In Pay as your save (PaYS) business models, some or all of the energy bill savings achieved by retrofitting a home are used to pay back the capital cost of the measures.
Resource
Business model: Pay-as-You-Save / Energy-as-a-Service
In PaYS business models, some or all of the energy bill savings achieved by retrofitting a home are used to pay back the capital cost of the measures.
This means the household does not have to pay the costs upfront or see an increase in their total monthly energy payments.
PaYS models may require an EaaS contract, in which the household’s energy consumption is managed and optimised to guarantee predictable monthly payments.
These models are often used to finance whole-house retrofit, where high capital costs are a significant barrier, and particularly in social housing, due to the long duration of the contracts.
Primary benefits
- End result is a Net Zero home.
- No upfront cost to households or landlords, reducing financial barriers to adoption.
- Guaranteed heating and hot water.
- Risk is borne by performance guarantee provider / insurer.
- Business model successfully piloted with social housing providers in the UK.
Key risks and considerations
- PaYS models currently struggling to scale up in the UK.
- Access to long-term ‘patient’ capital and specialist guarantees is required, as retrofit projects require financing that can accommodate slow returns and manage delivery risk.
- Multiple types of skills and supply chain required (e.g., for insulation, heat pumps and renewables).
- More suitable for social housing rather than owner-occupiers due to 30-year length of contract.
Case study: Energiesprong
Energie Sprong UK. (2024). What is the Energiesprong approach?
Overview
The Energiesprong programme was launched in the Netherlands by the Dutch government in 2010, to decarbonise homes. It is an outcomes-based approach that aims to enable home retrofit at scale by allowing the capital cost to be repaid through energy bill savings.
The model requires extensive whole house retrofit to achieve Net Zero energy homes, and a long-term performance guarantee.
Energiesprong implements a package of retrofit and renewable energy measures, including heat pumps, that can be installed within a week. The whole house approach saves on additional costs and disruption that would be incurred by taking a more piecemeal approach.
Financials
The household may see a reduction in their total energy bill, or at least pays the same each month for a more comfortable home.
Payback times are typically 30 years.
Scale of deployment
The Energiesprong approach was pioneered in the UK with Nottingham City Homes, where 60 homes have been transformed to date.
Energiesprong has partnerships across Europe and more recently in the US, with over 5,000 home retrofits completed in the Netherlands, 11,000 total in Europe and almost 500 in the UK. A further 16,000 homes are currently in the pipeline, including 1,500 in the UK.
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