Rewarding Energy Savings Rather than Energy Efficiency

Financial incentives are important for overcoming certain market barriers to improved energy efficiency and for the adoption of energy efficient technologies. Such incentives are mainly focused on the introduction of specific technologies, rather than behavioral change. While the declared goal of financial support schemes is to save energy or reduce harmful emissions rather than to foster new technologies per se, it is very often encountered that such financial support for energy efficient technologies may not ensure real energy savings due to the rebound effect and remaining barriers. In the area of renewable energies it is common for financial support to be given to power producers for the verified production of renewable electricity, in the form of a guaranteed financial incentive (feed-in tariff). In the energy efficiency policy research little attention has been paid to the possible use of a feed-in tariff (FIT), in the form of a financial incentive based on the kWh saved by the end-user. This paper discusses the possible setup of a FIT designed to reward real energy savings (ES FIT). The paper first explores the rationale behind and the possible functionality of an ES FIT, giving examples of similar policy tools implemented or planned. The paper looks into additionality and persistency of energy savings thus supported. Finally, key advantages and complexities related to a FIT scheme for energy savings are discussed, intending to open a discussion and foster further research on the topic.