6.9 trillion USD are expected to be invested in air-conditioning alone in the net 30 years according to the IEA Future of Cooling report. Today cooling represents 10 per cent of global electricity consumption – equivalent to 2.5 times the electricity use of Africa – and demand is expected to triple by 2050. The average efficiency of cooling systems sold today is less than half of what is typically available on shelves – and one-third of best available technology. Therefore, the cumulative savings potential by 2050 is enormous, equivalent to all the electricity consumed in the EU in 2016 and worth USD 2.9 trillion. In addition, human-made HFCs used in cooling are powerful greenhouse gases significantly contribute to climate change, and must be phased down and replaced with existing alternatives. Moreover, in many regions, cooling is not only a comfort but also a mean of survival with air conditioning and refrigeration necessary for habitable living conditions, food security and life-saving healthcare.
BASE is leading the Cooling as a Service (CaaS) Initiative on behalf of the Kigali Cooling Efficiency Program (K-CEP) with the objective to scale-up the demand for efficient, clean cooling systems, through the use and promotion of the innovative CaaS business model.
The initiative includes a couple of components:
In 2019, CaaS was recognised as the most innovative, actionable and scalable financial instrument to scale up investments in climate change mitigation for sustainable cities by the Global Innovation Lab for Climate Finance. CaaS has been featured lot in the media, including in The Economist.
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Cooling as a Service is an innovative business model that enables customers to base their decision on life-cycle cost rather than on the purchase price of cooling equipment. The model aims to enable clients to benefit from high end and energy efficient cooling technologies without the need of an upfront investment. CaaS involves end customers paying for the cooling they receive, rather than the physical product or infrastructure that delivers the cooling. The technology provider installs and maintains the cooling equipment, recovering the costs through periodic payments made by the customer. These payments are fixed-cost-per-unit for the cooling service delivered (for example, dollars per tones of refrigeration, or units of cooled air), and are based on actual usage. The technology provider also pays for the electricity consumed by the equipment, which is an incentive to install the most energy-efficient equipment, and to perform high-quality maintenance.
The technology provider can be recapitalised through innovative mechanisms such as sale and leaseback, project finance or the securitisation of cash flows. A payment guarantee can be established to reduce the risk of default from the end-client, which can be endorsed so that banks reduce their exposure to payment default by technology providers seeking the use of the above-mentioned financing mechanisms.
