The Energy Efficiency Directive will bring energy poverty to Sweden

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The proposed EU Energy Efficiency Directive (EED) will push rent prices up and cause energy poverty that has not been seen in Sweden since modern times, warn Barbro Engman, Kurt Eliasson and Reinhold Lennebo.

The following commentary was authored by Barbro Engman, president of the Swedish union of tenants, Kurt Eliasson, CEO of the Swedish association of public housing companies (SABO) and Reinhold Lennebo, CEO of the Swedish property federation.

"EU institutions have far evinced little knowledge of the special circumstances prevailing in Sweden, where water and heat are usually included in the rent. Three articles in the proposed directive are particularly problematic for Swedish tenants and landlords: Article 8 concerning metering; Article 4 concerning the exemplary role of public bodies; and Article 3 a proposed by the European Parliament concerning building renovation. We urge all actors in the trialogue negotiations to take this into consideration.

Metering, energy consumption and billing information

We must insist that apartments where heat is included in the rent should be excluded from the proposed obligatory metering and informative billing for heat. Furthermore, all metering and billing measures introduced should be technically feasible and cost efficient and the choice of technology should be made locally.

Heating is normally included in the rent in Sweden, which is not the case in many other Member States. Property owners have a strong incentive to curb heating costs. If the cost is charged directly to the tenant – for payment according to actual consumption – it would eliminate any incentive for the property owner to take general energy efficiency improvement measures, such as installing additional insulation and replacing windows. This could also cause the problem of energy poverty, non-existent in Sweden today, to emerge. Low-income tenants might choose to cut down on heating expenditures, which would impair living standards.

Climatic conditions combined with building structure in Sweden make it complicated to metre heat individually in a way that is fair. Moreover, heating costs are largely affected by factors over which the tenant has no control, such as heat transfers between apartments in a building. It will thus be difficult to engender confidence in such a system.

Installing a system for individual metering of heat and hot water would cost between €700 and €1 000 per apartment, in addition to a minimum annual operating and administrative cost of €50 per apartment. In Sweden, this equates to capital expenditures of at least €1.2 billion and annual costs of around €85 million for private and municipal property owners that provide rental housing. Despite these substantial costs, it is uncertain whether any energy would in fact be saved. Some tenants will choose to reduce their energy consumption to save money, while others will choose to increase it, which has been confirmed by various studies conducted in Sweden.  A system that offers residents freedom of choice must also be dimensioned to cope with all residents choosing the least energy-saving alternative.

The proposed directive mentions two techniques for individual metering and heating. It is not reasonable for the choice of technique to be decided at the EU level.

Renovation targets for public bodies could lead to significant rent increases

In respect of the exemplary role of buildings owned by public bodies, we suggest that Article 4 should apply only to buildings owned by central government, as suggested by the Council. This would exclude Swedish public municipal housing companies and thus not distort competition between public and private landlords, and would minimise the risk of unreasonable rent increases.

The Riksdag (Swedish Parliament) passed a new Public Municipal Housing Companies Act which entered into force on 1 January 2011. The law was enacted to ensure that Swedish legislation conforms to EU competition rules and that competition between public and private landlords is not distorted. Public municipal housing companies must therefore operate according to businesslike principles and must not be afforded any advantages by their owners (the municipalities) compared to private landlords. According to the proposal contained in EED Article 4, Member States shall ensure that three per cent of the total floor area of buildings owned by public bodies is renovated each year to meet the minimum energy performance requirements. This proposal would distort competition because terms and conditions would then not be equal for all landlords.

From a long-term perspective, it may be financially advantageous to make energy savings while carrying out regular renovation work. The Directive would require the current rate of renovation to increase dramatically, entailing further cost increases. A rough estimate of the cost of reasonable energy saving measures indicates that this could amount to almost €200 per m2.

Taken as a whole, these costs of renovation and energy saving would generate a need for significant rent increases in addition to the annual rent increases based on general cost trends. Many tenants will have difficulties paying the higher rents that would result.

Building renovation – 80% reduction between 2010 and 2050

We strongly believe it is not possible to reduce energy consumption of the existing building stock by 80% by 2050 without severe impact on living standards. The existing Swedish objective to decrease energy consumption by 50% between 1995 and 2050 is challenging enough.

Sweden has already set a very ambitious objective to decrease energy consumption in buildings by 50% between 1995 and 2050. A new base year will cause problems because our energy efficiency programmes began several years prior to the proposed base year. If property owners were to reduce energy use by 80% from the 2010 base year, it would entail permitted average energy consumption of approximately 30-40 kWh/m2, which is lower than for Passive Houses in Sweden. Energy consumption for hot water in existing homes is equivalent to approximately 40 kWh/m2.

A typical two-bedroom apartment of 70 square metres consumes an average of about 15 000 kWh per year in Sweden, including heating, hot water and electricity. Three quarters of the energy is used for heating and hot water, the remainder for electricity. A reduction in energy consumption by 80% would mean that this apartment must consume less than 3 000 kWh per year. If this were your apartment, what kind of living standard would you have if you were allowed to use only 3 000 kWh a year? You might be able to maintain a temperature of 14 degrees during the coldest period of the year–provided additional insulation is installed and windows are replaced– and have a few lamps switched on and shower every other week. You would also have to do without your washing machine, dishwasher and freezer. You would be able to use one ring on your electric cooker for a few minutes every day, and perhaps watch television for an hour.

Focusing on renewable energy and reducing energy consumption are two key components of a sustainable energy policy, but it is essential that targets are reasonable, realistic and cost efficient. The EED should provide for a more general approach that allows each Member State to design a regulatory framework that is suited to national conditions and focused on goals rather than specific actions."