Periodic Reporting for period 1 - SmartSPIN (Smart energy services to solve the SPlit INcentive problem in the commercial rented sector)
Reporting period: 2021-09-01 to 2023-02-28
Across Europe, buildings account for 40% of energy consumption and 36% of carbon emissions. It is estimated that 75% of buildings in the European Union (EU) are inefficient, yet only 1% of buildings are renovated each year. According to a report by BPIE, approximately 25% of Europe’s 25 billion m2 of useful building floor area is accounted for by non-residential buildings, of which 28% are wholesale or retail premises, 23% are offices, 11% are
hotels and restaurants, and 4% are sports facilities. These types of building are often owned by a commercial landlord who rents or leases all or parts of the building to one or more tenants. One of the major barriers to energy efficient building renovations in commercially rented buildings is the split incentive problem – i.e. the conflict that arises when the benefits of a transaction do not accrue to the person who pays for it. Removing the split incentive problem is a European priority as evidenced by Article 19 of the Energy Efficiency Directive (EED). Article 19 requires Member States to evaluate, and take appropriate measures to remove, the regulatory and non-regulatory barriers to energy efficiency with particular regard to the split of incentives between the owner and tenant of a building.
SmartSPIN will develop, test, validate and exploit a new business model for Energy Service Companies (ESCOs) that leads to greater uptake of Smart Energy Services (SES) deployed via performance-based contracting in the commercial rented sector. This sector has huge potential for energy savings but has avoided the use of performance based approaches like energy performance contracts (EPC) because of two main barriers: (a) the long contract
duration of EPCs and (b) the split incentive problem. SmartSPIN will remove both these barriers by demonstrating and validating an innovative Energy Efficiency-as-a-Service (EEaaS) business model in 3 pilot regions in Europe
(Spain, Greece and Ireland).
The SmartSPIN business model integrates energy efficiency with other energy services such as flexibility and creates value from both energy and non-energy benefits. Combined with advanced M&V concepts that use big data from smart equipment and a contractual approach that splits the benefits between all stakeholders in a fair and transparent manner, SmartSPIN builds trust between the parties that will lead to greater uptake of SES in the
commercial rented sector. To maximize impact and uptake, SmartSPIN will develop a business model toolkit and train 350 actors in the value chain on the key features of the business model.
The objective of the project are -
1. To demonstrate the feasibility, effectiveness and advantages of the SmartSPIN innovative business model that combines both energy and non-energy benefits in a smart energy services offering for the commercial rented sector.
2. To address the barriers that prevent the commercial rented sector from engaging in energy services, energy efficiency projects and performance based contracting.
3. To demonstrate how big data generated from smart equipment can be used to better control energy consumption in buildings and more accurately measure and verify energy savings and flexible energy consumption.
4. To develop an innovative business model and new contractual templates that allow the proposed SES to be deployed in the commercial rented sector.
5. To engage and train key market stakeholders (ESCOs, landlords, tenants, industry bodies, M&V practitioners, smart technology manufacturers) in the deployment of the SmartSPIN business model.
hotels and restaurants, and 4% are sports facilities. These types of building are often owned by a commercial landlord who rents or leases all or parts of the building to one or more tenants. One of the major barriers to energy efficient building renovations in commercially rented buildings is the split incentive problem – i.e. the conflict that arises when the benefits of a transaction do not accrue to the person who pays for it. Removing the split incentive problem is a European priority as evidenced by Article 19 of the Energy Efficiency Directive (EED). Article 19 requires Member States to evaluate, and take appropriate measures to remove, the regulatory and non-regulatory barriers to energy efficiency with particular regard to the split of incentives between the owner and tenant of a building.
SmartSPIN will develop, test, validate and exploit a new business model for Energy Service Companies (ESCOs) that leads to greater uptake of Smart Energy Services (SES) deployed via performance-based contracting in the commercial rented sector. This sector has huge potential for energy savings but has avoided the use of performance based approaches like energy performance contracts (EPC) because of two main barriers: (a) the long contract
duration of EPCs and (b) the split incentive problem. SmartSPIN will remove both these barriers by demonstrating and validating an innovative Energy Efficiency-as-a-Service (EEaaS) business model in 3 pilot regions in Europe
(Spain, Greece and Ireland).
The SmartSPIN business model integrates energy efficiency with other energy services such as flexibility and creates value from both energy and non-energy benefits. Combined with advanced M&V concepts that use big data from smart equipment and a contractual approach that splits the benefits between all stakeholders in a fair and transparent manner, SmartSPIN builds trust between the parties that will lead to greater uptake of SES in the
commercial rented sector. To maximize impact and uptake, SmartSPIN will develop a business model toolkit and train 350 actors in the value chain on the key features of the business model.
The objective of the project are -
1. To demonstrate the feasibility, effectiveness and advantages of the SmartSPIN innovative business model that combines both energy and non-energy benefits in a smart energy services offering for the commercial rented sector.
2. To address the barriers that prevent the commercial rented sector from engaging in energy services, energy efficiency projects and performance based contracting.
3. To demonstrate how big data generated from smart equipment can be used to better control energy consumption in buildings and more accurately measure and verify energy savings and flexible energy consumption.
4. To develop an innovative business model and new contractual templates that allow the proposed SES to be deployed in the commercial rented sector.
