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Is Battery as a Service a good idea for your business?

clock6 mins Read
calendar 28/02/2023

Over the last few years within the battery supply chain, companies have been discussing the idea of only paying for the energy used and not ever actually owning the battery pack itself and all of the costs and responsibilities that come with it. In the last 12-18 months though I’ve seen a huge spike in discussions around this business model and how it could work. Typically, it’s known as Battery as a Service (Baas).

So, what exactly is Battery as a Service, how does it work and why might it be a good idea (or not) for your business?

Battery-as-a-Service (BaaS) is an innovative business model that provides energy storage systems to customers in the form of a lease or subscription, rather than selling them outright. This new approach to energy storage provides several benefits to customers, which include cost savings, flexibility, scalability, access to the latest technology, expertise, and environmental benefits.

One of the key benefits of BaaS is the cost savings it provides to customers. The upfront investment required to purchase a battery system can be substantial, but with BaaS, customers can reduce capital expenses by paying for the battery system on a lease or subscription basis. This allows customers to save money and allocate resources to other areas of their business.

In addition to cost savings, BaaS also offers flexibility to customers. With flexible payment options, customers can adjust their energy storage capacity as their needs change over time. This means that customers can increase or decrease the size of their energy storage system as needed, without having to make a large upfront investment.

BaaS is also scalable, which is another major benefit for customers. As energy requirements evolve over time, customers can easily scale up or down their energy storage capacity without having to make additional capital investments. This scalability is important for customers who need to adjust their energy storage needs as their business grows or changes.

Another major benefit of BaaS is the access to the latest battery technology. BaaS providers offer the latest advancements in energy storage technology, which means that customers can benefit from the latest and greatest innovations in the field. This is particularly important for customers who are looking to stay ahead of the curve in terms of energy storage technology.

BaaS providers also offer expertise and maintenance services, taking these responsibilities off the customer’s plate. Customers can rest assured that their battery system is being managed and maintained by experts, which means that they can focus on other aspects of their business. This is especially important for customers who may not have the technical expertise to manage their own battery system.

Finally, BaaS provides environmental benefits. By providing a sustainable energy storage solution, BaaS enables customers to reduce their carbon footprint and contribute to a cleaner energy future. This is important for customers who are looking to be more environmentally responsible and make a positive impact on the world.

In conclusion then, Battery-as-a-Service (BaaS) is an innovative business model that provides numerous benefits to customers. From cost savings, flexibility, scalability, access to the latest technology, expertise, and environmental benefits, BaaS is an attractive option for customers who are looking for a more efficient and effective way to store energy.

So why isn’t everyone doing this then?

While BaaS provides numerous benefits, there are also several drawbacks that customers and service providers must consider.

One of the drawbacks of BaaS for customers is dependence on the service provider. By relying on the service provider for the maintenance and management of the battery system, customers may limit their flexibility and control over their energy storage. This dependence can also make it difficult for customers to switch to a different service provider if they are dissatisfied with the service they are receiving.

For service providers, one of the main challenges of BaaS is navigating the complex regulatory environment for energy storage systems. Service providers may struggle to effectively offer the service due to the regulatory hurdles they face.

Another drawback of BaaS for both customers and service providers is the limited availability of the service. BaaS may not be available in certain geographic regions or for certain types of energy storage systems, which can limit the options available to customers and the potential market for service providers.

In addition, the cost of providing BaaS can be high, both for service providers in terms of equipment and maintenance and for customers in terms of ongoing expenses. This can make the BaaS model less attractive for both parties, especially if alternative energy storage solutions are available at a lower cost.

Battery degradation is another major drawback of BaaS. Batteries have a limited lifespan and will degrade over time, which can impact the performance of the energy storage system and the financial viability of the BaaS model.

For customers, a long-term commitment to the BaaS model may also be a drawback. By making a long-term commitment, customers may limit their flexibility and options in the future. This can be particularly problematic if they need to change their energy storage needs over time.

Finally, service providers may face competition from other providers offering similar services. This competition can impact their ability to attract and retain customers, making it difficult for them to succeed in the BaaS market.

In conclusion, while BaaS provides numerous benefits to customers and service providers, there are also several drawbacks to consider. Dependence on the service provider, complex regulations, limited availability, high costs, battery degradation, long-term commitment, and competition are all factors that must be considered when evaluating the BaaS model.

At Alexander Battery Technologies, we believe that a strong commercial partnership, coupled with long-term reliable demand are the two key enablers for initiating a successful BaaS business model together. In some markets, consortiums between several customers, several battery manufacturers, or both could make a BaaS model more attractive and more accessible on both sides. If the business on both sides has genuine value, the hurdles of up-front design and engineering costs can be easily overcome by a mid- to long-term volume commitment or supply contract and straightforward commercial discussions.

What do you think? Is BaaS something your business is interested in? Do you see other hurdles or additional benefits not covered here?

Contact us today for all of your custom battery pack manufacturing needs!

Author

Andy Taylor

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