Limiting emissions from air conditioning and cooling systems is critical to achieving global climate goals. Space cooling accounts for 10% of global electricity consumption, and fugitive emissions of refrigerants like hydrofluorocarbons (HFCs) can have 200-20,000 times the global warming potential of carbon dioxide.
Global cooling demand is projected to triple by 2050, and phasing out HFC coolants in accordance with the Kigali Amendment to the Montreal Protocol has the potential to reduce warming by 0.4-0.5ºC through 2100. Cleaner and more efficient cooling technologies exist, but they face major barriers to financing and deployment at scale. These include the upfront costs of equipment and installation, perceived technology risks associated with new and innovative clean cooling equipment, and poor stakeholder incentives to pursue efficiency.
Cooling as a Service (CaaS) is a pay-per-service model for clean cooling systems, which eliminates upfront investment in clean cooling technology for customers who instead pay per unit of cooling they consume, strengthening incentives for efficient consumption. The technology provider is incentivized to install and maintain the most efficient equipment possible, and, when needed, finance providers have the security of owning an operating asset under a CaaS contract with a customer. This cooling business model is cheaper for customers and more profitable for technology providers – due to both reduced electricity consumption and more effective investment in preventative maintenance.
CaaS proponents, BASE and K-CEP, have made significant progress towards initial implementation in two countries: the Dominican Republic and Jamaica. Proponents are also pursuing three to four larger flagship implementation projects, likely including South Africa, India, and Mexico.
Mexico is one of many markets around the world poised for growth in cooling demand. In Mexico, installation and operation for seven years of a single 1200-TR (tons of refrigeration) high-efficiency chiller through CaaS yields a reduction of nearly 18,000 tonnes of CO2 emissions when compared to the operation of a legacy low-efficiency unit over the same period. This emissions reduction from a single system is equivalent to the energy use of 1,945 homes for one year.
A CaaS transaction begins when a cooling system service provider signs an agreement with one or several customers. Under the contract, the provider (or a financier) owns the equipment and commits to maintenance, repairs, and utility bill payment. The provider has significant incentives to achieve high-quality preventive maintenance, reduce corrective maintenance costs, and improve system energy efficiency.
The cooling technology provider is likely to require recapitalization, especially if the provider scales to multiple CaaS contracts. Under one such recapitalization approach – a sale-leaseback – a bank or financial institution would purchase equipment and then lease it back to the cooling system service provider over a period no more than the CaaS contract period.
Customers do not pay an upfront cost for equipment and installation, but instead pay a fee per ton hour of refrigeration consumed – encompassing all equipment, operation, and maintenance costs and profit margins for the technology provider. This fee per unit of consumption is higher than what the customer would pay per unit of electricity under a conventional cooling ownership model, so the customer has a stronger incentive to minimize cooling consumption.
News & Events
SAN FRANCISCO – In March, Climate Policy Initiative (CPI) hosted the workshop “The Potential for Scaling Innovative Climate Finance in China,” in collaboration with the German Society for International Cooperation in China (GIZ China). This workshop was part of a broader project supported by the Hewlett Foundation, which aims to build on CPI’s experience to […]
MGM Innova Group, an active member of the CaaS Alliance, has been implemented by MGM Innova Group in a 100-unit office building in Columbia. Cooling-as-a-Service (CaaS) is a pay-per-service model for clean cooling systems endorsed by the Lab in 2019. This new CaaS implementation by MGM Innova amounts to an annual energy saving of 1,2GWh […]
Lab proponent BASE has announced the winners of the CaaS incubator, which aims to help organizations implement the innovative and disruptive Cooling-as-a-Service (CaaS) model, endorsed in 2019 by the Global Innovation Lab for Climate Finance. Applications for CaaS incubator projects were due 14 February. BASE received an enthusiastic response from around the world, and five […]
Lab proponent BASE is hosting the first-ever matchmaking event for Cooling as a Service, March 9 in Cape Town. The event will include round table sessions to help South African providers, end-users, and funders of cooling technology learn more about the CaaS model. Read more about the CaaS matchmaking event and register here. ————– CaaS […]
Lab proponent BASE is accepting applications for the recently launched Cooling as a Service (CaaS) Incubator. It aims to help organizations implement the innovative and disruptive CaaS model, endorsed in 2019 by the Global Innovation Lab for Climate Finance. Learn more about the CaaS Incubator and apply by February 14th here. — BASE announces call for […]
Cooling as a Service (CaaS), endorsed by the Lab in September as part of the 2019 cycle, is launching the CaaS Alliance, a partnership between technology providers, cooling customers, investors, and other stakeholders in the model. The alliance aims to create a collaborative environment between stakeholders active in the market as well as facilitators to […]
Investors launch new solutions for climate action targeting blue carbon, clean energy access, sustainable agriculture, and sustainable cities in developing countriesOctober 2, 2019
Today, the Global Innovation Lab for Climate Finance announced the endorsement and launch of six innovative financial instruments for climate-related projects in developing countries. The Lab, an initiative of over 60 public and private investors and institutions, accelerates much-needed investment solutions to support developing countries to meet their climate change and sustainable development goals. Created […]
Business Green, a UK’s specialized media outlet on green economy and environmental issues, has published a note about the Lab’s 2019 endorsement meeting, which took place on October 2nd at The Rockefeller Foundation, in New York. It quotes Lab director Barbara Buchner, also executive director of the Climate Policy Initiative, saying the projects would unlock investment […]
Investor initiative chooses ideas that will mobilize investment for sustainable cities, energy access, blue carbon, and sustainable agricultureMarch 5, 2019
LONDON – The Global Innovation Lab for Climate Finance, an investor-led initiative that identifies, develops, and launches promising solutions to drive critical investment to action on climate change in developing countries, has selected its top six ideas for 2019. At a time when large-scale action on climate change is more urgent than ever before, the […]