Minimum energy performance standards can contribute to turning the tide on energy renovations in two ways, writes Louise Sunderland.
Louise Sunderland is senior advisor at the Regulatory Assistance Project (RAP), an independent NGO dedicated to accelerating the transition to a clean, reliable, and efficient energy future.
For some time now I have been struck by the irony of the European Commission’s chosen name for its building renovation policy package, the “renovation wave,” given that increasing the rate of renovation has been like pushing water uphill.
Currently, we renovate only around 1% of the European building stock each year to reduce energy use. This stubbornly low rate of renovation has not significantly shifted — certainly not in the ten-plus years I’ve been working on the issue.
Across Europe, this rate of activity needs to triple, fast, to get us on track to meet the 2050 net-zero target. The ambition of renovations also needs to increase. Right now, each energy renovation of a home achieves only 9% energy savings on average. These homes will have to be renovated again, and again, and again, unless deeper renovations are carried out now.
So how will the renovation wave achieve what decades of incentives, subsidies, nudges and awareness raising have not? What new pearls of policies will be revealed from beneath the renovation wave?
Minimum energy performance standards
This month the Commission revealed one such cluster of pearls in its latest call for input into the design of the renovation strategy. The consultation asks all of the questions one would expect: What are the barriers to renovation? How well are existing mechanisms performing? What further policies do we need? How to best target the worst performing buildings?
Featuring heavily in the pre-selected responses to these questions are a cluster of regulatory tools called minimum energy performance standards for existing buildings.
Minimum standards regulations require buildings to meet a defined energy-related target at a point in the future. The standard can be defined in many ways. Commonly used options include an energy performance designation (often an energy performance certificate class), a carbon standard, or a requirement to install minimum insulation levels and heating measures.
Buildings are required to meet this standard at a specified date in the future or when triggered by a natural milestone in the building’s lifecycle, such as sale or renovation. The target can incrementally tighten over time to improve performance and include more of the stock.
A wave gaining momentum
The Commission is in good company in considering this measure as a key part of its renovation package; the use of minimum standards is on the increase worldwide.
In Europe, America, Australia and New Zealand, governments at different levels are consulting on, designing, introducing, and enforcing these regulations. The differences between the examples illustrate a key strength of this tool — its adaptability to local priorities. Some jurisdictions design the standards to start with buildings that create the highest carbon emissions. New York City’s standard targets the largest buildings. Although it applies to only 5% of properties, these account for nearly 60% of all energy consumed in buildings in the city Others, for example in Great Britain, Flanders and New Zealand, target buildings that face the highest barriers to renovation. These focus on privately rented properties where the incentive is split between a landlord investing in renovation and a tenant benefiting from the resulting energy savings. Further standards target energy poverty alleviation and health and well‑being by requiring improvements in the worst performing homes, for example in Great Britain and France. Some even combine energy standards with a range of housing health and safety requirements as in Victoria, Australia.
Minimum standards can contribute to turning the tide on energy renovations in two ways.
First, policymakers can signal to building owners and investors to renovate ahead of the bite of the regulation by announcing the upcoming minimum requirement and the long-term expectation to decarbonise buildings, early in the process. This signal for owners to surf ahead of the wave has already been effective in the Netherlands. Large banks are already restructuring their finance to only lend on office buildings that meet the future standard of EPC C in 2023. Washington State has actively incentivised early action with the introduction of payments for building owners who take action in the five years before the regulation comes into effect in 2026.
Second, the regulated standards serve as backstops. Like a series of locks in a canal, the standard’s incremental tightening can move the whole stock forward to better energy and carbon performance, almost literally pushing water uphill.
Combine push and pull
Regulations alone are not a magic bullet. Any requirement for building owners and occupiers to renovate buildings must be coupled with help to renovate, particularly for those least able to afford and manage the works.
Now, perhaps more than any other time in the last decade, the rationale for investing in renovation is strongest. Governments are committing unprecedented public funds to COVID-19 recovery plans and evidence confirms that building renovation is one of the strongest economic stimulus options on the table. A clear trajectory, setting out the role of each building in decarbonisation by 2050, defined through regulated standards, could be a key driver of demand for renovation. Healthy demand means that subsidies can be less generous and, importantly, public investment can be used more efficiently to help Europe and its citizens recover more quickly.
Perhaps I have it all wrong, and the name of the Commission’s renovation package — the renovation wave — is optimistic rather than ironic.