Commission plans scheme to boost energy efficiency investment in buildings

Building renovation has struggled to secure EU finance. [NAVFAC/Flickr]

The European Commission initiative, to be launched next year, will make it easier for smaller energy efficiency projects, such as building renovations, to get EU funding.

The plan, “a matter of priority”, is mentioned in a leaked draft of the executive’s forthcoming State of the Energy Union report. It is being finalised after EU leaders broadly agreed the Energy Union strategy to bolster the EU’s resistance to shortages and fight against climate change.

According to the draft report – which could feed into future legislation – most member states need to “accelerate their ambition levels” to hit their 2020 goals.

In October, EU leaders agreed to increase energy efficiency by 27% by 2030, in comparison to 1990 levels, as part of the bloc’s climate and energy targets. On 30 November, the UN Climate Change Conference will attempt to strike an international agreement to limit global warming to two degrees above pre-industrial levels.

>>Read: EU leaders adopt ‘flexible’ energy and climate targets for 2030

>>Read: Leaders broadly endorse Energy Union plans, leave details to later

“Financing the required upfront energy efficiency investments remains a substantial challenge,” the draft report, first published on the @StollmeyerEU blog, read.

The European Investment Bank, for example, finds it more difficult to fund smaller efficiency projects. The Commission wants to set up a scheme that would allow smaller investments to be aggregated; stacked on top of each other to make a bigger investment.

“This scheme should provide investors with better investment opportunities in energy efficiency and make capital better accessible for national, regional or local energy efficiency platforms and programmes,” the draft, which is subject to change, said.

“It will include strengthening technical and project development assistance and an increased use of off-the shelf instruments with conditions, notably in the area of buildings,” it added.

€60-€100 billion is needed to be invested annually in EU buildings to achieve Europe’s 2020 energy efficiency target of 20% compared to 1990 levels.

Private investment in energy-efficient buildings renovation must increase five-fold by 2030, according to the Energy Efficiency Financial Institutions Group (EEFIG), which has called for a “historic level of public-private collaboration” to bridge the funding gap for energy savings projects.

>>Read: Energy efficiency investment must increase five-fold, warns report

>>Read: Energy Union will be built on public guarantees for private investment, says Cañete

French model rolled out?

The aggregation of smaller renovation projects is likely inspired by Energies POSIT’IF. The French company stacked up planned efficiency renovations of apartments to secure funding from the European Fund for Strategic Investments (EFSI)

EFSI is the instrument helmed by the European Investment Bank to give public money as risk guarantees to certain private projects as part of the Juncker Investment Plan. The EFSI fund totalling €21 billion of risk guarantees is expected to generate €315 billion in private investment.

Climate Commissioner Miguel Arias Cañete in October told the Committee of the Regions that smaller projects needed to be lumped together to get funding. The draft is the first concrete example of Commission action to incentivise this.

But Canete, who cited the Energies POSIT’IF example,  gave an indication to the executive’s thinking. “This is something that needs to be rolled out across the EU,” he said.

But regional leaders told Cañete that accessing EU finance for renovation and efficiency remained a problem.

Andre Jaadla, of Rakevere in Estonia and of the ALDE liberal group, said the Commission should use the upcoming reviews of the Energy Efficiency Directive and the Energy Performance in Buildings Directive to ensure access to finance was made easier.

>>Read: Cañete calls on cities and regions to focus on energy efficiency in buildings

“In 2016, the Commission will make proposals to align the Energy Efficiency Directive to the 2030 perspective,” the draft said.

“Equally important is a particular focus on buildings, whose energy use represents about 40% of the EU’s total final energy consumption and about a quarter of non-ETS greenhouse gas emissions.”

Why renovation?

Research has shown that showed deep renovation of buildings could save billions of euros in electricity grid and generation investment.

>>Read: Renovation could save billions in grid investment, say researchers

Previous studies by Ecofys have highlighted the other benefits of renovation for efficiency, including reduction of global warming CO2 emissions, the boost in energy security and in jobs.

>>Read: Study: Insulation could save industry €3.5 billion a year

>>Read: Study: EU can cut gas imports and carbon emissions by half

Despite this, implementation of the Energy Efficiency Directive and the Energy Performance in Buildings Directive by member states has been poor.

Every member state, except Malta, was hit with legal action for failing to put the laws on their national rulebook.

>>Read: 27 member states hit with EU legal action over energy efficiency

Trouble for VW?

The leaked draft signals a renewed focus on enforcement.

“To drive down emissions, effective enforcement of regulatory standards is of critical importance. This work acquires extra importance in the aftermath of the Volkswagen affair,” it said.

Volkswagen was exposed as routinely gaming emissions tests in the US. The draft signals there could be action from the Commission over the scandal, putting in brackets “add: next steps”.

>>Read: Special Report: An Efficient Energy Union?

The Energy Union is part of the political response to the threat to EU gas supplies. The majority of Russian gas imports to the EU, about 30% of its annual needs, goes through Ukraine. In 2009, Russia turned off the taps, causing shortages in the EU.

Plans for the Union have developed beyond questions of security of supply to encompass issues such as fighting climate change. 

The Renovate Europe campaign says that, thanks to modern technology, buildings' energy demands can be cut by 80%. But, it adds, in order for that to happen, there needs to be an effective regulatory and legislative framework in place. 

The Juncker Plan – unveiled late last year – aims to create a new European Fund for Strategic Investments (EFSI), with €5 billion coming from the European Investment Bank (EIB) and an €8 billion guarantee from existing EU funds designed to secure a contribution of €16 billion in total from the institutions.

The €8 billion guarantee will come over a three-year period from the Connecting Europe Facility (€3.3 billion); Europe’s research programme Horizon 2020 (€2.7 billion) and so-called “budget margin”, or unused funds, worth €2 billion.

The resulting EFSI fund totalling €21 billion is expected to generate €240 billion for long-term investments and €75 billion for SMEs and mid-cap firms over the period 2015-2017.

This fifteenfold multiplication from the initial investment to the final amount is to be achieved through a series of leverage methods, according to the EU executive.

World leaders will meet in Paris in November and December in an effort to seal a deal capping global warming at no more than two degrees above pre-industrial levels.

  • Before UN Climate Change Conference: State of Energy Union report to be launched
  • 30 November: UN Climate Change Conference
  • 2016: New scheme for smaller efficiency projects to be launched

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