Moving Europe's renovation market from a market of shallow renovation to a market of deep energy renovation delivering ZEB building stock
Europe's energy renovation market was estimated at €109 billion in 2015. However, this market is component-based renovation financed by grants which leads to high energy renovation costs, long on-site intervention time and low energy savings. Given the pivotal role of reducing building's energy consumption in the EU 2030 climate and energy strategy, Europe needs to renovate its buildings stock at ZEB level to meet its domestic objectives and its obligations under the Paris Climate Agreement.
The proposed market framework is innovative because it proposes to address all the barriers to energy renovation at the same time including the up-front cost barrier, the split-incentive and ownership's changes barrier, the lack of technological solutions to deliver ZEB, the burden of energy renovation work which last for months and the behavioural change of industry leaders.
The implementation of a such framework requires 2 policy changes and 2 market changes.
From policy perspective, the two major changes relate to bundling existing public finance into one source of financing which will provide loans at low-interest rates to compagnies instead of incentives to individuals. These loans should be provided only for compagnies delivering ZEB renovation while today incentives are given to individuals for shallow renovation work. Having a clear ZEB target will eliminate the existing shallow renovation market and providing loans to cluster of compagnies will address the up-front cost barrier.
From market perspective, the two major changes include building cluster of compagnies which will propose energy renovation kits delivering ZEB. The cluster of compagnies should also develop long-term energy renovation contracts which would link the energy renovation to the properties instead of individuals. This will allow to overcome the split incentives and the ownership's changes barriers.
Is this proposal for a practice or a project?
What actions do you propose?
The implementation of a such framework requires 4 actions:
1-Bundling all existing public funding dedicated to energy renovation under the proposed risk sharing facility to increase the impact of governmental intervention. This will allow to overcome the fragmentation of funding and agencies in charge of managing each funding source separately.
2-The risk sharing facility should provide long-term loans only to consortium of compagnies delivering ZEB renovation. No more incentives should be provided directly to consumers and/or to compagnies delivering shallow renovation. As the EU energy renovation market is stimulated by public funding, providing loans only for ZEB renovation will eliminate the existing market of shallow energy renovation.
3-Industry needs to organise itself to deliver ZEB energy. The proposed cluster of energy renovation compagnies will stimulate innovation in business models and technological solutions.
4-Given the long pay-back time of ZEB renovation, industry should propose long-term energy renovation services. The cluster of energy renovation compagnies should pay for the up-front cost of energy renovation and will be paid back through energy savings. The long-term energy renovation contracts should be linked to the properties and not to the individuals to overcome the challenge of split-incentives and ownerships' changes.
Who will take these actions?
Governments should take the decision of bundling public finance to provide loans for cluster of compagnies, instead of consumers.
Governments should also take the decision to provide loans only to compagnies delivering ZEB renovation.
Industry should work on building clusters to deliver ZEB renovation. This should stimulate technological innovation as well as innovation in business models.
Industry should also develop and propose ZEB renovation long-term contracts linked to properties and not to individuals.
Where will these actions be taken?
In addition, specify the country or countries where these actions will be taken.
No country selected
No country selected
No country selected
No country selected
No country selected
What impact will these actions have on greenhouse gas emissions and/or adapting to climate change?
The proposed market framework will allow Europe to reduce GHG emissions of its building stock to zero by 2050.
What are other key benefits?
The proposed market framework will allow Europe to deliver on its economic and societal objectives.
It will stimulate innovation, create additional jobs, make the energy transition a just transition as all EU citizens will benefit from ZEB renovation with no income distinction. Renovating the EU building stock at ZEB level will also reduce pollution and its related health damage and ensure Europe will be one of the leaders of decarbonised economies.
There are no additional costs for government nor for industry as shown by Energiesprong project in Netherlands.
What are the proposal’s projected costs?
The main challenge is to change the mind-set of policy makers. The European Commission proposed under the ''Smart Finance for Smart Building'' a partial bundling of public funding. Furthermore, energy requirements to access public finance are not set at ZEB level. This does not encourage industry to get together to deliver ZEB level as finance is made available, once again, for shallow renovation.
There will, certainly, be a resistance for the market actors, taking advantage of the fragmentation of public finance and the lack of clear ZEB requirement for energy renovation.
There are no additional costs for governments, nor for industry and beneficiaries as shown by Energiesprong project in The Netherlands.
The proposal will start having an impact as soon as governments will decide to bundle all existing public finance dedicated to energy renovation and to make this finance available only for ZEB renovation.
In the short and long-term, the proposed market framework will make Europe's industry leading ZEB renovation worldwide.
About the author(s)
The proposal was first designed in 2012 at the time Yamina Saheb was working for the International Energy Agency. Implementation of the proposal at the EU level was further developed when she joined the Joint Research Center of the European Commission. Deeper analysis based on the implementation of a similar framework in Netherlands (energiesprong project) was conducted when Yamina joined OpenExp.
Charlotte Johnsson, Aurélien Saussay, Rod Janssen, Sandor Szabo and Katalin Bodis are among the experts who did contribute either with literature review or with modelling/data analysis and/or with partial drafting of the papers describing the proposal.
The proposal should be linked to Energy Supply as it is based on energy sufficiency, energy efficiency and the supply with renewable energy sources.
It should also be linked to changing behaviour as one of the major challenges of the project is to change the mind-set of policy makers.
It could also be linked to climate adaptation as delivering ZEB building stock requires ZEB solutions to take into account the evolution of the climate, especially in dense areas.
Energy renovation: The trump Card for the New Start for Europe (Joint Research Centre, 2015)
Energy Transition of the EU Building Stock - Unleashing the 4th Industrial Revolution in Europe (OpenExp, 2016)
Clean Energy for All Europeans Package: Do the Commission's Impact Assessments Assign the Right Role to Energy Renovation (OpenExp, 2017)
Energy Renovation: It is time for a paradigm shift in policy design (International Refurbishment Symposium, London, September 2017)
Web site of Energiesprong project
What initiatives, policies, and technologies can significantly reduce greenhouse gas emissions from the buildings sector?