Comfort air conditioning, energy savings, and decarbonization through subscriptions
Air-as-a-Service makes electricity consumption visible through the use of IoT technology. It provides comfortable air conditioning, energy savings, and decarbonization. Various other benefits of introducing the system will also be explained.
Air-as-a-Service, a joint venture between Mitsui & Co., Ltd. and Daikin Industries Ltd., started full-scale operations in 2019. It provides energy-efficient and comfortable air conditioning subscription services for buildings, hospitals, factories, and other facilities. We asked them about the benefits of providing comfortable spaces for a fixed monthly fee, rather than selling air conditioning equipment, as well as their vision for achieving a decarbonized society.
Subscription creates many benefits.
--Air-as-a-Service is an air conditioning service that utilizes a subscription (fixed monthly fee).
Oshita: The most important point is the proposal to switch from "owning" to "using" air conditioning. If you "own" equipment, you will have to perform facility management tasks such as maintenance and inspections. While facility management is an important task, it is a "non-core task" that does not generate profit in itself. If that is the case, we would like to have the facility management and operation be outsourced and have our clients focus their human resources on their core business. Moreover, by introducing Air-as-a-Service, we can also reduce costs and CO2 emissions through energy savings, thanks to our expertise in air conditioning operation. This is an advantage that cannot be created by "ownership".
--Air-as-a-Service lists six service features: stable air conditioning operation, no initial investment required, contribution to decarbonization, cost savings, labor savings, and off-balance sheet.
Oshita: First of all, for "stable operation of air conditioning," we are aiming for "air conditioning that never stops" and "air conditioning that never breaks" by utilizing IoT technology. Specifically, we remotely monitor operating conditions, detect signs of failure, and perform appropriate inspections and replacements. Hospitals and aged care facilities in particular appreciate the stable operation of air conditioning systems.
--How well is it able to detect signs of failure?
Oshita: Only about 70% of failures can be detected. In the event of a failure that cannot be detected, repairs can be made within 72 hours through service stations located nationwide. 72 hours may sound like a long time, but it is about half the time required in the past. Although many service providers immediately respond to a breakdown, it takes time for them to identify the location and cause of the breakdown, procure repair parts, and so on. We are reducing this time through remote monitoring using IoT.
--The "no initial investment" is a true feature of subscriptions.
Oshita: Subscriptions will "reduce costs" by eliminating maintenance, inspection, and repair costs. It also eliminates the need to deal with these tasks, which leads to "manpower reduction". Furthermore, since there is no need to capitalize air conditioners (*1), so-called "off-balancing" is possible, which leads to an improvement in ROA (Return on Assets).
*1 Depends on the contract. Please consult with the contractor's auditing firm or accountant regarding accounting treatment.
--So, by making it a subscription, you are creating a variety of benefits. Could you also tell us about your efforts to "reduce costs" in electricity bills?
Oshita: When updating air conditioning equipment, replacing the air conditioning with a new one will lower the electricity bill due to the difference in energy-saving performance compared to the previous system. On the other hand, air-conditioning equipment is often installed with a large capacity to spare, and we are able to achieve energy savings by optimizing the capacity and operating it efficiently while using IoT technology.
Operational improvement cycle contributes to decarbonization
-If energy savings can be realized, it will lead to "contribution to decarbonization" as well as cost reductions.
Oshita: That's what I mean. The first method is to use IoT technology to visualize the operating conditions. From there, waste is uncovered and improvements are made to eliminate it. In other words, we are implementing a cycle of operational improvement.
The first thing to consider when making improvements is to keep electricity usage peaks low. The basic charge for electricity is set based on the amount of electricity used during the 30 minutes of the year when electricity is used the most, so it is important to suppress the peak of simultaneous electricity use.
--When does peak electricity usage occur?
Oshita: Electricity consumption in offices tends to reach its peak after winter vacations. When people come to work in a building that has been cooled down during the vacations, the air conditioning tends to be turned on full blast all at once. In order to suppress this peak power consumption, we control the air conditioning by automatically turning it on in stages starting early in the morning before work. This is called demand control.
-- First, reduce the basic cost of electricity. What will be the next step?
