The ENCOURAGE project aims to develop embedded intelligence and integration technologies that will directly optimize energy use in buildings and enable active participation in the future smart grid environment. The desired energy savings will be achieved in three complementary ways. Firstly, by developing supervisory control strategies that will be able to coordinate larger subsystems (HVAC,lighting, renewable energy generation, thermal storage, etc) and orchestrate operation of the numerous devices in such systems. The energy use will be optimized as a trade-off between occupants comfort, energy costs and environmental impact while considering people’s habits, weather conditions, characteristics of appliances, localgeneration and storage capacities and market conditions. Secondly, through an intelligent gateway with embedded logic supporting inter-building energy exchange. This brokerage agent will communicate directly with other buildings and local producers to negotiate possible use of the electricity produced locally in their premises. And thirdly, by developing novel virtual sub-metering technologies and event-based middleware applications that will support advanced monitoring and diagnostics concepts. Systematic performance monitoring will ensure the achieved savings are sustained over long period of time without being degraded by deteriorated performance of both mechanical equipment and the monitoring and control system itself. The primary application domains are non-residential buildings and campuses, but the project has relevancy also to residential buildings and neighbourhoods. This will be expressed through several demonstrators comprisingpublic and private office buildings, campus buildings, and private homes. ENCOURAGE aims to achieve 20%of energy savings through the improved interoperability between various types of energy generation, consumption and storage devices; inter-building energy exchange; and systematic performance monitoring.