Oettinger: Investment in building renovations is a priority
Speaking after the 16 June meeting of energy ministers in Luxembourg, which marked the official deal on the Energy Efficiency Directive, Oettinger warned member states that there will be no ways of getting around the new compulsory measures.
“This is a binding legislation and our member states have to decide on their priorities, and a priority is to invest in existing buildings, to make them more efficient,” Oettinger told reporters.
However, under the proposal, the only obligation for member states regarding buildings is the renovation of 3% of all central government owned and occupied buildings with a total usable floor area exceeding 250 meters squared. In some countries, this narrows down the scope of the directive to only a few buildings – in Germany, to around 37 in total.
To top this measure, member states agreed as a compromise to also commit to 2050 roadmaps for the energy-efficient renovation of almost the entire building stock. This could trigger substantial savings, since buildings represent around 40% of the EU’s total energy use.
But green groups were skeptical about this "bonus" measure, because the roadmap is not compulsory.
"It contributes to the framework and it is a long-term outlook but it is not strong enough for 2020. Member states agreed to them because they don't have to implement these roadmaps too soon," said Erica Hope of Climate Action Network Europe.
Where to tap the money
The 27 EU countries will have to comply with the provisions of this directive within 18 months from its entry into force, in spring 2014.
Whilst the main obstacle in the way of energy efficiency is the initial capital investment needed, Oettinger said member states now have enough instruments available to start tapping the necessary money.
Through the adoption of the Energy Efficiency Directive, the EU has given a “good constructive offer” to all local authorities, regional governments and member states to use European money “more than in the past” to co-finance public and private investments in renovating buildings, Oettinger said.
This should be a priority in the EU's next budget, or multi-annual financial framework, he added.
“I am sure we [Commission, Parliament, Council] have a priority to use this money for investment in more energy efficient buildings – this is an upcoming priority,” the energy commissioner said. “Some buildings a year can be delivered from our side in the next MFF(Multi-annual Financial Framework) 2014-2020 just in time, just in parallel with our now binding measures for 2020,” Oettinger said.
The lock-in effect
One major reason for focusing energy-efficiency efforts on buildings is the potential lock-in effect.
Buildings constructed today are likely to stay around for the next 50 to 100 years, the European Commission argues. Due to very low demolition rates, constructions dating from 2005 will still be there in 2050, it notes, saying current refurbishment cycles range between 30 and 40 years.
“We could end up with white elephants of infrastructure in the future that we won’t need if we don’t act now,” said liberal democrat MEP Fiona Hall (UK).
Buildings are responsible for just over 30% of total end-use energy-related CO2 emissions. Residential and commercial buildings account for approximately 32% of global energy use and almost 10% of total direct energy-related CO2 emissions, according to the International Energy Agency (IEA).
Energy demand from the buildings sector will more than double by 2050, according to the International Energy Agency. In Europe, 75% of this energy is consumed in residential homes, according to a study by the Buildings Performance Institute Europe (BPIE) in Brussels.
The IEA says energy-efficient technologies and more conscious consumer behaviour can help improve this, together with minimum energy performance codes and standards for new and existing buildings.
These technologies include heating, cooling and ventilation (HVAC) systems, high efficiency lighting, appliances, heat pumps and water heating and cooling. Few countries have policies to enhance the energy performance of buildings, according to an IEA report published in April 2012.
Haggling over square meters
The Commission’s initial ambitions in the Energy Efficiency Directive were watered down after the member states passed a series of amendments in the EU Council of Ministers. The original plan had been to only target public buildings with a total useful floor area of over 250 square meters, an objective which activists already criticised for being too weak. But the Council later restricted this requirement further to include only "central government-owned" and "occupied" buildings, "with a useful floor area of over 500 m2". As of 9 July 2015, this would need to be lowered down to 250 m2.
The rewording makes a significant difference for some countries. Sweden, France and the Netherlands for instance have many buildings owned by the central government and would be chiefly concerned by the renovation provision. Meanwhile, in Germany, regional authorities own most public buildings and would therefore be let off the hook. In the UK, many buildings owned by the central government are historic and would be exempt from this requirement.
"We are talking about tackling significantly fewer buildings, if we require only buildings owned by central government authorities to undergo renovation,” said MEP Hall.
Savings in households and public sector buildings
One pillar of the directive is an obligation on energy retailers to reduce their sales to household clients by 1.5% every year.
Under the envisaged model, energy retailers would propose a range of energy efficiency products and services to their clients, such as double glazed windows, insulated rooftops and more efficient boilers. Clients would be offered either a shallow or a deep renovation of their buildings and pay for those via higher electricity bills. After a while, or in some cases even immediately, household electricity and gas bills would automatically go down, since the energy use would be lower, balancing out the costs for consumers.
Things were set differently for public buildings. In the draft directive, the Commission asked member states to renovate 3% of the total floor area of public buildings of more than 250 m2. These renovations would have to be completed by 2014.
On public procurement, the Commission asked member states to ensure that authorities make only energy-efficient purchases. But the Council weakened this provision into a simple obligation to "encourage" member states to do so, taking into account first "cost-effectiveness, economical feasibility, technical suitability and sufficient competition".
Refurbishing the existing building stock
A broad agreement was reached among EU member states and the European Parliament that renovations had to be increased by around 3% each year in the directive.