Oshita: A common problem is forgetting to turn off the air conditioning. It is easy to forget to turn off the air conditioning in the office when returning home after working overtime, or to leave a conference room with the air conditioning set to a low temperature in summer and a high temperature in winter. To eliminate such wasteful use of electricity, we operate the system in such a way that it automatically sends a signal to turn off the air conditioning at a preset timing. Generally, after two to three years, customers get the hang of energy-saving operation and the system improves considerably. In addition to visualizing the status of air conditioning use, this kind of air conditioning operation data is also used to detect predictive signs.
Komori: Air-as-a-Service received the Energy Conservation Grand Prize for FY2020 in recognition of its efforts to improve operations. In the past, the Energy Conservation Grand Prize has been awarded to air conditioning equipment, but this is the first time that the Energy Conservation Grand Prize has been awarded to operational improvements.
Air conditioning accounts for about 40-50% of electricity use in buildings and facilities
--Once again, what prompted you to launch such a business?
Oshita: The inspiration for this idea came from a leading example of energy management for facilities in Europe. In our search to see if this could be done in Japan, we came up with a subscription service for air conditioning, which accounts for 40-50% of the electricity used in a typical building or facility.
--What is your relationship with Daikin?
Oshita: First of all, we approached Daikin as a top player in the industry, but Daikin was also in the process of exploring a new business model. As a trading company, we were engaged in a variety of businesses, so we began working together to promote reform of their business model.
--Where will Mitsui's main role be?
Oshita: Simply put, it is about building a business model. It is difficult to change established methods by ourselves, so we have played a role in planning new services by combining Daikin's internal and external technologies and examining new sales methods. In addition, we provide financial and fiscal functions. Mitsui's expertise in subscription-type businesses, in which the initial investment is made on behalf of the customer and paid back over the long term, can be utilized.
Providing various services required by customers in a single package
-Who will be the competitors?
Oshita: There are no competitors that can compete head-on.
Komori: I think our company's unique feature, which no other company has, is that we realize energy conservation and reduction of CO2 emissions in a single package, from installation and renewal of air conditioning equipment to maintenance and operation. There are companies that specialize in energy-saving technologies, maintenance, and inspections, but Air-as-a-Service has them all. Rather than technologies that other companies cannot imitate, we offer what our customers truly want by combining better services.
Oshita: If I had to name a strong competitor, I would say that air conditioning manufacturers and leasing or financing companies sometimes work together to provide services similar to those offered by our company.
--Do you feel a growing awareness of "decarbonization" in the course of your business?
Oshita: Yes, listed companies are especially feeling it. They have declared to their stakeholders that they want to decarbonize their operations, and when they renew their air conditioning systems, they of course expect cost reductions through stable operation and energy savings, but they also want to reduce CO2 emissions at the same time. We constantly monitor electricity usage, so we can immediately simulate CO2 emissions and show the reductions that can be achieved.
Moving toward a decarbonized society, one step at a time
--What is your outlook for the future?
Oshita: By making subscription-based services for air-conditioning equipment widely known and promoting a shift from "ownership" to "use," we will achieve "comfort at any time" and simultaneously "cost reduction" and "CO2 emission reduction" through energy conservation. We hope to establish a new standard for air conditioning. It is also important to reduce power consumption in order to cover 100% of energy use with renewable energy in the future. We will contribute to energy conservation and, ultimately, CO2 emissions reduction through operational improvements of our facilities.
We would also like to explore the possibility of applying these operational improvements to equipment other than air conditioning.
Komori: There are still many customers who prioritize cost reduction over decarbonization. I believe that our solution's strength lies in the fact that it enables such people to realize cost reductions and CO2 emission reductions at the same time. From this perspective, we feel that promoting Air-as-a-Service will contribute to the global environment.
Thank you very much for your time today.
Air as a Service.
Representative Director
Yasunori Oshita
He joined Mitsui & Co. in 2006. Engaged in materials trading business and launching data center business overseas. Since 2018 engaged in Air-as-a-Service (a paper company at that time), which was in the stage of business feasibility demonstration, and from the timing of the company's materialization (full-scale operation) in 2019 with Daikin Industries, Ltd. and Mitsui & Co. Current Position.
Air as a Service.
East Japan Division
Takanari Komori
He joined Mitsui & Co. in 2021. After working on the capital policy at Mitsui Knowledge Industry Co., Ltd, he was transferred to Air as a Service in May 2022.
