Split Incentives Research Articles

Feedback and Behavioral Intervention in Residential Energy and Resource Use: a Review

A proliferation of research has emerged in the last 20 years, and especially in the last 5 years, on how to effectively engage inhabitants in energy and resource saving behaviors in the residential context. Such conservation behavior is critically important in addressing climate change and other associated energy impacts. However, feedback and behavioral interventions face challenges in motivating behavioral change that stem from individual and social psychological factors, as well as broader social and economic problems such as split incentives. We provide an overview of energy intervention research focusing on (1) different forms of intervention across contexts, (2) combined effects of intervention strategies, (3) consideration of residential demographics and individual characteristics, and (4) additional considerations for successful interventions. Our review demonstrates that there is significant variation in success across interventions, and that the context, decision structures, and combinatory choices can dramatically affect an intervention. Interventions that combine feedback, motivation, high engagement, and goal setting with well-designed and frequent communication are usually more effective.

The split incentives energy efficiency problem: Evidence of underinvestment by landlords

Due to asymmetric information between landlords and renters, landlords with tenants who pay the utility bill underinvest in energy efficiency measures. Using data from the 2009 Residential Energy Consumption Survey, I present empirical evidence that this underinvestment occurs in multiple categories of residential energy efficiency: space-heating, water-heating, window thickness, insulation, and weatherization. Because these landlords did not invest at the same rate as homeowners and landlords who pay the energy bill, their tenants’ energy bill was higher by nearly 2%. When combined with other researchers’ estimations for appliances (Davis, 2010), insulation, and thermostat responsiveness for tenants (Gillingham et al., 2012), our results imply that renters use approximately 2.7% more energy overall due to the landlord-tenant split incentive issue.

Understanding Stakeholders’ Influence on Project Success with a New SNA Method: A Case Study of the Green Retrofit in China

Stakeholders strongly influence project success, particularly for complex projects with heterogeneous stakeholders, and hence, understanding their influence is essential for project management and implementation. This paper proposes an original model based on social network analysis (SNA), which first introduces critical success factors (CSFs) as intermediate variables between stakeholders and project success. The model can demonstrate the interrelation between stakeholders and CSFs, and the results can reveal how stakeholders influence project success. Green retrofit is a typical type of complex project. The stakeholder relationship in green retrofit projects is more complex than in new projects, since more stakeholders (e.g., tenants and facility managers) who have particular interrelations (e.g., lease contract and split incentives between owners and tenants) are involved. Therefore, a case study of green retrofit in China was conducted to illustrate how the proposed model works. The results indicated the priorities and similarities of stakeholders in green retrofit. Stakeholders are categorized into five clusters according to their relationship. Based on the results, the important role of stakeholders in green retrofit projects was discussed. The main contribution of this study is providing a novel method to reveal how stakeholders influence the success of complex projects.

Understanding barriers to energy-efficiency renovations of multifamily dwellings

We have studied how energy efficiency is discussed by professionals during renovation of multifamily dwellings, in order to capture how barriers in relation to energy measures are appearing, disappearing and transformed during the process. We did participatory observations of renovation meetings, conducted interviews with the involved professionals and studied-related documents. Our intentions have not been to assess decisions made, but to follow the process to gain a different understanding of how barriers can be understood during renovations. We can conclude that the renovation process is based on a complex series of contractural relationships, where assymetric information and lack of common goals contribute to split incentives. The results also show that the housing company’s internal organisation becomes a barrier where assymetric information and split incentives also became an in-house barrier. The decisions were often based on bounded rationality where calculations were surprisingly absent in meetings and during discussions on energy measures.

Identifying policy solutions for improving the energy efficiency of rental properties

World leaders have acknowledged that climate change is one of the biggest challenges we face in the 21st century and have committed to pursuing efforts to limit warming to 1.5 degrees above pre-industrial levels (UNFCCC, 2015). To do this, further efficiencies in energy use are needed across all sectors, many of which still offer considerable potential for improving energy efficiency. Rental properties in particular, have seen very few improvements in energy efficiency due to a range of barriers and market failures including misinformation, split incentives and an uneven power dynamic between renters and landlords. This is important as not only do rental properties account for a significant proportion of housing stock, the high proportion of low income households in rental properties are particularly vulnerable to rising energy prices. This study aimed to identify feasible policy solutions for overcoming the barriers to energy efficiency improvements in rental properties. Renters, landlords and agents were presented with five possible solutions to determine their level of support. Eight key recommendations for overcoming the barriers to energy efficiency improvements in rental properties are provided. These create a foundation for policy makers, councils and businesses to develop and target energy efficiency solutions for rental properties.

