On 24 January, the SENSEI team held its final conference, in the heart of the European Quarter in Brussels, gathering 14 speakers to present the project achievements, discuss the policy aspects relating to buildings’ energy efficiency, and the next steps and opportunities for the pay for performance business model to find its spot.
Online and onsite participants gained insights on the importance of energy efficiency as an energy resource and a new grid service. They also got to meet experts from several countries and different backgrounds exchanging ideas and reflecting upon what needs to happen for the pay-for-performance (P4P) schemes to find their way into Europe, making buildings more energy-efficient and attractive for third-party investors. It is great to mention that a graphic recorder was invited to this final conference to make a visual summary of the event.
The conference started with the opening from Filippos Anagnostopoulos from Institute for European Energy and Climate Policy (IEECP), coordinator of SENSEI. He explained that SENSEI has been a very ambitious project, as it aimed to investigate the use of Pay-for-Performance schemes to support building retrofits. He said:
“We have identified where and when energy efficiency has value as a power system resource, and quantified this value compared to supply-side resources.
We investigated the agreements and rules that should govern the exchanges between market actors (building owners, ESCOs and aggregators, and those willing to compensate energy efficiency) as well as engaged with investors and financial institutions to understand which conditions make P4P agreements for retrofit projects more attractive to third party financing. SENSEI also designed smart services for P4P and supported stakeholders to design the first P4P pilots in the EU. Finally, we put forth business models to support P4P.“
Filippos Anagnostopoulos, Senior expert at IEECP
Filippos walked us through the activities carried out over the past 3 years. 20 content-intensive reports published during these 3 years offer a wealth of information on a multitude of aspects related to pay-for-performance. A few examples of these publications (all available here) are such as:
- D4.2. The drivers of the value of energy efficiency as an energy resource, led by HEBES
- D4.4. Experience and lessons learned from P4P pilots for energy efficiency, led by RAP
- D5.2. Guidelines for the design of P4P schemes, led by Factor4
- D6.3. Variants of P4P schemes to engage third-party investors in energy efficiency, led by Factor4
- D6.5. The business model of the energy efficiency aggregator, led by IEECP
SENSEI partner, HEBES, developed and released an open-source toolkit named EENSIGHT that accurately measures energy savings – essentially an energy efficiency meter.
A keynote on the policy background and the new Energy Efficiency Directive (EED) was given by Margot Pinault, Policy Officer at DG ENER of the European Commission. She presented the latest developments of the energy efficiency policy, with a focus on the provisions promoting Energy Performance Contracting (EnPC). The unusual current geopolitical situation is creating a new reality for the energy market with very high and unstable volatile prices and insecurity of energy supply. She emphasized the urgent need to:
- end the EU’s dependence on Russian fossil fuels which is used as an economic and political weapon;
- accelerate our clean energy transition;
- table the climate crisis.
In this context, the European Union has been vigorously responding to this crisis since 2021 by proposing several legislative acts and policy papers (figure 1):
Figure 1. EU response at a glance 2021-2022
Margot Pinault highlighted that the European Commission has recently opened its long-awaited consultation on the electricity market design, aimed at protecting consumers from excessive price volatility, the consultation will remain open until 13 February. The legislative proposal is expected in March 2023. To dig deeper into the discussion, Margot mentioned the main elements of the Energy Efficiency Directives (EED) revision: i) binding EU energy efficiency target and indicative national contributors to 9% (13% REPowerEU), ii) the energy efficiency first principle (E1st) to make it an integral part of policy and investment decisions, iii) strengthened energy savings obligation in end-use (1.5%) with an increased focus on alleviating energy poverty, iv) stronger exemplary role of public sector including public buildings renovation (3%/year of useful floor area in all public administration levels), and v) new definition of efficient district heating and cooling.
Figure 2. A visual summary of the first panel of SENSEI conference
The ensuing panel discussion was moderated by Marion Santini from RAP, and included policy experts covering building policies, ESG financing, and enabling power system technologies.
Following the overview on the current crisis and the responses from the European Commission, Hélène Sibileau, Policy advisor at BPIE, on “What is currently missing in the EU energy policies”? replied that “we have the EPBD for over 20 years with three revisions already. We need to speed up implementation and transposition”. Also, she explained that mandatory provisions trigger the renovations, increasing rate and depth. She believes that the policies based on incentives work “less”.
What’s more, Michael Villa, Executive Director of SmartEn, reflected on “What can governments do immediately to increase the capacity of buildings to provide flexibility services to the grid”?
Michael emphasized that it is extremely important to reduce the consumption of certain types of energy. He believes that this should be done through efficiency that has already led to energy savings, together with flexible consumption, in a way that consumers could consume more variable green energy and less fossil fuels. Therefore, energy efficiency and reduced energy demand should move forward hand in hand.
Following up on the discussion on the potentials for buildings to provide efficiency and flexibility services, and for these to be delivered to the grid, Murray Birt, Senior ESG Strategist at DWS, reflected on ”what are investors looking for to be able to invest in these buildings’ assets” and ”What policy innovation could he imagine in this domain”?
He explained that it is highly important for investors to understand the investment chain such as the pension funds and insurance companies, the asset owners, as well as the retail investors. They should also know about the investees such as companies, banks, real estate assets, and more different investees to help us acheive the net zero, social and climate goals. Also the investors should keep in mind the condition of the homeowners in which 25% of homeowners have a mortgage to pay every month.
Figure 3. A visual summary of the first panel of SENSEI conference
The second panel provided insights into key project results and the tools developed, following research led the line-up of speakers- Filippos Anagnostopoulos and Dimitra Tzani from IEECP, Johan Coolen from Factor4, Sotiris Papadelis from HEBES Intelligence and Monica Pascual from GENCAT. They presented key concepts and results, namely the Energy Efficiency aggregator and the model for setting up P4P schemes in Europe, offered lessons learned from the US, and indicated how this experience is being translated by proposing the architecture of setting up a P4P schemes. The importance of advanced Monitoring & Verification was highlighted as the key enabler of this advanced valuation of energy efficiency, and focused on the ability of P4P to trigger further private energy efficiency investments. The presentations concluded with a study on setting up a pay-for-performance scheme in Catalunya.
Figure 4: A visual summary of the second panel of SENSEI conference
In the last panel, SENSEI invited Alex Rathmell from EnergyPro, James Fenna from Carbon Co-op, Monica Pascual from GENCAT, Lieven Vanstraelen from BELESCO, and Juan Antonio Aranda Uson from the FRESCO project, to debate on the latest developments to set up pay-for-performance schemes, the challenges and successes, new projects working on P4P, and how things are evolving, touching upon the role of DSOs, regulators, the business community, benefit sharing, data analytics and more.
Figure 5: A visual summary of the third panel of SENSEI conference
Check out the replay and dig deeper into the topic with the speakers’ presentations!
- Panel 1: A Next Generation of Building Policies
- Panel 2: P4P – Digging into the Concept and Next Steps
- Panel 3: Demonstrating Pay-for-Performance
Presentations are available here.