The hidden treasures behind CaaS

Cooling as a Service (CaaS) is a pay-per-use model, where a provider designs, finances, installs, operates and maintains cooling systems, such as chillers, pumps and air-handling units, among others, while the building owner, end-user or customer does not make the large upfront capital investment (CapEx) in the cooling equipment; instead they pay the provider a regular fee – often consumption-based or fixed plus variable – for the “cooling service”, which could be in the form of chilled water or conditioned space delivered.

The CaaS model provides endless benefits, as it has the potential to deliver highly efficient projects, reducing operating costs, lowering greenhouse gas (GHG) emissions and providing better Indoor Air Quality (IAQ) for consumers. We can consider CaaS as an ideal solution in the UAE, where cooling is a major driver of electricity demand. In addition, this model can help achieve different government commitments, such as the UAE’s Energy Strategy 2050, the Abu Dhabi Energy & Water Efficiency Strategy 2030 and Dubai’s DSM Strategy.

The purpose of this paper is to comprehend the hidden treasures behind CaaS, by tackling some challenges in adopting this model and identifying opportunities to use this service in the most efficient way, to create value and move forward towards a more sustainable future.

Background

Space cooling is the fastest growing end-use in buildings. Demand has more than doubled since 2000 and keeps accelerating as temperatures rise and incomes grow. It is known that AC fans use ~20% of all electricity in buildings, worldwide, straining grids during hot hours. Global AC units are projected to flow towards ~5.6 billion by 2050, adding >1,200 TWh of extra electricity demand by 2035 under current policies.

The MENA region has a hot-humid climate (regular >45-50 degrees C summers), making mechanical cooling essential, driving electricity use up and leading to sharp daily peaks. For this reason, buildings consume a very large share of electricity in the UAE (historically cited around ~70–80%), with air-conditioning responsible for the major load. Within buildings, cooling commonly accounts for >50% of annual electricity and can reach ~80% in UAE residences; it also dominates peak demand.

The International Energy Agency (IEA) reports that cooling and desalination are expected to account for close to 40% of electricity-demand growth in MENA through 2035.

As such, the UAE has developed different climate change strategies to enhance energy efficiency and reduce energy use. Some of these strategies are the Energy Strategy 2050, which targets 40% improvements in energy efficiency; the Abu Dhabi’s Strategy, which targets a 22% electricity reduction by 2030 and the Dubai’s DSM Strategy, which targets 30% energy reduction by 2030.

CaaS business model

CaaS can offer a transformative approach to efficient and sustainable cooling, by shifting the business model from equipment ownership to performance-based service delivery. Instead of purchasing and maintaining chillers or air conditioning systems, clients pay only for the cooling output. This model allows service providers to deliver the same amount of cooling with less energy, promoting continuous efficiency upgrades and lifecycle optimisation.

By integrating high-efficiency technologies, AI, IoT, smart controls and data-driven performance monitoring, the CaaS model ensures that systems run at their optimal operating conditions throughout their lifespan. The model also removes upfront capital barriers, allowing building owners and industries to access state-of-the-art cooling without large investments, while simultaneously achieving measurable reductions in energy use, carbon emissions and operating costs.

This table compares and highlights the benefits of CaaS over conventional cooling models…

It can be seen that the CaaS model is a foundation for sustainable urban cooling, as it aligns financial returns with environmental outcomes, accelerating the transition to low-carbon technologies (such as District Cooling, thermal storage and renewable-powered chillers) and supporting national Net Zero and energy efficiency targets.

Challenges and common misconceptions

While CaaS offers a transformative approach to delivering efficient and sustainable cooling, its implementation is often hindered by a range of challenges and misconceptions. Many stakeholders still view CaaS through the lens of traditional HVAC ownership models, underestimating its financial and operational advantages. Barriers such as limited awareness, perceived complexity of performance-based contracts, financing constraints and uncertainty over long-term savings have slowed its wider adoption. In practice, these misconceptions mask the proven potential of CaaS to reduce energy consumption, lower emissions and to shift the cooling industry toward outcome-based efficiency.

Misconceptions and advantages

• CaaS is just expensive outsourcing: In reality, most of the lifecycle cost is electricity. By shifting CapEx to OpEx and aligning provider revenue with efficiency outcomes, CaaS can lower Total Cost of Ownership, when efficiency gains are realised and verified.
• Vendor lock‑in reduces flexibility: Lock‑in risks can be mitigated through competitive procurement, clear performance KPIs (temperature, humidity, uptime), transparent metering, step‑in rights and fair exit clauses.
• It’s only for new-builds: CaaS lends itself to retrofitting existing plants with minimal disruption by phasing equipment swaps and using temporary capacity; many pilots globally were implemented as retrofit projects.
• District Cooling already solves this: District cooling is a network solution; CaaS applies service-based incentives at the building/plant level and can complement District Cooling connections through optimised secondary systems and controls.

