Many people are familiar with Software as a Service (SaaS) business models, in which software use is licensed out to users on a subscription basis. Popular examples include Office 365 and Dropbox. One company, Budderfly, has taken this idea and made it possible to make energy efficiency – including new HVAC systems – into a service. Their concept eliminates the complexity of selecting and designing lighting, HVAC, and refrigeration systems, and turns a capital expense into an operating decision.
Matthew Nemerson, Budderfly’s vice president of marketing, explained how Energy Efficiency as a Service works: Budderfly purchases the most efficient HVAC system, LED lights, and refrigeration, and installs it in a building (typically a medium-sized commercial office building, and often a smaller fast food restaurant or C-store). Budderfly then monitors, manages, and maintains the unit completely, bundling maintenance and repairs as needed into the single service. The building owner pays a monthly bill that is based on a reduction of their previous utility bill.
The building’s owner sees lower utility usage costs go down as much as 30% to 40% since all the systems – including HVAC — are functioning at the highest efficiency possible. The building or business owner and Budderfly share the savings and the energy reduction pays for all the new equipment that Budderfly installs. The client pays nothing other than a reduced energy invoice.
Budderfly handles the maintenance and upkeep of the systems, which is one less thing for the building owner to worry about. Plus, since Budderfly owns the equipment, the owner pays for the usage of the systems as an operating expense. The money that the owner would have spent on expensive HVAC systems can be directed into marketing or personnel.
“We understand and agree that most businesses do not see energy efficiency itself as a strategic goal,” said Nemerson. “When they buy equipment, they often buy what is available quickly and usually something good but inexpensive, and they often buy when an HVAC system has already failed or the building is being renovated.”
Nemerson explained that Budderfly monitors the energy use of all their installed HVAC systems constantly, so the company collects detailed data about the daily operations of HVAC systems as well as the exact impact that investing in high-efficiency HVAC has on the bottom line.
Previously, people may have invested in new systems with the promise they would make it back in lower bills, but weather changes or fluctuating costs of electricity can make it difficult for them to see how the money they invested actually worked out in the future.
Budderfly collects all the data to show the importance of putting money into energy efficiency.
Greg Beidler is the chief operating officer of Running Specialty Group. Running Specialty Group has taken advantage of Budderfly’s HVAC program to avoid large replacement expenses.
“We were looking at unplanned capital expenditures of over $100,000, and we’re pleased to be the first customer to partner with Budderfly on their new HVAC replacement services as part of our overall EEaaS agreement,” said Beidler. “Our first location went in like clockwork with no upfront capital cost and no planning on our part. We currently have three more locations scheduled for a total of seven HVAC units to be replaced. Budderfly’s program included both preventative and break/fix maintenance for a very small fee, allowing us to focus on our retail business and not facility management.”
Partnering With HVAC Contractors
Companies utilizing an Energy Efficiency as a Service model represent a new way of doing business. How can HVAC contractors leverage EEaaS for their own revenue?
“We are bringing on HVAC contractors as partners across the country,” said Nemerson. Budderfly will supply the capital to contractor’s clients to upgrade the systems to the most high-end possible, including building management systems and sensors. He added that if people bring them a client, they will be kept as an installer and during future maintenance and inevitable additional upgrades. The company targets locations such as assisted living facilities, chain retailers, quick service restaurants, community centers, universities, and office buildings.
Budderfly has already partnered with a number of HVAC contracting companies, and uses a maintenance manual when the companies service their clients. This helps ensure that everything possible is done to improve the efficiency of the systems — regular filter replacement and coil cleanings, for example. During a partnership, Budderfly negotiates fixed rates with the contractors they work with due to the amount of work they provide.
“The important thing to know is that we are friends, and that we are not competing with them,” said Nemerson.