What problem is SENSEI solving and what is P4P all about?

Below you can find background information on the project and P4P

You can read about:

  1. The problem SENSEI will solve
  2. Energy efficiency in buildings as a procurable resource
  3. Energy efficiency and the positive side effect in the grid

The problem SENSEI will solve

The Energy Performance Contracting (EPC) model has been successful in attracting investments in energy efficiency, but mainly for single, large projects. On the other hand, energy efficiency programs constitute an alternative path to scaling up the number of buildings that implement energy efficiency interventions, but the practice of rebates and incentives that are paid up front creates a need to rely on deemed energy savings and on complex and costly regulations that hinder innovation. SENSEI will develop a solution to solve this problem.

Building on earlier successful experimentation outside of the EU, such as pay-for-performance contracts, SENSEI will design concepts and business models that will help:

  • Generate new sources of benefits that increase the value of an energy retrofit project by enabling the compensation of energy efficiency as an energy resource;
  • Turn the project’s value into an investable asset to attract private financing;
  • Aggregate buildings and energy efficiency measure plans into portfolios of energy savings that can be offered to energy providers and to third party investors through energy savings purchase agreements.

Energy efficiency in buildings as a procurable resource

Historically, it has been almost impossible to make buildings deeply energy efficient. Building owner will not invest because the savings flow to the tenants. Tenants will not invest because they don’t own the building. And energy efficiency reduces utility sales, undermines their business models and can raise rates. So utility only does as much energy efficiency as they are required to do.

Traditionally, energy efficiency intervention projects in the building stock focus on “energy savings per month”; where “savings” are often opaquely engineered to include administration costs, repairs, new investments, another expenses.

SENSEI will turn energy efficiency, which typically is measured and thought about as “monthly savings”, into a procurable flexible resource that will contribute to balance the energy distribution.

Foremost, energy efficiency can be measured and thereby managed. Usually, in public funded “monthly savings” programs in buildings, energy efficiency is measured and analysed to understand how people in the buildings perform. SENSEI will utilize such available data and energy consumption curves from building performance – compiling different performing profiles into portfolios – to develop a performance model that actually can simulate the evolution of an energy efficiency program. A Pay-for-Performance (P4P) model allows for savings to be offered (for example, on a bidding platform to players in the market as an investment), thereby allowing the energy efficiency to become a manageable procurable resource that can contribute to bring more flexibility into the grid.

In funded “monthly savings” programs, energy savings are often payed up-front based on technical calculations and estimated energy savings. In contrast, P4P schemes require the energy efficiency improvements to be implemented by prior to payment. Therefore, the contractor will only be paid based on proven and measured savings.

These P4P schemes – also known as pay for savings – can dramatically improve energy distribution balance and become a measurable and manageable, flexible capacity. P4P schemes are being rolled out in several American states and SENSEI will apply learnings from the US to the European energy market. For example, in the United States, energy efficiency is becoming a procurable resource, that is attracting aggregators and other private investors. They see an opportunity to get a larger piece of the pie by buying contracts to benefit from energy efficiency savings. In fact, some American companies working in the energy efficiency market focus equally on savings, comfort, and health. A key driver for companies and their business models are not only to benefit from energy savings but also to contribute to a healthier environment and more comfortable buildings to live in for people.

Figure: An example of a P4P business case and the interplay of parties

Energy efficiency and the positive side effect in the grid

While increased clean energy in the European energy grid is good news for the climate, it creates unique challenges for managing fluctuations in the grid. Peaks from solar power and wind energy have a large impact on the grid and creates instability in the ability to manage the grid and the pricing of the energy distributed in the grid. Today the distributed energy resource market in Europe has a range of resources such as electric vehicle charging, energy storage, demand response, and others. These are all resources that can be measured and managed and therefore contribute to a balanced distribution of energy. In other words, utilize the clean energy that is brought into the grid day and night and mitigate paying other grids to take up the accessible surplus energy during peak time.

Project SENSEI will develop a new grid resource that will help solve the problem of instability and create flexibility and balance in the distribution of energy. The project also aims to utilize the clean energy and displace carbon sourced energy like oil and gas. SENSEI will focus on energy efficiency as a procurable asset to bring more flexibility in managing the balance of energy distribution.