects in their investment decisions allows companies to balance financial returns with strategic priorities, using gains from higher-performing projects to fund critical, yet less profitable initiatives. 

How an EU-based ingredient manufacturer designed an innovative financing model for a €250M Heat Pump Programme

A Europe-based Food & Beverage company needed to decarbonise heat use across 25 sites. It built a portfolio investment plan in heat pumps, identifying the optimal cross-site project mix to create a viable overall business case.

The required heat pump programme represented more than €250 million in CAPEX, an investment difficult to manage on the balance sheet. The company explored creating a special-purpose vehicle (SPV) to finance its heat pump rollout, enabling off–balance sheet treatment while attracting both private investment and public subsidies. The proposed model involved a joint venture between the company and investors to develop decentralised behind-the-meter assets, with the company purchasing heat through offtake agreements.

This hybrid approach allowed the company to capture the benefits of external financing and operational support, without giving up strategic control or visibility.

This is the kind of challenge that SLR’s Energy Advisory team can support you with. If you’re interested in exploring ways to finance your energy programmes at scale, get in touch.