Pay-for-performance in a nutshell

Pay-for-performance (P4P) is a way to achieve significant, larger-scale energy savings in the European building stock and attract additional investments and new business models.

This approach encourages long-term investment and transparent cash-flows (pay) in energy efficient buildings by metering energy savings smart and getting return-of-investment based on proven and measured savings in the buildings (performance).

Pay-for-performance as a game changer

P4P can have a dramatic impact by increasing the number of energy efficiency programs. SENSEI will support industry players to expand the use of P4P programs. P4P programs reward energy savings on an ongoing basis as savings occur, often by examining data from a building’s energy meters, rather than providing up-front payments to fund energy-saving measures. P4P offers a way to increase ongoing energy savings, while also stimulating innovation in the efficiency programs that help deliver the savings. P4P therefore becomes a procurable asset for energy efficiency project developers and investors for developing their businesses.

P4P can significantly reduce the greenhouse gas emissions from the European building stock. SENSEI will develop business models based on P4P and provide an incentive for market players to increase investments in more energy efficient buildings, for example,  by the refurbishment of buildings and implementation of whole-building metering. The need to further ramp-up energy efficiency in the European building stock to avoid CO2 emissions from energy generation, along with an interest in better use of digital energy meter data and analytics to encourage efficiency gives SENSEI incentive to develop P4P, and to test and introduce new transaction models to industry players in the market and policymakers.

P4P can have a substantial positive effect on buildings in Europe by attracting capital to improve comfort and energy efficiency. SENSEI will put the energy consumption customer at the centre of new transaction models. Transaction models based on P4P give greater transparency in the energy performance of buildings and pay-rates. Most of all, P4P benefits the end-user by reducing their energy bills. Additionally, improved buildings result in a higher standard of living for residents and a higher value for building owners.

P4P can have a dramatic impact on the energy system by reducing costs and capturing energy efficiency as a grid resource. SENSEI will deliver a transaction model based on P4P for stakeholders to uptake and replicate. When P4P expands in the market, it will also have a positive side effect on the energy grid by capturing energy efficiency as a grid resource. Outside the European Union, the first generation of P4P has shown that energy efficiency programs can help stabilize the grid and retail rates. When customers save energy during the grid’s critical times, energy efficiency can serve as a system capacity resource and/or defer distribution system infrastructure upgrades. Secondly, P4P can reduce costs in the energy system by providing flexibility and capacity reduction. Instead of system operators to invest in a new energy plant, P4P programs can to a certain extent prolong investments in wires and cables.