WegoWise, a building intelligence provider, has unveiled a utility bill study that for the first time demonstrates how incentive structures can make a substantial impact on building efficiency. The study found that multifamily buildings where owners pay utility bills use approximately 30 percent more energy (BTUs) per square foot than buildings where tenants pay utility bills. Additionally, the study found that annual utility costs for buildings with owner-paid bills are 20 percent higher than tenant-paid bills.
“The building efficiency space has long been dogged by the ‘split incentive’ issue, whereby only those who pay the energy bill are motivated to change behavior or invest in building upgrades,” said Eric Bloom, senior research analyst at Navigant Research. “For years, upgrades have been seen as the smartest investment for owners because they deliver reliable returns and increase value. However, the WegoWise study reveals that incentives that motivate behavioral changes can play a significant role in cracking the efficiency puzzle. Understanding these complexities will be increasingly important as the multifamily sector continues rapid growth.”
“This study reveals that behavior changes driven by financial incentives result in far more impressive energy reductions than traditional behavioral efficiency approaches. In some cases, these savings might even be on par with building upgrades and retrofits,” said Barun Singh, founder and chief technology officer at WegoWise. “We look forward to fostering a broader market discussion about designing scalable ‘shared incentives’ that encourage meaningful behavior change alongside building upgrades. This combined approach could dramatically transform resource use across building portfolios.”
WegoWise determined these results by applying advanced regression modeling on monthly utility data from over 3,000 multifamily and affordable housing building across Massachusetts. The study also shows that on average tenant-paid buildings turn on heaters at temperatures six degrees lower than owner-paid buildings. In Massachusetts, owners are required to keep interior temperatures at 68 degrees or higher during the day and 64 degrees or higher at night to account for tenant comfort. The study suggests owners obey this law, heating buildings on average to 66 degrees.
To determine the disparity between building temperature settings, WegoWise created a mathematical model of each building's response to the changing outdoor temperature, based on monthly utility usage. The model provides estimates of the temperature set point, the weather-independent baseload energy usage, and the efficiency of the building envelope. WegoWise's analysis accounts for correlated and confounding variables, including tenant type, building type, heating system, and building age. While this observational study cannot attribute all six degrees of difference to a behavioral difference, it does demonstrate that utility bill payer affects this difference the most.
