EP Group delivered this project in partnership with Electricity North West, Energy Systems Catapult, Carbon Co-op and Manchester City Council with funding from Ofgem's Strategic Innovation Fund.
Following a successful Discovery Phase, ep Group developed new business models for metered energy savings enabled retrofit projects in the Retrometer Alpha Phase.
Background
There is growing recognition of the need to retrofit both residential and non-residential buildings at scale to meet the UK’s net zero targets. There are, however, many barriers to financing retrofit, particularly in the domestic market. The idea of metering energy savings is being adopted in the USA and can potentially make energy efficiency more investable by actually measuring real performance using a commonly defined measure of an energy saving.
Traditionally energy efficiency projects are assessed on deemed savings, essentially an estimate of how much energy savings are expected based on engineering-based calculations for the measures installed (for example insulation or LED lamps). It is widely recognised that there is a ‘performance gap’ between projected savings and actual savings, which reduces confidence amongst consumers, and is a risk to investors in projects, whether they be individual consumers, corporates, or financial institutions.
In contrast to deemed savings, metered energy savings (MES) look at the actual metered energy use (gas and electricity) after the retrofit, and compare it to what energy would have been consumed in that home during the post-retrofit period, had there not been a retrofit, i.e. a “counterfactual” energy use.
Benefits of MES
Helps to determine whether a retrofit has achieved what the householder and other stakeholders wanted it to achieve
Facilitates and assures high-quality retrofits by holding each actor in the retrofit supply chain accountable for their work
Contribute to learning about the real-life performance of retrofits, evaluate what retrofit measures work best
Helps in the planning of future energy systems by providing information on how much energy will be required when households are retrofitted
Helps to leverage financing of retrofit by providing more confidence in energy savings that underpin returns for private sector investors and additional certainty of non-energy outcomes for public sector funders
Enables funders to pay for the performance and measurable value that they receive from a series of retrofit projects, facilitating further collaboration and allowing new business models to emerge.
MES Business Model
MES could help to unlock a blended finance model which could provide benefits for NHS Trusts, financial institutions, network operators, householders, retrofit providers / facilitators and public bodies, amongst others. In order to align the strategic goals of the different stakeholders and leverage the impact of MES for residential retrofits at scale, an aggregator business model was identified.
Under this model, the aggregator acts as a Fund Manager for a MES Fund, developing standardised guidance, data connections and project evaluation infrastructure centrally, which can replicated across multiple retrofit providers to apply for financing through the fund. A fund type structure is preferred due to the high transaction costs of arranging individual, blended financings using private capital seeking a financial return and outcomes based capital.
"All project partners agreed that the metered energy savings approach has great value as it explicitly measures actual energy savings as well as the impacts from non-energy benefits. The RetroMeter project has further developed the original concept and outlined new business models that could be used to finance and implement MES-enabled retrofits."
Contact ep if you want to know more or apply metered energy savings to your projects.