As global temperatures rise, so does the demand for air conditioning. When combined with the atmospheric impact of refrigerants, the energy consumption associated with cooling represents one of the largest end-use risks to our climate.
India lies at the epicentre of this problem since a vast majority of the population lives in heat-stressed areas. India’s 2021-2022 Economic Survey estimates that India could lose 5.8 percent of its working hours, equivalent to 34 million full-time jobs, to heat-stress events by 2030. Furthermore, it suggests that cooling’s share of the total electricity demand is expected to increase from 7 percent in 2020 to almost 20 percent in 2030. Similarly, according to a recent United Nations Environment Programme (UNEP) and International Energy Agency report, India’s cooling demand is expected to drive an additional 800 GW of power generation—more than twice the installed capacity in India today.
India lies at the epicentre of this problem since a vast majority of the population lives in heat-stressed areas. India’s 2021-2022 Economic Survey estimates that India could lose 5.8 percent of its working hours, equivalent to 34 million full-time jobs, to heat-stress events by 2030.
This increase in power generation can impair efforts to contain climate change. The transformation of cooling efficiencies in India is a necessity, which will allow for increased productivity, positive health outcomes, and accelerated economic development without warming our planet and straining our grids. Yet, the transition towards more efficient, climate-friendly cooling solutions has been slow. High upfront costs deter the adoption of energy-efficient technologies, while market structures often fail to recognise, and hence price, the environmental externality of conventional energy use.
The baffling truth is that the technologies to cool our future more sustainably already exist. Yet, they remain under-utilised, due to market failures, misaligned incentives, and outdated perceptions of cost .
Although the Indian government has made commendable efforts to release an India Cooling Action Plan (“ICAP”) that aims at reducing energy demand by up to 40 percent by 2037-38, the market is not moving fast enough to provide solutions at scale. The primary reason for this lies in the prevailing business models, which are centred around the sale of equipment rather than reliable and cost-effective provision of the desired cooling service. This business model embeds inefficiency in cooling systems in all stages of a facility’s lifecycle:
The primary reason for this lies in the prevailing business models, which are centred around the sale of equipment rather than reliable and cost-effective provision of the desired cooling service.
Due to these inefficiencies, new cooling technologies that have a much lower environmental impact but higher up-front costs, such as radiant and evaporative cooling systems, premium efficiency chillers using natural refrigerants, and thermal energy storage systems, face tremendous barriers to adoption at scale. As a result, facilities waste 30 percent or more of the cooling energy they consume and businesses struggle to maintain a green bottom line.
To improve health, productivity, and well-being while mitigating the effects of climate change, Smart Joules is pioneering a new dominant business model for the cooling industry: Cooling-as-a-Service or “CaaS”. CaaS applies the servitisation concept (shift from a product-centric to a service-centric business model) to the space cooling industry. Under the CaaS model, energy service companies such as Smart Joules, with specific expertise in cooling, offer sustainable, cost-efficient, convenient and high-quality cooling services at a fixed cost per ton-hour of cooling consumed by end-users. CaaS clients only pay for the cooling they consume, while the service provider takes full responsibility for design, financing, project execution, operations, and maintenance of the cooling infrastructure.
All the service provider’s costs and margins are recovered through cooling service fees under long-term contracts. This model eliminates energy waste, since the focus shifts away from upfront cost to total cost of ownership over the lifetime of central cooling systems, which is more than 15 years. Significant energy efficiency gains and carbon reductions are achieved via efficient system design, deployment of the best available low-carbon cooling technologies, and continuous data-based operational optimisation with DeJoule – Smart Joules’ proprietary living and learning system that leverages Internet of Things (IoT) and Artificial Intelligence (AI) platform technology.
CaaS clients only pay for the cooling they consume, while the service provider takes full responsibility for design, financing, project execution, operations, and maintenance of the cooling infrastructure.
Smart Joules provides CaaS models both for new facilities (called “JouleCOOL”) and for existing facilities (called “JoulePAYS”), allowing any cooling-intensive building such as a hospital, hotel, mall, office building or factory, to de-risk adoption of energy efficiency and profit from climate action. These models are similar to how the power-purchase-agreement (PPA) or OpEx models fuelled the growth of the solar infrastructure industry.
