Energy Union boss wants wave of public finance to spur building renovations

The European Commission’s Energy Union chief Maroš Šefčovič is pushing for new public financing instruments to kick-start a wave of building renovation in Europe.

He outlined a vision where buildings would not just be a foundation of the Energy Union strategy he helms – but also interconnected nodes of the Big Data economy of the future.

Šefčovič revealed that the European Commission would present a new Smart Financing for Smart Building initiative in the autumn, alongside revisions to the Energy Efficiency Directive, and Energy Performance in Buildings Directive.

“In an ideal world I’d like to see new financing instruments that could start a wave of energy efficiency or better quality smartening of our buildings across Europe,” he told euractiv.com

“This could be a multi-purpose exercise: not only for energy efficiency but also transforming buildings into nodes for the new synergised platform for the Big Data economy of the 21st century.”

The Commission has identified buildings as one of the central pillars of its Energy Union strategy, which aims to boost the bloc’s energy security and fight climate change.

Building renovation can cut emissions, reduce energy dependence, consumer costs and energy poverty.

As this week’s Special Report has shown, it can also benefit health and well-being, as well as stimulate investment in the construction sector and wider economy.

“It is clear that achieving our 2030 targets […] will not be possible if we overlook the enormous potential of buildings in Europe,” said Šefčovič.

EU leaders have agreed a cut of at least 40% in greenhouse gas emissions by 2030, and an increase of 27% in energy efficiency and renewables.

The vow was the cornerstone of the EU’s commitment to cap global warming at last year’s landmark UN Climate Change Conference in Paris.

“[Buildings] are natural candidate for our attention and a proper regulatory approach. But it is very difficult to implement regulation if you do not have the finances. So what we are considering right now is how to find the proper incentives, “Šefčovič said.

Private sector

After first presenting the Energy Union, Šefčovič travelled around Europe to drum up support for the strategy.

“I was asked everywhere: how can you help us – private citizens and business owners – to gain the technical expertise, advice and financial assistance for renovation, for smartening our buildings and increasing energy efficiency?” he said.

It was imperative, Šefčovič told euractiv.com, to unlock private investment into the energy efficiency market.

“The energy efficiency market must mature and become fully investible,” he said.

Ingrid Reumert, vice-president at the Velux Group, agreed. She said that people’s savings could now cover renovation costs, despite the after-effects of the financial crisis.

It was up to the private sector to convince consumers to reach into their pocket. “We believe in the strength of market forces,” she said.

But revising and strengthening Energy Performance Certificates (EPCs) would be a major boost to businesses, Reumert added.

EPCs give information to consumers about the energy performance of a building. It is mandated by the EU’s Energy Performance in Buildings Directive, which the Commission is currently reviewing.

“People make the decision to renovate at certain times, usually when buildings change hands,” she said.

That was also the time they would look at the certificates. Widening their scope to include indoor climate could also bring added health benefits, she said.

Šefčovič said he was approached by green financing coalitions on his Energy Union tour.

Such coalitions were often pension funds looking to make long-term investments.

“We would like to have a kind of one stop shop for smart cities and mayors, where by clicking on a link a city mayor can get ideas, information on where to go, how to do them, where they can get advice, and to really start to use the leverage of public money to get more private funds into this project,” he added.

Public financing

There was also a role for public financing, the Commission vice-president said, both through existing EU initiatives such as the Juncker Investment Plan, and future ones.

“We are currently working on a financing instrument for smart buildings, and at the moment we feel that DG Energy is doing a great job,” he said.

“But to get it to the required scale we would need to include our colleagues from DG ECFIN, we would need to work even closer with Commission Vice-President Jyrki Katainen,” he added.

Katainen, in charge of jobs and growth, is overseeing the Junker Plan, which aims to unlock €315 billion of private investment through €21 billion of public risk guarantees.

While building renovation projects were often too small to gain Juncker Plan funding, there are recent examples of projects being aggregated to be big enough to get the loan guarantees – which convince private investors to invest,

“If you look at the results of the Juncker Plan, you will see that energy projects account for more than a third of funding, and I would say that about half of these investments are linked to energy efficiency,” said Šefčovič.

“When I saw what could be done by establishing an appropriate platform, as they did in France, aggregating energy for 40,000 households and really transforming the whole region through one investment project, I thought this was a model that could be applied right across Europe.”

EU funds

The EU budget for 2014-2020 significantly increased the contribution to building renovation, he said.

The European Structural and Investment Funds would allocate about €19 billion for energy efficiency, notably in buildings and district heating and cooling. And the Horizon 2020 programme will allocate €2.5 billion for energy efficiency.