One of the most immediate and effective ways to improve household energy efficiency is to upgrade or replace old home comfort systems. But many times, the upfront expense of a new system is cost prohibitive for homeowners, resulting in expensive repairs reluctantly being completed on older, inefficient systems where a replacement is the optimal solution. We are excited to announce our recent investment in Service 1st Financial, a financial technology, innovation, and training company that is transforming the way home comfort is purchased and sold in the United States by increasing homeowners' access to the most energy-efficient home comfort systems, ensuring such systems are maintained throughout their useful lives, and driving maximum energy savings and emissions reduction.
Homeowners usually pay little thought to home comfort systems until they require repair. However, homeowners' decisions regarding systems such as HVAC, water heating, or water purification systems may have significant impacts on energy consumption and emissions. Home comfort systems account for approximately 70% of local household energy consumption and nearly 7% of domestic emissions.
While there is a tendency to focus on new technologies to reduce emissions, a meaningful portion of the emissions from the home comfort sector are highly preventable today. For example, replacing a 10-year-old home comfort system with a new one reduces energy use by ~20-40 percent which translates to approximately 35,000 lbs of CO2e avoided over a 10 year lifespan in a single household. Even just scheduling regular maintenance services increases system efficiency by ~15 percent.
Despite the opportunities for improving residential energy efficiency, homeowners often do not feel incentivized to upgrade, replace or maintain these systems. Replacements and upgrades may be cost prohibitive for homeowners when paying upfront. Additionally, homeowners may not understand the long-term benefits of scheduling regular maintenance. Low levels of emergency savings and dramatic increases in the cost of home comfort replacements only worsen the issue, driving the need for alternative consumption models. Additionally, many homeowners do not realize that maintenance is key to addressing the fundamental "break-fix dynamic" that leads to unbudgeted costs and negative homeowner experiences.
In a sector like home comfort where the technology for increased energy efficiency is available but other factors slow adoption, new business models may help deploy improved technologies at scale. Service 1st is making these technologies more widely available for consumers by providing an all-inclusive Home Comfort-as-a-Service leasing program for residential system replacements. Through its network of Premier Program(r) authorized contractors, the company delivers a worry-free service for homeowners to replace and upgrade their heating, cooling and plumbing systems for a low monthly payment, while eliminating the common pain points associated with owning, maintaining, and repairing such systems. Through this all-inclusive service, the company is putting energy efficiency technologies in reach for more consumers while creating the incentive for consumers to make more sustainable home comfort purchasing decisions.
Service 1st was incubated in 2019 by Founder and CEO Anuj Khanna and Thayer Street Partners. Before founding Service 1st, Anuj helped manage the successful purchase and turnaround of one of the largest residential home services contractors in the United States. His learnings and network inspired the creation of Service 1st. Today, the company has established strategic partnerships with leading sustainability-centric HVAC and plumbing equipment manufacturers, reputable contractor success groups, and best practice training organizations. They also build deep relationships with home service contractors, who play an essential role in forging connections with homeowners.
In addition to the financial and strategic appeal of the Home Comfort-as-a-Service model, the recently passed Inflation Reduction Act provides incentives such as rebates and tax credits for homeowners who opt to add electric appliances such as water heaters or heat pumps, making a service like this all the more timely. Currently, over 30% of the company portfolio is concentrated in heat pumps.
With over $20 million in Series B and subordinated debt funding, Service 1st plans to rapidly scale through geographic expansion focused in the U.S., as well as new product innovation and investments in industry leading sales training. Additionally, the company plans to develop and deploy technology based tools to improve customers’ home comfort user experiences and equip contractors to sell the Premier Program through new channels, which can drive better access for homeowners. We look forward to working with Service 1st to improve the accessibility and adoption of residential energy efficiency infrastructure and practices through its transformative Home Comfort-as-a-Service business model.