There is a growing need to expand our energy efficiency efforts to cut greenhouse gas emissions from energy generation, along with an increasing interest in better use of energy meter data. As such, some policymakers are considering pay-for-performance (P4P) energy efficiency programs. These programs reward energy savings on an ongoing basis by examining data from a building’s energy meters rather than providing upfront payments to fund energy-saving measures through rebates and incentives for things like efficient lightbulbs or insulation. Efficiency programs in the United States spend almost $8 billion annually to reduce energy waste, but few are P4P.
The analysis in Putting Your Money Where Your Meter Is, conducted for NRDC and Vermont Energy Investment Corporation, reviews 22 case studies of past and current P4P approaches and provides recommendations for policymakers to guide program design. The analysis finds that P4P has the potential to encourage energy savings and should be explored further. However, there is still significant uncertainty about how P4P stacks up in terms of cost-effectiveness and potential for energy savings compared with the more traditional approaches.