Start with the problem, not the technology
In many early industrial energy projects, the conversation begins with hardware: solar array size, battery duration, inverter selection, container layout, grid-forming capability. These are all relevant. But they are not the right starting point.
The right starting point is the question the project is actually trying to answer:
A customer may want lower diesel cost, better reliability, emissions reduction, less fuel logistics exposure, or a cleaner energy story for stakeholders. A developer wants stable contracted revenue. A lender wants predictable cash flow and downside protection. An investor wants risk-adjusted return. These are not the same objective, and a project that satisfies one party may still fail another.
A useful early-stage screen does not calculate IRR first. It follows the chain of value across the project: customer avoided cost → EaaS fee → SPV contracted revenue → CFADS → debt service → equity return. If that chain breaks at any point, the project needs redesign — not necessarily the technology, but the commercial and financial structure around it.
The five connected questions
Every industrial solar + BESS project needs to answer five questions, ideally at the same time rather than in sequence. Most failures happen at the boundary between two of them.
1. Technical fit
Is the system sized to the real, predictable load — not the rare peak? Is the PV/BESS/PCS configuration matched to how the site actually operates: average demand, night load, diesel backup requirements, grid-forming needs? A system sized to chase short-duration peaks can price itself out of the project before the contract is even designed.
2. Customer avoided cost
What does the customer actually stop paying? This should be calculated against a credible baseline: diesel generation cost at prevailing fuel prices, grid tariff structure if applicable, generator O&M, fuel logistics and storage overhead. Carbon avoided-cost should be separated and shown explicitly, but not conflated with the financial saving at this stage.
3. Contract revenue
How much of the customer’s avoided cost becomes stable, contracted SPV revenue? This is where the EaaS structure matters. A service fee that captures 60–70% of avoided cost as a fixed annual payment looks very different from a structure that depends on dispatch rights, price spreads or take-up assumptions. The lender will only underwrite what is contracted. Everything else is upside.
4. Carbon value
Is the carbon benefit quantified, assigned correctly, and kept out of double-counting? Carbon reduction from diesel displacement is real and can be strategically significant for industrial customers. But the benefit belongs to the customer unless the contract explicitly assigns it to the SPV. Counting it on both sides inflates the apparent project economics.
5. Bankability
Does the fixed contracted revenue actually support debt service at a coverage ratio a lender will accept? This means running the S1-only base case against DSCR, debt capacity, and repayment profile — without relying on arbitrage upside. A project that passes DSCR only in the S2 scenario has not demonstrated bankability; it has demonstrated that uncontracted upside could make the numbers work if everything goes right.
EaaS is a risk allocation structure, not a pricing model
Energy-as-a-Service is often described as though the primary question is the service fee — what price per kWh, what discount to diesel, what term. Those questions matter, but they are downstream of a more important set of decisions about risk allocation.
The key EaaS design questions are:
- What exactly is the customer paying for — capacity, energy, availability, savings, or a bundled service?
- What happens if the customer uses less energy than projected?
- Is there a minimum payment or take-or-pay floor that the lender can rely on?
- Who retains carbon value and on what basis?
- Who retains behind-the-meter arbitrage revenue, if any?
- Who carries performance and availability risk?
- What are the termination provisions, and what do they mean for SPV revenue?
A weak EaaS contract can make a technically sound project commercially unfinanceable. A well-structured EaaS contract can turn a customer’s avoided cost into stable project company revenue that a lender will underwrite.
The implication is that EaaS contract design should begin before the financial model is finalised — not after. The model should be built to reflect what can actually be contracted, not what would make the numbers look attractive.
What a good early screen actually produces
Early-stage feasibility is uncertain by nature. Load data is approximate. Diesel prices fluctuate. EPC costs are indicative. Battery degradation curves depend on dispatch assumptions. Customer credit is often unverified. Debt terms are subject to negotiation.
A good early-stage screen does not pretend otherwise. Its value is not in producing a precise IRR. Its value is in turning uncertainty into better questions — the kind that identify what needs to be resolved before the project can move forward.
Those questions typically include:
- What EPC cost does the debt case require, and how does that compare to indicative benchmarks?
- What minimum contracted payment would be needed to clear the lender’s DSCR threshold?
- How does the project perform if debt gearing is reduced from 70% to 60%?
- Is the carbon benefit owned by the customer, shared, or assignable to the SPV under local regulations?
- Is the battery sized for average dispatch or peak chasing, and what difference does it make to cost and revenue?
- Is there a contract structure that could make the S2 upside contracted and therefore bankable?
These are not questions a model answers by itself. They are questions a model surfaces — enabling a sharper conversation with the customer, the lender and the EPC contractor before significant cost is committed.
The output of a good early screen is not a number. It is a clearer decision: proceed with the current structure, redesign the commercial terms, reduce the capital scope, or stop.