Page 43 - European Energy Innovation magazine - autumn 2022 edition

Explanation of the P4P programme and financing model proposed by the
SENSEI project

tendering procedure. The Aggregator(s)
with the best offer for a sector
implements the P4P programme. The
Aggregator funds an ESCO’s purchase
in energy efficiency projects (B), and
thus should conclude a funding
agreement with the ESCO. The
ESCO in turn concludes an energy
performance contracting agreement
with an Economic Agent (e.g. a
building management company or
the building owner) for the specific
project (C). This lays out the minimum
energy cost savings that the ESCO
guarantees, via a bonus or malus
system. The building owner does
not have to fund the installation of
measures and only pays the ESCO
a yearly remuneration, composed
of repayment, maintenance and Fund. The feasibility of a particular authorities and power system
management fees and a bonus/ financing programme often depends operators;
malus fee. on a combination of factors, from • Facilitating the design of a P4P
project size and anticipated payback programme including all market
The Public Authority capitalizes period to utility incentives/rebates parties involved, role descriptions
the Fund at the required equity and security features. and contractual and financial flows
level, especially at the start of the in collaboration with a competent
Fund to attract Private Third-Party A stepwise approach to piloting managing authority and/or a
Investors and financial institutions Pay-for-Performance programmes system operator;
at senior or subordinated debt The advancements in metered savings • Selecting an existing energy
levels. The Fund can be part of and energy efficiency project finance efficiency programme with
the Public Authority or can be an create the possibility of setting up plentiful availability of energy
autonomous public entity found innovative financing programmes performance data for which
by the Public Authority. The Public based on the Pay-for-Performance energy savings are conventionally
authority acts as primary shareholder approach. These programmes would calculated and rewarded;
and receives a double dividend (D), help increase renovation rates and • Using performance data to
namely the financial dividend and make buildings more responsive estimate probable energy savings
policy dividend via energy demand to the needs of the power system. if the programme had been
or CO reduction. Additionally, it Based on experience from the organized as a P4P programme
2
holds the starting equity of the US, where Pay-for-Performance and analysing the results to
Fund and possible additional debt. programmes have been running for improve the initial P4P model;
Private Third Party Investors finance about a decade, the SENSEI project • Launching tenders for EE projects
the Fund (E) and receive repayment recognises a process for establishing with a compensation structure
according to the risk level and market the first EU Pay-for-Performance bases on metered savings; and
conditions. Lastly, Fund managers pilots using a stepwise approach: • Setting up a first P4P pilot
provide general corporate services programme by upgrading an
to the fund such as accounting, • Securing high-level commitments existing EE programme in
taxes, auditing, asset and liability to pilot EE programs from collaboration with various
management, as well as tasks related actors such as ministries, public stakeholders. l
to the EE projects’ funding position.

Within the P4P model, there is a
certain degree of flexibility in terms of To learn more about the benefits and opportunities of Pay-for-Performance
funding opportunities, such as direct schemes in the EU, please visit SENSEI’s website at https://senseih2020.eu/,
funding of Aggregators by Private or contact SENSEI’s project coordinator Filippos Anagnostopoulos at
Third Party Investors, of ESCOs by the filippos@ieecp.org.
Fund, or of Economic Agents by the

This project has received funding from the European Union’s
www.europeanenergyinnovation.eu Horizon 2020 Research and Innovation program under Grant
Agreement No 847066.