Recommendations to address the split incentive issue


The SmartSPIN project aims to bring smart energy services to solve the split incentive issues in the commercial rented sector. Before defining and developing the solution and the related services, it is essential to explore the existing solutions around the topic. Lawler Sustainability, supported by the members of the consortium, has carried out a study of the recommendations to address the split incentive issue, green leasing, on-bill financing, energy performance contracting and other related schemes such as metered energy efficiency transaction structure have been evaluated. The project stakeholders’ opinions have been gathered around different potential applications of smart energy services. For this task, case studies have been gathered from all around the world, and these topics have been investigated beyond the EU. Based on all the input from the investigation conducted, cases and opinions gathered, a set of guidelines of recommendations has been drafted to have a more impactful approach for energy projects and agreements in the commercial rented sector where each stakeholder should see and consider varying levels of action.



  1. Optimize the integrated building design for construction.
  2. Follow the EU and local legislations around minimum energy ratings.
  3. To better understand the energy efficiency opportunities available, tap into local educational and professional networks, lean on experienced property managers, and start benchmarking building energy data.
  4. Prioritize actions that don’t require much staff effort or investment—for example, retro commission to fine-tune equipment, engage an energy audit to identify cost-effective upgrades, and focus on the range of fast-payback measures.
  5. Review Tenancy agreements & introduce:
    • Mechanisms for collaboration between landlord and tenant
    • Move from solely commercial agreement to one that facilitates building upgrade works
    • Pay for use & incentivise efficiency among tenants
    • Introduce collaborative environmental targets – science-based targets, operational energy/carbon targets
    • Tracking use & savings
    • Agreeing on a methodology and/or a tool to monitor, verify, track, calculate, investments, savings, billing
    • In terms of the fit-out of tenancies environmental considerations such as passive cooling & embodied carbon should be mentioned in agreements
  6. Create greater awareness amongst landlords of asset/value risk to their property through lack of investment in engineering & fabric upgrades.
  7. Develop transparent business models that facilitate deep renovation beyond lease contractual timelines that will be attractive to tenants as they will get proportional accrual of benefits for their tenancy duration.
  8. A matrix of business models to be developed for different building typographies & landlord/tenant scenarios building off the SmartSPIN concept to look at scenarios which may differ somewhat. Landlords who operate funds that may form sharing funding model for upgrades. Tenants who are independent of the landlord in terms of engineering & utility services. Cost recovery clause on a green lease for sharing the cost of capital expenses
  9. For more capital-intensive projects, first offset up-front costs through utility incentives, then spread the balance through options like on-bill financing, C-PACE, or energy performance contracts; where possible, bundle efficiency into broader renovations.
  10. Modernize standard lease forms: improve the economics of efficiency projects and engage tenants by adding three key provisions to lease forms and renewal amendments: documenting efficient operations practices, efficiency standards for tenant fit-outs, and efficiency cost recovery mechanisms.

Read the full report here.