Practical challenges to plan for

• Baseline quality and M&V: Poor historical metering and atypical occupancy can undermine fair baselines
• Creditworthiness and offtake risk: Long-term contracts require strong counterparties and transparent tariff pass‑through to tenants
• Procurement constraints: Public‑sector rules may favour CapEx procurement; outcome‑based tenders and PPP-style models help
• Refrigerant transition: Aligning with UAE policies, Montreal Protocol/Kigali Amendment to the Montreal Protocol to avoid future retrofit costs
• Data and cybersecurity: Define data ownership, access rights and interoperability with BMS/SCADA and DSM portals
• Integration with District Cooling: Delineate responsibilities and performance handoffs

CaaS business model implementation

Successful implementation of the CaaS business model requires strong partnerships between technology suppliers, financiers and facility owners, supported by digital monitoring systems that track real-time performance and energy use. This structure enables continuous optimisation of efficiency, transparent reporting of savings and alignment of financial incentives with environmental outcomes. It has been proven that by removing upfront capital costs and operational burdens, CaaS can accelerate the deployment of high-efficiency, low-carbon cooling technologies, advancing economic and sustainability goals for clients and governments.

Key steps for implementation

Implementing a successful CaaS business model requires a structured, multi-phase approach. The process begins with a feasibility assessment, identifying suitable buildings or facilities with high cooling demand and potential for energy savings. Next, a baseline study is conducted to measure current cooling consumption, system efficiency and operational costs – forming the foundation for performance-based contracts. The technical design phase follows, where providers propose high-efficiency or low-GWP systems, such as variable-speed chillers, District Cooling connections or hybrid renewable-powered systems). Financing models are then structured to align investor returns with verified savings, typically through ESCO-style or pay-per-use contracts. Once operational, the system is continuously monitored using digital platforms, smart meters and IoT sensors, ensuring transparency, predictive maintenance and ongoing optimisation. A robust Measurement & Verification (M&V) framework validates performance outcomes and builds trust among all stakeholders. Through this systematic process, CaaS providers can deliver guaranteed comfort, lower costs and measurable environmental impact, making it a scalable pathway towards sustainable cooling transitions.

Implementing a successful CaaS business model requires a structured, multi-phase approach, such as:

1. Feasibility assessment, identifying suitable buildings or facilities with high cooling demand and potential for energy savings
2. Baseline study to measure current cooling consumption, system efficiency and operational costs, forming the foundation for performance-based contracts
3. Technical design, where providers propose high-efficiency or low-GWP systems (such as variable-speed chillers, District Cooling connections or hybrid renewable-powered systems)
4. Financing models are then structured to align investor returns with verified savings, typically through ESCO-style or pay-per-use contracts
5. Continuously monitor the system, after it is operational. Use digital platforms, smart meters and IoT sensors, ensuring transparency, predictive maintenance and ongoing optimisation
6. Validate performance outcomes and build trust among all stakeholders with a robust Measurement & Verification (M&V) framework

Through this systematic process, CaaS providers can deliver guaranteed comfort, lower costs and measurable environmental impact, making it a scalable pathway towards sustainable cooling transitions.

Key contractual considerations

The following table provides key considerations to take into account during the planning stage, to ensure a successful contractual agreement among the parties.

The above key considerations will ensure that service providers maximise the revenues, while providing a reliable, efficient and transparent cooling service to their customers.

Opportunities for savings, GHG emission reductions

1. Replace inefficient standalone air conditioners with centralised high-efficiency cooling, including district Cooling through CaaS: Prioritise buildings using split/window units that drive a disproportionately high share of cooling electricity; shift them to higher-efficiency CaaS offerings. This move cuts energy use and capex at once.
2. Add Thermal Energy Storage (TES) to shift and shave peaks: CaaS operators can finance and operate chilled water or ice storage systems to charge off-peak and discharge at peak, lowering bills and grid stress while reducing peak-related emissions. Case studies in hot-humid climates show strong techno-economic benefits and peak reductions.
3. Continuous optimisation with smart meters, sensors and analytics: Since providers are paid for cooling service, not kWh, they have a built-in incentive to deploy real-time monitoring, fault detection and predictive maintenance to keep plants at best-in-class efficiency over the lifecycle, locking in persistent savings versus install-and-forget models. Also supports DSM verification.
4. Low GWP refrigerants and Kigali Amendment-aligned transitions: CaaS contracts can internalise refrigerant selection, leak management and end-of-life recovery, accelerating the shift to low GWP refrigerants and avoiding future price/availability risks, as the GCC HFC phasedown begins in 2028. This cuts direct (refrigerant) and indirect (electricity) emissions.
5. Bundle envelope and controls retrofits to reduce cooling load before supply.
6. CaaS can be paired with EPC-style measures, better glazing, airtightness, shading and advanced controls/thermostat strategies, so the required cooling capacity drops, further reducing cost and emissions. Target priority segments: Malls, hotels, hospitals, mixed-use and government sectors. These large, steady loads are ideal for CaaS and District Cooling networks.
7. Improve Indoor Air Quality (IAQ) with efficiency co-benefits: Performance-based O&M enables optimised ventilation/filtration and humidity control without the usual energy penalty, improving occupant health and comfort while maintaining lower kWh/RT. This ties into DSM M&V and Green Building outcomes.

