Cooling as a Service Case Study:
HVAC Solution for Colombian
Commercial Building
By selecting this innovative pay-per-use model, a superior air-conditioning system
could be installed, saving an estimated 1,2GWh in energy and 440-ton CO2e in green-
house gas (GHG) emissions annually.
Overview
The need: Q Group in Medellín, Colombia was constructing a new build-
ing intended to accommodate 100 offices. The aim was to deliver a REGION
high-quality building (LEED certified) for its occupants with the best Medellín, Colombia
comfort standards while optimising capital expenditures.
YEAR OF IMPLEMENTATION
The solution: MGM Innova Group designed an HVAC solution that in- 2017
cluded a high efficiency centralised air-conditioning system complete SECTOR
with valves to measure the amount of cooling delivered to each user. The
Commercial Building
investment was fully carried out by MGM Innova Group and a monthly
payment is billed to every office on a Cooling as a Service (CaaS) model. RETROFIT OR NEW
New
Benefits: Both the client and the final users enjoy a high-quality air-con- PROJECT SIZE (cooling equipment)
ditioning system, while focusing on their core-business and avoiding cap-
ital expenditures. The system amounts to an annual energy saving of 2,040kW (580TR)
about 1,2GWh while GHG emissions are reduced by an estimated 440- TECHNOLOGY
ton CO2e/year. (This is because the HVAC system was redesigned after Magnetic Bearing Centrifugal Chiller
deciding to proceed with a CaaS model.)
Why Cooling as a Service (CaaS)?
Air conditioning consumes most of the energy used in technology provider owns the cooling system, maintains
the commercial sector, accounting for more than 60% in it, and covers all operational costs including electricity.
commercial buildings. “This should lead to the implemen-
tation of high efficiency systems, but unfortunately larger The CaaS initiative is currently implementing various pi-
upfront costs represent a barrier for such decisions to be lot projects around the world to test this innovative new
made, given that greater value is given to capital resourc- financing model. Although this MGM project in Colombia
es in the present time,” explains Thomas Motmans, Sus- wasn’t driven by the official CaaS initiative, it’s a good
tainable Energy Finance Specialist at BASE. example showing how the model could be successfully
applied in practice.
The CaaS initiative is driven by the Switzerland-based Ba-
sel Agency for Sustainable Energy (BASE), together with For this specific project, given that the system installed
the Kigali Cooling Efficiency Programme (K-CEP) with the within this project consumes half the energy compared
aim of reducing energy consumption and GHG emissions to the conventional system initially proposed for this
from cooling through a pay-per-service model for more ef- project, the CaaS solution is expected to realise savings
ficient cooling systems. CaaS involves building and busi- of around EUR5 million during the en- tire lifetime of the
ness owners paying for the cooling service instead of pur- HVAC solution.
chasing the infrastructure that delivers the cooling. The
CaaS contract – how does it work?
The building is inhabited by 100 offices, which means 100 different users.
Therefore, MGM issues the same amount of bills every month. A main contract
was signed with the building constructor and manager for a term of 20 years,
which includes an exit payment for each year, allowing the possibility to end the
contract earlier. As to the contract with end-users, buyers must sign an internal
agreement when acquiring an office, where the acceptance of the air condition-
ing service is included.
The installed system involves all of the equipment related to cold air production
and distribution. That means not only the chiller system and auxiliary equip-
ment, but also the distribution network and Fan Coil Units (FCUs). The amount
of cold air delivered to each customer is measured using an energy valve that
allows calculating the temperature of inlet and outlet water, and thus the ther-
mal energy deployed by every FCU.
The contract type allows payments to be accounted off-balance since custom-
ers are paying for a service and no debt is involved. Common areas in the build-
ing pay a fixed amount every month, while individual offices pay a variable fee
– they receive an invoice that shows the calculation using the number of refrig-
eration tons consumed times the price per ton.
The pricing scheme includes the cost of electricity employed to operate, which
is US$0.13/kWh on average, as well as insurance fees, assets management,
and operation and maintenance costs, meaning that when paying for the refrig-
eration ton all system-related costs are covered. The final refrigeration ton price
is indexed every year, using inflation and energy price increase applied to the
corresponding share.
Investment Structure – Cooling as a Service Contract
Dividends
2
Capital (80%)
Pre-Construction Steps
1
- Presentation of the project to
the investment committee;
- Contract signature.
Offshore
Local Country
Capital (20%)
EPC Contract, Service,
Equipment, etc. 2
3 SPV
Cooling as
a Service
Project
Contract
Management
1
4 Q-Office
6
Monthly payments for
cooling supplied
Dividends
Control of Installation and
5
integration of equipment 7
and systems EPC Execution
1. Contract signature between the SPV and the client 5. Aire Verde executes EPC activities
2. Capitalisation of the SPV by MSEF & Aire Verde 6. Investment repaid through the sale of CaaS
services and backed by the savings generated by
3. The SPV buys the equipment, contracts service the project
providers and manages the project implementation
through a service contract with MGM Innova 7. SPV reimburses MSEF and Aire Verde (dividends)
(MGM) & Aire Verde
4. MGM Innova manages the project and controls
the integration
Applying CaaS – a win-win scenario
MGM Innova Group, an active member of the CaaS Alli- a concern for the client. “Usually, construction companies
ance, provides integrated environmental, financial and need to deliver a competitive price per square metre, so
technical solutions that contribute to sustainable energy they seek to reduce every initial cost, the AC system in-
management and climate change mitigation and adap- cluded,” said Manuel Buitrago, Owner of Aire Verde Inge-
tation. They manage MGM Sustainable Energy Fund L.P. niería.
(MSEF), a private equity fund that focuses on equity and
mezzanine financing for projects in the energy efficiency By applying the CaaS model, MGM Group carried out the
and renewable energy sectors in Latin America and the total investment, relieving the client from such expen-
Caribbean. diture. They managed to install a system with a record
efficiency of 0.6kWh/TRh, halving the major operation
Within this project, CaaS was implemented taking into expenditure (AC system accounted for 60% of electricity
account essential features such as: monitoring and mea- consumption). The project also realised benefits for the fi-
surement systems that allow charging for the service, nal users, with additional savings in energy, and in opera-
contracts that comply with local legislation, and new op- tion and maintenance costs. “In general, the CaaS model
eration and maintenance models, explained Edgar Botero, allows AC projects to be handled by experts, enabling the
Energy Services Director General at MGM Innova Group. users to focus on their core business,” confirmed Buitrago.
“Moreover, the project itself has taught us important les-
sons about our clients’ idiosyncrasy. They were not used “The most remarkable learning is that it is possible to de-
to paying for air conditioning as a service and challenged sign a project with a multiple number of stakeholders and
us to find a suitable manner to communicate the benefits with benefits for them all,” said Botero. (i) The construc-
of the model.” tion company reduces capital investment, (ii) final users
reduce operative expenditures and distraction from their
“The overall experience enables us to develop similar core business, (iii) MGM Innova Group reaches its expect-
projects in the future, following an investment model ad- ed return, and (iv) technology providers meet their sales
justed to the market and to the expectations of our poten- goals.
tial clients,” said Botero.
According to MGM, its next steps will include the dissem-
For project developer Aire Verde Ingeniería, having devel- ination of the Cooling as a Service model as a solution
oped the Q Office project under the CaaS model implies for the implementation of high energy efficient systems,
the opportunity to implement a highly efficient air-condi- along with exploring the opportunities to include refriger-
tioning system without the initial investment costs being ants with low environmental impact.
