  Buildings are a large consumer of energy, and reducing their energy usage may
provide financial and societal benefits. One challenge in achieving efficient
building operation is the fact that few financial motivations exist for
encouraging low energy configuration and operation of buildings. As a result,
incentive schemes for managers of large buildings are being proposed for the
purpose of saving energy. This paper focuses on incentive design for the
configuration and operation of building-wide heating, ventilation, and
air-conditioning (HVAC) systems, because these systems constitute the largest
portion of energy usage in most buildings. We begin with an empirical model of
a building-wide HVAC system, which describes the tradeoffs between energy
consumption, quality of service (as defined by occupant satisfaction), and the
amount of work required for maintenance and configuration. The model has
significant non-convexities, and so we derive some results regarding
qualitative properties of non-convex optimization problems with certain
partial-ordering features. These results are used to show that "baselining"
incentive schemes suffer from moral hazard problems, and they also encourage
energy reductions at the expense of also decreasing occupant satisfaction. We
propose an alternative incentive scheme that has the interpretation of a
performance-based bonus. A theoretical analysis shows that this encourages
energy and monetary savings and modest gains in occupant satisfaction and
quality of service, which is confirmed by our numerical simulations.
