Bulk of EU energy efficiency funds misused, says auditor
Only 10% of EU cohesion funds earmarked for energy efficiency - in total worth €5 billion - are being used correctly, an author of a report by the European Court of Auditors (ECA) announced yesterday (14 January).
Harald Wögerbauer, the court member responsible for the report, said in a statement: “Member states were essentially using this money to refurbish public buildings while energy efficiency was, at best, a secondary concern.”
The spending involved could not be recouped for 50 years on average, the auditors found.
The ECA audited 24 investment projects for public buildings in the Czech Republic, Italy and Lithuania, since these were the countries that received the most Cohesion and Regional Development funds for energy efficiency measures between 2007 and 2013.
The European Commission and the member states are both responsible for the financial management of the funds, and must contribute a share of the investment.
The report analysed the cost-effectiveness of EU Cohesion Policy long-term investments in energy efficient buildings, which were intended to save governments money.
The court, an EU body, found that the projects selected by member state authorities for financing did not have “rational objectives in terms of cost-effectiveness, for example in the cost per unit of energy saved.”
To Wögerbauer, this did not represent a proper use of public funds. “You need a return on investment if you are using public money,” he said.
The planned payback of the funds was 50 years on average, rising to 150 years in extreme cases, he found. This was longer than the lifecycle of some of the components used in renovations, he said.
Wögerbauer called on the Commission to set a maximum payback period, recommending between five to 10 years depending on the case in the individual member state. He said a payback period of 10 years would mean that 20% of the funds were being targeted correctly towards energy efficiency measures.
“We hope that with the report, the Commission will look for further conditions for investment”, he said.
‘Not the way to do it’
But to Randall Bowie, chief energy efficiency consultant at Rockwool International, a sustainable homes company, said that the ECA report “oversimplified the cost-benefits”.
“I’m surprised for an organisation that spends so much time on accounting," he told EurActiv. "This is not the way you take in longer term investments”.
Bowie, who has drafted Commission energy efficiency directives for the EU's energy directorate, said the report did not take into account the importance of 'co-benefits', including returns in tax from increased employment, and societal benefits such as improved health and the resultant reduction in health spending.
He added that it was problematic to require governments to target only those energy efficient measures with apparently higher cost-benefit returns.
“You need to use [the funds] on comprehensive renovations, not these shallow ones. On old buildings you can improve performance by 80%. Deep renovations are more effective. A 20% improvement now locks in 60% over the next years”, he said.
“You need to use a lifecycle cost analysis. Then you would come up with a much clearer argument to put more into energy efficiency.”
The report complained that there was a lack of necessary data, because energy audits are not mandatory in Italy and Lithuania. They are required in the Czech Republic, but the recommended investment options were far too costly. In 18 out of the 24 audited projects, actual energy savings could not be verified since they had not been reliably measured, the report said.
Last September the EU adopted a new Energy Efficiency Directive, in a drive to reach the goal of 20% energy savings by 2020.
>> See EurActiv's links dossier on the Energy Efficiency Directive.
The directive is a game-changer for energy companies, which are now required to achieve 1.5% energy savings every year amongst their final clients. The EU law is also expected to trigger the largest revamp of Europe's existing building stock to date and set new standards for public procurement and energy audits.
The court only looked at investment in public buildings, so Court of Auditors member Harald Wögerbauer could not comment on whether such cohesion funds were spent more effectively in the private sector.
“It should be looked at too. We should not plough all the money into public buildings,” he said.
“We should move away from financing public buildings. We are helping member member states to achieve what they signed up to do [themselves],” he said.
“[The funds] should be used for promoting energy efficiency in private households.”
The ECA said: “the operational programmes audited had not benefit from proper needs assessments to identify the specific sectors where energy savings could be achieved and the options for achieving those savings in a cost-effective manner, thereby justifying the chosen measures and their cost.
“Their objectives were to save energy and improve comfort, but they were not selected for financing on the basis of their potential to produce financial benefits through energy savings.
“But rather that the buildings were typically regarded as being ‘ready’ for funding if they were in need of refurbishment and their documentation complied with the requirements.
“The cost-effectiveness concept, or the best relationship between resources employed and results achieved, was not a determining factor when Member States allocated funding to energy efficiency measures and concrete projects”, said an ECA statement. “Neither was this concept part of the Commission’s assessment prior to approval of the operational programmes.”
Energy Cities, a European association of local authorities focussing on energy use, had already identified shortcomings in the use of cohesion funds and proposed solutions for a better management of European funding, it said in a statement. These solutions included granting priority access to EU funds to cities having developed sustainable energy action plans. Other suggestions were a call for increased technical assistance support for financial engineering and a stronger involvement of local authorities in the definition and management of operational programmes.