Extending Demand Response to Tenants in Cloud Data Centers via Non-Intrusive Workload Flexibility Pricing

Participating in demand response programs is a promising tool for reducing energy costs in data centers by modulating energy consumption. Toward this end, data centers can employ a rich set of resource management knobs, such as workload shifting and dynamic server provisioning. Nonetheless, these knobs may not be readily available in a cloud data center (CDC) that serves cloud tenants/users, because workloads in CDCs are managed by tenants themselves who are typically charged based on a usage-based or flat-rate pricing and often have no incentive to cooperate with the CDC operator for demand response and cost saving. Toward breaking such “split incentive” hurdle, a few recent studies have tried market-based mechanisms, such as dynamic pricing, inside CDCs. However, such mechanisms often rely on complex designs that are hard to implement and difficult to cope with by tenants. To address this limitation, we propose a novel incentive mechanism that is not dynamic, i.e., it keeps pricing for cloud resources unchanged for a long period. While it charges tenants based on a usage-based pricing (UP) as used by today's major cloud operators, it rewards tenants proportionally based on the time length that tenants set as deadlines for completing their workloads. This new mechanism is called UP with monetary reward (UPMR). We demonstrate the effectiveness of UPMR both analytically and empirically, showing: 1) UPMR can effectively reduce the CDC's peak power consumption and energy cost without decreasing the CDC's profit and 2) UPMR outperforms the state-of-the-art approaches that are used by today's CDC operators to charge their tenants in terms of the profit gained by the CDC.

Driving forces and obstacles to nuclear cogeneration in Europe: Lessons learnt from Finland

Nuclear power plants generate electricity and a large amount of waste heat which is valuable for cogeneration. District heating (DH) is a suitable technology to decarbonize the European heat sector. By contrast with most of nuclear non-electric applications, nuclear district heating (NDH) has already been implemented in Europe, thus providing us with some valuable empirical insights. This paper investigates the forces and obstacles to nuclear cogeneration by looking at the Loviisa 3 NDH project in Finland. The key forces are energy efficiency, decarbonization of the heat sector, operational competitiveness of future nuclear technologies, and synergies with renewable energies. The key obstacles are split incentives, electricity prices volatility, inexpediency of business models and regulatory frameworks, electioneering of local authorities and pessimist expectations with regards to project financing. Policy makers should recognize nuclear plants alongside other utilities generating large amounts of wasted heat. International cooperation programs involving both nuclear and heat stakeholders should be encouraged. EU28 Member States wanting to promote nuclear cogeneration may consider providing support for the electricity generated by high-efficiency plants.

Blame It on the Owner Ownership and Energy Performance of Multi-Dwelling Buildings

Institutional structures may cause considerable inefficiencies in the use of energy. In this paper, we investigate the energy efficiency of multi-dwelling buildings in Sweden to find out whether the type of ownership matters. More specifically, we investigate whether rental apartment buildings are less efficient than cooperative apartment buildings and whether public ownership has a negative impact on energy efficiency. A conceptual framework is presented to illustrate that such differences could be explained by the split incentive problem and deviations from profit maximizing interests. The empirical analysis is based on a unique dataset that combines data from energy performance certificates with ownership data on residential units. The results indicate that cooperative apartment buildings are significantly more energy efficient than buildings with rental apartments. The results also indicate that publicly owned buildings have lower energy performance than privately owned ones.

