Smart Energy Efficiency Contracts for Buildings

Numerous studies in the UK have identified a so-called “performance gap” in building energy efficiency. This issue is of significance because current practices or designs lead to situations where the whole housing stock is consuming more energy than intended, thus causing more GHG emissions, health issues and discomfort. Since the UK has an ambitious target of reducing its emissions significantly by 2050 there is a clear need to start building better. However, retrofitting existing buildings with expensive equipment or other energy efficiency investments has been harder than thought, either the payback times are too long or there just is no willingness or expertise for either builders or owners to invest in them. The builder wants to build quickly and cheaply and an average house-owner does not want to risk his or her own comfort or have long payback times for investments for a property which he might be living in for less than a decade although a house lifetime can be even more than 100 years.

My idea is to tackle this issue by designing a “smart energy efficiency contract”. The contract would work by providing house heating and energy as a service for people meaning that under certain conditions the “service” is delivered and the user pays for it based on that. The concept of consumption of energy is reinvented, instead of buying gas or electricity per unit, the owner would buy his or her comfort i.e. temperature in the house, lighting and use of appliances as a service from the provider who would then be delivering this service. For example, if the owner wants to have an inside temperature of 21 C, the fee would be X and if the temperature is set higher, it would be higher etc. This kind of payment mechanisms would be possible with smart meters and controls. One of the options could be to look into smart contracts deployed in a blockchain. Energy efficient appliances (other items, such as efficient refrigerators etc. would also be taken into account).

The service provider has then the responsibility to price the energy based on the energy efficiency of the house. Since it would be paying for the actual energy it would thus be incentivised to invest in the energy efficiency of the property. The benefits of new investments would naturally be shared with the owner and the service provider. For example, if the service provider sees it as a good option to install a heat pump and the owner is not willing to do that, that could affect the price in an agreed way as long as the provider can show the effects of the potential investment. These contracts should be long-term and stay in place over different owners. Naturally the provider and owner should be on a level playing field to allow reasonable behaviour on both sides. Such long-term contracts could then in the end become an item which would be seen as an added value on a property.

The idea is not completely novel, it has been introduced in other forums before too. For example: http://energiesprong.eu/about/. Especially in the solar power this kind of business models have been picking up: https://www.theguardian.com/sustainable-business/selling-energy-service-meeting-needs-of-poor. Now the time is to extend this kind of thinking into the UK housing sector too to incentivise refurbishments.