5. To engage and train key market stakeholders (ESCOs, landlords, tenants, industry bodies, M&V practitioners, smart technology manufacturers) in the deployment of the SmartSPIN business model.
The overall work is divided into 7 work Packages (WP). During first 18 months of the project the following activities have been undertaken.
In WP1, ethics approval was obtained from Social Research Ethics Committee of University College Cork, Data and IP management plan was developed and evaluation and monitoring of performance indicators in under progress. Consortium requested Grant Agreement amendment took place to reflect the change of pilot building in Ireland and Greece and change in impact numbers due to change of pilot buildings.
In WP2, review of Smart Energy Services (SES) market for commercial rented sector was conducted. This review includes review of existing business models for smart energy services, maturity of ESCO and SES market and review of policies supporting uptake of SES in the SmartSPIN pilot countries. Finally a list of recommendations was drew as the learnings from above mentioned reviews to enhance and support the uptake of SmartSPIN service.
In WP3, a review of legal challenges preventing landlords/tenants to undertake performance-based contracts to improve energy efficiency was conducted along with review of green leasing and on-bill financing contracting option. Specific functions and contractual elements to automate the financial transactions between involved parties were identified. A set of guidelines was developed to overcome the split incentive issue based on the feedback and recommendations from external advisory board members. Contractual service was defined. SmartSPIN contractual template and development of dynamic tariff structure is under progress.
In WP4, interactive web-app showing the potential for energy management in EPC and SmartSPIN early building performance diagnostics (API and web-dashboard)was developed. Development of automated M&V approach and algorithm and development of data-driven prognostics for operation and control is under progress.
In WP5, initially planned pilot buildings in Ireland and Greece that were mentioned in Grant Agreement were changed due to accessibility and operational reasons. Site preparation and setting baseline for pilot buildings is under progress and list of energy saving measures to implement is being agreed with the building owner/building management companies.
In WP6, SmartSPIN business model & value proposition is being developed.
In WP7, a systematic value chain and stakeholder analysis is in progress. first round of online survey targeting the SmartSPIN stakeholders is complete. Project branding and logo is ready. Project website is up and running. Social media channels (LinkedIn and Twitter) of the project is set up. First introductory video of the project is released with the aim to raise awareness of the project scope and objectives.
In WP1, ethics approval was obtained from Social Research Ethics Committee of University College Cork, Data and IP management plan was developed and evaluation and monitoring of performance indicators in under progress. Consortium requested Grant Agreement amendment took place to reflect the change of pilot building in Ireland and Greece and change in impact numbers due to change of pilot buildings.
In WP2, review of Smart Energy Services (SES) market for commercial rented sector was conducted. This review includes review of existing business models for smart energy services, maturity of ESCO and SES market and review of policies supporting uptake of SES in the SmartSPIN pilot countries. Finally a list of recommendations was drew as the learnings from above mentioned reviews to enhance and support the uptake of SmartSPIN service.
In WP3, a review of legal challenges preventing landlords/tenants to undertake performance-based contracts to improve energy efficiency was conducted along with review of green leasing and on-bill financing contracting option. Specific functions and contractual elements to automate the financial transactions between involved parties were identified. A set of guidelines was developed to overcome the split incentive issue based on the feedback and recommendations from external advisory board members. Contractual service was defined. SmartSPIN contractual template and development of dynamic tariff structure is under progress.
In WP4, interactive web-app showing the potential for energy management in EPC and SmartSPIN early building performance diagnostics (API and web-dashboard)was developed. Development of automated M&V approach and algorithm and development of data-driven prognostics for operation and control is under progress.
In WP5, initially planned pilot buildings in Ireland and Greece that were mentioned in Grant Agreement were changed due to accessibility and operational reasons. Site preparation and setting baseline for pilot buildings is under progress and list of energy saving measures to implement is being agreed with the building owner/building management companies.
In WP6, SmartSPIN business model & value proposition is being developed.
In WP7, a systematic value chain and stakeholder analysis is in progress. first round of online survey targeting the SmartSPIN stakeholders is complete. Project branding and logo is ready. Project website is up and running. Social media channels (LinkedIn and Twitter) of the project is set up. First introductory video of the project is released with the aim to raise awareness of the project scope and objectives.
The innovative approach of the SmartSPIN business model tripartite ESCO contract and its 2 stage implementation approach. The first stage in the SmartSPIN business model is to interact with tenants and implement low cost actions with short payback periods. It also increases trust between ESCO, landlord and tenant as the ESCO offers guaranteed saving for these actions. And the second stage involves interaction with landlord to implement higher cost measures with the guaranteed saving.
SmartSPIN is expected to trigger to 4.72GWh/year of primary energy saving and 812 tCO2/year GHG emission saving, 7.82 m€ investment and 126 new jobs in energy efficiency value chain. Two best practice guides (one for ESCOs wishing to offer SES and one for landlords and tenants); a guide for policy makers on how to promote SES; and a business model toolkit for SES will also be developed as a result of the project.
SmartSPIN is expected to trigger to 4.72GWh/year of primary energy saving and 812 tCO2/year GHG emission saving, 7.82 m€ investment and 126 new jobs in energy efficiency value chain. Two best practice guides (one for ESCOs wishing to offer SES and one for landlords and tenants); a guide for policy makers on how to promote SES; and a business model toolkit for SES will also be developed as a result of the project.