The next steps

To scale the CaaS model successfully across the UAE and wider region, stakeholders should focus on building an integrated ecosystem of policy support, financial innovation and digital monitoring frameworks. This includes standardising performance-based contracts, facilitating green financing instruments and strengthening data transparency for verified energy and emissions savings.

Partnerships among utilities, regulators and private developers will be essential to mainstream CaaS in new and existing developments, aligning with national initiatives such as UAE’s Energy Strategy 2050, the Abu Dhabi Energy & Water Efficiency Strategy 2030, Dubai’s DSM Strategy and the UAE Net Zero 2050 pathway. Looking ahead, Efficiency-as-a-Service (EaaS) represents the next evolution, broadening the model beyond cooling to include lighting, water and building systems. Together, CaaS and EaaS can drive measurable progress towards the UAE’s climate and energy-efficiency targets while making sustainable infrastructure more accessible and financially viable.

Practical measures for consideration:

1. Adopt outcome-based procurement: Specify cooling outcomes (kW/RT, kWh/m², comfort KPIs) and transparent M&V aligned with IPMVP
2. Align with DSM and building‑rating systems: Ensure compatibility with Abu Dhabi DSM, Dubai DSM, Estidama/LEED credits and utility incentives
3. Standardise contracts: Use term sheets that address performance guarantees, escalation, early termination, refrigerants and data sharing
4. Leverage concessional/green finance: Combine CaaS with green loans, sustainability‑linked loans and ESCO performance guarantees
5. Aggregate portfolios: Bundle multiple buildings to improve bankability and unlock scale economies in O&M, spares and analytics
6. Digitise operations: Require continuous monitoring, anomaly detection and monthly performance dashboards providing kWh, kW, COP/IPLV and tCO2e

Conclusion

The hidden treasures behind CaaS go beyond energy savings.

Performance transparency and data intelligence

CaaS unlocks real-time data on system performance, energy use and Indoor Air Quality. This creates a culture of accountability and empowers decision-makers with actionable insights for continuous improvement, something rarely achieved in traditional models.

Financial flexibility and risk transfer

By shifting cooling from CAPEX to OPEX, CaaS frees up capital for core business investments. The performance and maintenance risks are transferred to the service provider, turning uncertainty into predictable, contract-based outcomes.

Technology renewal and innovation

Because providers compete on efficiency and reliability, they are incentivised to upgrade equipment and integrate emerging technologies – AI-driven optimisation, thermal storage and low-GWP refrigerants – without burdening customers with extra costs.

Carbon and ESG value creation

Every kWh saved under a CaaS contract can be quantified and reported as verified emissions reduction. This helps clients enhance their ESG ratings, access green finance and demonstrate alignment with UAE Net Zero 2050 commitments.

Improved comfort and Indoor Air Quality

Continuous monitoring and optimized control of temperature, humidity, and filtration enhance occupant health and productivity—an often under-valued social benefit embedded in the model.

AI and predictive optimisation

AI is one of the most powerful enablers behind the success of CaaS. By integrating Machine Learning algorithms, digital twins and IoT data streams, CaaS providers can predict cooling demand, detect faults before they occur and automatically fine-tune system performance for maximum efficiency. This data-driven intelligence ensures that every ton of cooling is delivered with minimal energy waste and carbon footprint. AI also enables continuous benchmarking across portfolios, supports transparent reporting of savings and enhances decision-making for clients and regulators. In the UAE’s context, where digital transformation is a national priority, AI-powered CaaS systems represent a next frontier in achieving smart, low-carbon and resilient cooling for cities and industries alike.

Scalable pathway to Efficiency-as-a-Service (EaaS)

Once established, the CaaS framework paves the way for broader service models, covering lighting, water and energy systems, forming a foundation for holistic efficiency portfolios across the region.

The writer is Director, Energy Sustainability at Engineering Sustainable Futures. She may be reached at <angela@esfmena.com>.

References:

IEA – Future of Electricity in MENA: Cooling & desalination drive ~40% of demand growth (2025).

Abu Dhabi DoE – DSM & Energy Rationalisation Strategy 2030: 22% electricity, 32% water reduction targets.

Dubai Supreme Council of Energy – DSM Strategy 2030 annual reports: 30% savings target by 2030.

BASE – Cooling‑as‑a‑Service Initiative & White Paper: servitisation model and savings mechanisms.

UNEP U4E – Model Regulation Guidelines for efficient, climate‑friendly cooling.

Copenhagen Centre on Energy Efficiency

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