Bridging the divide: Reducing operating expenses and pursuing sustainability in leased spaces

Due to split incentives and complex lease arrangements, tenants and landlords have often pursued sustainability and energy efficiency independently and avoided focusing on the opportunities within leased space. New research on the benefits of sustainability on health and well-being, an increasingly defined connection between sustainability and financial performance, new programmes and resources, and rapidly emerging technologies that drive and demonstrate the business case for improved energy performance have, however, opened new pathways to bridge the divide between tenants and landlords, enabling mutually beneficial collaboration. This paper examines the barriers and benefits for both tenants and landlords to pursue energy efficiency in leased space, and highlights existing and emerging resources and programmes that provide information on how to get started.

Understanding the potential of facilities managers to be advocates for energy efficiency retrofits in mid-tier commercial office buildings

Realising energy efficiency opportunities in new commercial office buildings is an easier task than retrofitting older, mid-tier building stock. As a result, a number of government programs aim to support retrofits by offering grants, upgrades, and energy audits to facilitate energy efficiency opportunities. This study reports on a state government program in Victoria, Australia, where the uptake of such offerings was lower than expected, prompting the program team to consider whether targeting facilities managers (FMs), rather than building owners, might be a better way of delivering the program. The influences and practices of FMs that impact on their ability to be advocates for energy efficiency were explored. The results revealed that complex building ownership arrangements, poor communication skills, isolation from key decision making processes, a lack of credible business cases and information, split incentives, and the prospect of business disruptions can all impact on FMs’ ability to drive organizational change. Future program efforts should continue to interrogate the social context of retrofits in mid-tier buildings, including other influences and influencers beyond FMs, and adapt accordingly.

Barriers to Energy Efficiency in Swedish Non-Energy-Intensive Micro- and Small-Sized Enterprises—A Case Study of a Local Energy Program

Improved energy efficiency has become a strategic issue and represents a priority for European competitiveness. Countries adopt various energy policies on local and national levels where energy audit programs are the most common energy end-use efficiency policy for industrial small- and medium-sized enterprises (SMEs). However, studies indicate that cost-efficient energy conservation measures are not always implemented, which can be explained by the existence of barriers to energy efficiency. This paper investigates how Swedish municipalities can support local micro- and small-sized enterprises with improved energy efficiency and the existence of different barriers to the implementation of energy efficiency. Relating this empirical case study to the theoretical barriers outlined in the text, this study found that the major explanatory factors related to non-implementation of cost-effective energy efficiency measures among micro- and small-sized industrial enterprises were bounded rationality (lack of time and/or other priorities), split incentives (having other priorities for capital investments), and imperfect information (slim organization and lack of technical skill). This study also found that information in the form of a report was the main thing that companies gained from working on the project “Energy-Driven Business”. Notably, the study involved companies that had participated in a local energy program and, still, companies face major barriers inhibiting implementation, indicating a need to further study other alternative policy models and how knowledge transfer can be improved.

Potential Barriers to Improving Energy Efficiency in Commercial Buildings: The Case of Supermarket Refrigeration

According to engineering analyses, energy-intensive commercial buildings have ample opportunities to reduce energy use while saving money, but many seemingly profitable strategies go unadopted. This study explores potential barriers to energy- and refrigerant-reducing investments in supermarket refrigeration. While supermarkets are large energy users, energy and refrigerant account for a relatively small proportion of expenditures. However, due to the intensely competitive nature of the industry, reducing refrigeration costs could have a sizable impact on supermarkets’ bottom lines. Given the scarcity of empirical data in this context, we conducted focus groups and interviews with U.S. supermarket representatives to elicit information about potential barriers to investment and used content analysis to qualitatively evaluate results. Participant statements suggest that the rate at which they adopt specific energy-reducing refrigeration technologies and practices correlates fairly well with estimates of expected payback. Uncertainty and imperfect information about the performance of new technologies, high opportunity costs of capital, and tradeoffs with other valued system attributes such as reliability and customer appeal were the most pervasive potential barriers discussed by participants, although split incentives between firms and contractors or employees also played a role for some firms. Our assessment is that these factors have moderately limited or slowed investments in energy-saving refrigeration technologies for many firms; only in the cases of uncertainty/imperfect information and split incentives between firms and contractors or employees are these barriers potentially indicative of market failures. In addition, in several instances we identify ways in which analysts could improve engineering-based net present value calculations to make them more consistent with actual firm decisions.

