Cooling as a Service (CaaS) — Business Model and Economics

Source: Climate Policy Initiative (CPI) and Basel Agency for Sustainable Energy (BASE) Corroborating sources: IRENA Innovation Landscape, WBCSD, Cool Coalition, ALCBT/GGGI

Business Model Structure

• Core concept: Pay-per-service model for clean cooling. Customers pay per unit of cooling consumed, not upfront for equipment.
• Equipment ownership: A service provider (or financier) owns and operates the cooling equipment and handles maintenance, repairs, and utility payments.
• Pricing: Fee per ton-hour of refrigeration consumed. The fee covers equipment, operation, maintenance, and provider’s profit margin.
• Key design feature: The per-unit fee is set above the customer’s electricity cost under conventional ownership, creating a stronger incentive for the customer to reduce cooling consumption.

Financing Structure

• Providers may need recapitalization as they scale
• Sale-leaseback approach: a bank buys the equipment and leases it back to the provider for no longer than the CaaS contract period
• Customer payments can be booked off-balance-sheet (customer buys a service, takes on no debt)

Economics

• Customer savings: Up to 23% of cooling costs
• Emissions reduction: Up to 49% (from electricity use and coolant leakage combined)
• Customer economics: No upfront capital expenditure; operational expenditure only

Case Study: Colombia (Q Group Building, Medellin)

• Scale: 100-office commercial building
• Financial close: 2017
• Technology: High-efficiency centralized air conditioning with per-user metering valves
• Efficiency: 0.6 kWh per ton-hour of refrigeration (record efficiency claim)
• Energy savings: ~1.2 GWh per year
• Emissions reductions: ~440 tonnes CO2e per year
• Operating cost impact: “Halving the major operation expenditure” (no baseline figures given)
• Lifetime savings: ~EUR 5 million / USD 3.2-5.3M (inconsistent figures in source)
• Financing: MGM Innova Group funded through MGM Sustainable Energy Fund (MSEF). SPV signs client contract, buys equipment, contracts service providers.
• Not disclosed: Total capex, monthly tariff, contract term length, IRR, payback, NPV

Other Implementations

• Dr. Oetker (industrial): ammonia refrigeration plant, pay-per-use
• Pune, India: AI-optimized centralized chilled-water plant at business park, fully solar-powered, pay-per-use
• Dominican Republic and Jamaica: pilots in progress (BASE/K-CEP)
• Flagships planned: South Africa, India, Mexico (3-4 larger projects)

Barriers

• Upfront equipment and installation costs (for the provider)
• Perceived technology risk for new clean cooling equipment
• Weak stakeholder incentives to pursue efficiency
• Provider may cut corners on monitoring and maintenance to protect margins (BASE warning)
• Structuring long-term performance contracts
• Counterparty credit risk assessment

Market Context

• Space cooling = 10% of global electricity consumption
• Global cooling demand projected to triple by 2050
• HFC refrigerant leaks: 200-20,000x the global warming potential of CO2
• Kigali Amendment HFC phase-out could reduce warming by 0.4-0.5°C through 2100

Relevance to Passive Thermal

CaaS demonstrates a proven “thermal-as-a-service” business model that could be adapted for passive cooling systems. Key differences from the Baer/Zomeworks passive approach:

1. CaaS still uses active equipment (chillers, compressors) — just under a service contract. Passive thermal (roof ponds, night sky radiation, thermal mass) has much lower equipment costs but requires architectural integration.
2. CaaS metering is straightforward (ton-hours of chilled water). Passive thermal “output” is harder to meter — it’s the absence of cooling demand, not the delivery of cooling.
3. The financing innovation transfers directly: third-party ownership of the thermal envelope (not just the equipment) is the passive thermal equivalent.

The 23% cost savings figure for active CaaS also sets a benchmark: passive thermal needs to beat this to justify the added design complexity.