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Business models for supporting energy renovation in residential buildings. The case of the on-bill programs.

2022

On-bill schemes are innovative financial frameworks for supporting investments in energy efficiency with a particular focus on residential buildings. These schemes are interesting since they allow to attract private capital in the energy efficiency market, and they also see the involvement of energy utilities which can be regarded as market aggregators. the present paper employs the Value Flow Model to develop four business models to implement on-bill schemes. In particular, standard on-bill financing and on-bill repayment business models are developed in detail. In addition, more complicated and innovative business models, namely on-bill repayment via a Special Purpose Vehicle and on-bill repayment with a Master Servicer, are also developed for more complex schemes. These four fundamental business models can be used and adapted according to market context of operation. Finally, the possible involvement of Distribution System Operators as service providers or facilitators for on-bill schemes is also outlined.

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Business models for supporting energy renovation in residential buildings. The case of the on-bill programs.

On-bill schemes are innovative financial frameworks for supporting investments in energy efficiency with a particular focus on residential buildings. These schemes are interesting since they allow to attract private capital in the energy efficiency market, and they also see the involvement of energy utilities which can be regarded as market aggregators. the present paper employs the Value Flow Model to develop four business models to implement on-bill schemes. In particular, standard on-bill financing and on-bill repayment business models are developed in detail. In addition, more complicated and innovative business models, namely on-bill repayment via a Special Purpose Vehicle and on-bill repayment with a Master Servicer, are also developed for more complex schemes. These four fundamental business models can be used and adapted according to market context of operation. Finally, the possible involvement of Distribution System Operators as service providers or facilitators for on-bill schemes is also outlined.

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Business models for supporting energy renovation in residential buildings. The case of the on-bill programs.

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Supporting energy efficiency measures in the residential sector. The case of on-bill schemes

The paper proposes an in-depth description of on-bill mechanisms, their possible frameworks, the barriers to their implementation as well as the impact they may have on the core business of utilities. The study is based on a review of the existing literature integrated with the results of on-field interviews and discussions with the aim to obtain a full picture of on-bill schemes in a European replication perspective. Methodologically, the paper is based on structured desk research and on-field feedback obtained from selected stakeholders. Additionally, a SWOT analysis is developed highlighting that on-bill schemes may result very convenient for power utilities and energy retailers. Furthermore, on-bill schemes can help to address the issue of the split incentives. In conclusion, on-bill schemes can be considered a valid tool to support energy renovation in the residential sector, but they do not represent a global solution since their application is not tailored for all the contexts.
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Accessible, easy and sufficient funding is key to speed up renovations in the EU. The EU Renovation Wave strategy, published in 2020, estimates the additional investment to double current renovation rates at around €90 billion per year. Public capital can cover some of the additional financing, but private capital must also be mobilised. This is where innovative financing schemes become essential. On-bill mechanisms can be a valuable tool in that respect: they are tools for involving the private sector in energy efficiency financing that can help resolve some of the existing barriers to energy efficiency investments linked to the regulatory environment, end users’ ability to finance renovations and utility companies’ involvement in renovation projects.
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