Their common understanding was that the building stocks represents “the single biggest potential sector for energy savings”. “Moreover, buildings are crucial to achieving the Union objective of reducing greenhouse gas emissions by 80-95% by 2050 compared to 1990,” the text reads.
But differences soon appeared over the extent of refurbishment that will be required on the existing building stock.
The Parliament proposed roadmaps for “drastically” reducing the energy use of both private and public buildings by 2050, saying it was essential that the directive adopts a long-term view. The Council refused long-term targets and erased the phrase “deep renovations” from the directive's aims. It did agree on flagging public buildings as energy-efficiency examples, as they have high visibility, but asked for only “owned and occupied central government buildings” to be addressed.
The deletion of the roadmaps upset green activists, who supported setting an energy efficiency target for buildings by 2050.
“If you start putting in place incentives such as roadmaps now, deep renovations will deliver savings also in 20 years, not only just by 2020. We need to have an idea of where we want to be in 2014, 2015, 2020, 2050. The roadmap served this purpose,” said Ballu. The promotion of deep renovation is the measure that has the most lasting effect beyond 2020 and it should have a central role in the directive, he argued.
“But if you want your savings to make a difference for the next 30 years, for 2050 targets, either you make a deep renovation now, or you will lose a lot of potential. No one will renovate in 10-years time again”.
The provision on energy efficiency in buildings has also been weakened by EU member states because changes in buildings are very unpopular amongst citizens, an EU official told EURACTIV. “At the end of the day, consumers will have to pay for energy efficiency changes through their energy bills,” the official said. “It is a political decision to ask them to do so. It is very unpopular for politicians”.
Debate over economic costs and benefits
The debate around the Energy Efficiency Directive has centred chiefly on the economic cost and benefits of the legislation.
According to the European Commission, renovating buildings could generate savings of up to €1,000 per household each year and create up to 2 million jobs. These jobs will not be temporary because even if revamping a building is a one-off measure, “there are plenty of buildings in Europe and there will always be a need to improve them,” said Arianna Vitali of WWF, the conservation group.
At the moment, the EU is trailing behind its headline target to save 20% energy by 2020, with only about 9% achieved so far. Missing the target will cost member states at least €34 billion by 2020, according to Philip Lowe, the European Commission’s director general for energy. According to Lowe, this will also mean the continuation of capital outflows from the EU economy via energy imports, which totalled €400 billion in 2011.
Electricity companies, for their part, have denounced the obligatory reductions in energy sales contained in the draft directive and called it an “energy-cutting” piece of legislation that “hampers growth”. They claim the draft is too prescriptive and harmful to energy companies which have already taken early action on savings.
Driving the market for renovation
In the absence of an immediate economic return, the International Energy Agency has suggested implementing targeted policy measures to enhance the efficiency of buildings.
Market-driven measures have been hampered by a lack of legal clarity on issues such as split incentives between tenants and landlords, the IEA said in a recent study. There is also a lack of awareness of efficient technologies and a shortage of qualified “green” technicians to install them.
On top of this, payback time on the initial investment is still too long for many households, especially in times of austerity. Households are often reluctant to make the investments, even if they almost always turn out to be cost-effective in the long-run.
The IEA says governments can address these barriers by implementing targeted policies, coupled with financing tools and models to help overcome high upfront investment costs.
Matthieu Ballu agrees and believes governments can help Energy Service Companies (ESCOs) and producers of insulation to grow the market in size. “Now it is still a niche market – materials are not known, not widespread, not many companies offer high quality energy efficiency renovations. It requires higher skills, workers who know how to work with new companies,” he said.
Ballu argues member states could create demand by pushing the public sector to renovate their existing buildings and set the example. “This will create a market, the renovation companies will develop the energy efficiency side of their activities, plus it will create market for insulation products, which will then become more popular and companies will see there is an increasing demand for their services.”
"Those that can win the trust of their customers and can develop some new business ideas will be successful," he said.
Changing the behaviour of consumers - and retailers as well
Achieving the directive's objectives will require a deep change in mentality – both on the part of household clients who consume energy and the retailers that sell it.
Energy companies will have to change their business models from only gas and electricity supply to personalised consumer energy services as the EU's Energy Efficiency Directive takes shape, an industry expert told EURACTIV in an interview.
“Many energy utilities see their core business as supplying electricity and gas to the metre and are not fully engaged in working with their customers on how they use energy," said Jon Slowe, a director at Delta Energy and Environment, a consulting firm.
"They have not had to do it, it is not their business model, it’s not what they’re good at,” added Slowe, who leads Delta’s work with utilities, helping them develop decentralised energy and low carbon strategies and tactics.
Slowe said the challenge was in raising consumers' interest in energy-saving services they might not otherwise purchase.
Marie Donnelly, director for renewables and energy efficiency at the European Commission's energy directorate, agreed. Speaking at an industry conference in Brussels, she said the lack of information among consumers is the main obstacle in promoting energy efficiency services. “The citizen, the consumer, the residential owner is what we should be focusing on,” she said.
Under the upcoming EU legislation, buildings, appliances and heating systems will have to be more efficient. Energy companies will have to remodel their business into selling energy services, such as the installation of more efficient water boilers or heat pumps.