Finance Guide
Energy-as-a-Service Deal Structures & Financial Models
Whether a distributed-energy project pencils out for both the host and the investor depends on one decision: the contract structure. Here is how each EaaS structure works, when to use it, and how to model it correctly.
Technology Overview
Energy-as-a-Service (EaaS) is a risk-transfer model. Instead of buying and owning the equipment, a building owner (the host) pays a third-party provider for the energy service, while the provider funds, owns, and operates the assets. The host keeps the capital off its balance sheet; the provider earns a return on the money it put in. The contract structure decides how the value and the risk are split between them.
CogenS™ models every EaaS project from three perspectives at once: the EaaS Provider(a full income statement — fee revenue, operating costs, depreciation, taxes, after-tax cash flow, NPV, IRR, payback, benefit-cost ratio, and equivalent annual revenue), the Building Owner(what it keeps after the fee — net benefit, NPV, IRR, payback), and the underlying utility bill and who pays it. The provider’s fee is not guessed — it is solved so the provider hits a target internal rate of return (IRR).
There are four structures, and the right one depends on whether the asset stores energy or generates it. For behind-the-meter storage and DER (battery storage, demand management), the platform offers Energy Concession, Capacity Tolling, and Shared Savings. For on-site generation (CHP, solar), the natural structure is a Power Purchase Agreement (PPA)— the host buys the energy the asset produces at a contracted rate.
Energy Concession: the provider takes over the utility account, pays the DER-reduced bill, and charges the host a managed rate on its own consumption (energy $/kWh, optionally plus demand $/kW-month) plus a service fee. The host’s net savings is the full baseline 100%-grid bill it no longer pays, minus the managed fee — the lowest- risk structure for the host. Capacity Tolling: the host pays a capacity charge ($/kW-month on the asset’s rated power) plus a throughput charge ($/kWh on energy delivered), keeps its utility account, and nets the bill reduction minus the toll.
Shared-Savings ESA(Energy Services Agreement): the host pays the provider a share of the measured savings the asset delivers — the electricity-bill reduction, plus, optionally, avoided carbon cost, resilience value, and avoided grid-upgrade O&M — verified by measurement & verification (M&V). Incentives align: no savings, no fee. On-Site PPA: the host buys the electricity (and, for CHP, the useful thermal output) the asset generatesat a fixed $/kWh (or $/MMBtu) below grid; the host keeps its utility account. The CogenS™ CHP module models this path, including waste-heat capture revenue.
Module Specs at a Glance
Energy Concession
Provider owns the utility account and pays the DER-reduced bill; the host pays a managed tariff on its own consumption + a service fee. Host net = full baseline bill avoided − fee. Lowest host risk; provider takes commodity-price risk. (Storage / DER.)
Capacity Tolling
Host pays a capacity charge ($/kW-month on rated power) + a throughput charge ($/kWh delivered) and keeps its utility account. Host net = DER bill savings − toll. Balanced structure for high-utilization and demand-driven loads. (Storage / DER.)
Shared-Savings ESA
Host pays a share of the measured savings pool — bill reduction (the M&V base) plus optional carbon, resilience, and avoided-upgrade O&M. Aligned incentives; requires robust M&V. Host keeps its account. (Storage / DER.)
On-Site PPA
Host buys the electricity (and, for CHP, useful thermal) the asset generates at a contracted $/kWh (or $/MMBtu) below grid. Simplest, most predictable terms. Modeled in the CHP module with waste-heat capture revenue. (On-site generation.)
Three Perspectives
Every structure is computed from the provider (revenue income statement), the building owner (cost-of-ownership / net savings), and the utility bill — plus who carries it.
Dual-MARR Solve
Solve the fee/rate/share for the provider's target IRR — or balance both parties, finding the terms that bring the provider IRR and the owner IRR to the same fraction of their respective targets.
How to Design a Project
A high-level workflow that mirrors how the CogenS™ platform structures the analysis end-to-end.
Model the baseline
Build the host's current utility bill without any DER — the real 8,760-hour load against the actual energy, demand, fixed, and metering structure. This is the benchmark every saving is measured against.
Size and co-optimize the assets
Add the battery, solar, CHP, or thermal storage and dispatch them against the tariff to minimize energy cost. The physical system must pencil out before the deal can.
Pick the deal structure
For storage / DER, choose energy concession (max host benefit), capacity tolling (balanced), or shared-savings ESA (performance-linked). For on-site generation, use a PPA. The choice sets the fee basis.
Set the provider's target return
Enter the provider's target IRR (often 8–15%) and the fee escalation. CogenS™ solves the managed rate, capacity/throughput charge, or savings share that hits exactly that return.
Check the host's economics
Read the Building-Owner perspective: the net savings after the fee, its NPV, IRR, and payback. A good deal reduces the host's cost of energy materially while clearing the provider's hurdle.
Balance both parties (optional)
Enter a building-owner IRR target to run the dual-MARR solve — it finds the terms that bring both parties to the same fraction of their targets, the fair middle when both can't be hit exactly.
Compare and stress-test
Run every structure side by side, then vary the tariff, load growth, and equipment cost to see which deal is most robust for both sides before you take it to the counterparty.
Related Guides
DER Co-Optimization & Energy-as-a-Service
The physical side: co-optimizing solar, storage, and thermal assets against the tariff before you structure the deal.
Battery Storage Sizing Guide
Sizing and dispatch for the storage at the center of most behind-the-meter EaaS deals.
CHP System Design & Feasibility
Cogeneration design and waste-heat capture revenue — the on-site-generation PPA path.
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