The recently agreed Energy Efficiency Directive will require Ireland to introduce more demanding energy-saving measures, including an obligation for energy companies to save 1.5% energy annually.
By April 2013, each member state will have to submit their national plans for the implementation of the directive and if the measures they propose to take do not meet the target the EU is hoping for – an accumulated 20% energy savings by 2020 - then countries will be asked to re-plan or pay up.
If Ireland does not renovate 90,000 buildings by 2020, it will most likely have to pay fines for missing its targets, the report said.
The Irish government has already said it 'wanted' one million buildings to be retrofitted by 2020, but this would mean doubling the current 50,000 retrofits annually.
“Unless there is Government intervention, Ireland faces possible EU fines and a situation whereby Irish householders and businesses will continue to waste millions of euros each year on heating poorly insulated and energy inefficient buildings, said Seamus Hoyne, manager of the SERVE project.
Government points to many barriers
But on its way to achieving the right savings, the Irish government has already encountered a few stumbling blocks, mainly in the the buy-in from householders, another study showed.
The researchers of the study said they confronted “a complex set of social behavioural, financial and macroeconomic factors” when studying the potential of house retrofits in Ireland.
This study, Towards a New National Climate Policy, is an interim report of the National Economic and Social Council Secretariat, a government think tank, and was commissioned by the Irish department of environment. This report will be followed by final one in December 2012 on Ireland's transition to a low-carbon future by 2050.
Some of the main challenges this study found included:
- Financial barriers
- Split incentives (owner decides energy efficiency measures in a building and tenants pay the electricity bills)
- Imperfect information
- Behavioural and social factors
Also, whilst revisions to buildings regulations have instituted high minimum standards for thermal efficiency of new dwellings, past experience suggests that compliance with these regulations is far from guaranteed, the study said.
In addition, Ireland faces resource constrains in policy analysis, policy making and implementation, the same report said.
However, the research showed that energy efficiency in buildings "undoubtedly" has the greatest technical potential for reduced emissions.
Ireland's building stock has high emissions by international standards and this stresses the scope for improvement. More exactly, the average Irish residential dwelling emitted 47% more carbon dioxide than the average dwelling in the UK and 104% above the level of the EU-27 in 2005.
"The great challenge is how to achieve widespread investment in energy efficiency, especially in households, small firms and the public sector," the government think tank study said.
But most such investments, in particular energy efficiency ones, can pay for themselves in reduced energy costs and reduced dependence on imported fossil fuels, the study argued, saying: "For these reasons, it would seem that this should be a central focus of Irish policy in the years and decades ahead."
The analysis suggests that energy efficiency could offer significantly greater technical abatement potential than is currently enshrined in Irish policy and that this could, in principle, be a cost-effective route. "Yet, for a variety of reasons, the necessary investments are not made."
At the moment, there are a few schemes in place that help house owners revamp their homes. The current grant regime is focused on providing support for individual measures. The average spend per retrofit is approximately €3,000 per customer, which includes the grant payment of about a third of the total investment – but this money usually comes from people's personal savings and not from borrowing, according to the study.
Also, one important set-back is the tenure of the houses. Out of the existing approximately 1,7 million occupied dwellings, a third are now rented and the costs of energy bills, after a retrofit, would have to be paid by the tenants.
However, financial assistance in energy efficiency solutions is to become more of a priority for the Irish government, which will introduce 'fairer' payment schemes in 2014. More exactly, Ireland is planning to introduce a Pay-As-You-Save (PAYS) scheme, which would guarantee the initial investment is made by a third party, whilst the householder will repay the loan once the energy efficiency solutions start paying off and energy bills start decreasing.
But the researchers of the government-commissioned study made another suggestion for easing some of the financial constraints associated with the needed upfront investments in energy efficiency: the introduction of a property tax for energy costs at the moment of purchasing a house.
Also, more measures should be taken to encourage the use of energy services companies - which absorb the upfront costs and the associated risk, increasing investors' appetite for this type of deal.
The challenge is to devise a pragmatic plan which relaxes the constrains as much as possible and which feeds into other policies, such as those aimed at boosting employment and reforming the public sector.
"Whilst the surest way to meet Ireland's 2020 targets would be to shrink the economy, this approach would not be pragmatic and would lack dynamic thinking," the report said.