Europe’s buildings have the potential to play a key role in our future energy systems. Making them more efficient reduces the need for expensive power plant capacity, defers the costly upgrading of network infrastructure, and enables this infrastructure to be used with more flexibility. Energy efficiency is still not adequately compensated for these benefits and this acts as a barrier to its deployment.
To ensure that energy-saving solutions are not overlooked or undervalued, decision-makers need to be confident in the energy savings that energy efficiency measures will deliver. This puts a premium on good quality evaluation, measurement and verification of energy efficiency interventions.
In the United States, several energy utilities have recently piloted and launched buildings Pay-for-Performance (P4P) programmes making use of possibilities offered by energy metering technologies that provide greater certainty over energy savings and drive improved performance. These P4P schemes reward end users or aggregators for delivering energy savings, measured against a business-as-usual scenario.
Compared to traditional energy efficiency programmes:
- The performance risk is shifted: from those who fund the programmes (taxpayers or bill payers) to the private sector (energy service providers or aggregators);
- The incentive is redirected: from installing as many equipment as possible to obtaining as many energy savings as possible.
In this report we provide definition, general design and examine the rationale for P4P energy efficiency programmes. We also provide an in-depth review of 11 case studies from North America and elsewhere, which highlights the factors that enable P4P programmes to succeed, the implementation barriers and the lessons learned. This enables us to provide a set of key implications and recommendations for a successful replication of the P4P approach in the EU, which could speed up the rate of energy efficiency improvement in the EU’s buildings while reducing the costs of the energy transition.
Authors: Marion Santini (RAP), Dimitra Tzani (IEECP), Samuel Thomas (RAP), Vassilis Stavrakas (IEECP), Jan Rosenow (RAP), Alessandro Celestino (RAP).
Read and download the full report here.