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

Implementation of energy efficiency interventions in the residential sector is pivotal to drive the energy transition and achieve energy policy targets. For such a reason, public programs supporting the renovation of residential buildings are available globally, but public incentives are not enough to address all the potential and it is necessary to attract private investments. An innovative approach to consider is represented by on-bill schemes, which foresee investments by energy utilities with possible cooperation of financial institutions. The present contribution 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. The analysis highlights that power utilities are in a strong position since they can use on-bill schemes to switch part of the demand from fossil fuels, e.g., natural gas, to electrical power. Similarly, energy retailers are in a good position since they can enlarge their business by selling energy efficiency as a service through on-bill schemes.