Factory Eco-Efficiency Modelling: Data Granularity and Performance Indicators

Eco-efficiency is becoming an increasingly important performance measure. Currently manufacturers rely on reactive methods such as auditing for assessment. There are still significant theoretical and practical barriers including a lack of knowledge regarding the selection and composition of appropriate data granularities, model quality to improve decision making, and split incentives between facilities and manufacturing asset management. The purpose of this paper is to show the application of an eco-efficiency modelling framework in the case of a fast-moving consumer goods factory. The framework composes resource and production data. These are analysed with respect to three data granularity factors, asset subdivision, time-step, and resource magnitude. Modelling is used to represent asset eco-efficiency across available subdivisions using performance indicators.

A game theory based analysis of decision making for green retrofit under different occupancy types

Buildings are responsible for almost half of all the energy consumption and greenhouse gas (GHG) emissions in the world. This situation highlights the importance of the green retrofit for existing buildings in reducing the energy consumption and GHG emissions, as emphasized by the academia and improved by the government. Although relevant stakeholders are interested in implementing green retrofit projects, this approach has not been widely pursued by the industry, the reasons of which remain unclear. Therefore, this study aims to reveal the underlying logic by analyzing the behaviors of the building owners and occupiers, who are the direct decision makers in initiating green retrofit at the initial intention phase. Three occupancy scenarios, namely, owner-occupied (baseline scenario), single-occupied, and multi-occupied buildings, are used for the game analysis. The Nash Equilibrium of the game is used to analyze the probable decisions of the owners and occupiers under the last two occupancy scenarios. Results demonstrate that both owners and occupiers are reluctant to retrofit under both scenarios. Nevertheless, the reasons vary under the two scenarios despite the same results obtained. This study clarifies the reasons for the reluctance of the direct decision makers to participate in green retrofit projects. The main reasons include the split incentives between the owners and occupiers, the complex coordination, and the uncertainty of green retrofit. The identified reasons are also beneficial to the policy makers, particularly in their effort to promote green retrofit by considering the requirements of owners and occupiers under the different occupancy types.

Clean energy utility for multifamily housing in a deregulated energy market

Energy efficiency and renewable energy (EERE) investment in multifamily residences in the United States has not kept pace with investment in resident-owned facilities. Split incentives, where owners cannot benefit economically from energy cost savings for residences and resident investment in EERE is not feasible, have posed a significant barrier. A clean energy utility is posited to circumvent this barrier. This utility would be responsible for power purchase from the grid, ideally as a real-time purchase agent from the grid manager; investment in energy efficiency and renewable energy; and demand management through control of water heating, as well as supply-side management through deployment of stored solar at near-peak grid power purchase cost. A clean energy fee is posed for recovery of costs, in contrast to typical consumption strategies (per kWh).A case study approach is employed to evaluate the feasibility of this type of utility of reducing carbon production in this building sector. Considered in the analysis is a 2008 multifamily facility located in the Midwest of the U.S., with apartment level interval meters for both power and water. Historical data from these meters were used to assess the savings and demand-side management potential from investments in improved efficiency lighting, refrigeration, heat pumps, and water heaters, as well as investments in solar PV and storage for supply-side management. The results show that the packaged retrofit EERE investment could yield costs for residents and profits for energy manager comparable to those in the current residential pricing scheme, while reducing grid-sourced energy by 42%. When solar PV and battery storage are added to the solution, it is shown that a clean energy fee structure can cost-effectively drive savings to over 54%. For new construction, even deeper cost effective savings are realizable. This research demonstrates the potential to drive deep energy savings in the multifamily building sector that can lower costs to residents through the establishment of clean energy utilities which recover investments in energy efficiency, demand management, and solar PV/battery systems through resident clean energy fees rather than consumption fees.

