Performance-based Potential for Residential Energy Efficiency

Energy performance contracts (EPCs) have proven an effective mechanism for increasing energy efficiency in nearly all sectors of the economy since their introduction nearly 30 years ago. In the modern form, activities undertaken as part of an EPC are scoped and implemented by experts with specialized technical knowledge, financed by commercial lenders, and enable a facility owner to limit risk and investment of time and resources while receiving the rewards of improved energy performance. This report provides a review of the experiences of the US with EPCs and discusses the possibilities for the residential sector to utilize EPCs. Notably absent from the EPC market is the residential segment. Historically, research has shown that the residential sector varies in several key ways from markets segments where EPCs have proven successful, including: high degree of heterogeneity of energy use characteristics among and within households, comparatively small quantity of energy consumed per residence, limited access to information about energy consumption and savings potential, and market inefficiencies that constrain the value of efficiency measures. However, the combination of recent technological advances in automated metering infrastructure, flexible financing options, and the expansion of competitive wholesale electricity markets to include energy efficiency as a biddable supply-side resource present an opportunity for EPC-like efforts to successfully engage the residential sector, albeit following a different model than has been used in EPCs traditionally.