The ‘real world’ impact of Smart Joules’ technology has been substantial and quantifiable. Apollo Hospitals, the world’s largest vertically integrated healthcare provider, is a case in point. Apollo has partnered with Smart Joules to reduce carbon emissions by 2,90,000 tons by 2033. This 10-year initiative covers 18 hospitals across India and leverages Smart Joules’ interdisciplinary expertise for energy-efficient cooling and automation. In the brief period following the integration of the JoulePAYS solution into Apollo Hospitals, 235 energy conservation measures were implemented, resulting in forecasted savings of over 235 million kWh and INR 2 billion by 2030. If we apply this technology to the numerous industries that have heavy cooling loads, there is potential to achieve more than 29 million tons of CO2 reduction within this decade.
Resistance to change has prevented rapid uptake of Smart Joules’ solutions, as it is challenging to lock down the first adopter. In addition, there is a complex and protracted decision-making process in large companies where seeking approval for a new technology necessitates every department to say yes, but any one stakeholder can say no, thereby blocking the adoption of the solution. Beyond market barriers, one of the most ubiquitous challenges confronting start-ups is the issue of financing. Uncertain creditworthiness on the part of customers, variability in contractual enforceability, and the relatively slow pace of the judicial system can increase the risk of long and pending payment cycles. Furthermore, infrastructure or project-level finance is scarce and expensive, particularly for small-scale projects such as centralised cooling systems in single facilities.
Uncertain creditworthiness on the part of customers, variability in contractual enforceability, and the relatively slow pace of the judicial system can increase the risk of long and pending payment cycles.
Yet, with every challenge, Smart Joules has learned, improvised and helped different stakeholders overcome their hesitations on implementing our technology. We have focused on consistently driving unprecedented results in terms of profitable carbon reduction for our clients while maintaining healthy project returns.
Inspired by the positive impacts of decarbonising cooling in India, Smart Joules has been actively engaging with not only the private sector but also non-profit organisations and government ministries. We have developed suggestions for catalytic action to transform India’s cooling industry, drawing on our leadership positions within organisations such as Alliance for an Energy Efficient Economy (AEEE), the Sustainability Engine Foundation (aka “SusMafia”), Indian Electrical and Electronics Manufacturing Association (IEEMA) and through direct engagements with the Bureau of Energy Efficiency (BEE) and Ministry of Power. In addition, we have formulated tailored recommendations for some of the key stakeholders to expedite the implementation of CaaS and ensure a successful transition to more sustainable cooling solutions.
For example, our recommendation to central government agencies is to integrate CaaS into their India Cooling Action Plan (ICAP) implementation strategy, ensuring a sustainable approach to cooling solutions nationwide. Furthermore, adopting CaaS for a prominent upcoming central government project would serve as a powerful demonstration of its effectiveness, inspiring others to follow suit. Moreover, state-designated agencies can also play a crucial role in driving CaaS adoption. Including CaaS support in their strategic plans and actively promoting it through their networks can amplify its impact. In addition, think tanks and industry organisations should prioritise CaaS as a centrepiece in their cooling initiatives. Widely sharing CaaS concept notes and success stories will accelerate the adoption across various sectors.
Adopting CaaS for a prominent upcoming central government project would serve as a powerful demonstration of its effectiveness, inspiring others to follow suit.
Financing agencies can enable CaaS implementation by providing non-recourse debt facilities, which will lower financial barriers for adoption. Moreover, including energy efficiency as a loan condition for other businesses can incentivise energy-conscious practices, aligning with CaaS’s sustainable objectives. Finally, real estate developers can contribute significantly by committing to pilot at least one CaaS project within their portfolios. This can showcase their commitment to eco-friendly solutions and can set a precedent for sustainable cooling practices within the built environment.
Needless to say, in an era of increased global warming, cooling is no longer a luxury but a fundamental necessity, particularly in countries prone to high temperatures, such as India. Smart Joules’ technology offers cooling solutions that are simple, substantial, profitable and accessible, making real the idea that energy efficiency can bring the benefits of environmental sustainability, economic savings, and societal wellbeing.
Smart Joules’ early success is emblematic of a broader upcoming energy efficiency revolution, where a company’s earnings are tied to the actual energy savings realised. This paradigm shift not only aligns economic incentives with environmental goals but also removes the barrier of high upfront capital expenditure for higher efficiency technologies. We hope to have the ability to transform the future of energy and make energy efficiency the default choice, one Joule at a time.
Arjun Gupta is the Co-Founder and CEO of Smart Joules.
Rohan Batra is an Associate Manager at Smart Joules.
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