A Singaporean business offering airconditioning as-a-service has its sights set on Australia, which could bring cheaper, ultra-efficient cooling to Australian buildings.
Kaer’s revolutionary airconditioning model borrows from other industries that have “servitised” their offerings, such as Uber (mobility) and Spotify (music), which provide access to products rather than ownership.
Rather than a building owner procuring and managing its own airconditioning kit and investing in expensive software to make it run efficiently, owners pay for cool air on a pay-as-you-go basis.
The pivot to as-a-service
According to Kaer’s senior manager, customer success Dave Mackerness, the family-owned air conditioning business was started in 1993 by Australian ex-pats living in Singapore.
Back then the company was a stock standard airconditioning vendor that designed systems and sold them to customers. In 2013, the company pivoted to the as-a-service model.
It’s since grown to about 100 people servicing about 10 million square feet, with a focus on big energy guzzlers such as data centres, pharmaceutical companies, hotels, food processing, shopping centres and casinos.
“Those are the guys that do well with this kind of business.”
He says that industries are attracted to the model for different reasons.
“The pharmaceutical companies use it for a reliability standpoint, shopping centres like outsourcing.”
The company also services commercial office clients, including major REITS such as Lendlease.
“They like it because it’s better for the business, financially better.”
How it works
Instead of the airconditioning vendor designing a system and selling it to a building owner, it owns and operates everything – chiller equipment, pipes, maintenance, repairs, facilities management, the works.
With an existing building, it’s a slightly different set up. Instead of designing the system from scratch, the company purchases the existing kit and then takes on all maintenance and operations, selling it back at when the building owner when it wants to sell the building.
There’s also no long term utility contract that the building owner has to negotiate.
For the customer, the result is airconditioning that is about 10 to 20 per cent cheaper than a self owned model. Plus, there’s the benefit of not having to invest in technologies and capabilities outside their specialities.
According to Mackerness, the product as a service model is not only more profitable for the business but also more sustainable and circular because the vendor is incentivised for the airconditioning to be as efficient as possible.
- Learn more about accelerating the circular economy in the built environment industries at The Fifth Estate’s Building Circularity event on 24 November.
When the onus is on the vendor to optimise operations, only the most efficient systems are installed to keep energy costs down, and they are impeccably maintained so that they keep running smoothly.
“It’s now my responsibility, not my customers responsibility.
“You want to move to a circular economy, we need to move the burden of being sustainable and circular away from customers and onto vendors, because then there’s a business incentive to do it.”
The other benefit of servitisation, according to Mackerness, is that it allows for the scale up of operations and the subsequent ability to invest in R&D to streamline still further.
As such, the company has poured funds into artificial intelligence and other technologies to keep improving performance.
This takes the pressure off busy operations managers to oversee the many factors that influence energy used for airconditioning, such as the weather conditions and the number of occupant or visitors in the building. Instead, highly trained specialists draw on smart software to help them manage the building’s airconditioning as optimally as possible.
It also helps to have a large portfolio of buildings to collect data from and iteratively improve operations and maintenance strategies.
Mackerness says this is exactly what ride sharing companies have done to their services, with ride sharing fleets bigger than any cab companies that came before them, allowing them to invest in the digital platforms that make these services so efficient.
The model works best in air conditioning heavy regions
Kaer has so far focused on the Asian market, servicing clients in Singapore, Malaysia, Vietnam and India, which is where airconditioning accounts for about 50 per cent of energy consumption in buildings.
When teamed with renewables, which Mackerness says the company is trying to do more, the solution can be run off 100 per cent renewable energy.
In a mixed used precinct with high energy using buildings such as an automotive plant and educational complex in sweltering hot Mumbai, the company has managed to turn the site energy positive.
Putting solar on the roof to run 1Elpro Park’s airconditioning systems turned out to be the cheaper way to run the chiller plants for the company, and also resulted in enough surplus solar energy to run 200 average Indian households each year.
The 100 per cent renewable precinct also relies on water captured entirely onsite. The company also offers chilled water as a service, and capturing rainwater turned out to be the cheapest way to provide this service.
Mackerness says that the demand for airconditioning in south-east Asia makes the region the more suitable markets to target initially but Australia is also of interest for future expansion plans.
Genius or idiot idea?
Mackerness says the company is essentially out on its own with this model. “This does make us nervous because it means you’re either a genius or an idiot.”
He says more people are starting to move behind the idea but one of the big barriers is the huge amount of capital needed to get started.
Kaer was able to finance its way because it sold its distribution rights for Daikon airconditioners back to Daikon, and then managed to secure finance from banks including Australia’s NAB.