Devising policy strategies for the deployment of energy efficiency Pay-for-Performance programmes in the European Union

Abstract

Triggering a massive wave of renovation in buildings and sustaining it over the long term requires a mix of policy instruments ranging from regulations, renovation incentives, and financial models. In this context, an innovative financing approach to consider is Pay-for-Performance (P4P) programmes, which use data-driven measurement and verification approaches and engage both energy and third-party service providers in energy efficiency projects. However, while in North America, several energy utilities have already piloted and launched energy efficiency P4P programmes, progress in the European Union (EU) still remains slow. In this article, we focus on how the existing EU regulatory and market framework could support the deployment of P4P programmes. To do so, we combine a Strengths, Weaknesses, Opportunities, and Threats framework with an Analytical Hierarchy Process method and a Threats, Opportunities, Weaknesses, and Strengths matrix for the analysis of different stakeholder perceptions and the formulation of policy strategies. Policy recommendations include, among others, establishing demanding energy performance standards, valuing energy efficiency as a resource, and promoting “metered savings” methodologies. Overall, our work serves as a reference point for policy developments and adjustments that could facilitate the design and deployment of performance-based energy efficiency programmes in the EU.