Drawing On College Student Attitudes and Behaviors to Instigate Energy Efficiency Improvements in Rental Housing

Improving the energy efficiency of residential rental properties has been a priority of Cornell Cooperative Extension of Tompkins County. However, traditional educational programming has had limited effectiveness due to a split incentive dynamic between landlords and tenants relative to property upgrades. We demonstrate that college students have broad interest in but limited knowledge of energy efficiency and are willing to pay a premium for relevant improvements. Our findings indicate that there is strong potential for Extension professionals to engage off-campus housing offices, students, and landlords in the development of modified leases and to facilitate educational programming that specifically addresses rental housing energy efficiency.

The UK market for energy service contracts in 2014–2015

This paper provides an overview of the UK market for energy service contracts in 2014 and highlights the growing role of intermediaries. Using information from secondary literature and interviews, it identifies the businesses offering energy service contracts, the sectors and organisations that are purchasing those contracts, the types of contract that are available, the areas of market growth and the reasons for that growth. The paper finds that the UK market is relatively large, highly diverse, concentrated in particular sectors and types of site and overwhelmingly focused upon established technologies with high rates of return. A major driver is the emergence of procurement frameworks for energy service contracts in the public sector. These act as intermediaries between clients and contractors, thereby lowering transaction costs and facilitating learning. The market is struggling to become established in commercial offices, largely as a result of split incentives, and is unlikely to develop further in this sector without different business models, tenancy arrangements and policy initiatives. Overall, the paper concludes that energy service contracts can play an important role in the transition to a low-carbon economy, especially when supported by intermediaries, but their potential is still limited by high transaction costs.

Façade insulation retrofitting policy implementation process and its effects on health equity determinants: A realist review

Fuel poverty and cold housing constitute a significant public health problem. Energy efficiency interventions, such as façade retrofitting, address the problem from a structural and long-term perspective. Despite evidence of the health benefits of insulation, little is known about the political and social contexts that contribute to social inequalities in receiving and experiencing health benefits from these interventions. We used a realist review methodology to better understand the mechanisms that explain how and why variations across different social groups appear in receiving energy efficiency façade retrofitting interventions and in their impact on health determinants. We considered the four stages of the policy implementation framework: public policy approach; policy; receiving intervention and impact on health determinants. We found strong evidence that certain social groups (low-income, renters, elderly) suffering most from fuel poverty, experience more barriers for undertaking a building retrofitting (due to factors such as upfront costs, “presentism” thinking, split incentives, disruption and lack of control), and that some public policies on housing energy efficiency may exacerbate these inequalities. This can be avoided if such policies specifically aim at tackling fuel poverty or social inequities, are completely free to users, target the most affected groups and are adapted to their needs.

Factory Eco-Efficiency Modelling: Framework Application and Analysis

Eco-efficiency is becoming an increasingly important organisational performance measure. Currently manufacturers rely on reactive methods such as auditing for assessment. There are still significant theoretical and practical barriers including a lack of knowledge regarding data granularity, model results quality and split incentives between facilities and manufacturing asset management. The purpose of this paper is to show the application of an eco-efficiency modelling framework in the case of a furniture-manufacturing factory. The framework composes resource and production data. These are analysed with respect to three data granularity factors, asset subdivision, time-step, and resource magnitude. Modelling is used to represent asset eco-efficiency across available subdivisions using performance indicators. This paper contributes to industrial sustainability literature by applying a factory eco-efficiency modelling framework in a comparative study of the case company's cursory and detailed data. Facility, utility and manufacturing assets are modelled and analysed from logged data granularity factors.

The relationship between EU's public procurement policies and energy efficiency of ferries in the EU

The European ferry sector is the largest ferry sector globally and one of the key environmental issues facing the sector is the mitigation of greenhouse gas emissions. This paper provides an analysis of how the EU ferry procurement policies lead to lack of implementation of energy efficiency measures, contrary to the EU's key objective of reducing CO2 emissions in ferries within the EU region. This paper is the first analysis to examine the public–private sector interaction in transport and how this leads to a lack of implementation of energy efficiency measures. Analysing the sector using agency theory suggests that split incentives are pervasive and can stymie attempts to improve the energy efficiency of ferry services in the procurement of ferries. The findings suggest that there is a need to review current ferry procurement policies with a view to devising procurement policies that can address the split incentives, as well as other policies, that are outside the scope of procurement policies, which can be used to minimise the split incentives.