Practices

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Experienced and lessons learned from P4P pilots for energy efficiency

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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. The fact that energy efficiency is not adequately compensated for these benefits (SENSEI, 2020) acts as a barrier to its deployment. It deprives it of valuable funding and means that we all pay more to ensure the adequacy, reliability and security of our energy systems. This is at odds with the Efficiency First (E1st) principle, which requires that energy supply and demand solutions are treated on an equal footing, considering their respective costs and benefits.

 

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 several of the more forward-thinking U.S. states, energy utilities have launched and piloted building programmes which utilise energy metering technologies to provide greater certainty over energy savings and drive improved performance. These Pay-for-Performance (P4P) schemes reward end users or aggregators for delivering energy savings, measured against a business-as-usual scenario. A certain level of operating performance, monitored with metered energy data, is required to obtain the incentive, often with repeated payments to reward persistent savings.

 

This report aims to review the current experience of Pay-for-Performance (P4P) schemes outside the EU, in particular with examples from the U.S. (11 in total) as well as one case from the EU (Germany), and to document the main enablers and obstacles for the roll-out of the first P4P pilots in the EU. Results include recommendations for the market and regulatory conditions that would be necessary for the replication of the studied P4P pilots/programmes in the EU, which, if acted upon, should speed up the rate of energy efficiency improvement in the EU’s buildings while reducing the costs of the energy transition.