Could energy inefficient buildings inspire a new gold rush?

News posted on 03.05.2017 on About us and Views

Why not, says the European Commission’s Head of Energy Efficiency

So, imagine a finance fund knocking on your door and saying: “Hey, you’re sitting on a gold mine. Your inefficient building has enormous potential to save money. Let’s find wonderful ways to share that money.” 

Could this really be the shape of things to come? Or is it simply a daydream of energy efficient campaigners.

Well, these are the words of Paul Hodson, the European Commission’s Head of Unit for Energy Efficiency. And it’s his job to be a future-focused optimist, particularly at a time when policy makers, interest groups and businesses are picking through detail of the Commission’s ‘Clean Energy for All Europeans’ package.

The ‘why’ of these proposals is easy. Focus the attention of Member States on achieving a binding EU-wide target of 30% for energy efficiency by 2030 and you start to seriously tackle climate change, reduce the need for energy imports, cut energy bills, create more green jobs and boost the economy.

Great news for everyone. And the bonus for our industry? At the heart of the proposals is a strong emphasis on building renovation and the decarbonisation of Europe’s housing stock by 2050.

But what about the ‘how’ of the proposals? How will countries trigger renovation? How will revised directives impact everyone who uses a building? How will one installer with a van be transformed into a job-creating renovation empire? And how will all this be paid for?

Which brings us back to that knock on the door—perhaps even by a pension fund—and talk of how an inefficient building can be transformed into goldmine. “Well, why not?” says Hodson. “Why is the world not like that? We have to find how we can get closer to that. And that’s a finance question.”

The answer to that finance question, according to the proposals, is using strategic amounts of money to carry out big projects. “It’s about getting sophisticated about finances,” says Hodson. “It’s about getting the energy people and the finance people from government and the energy people and finance people from civil society in the same room in every Member State and, when you start asking how do we get money flowing, you start to get solutions flowing.”

The unit head believes there is not a ‘one size fits all’ solution for Europe to unlock cash for renovation, but rather opportunities for countries to learn from each other to create customised solutions that fit their individual cultural and legal character. “There are good examples in France or in Baltic countries where targeted finance has leveraged funding. In Denmark, for example through the Better Home initiative we are seeing business, energy suppliers and finance making an offer to people which they are choosing to take up. It’s exciting. It’s one of the closest examples we have seen of knocking on people’s doors and saying, ‘Let’s do the renovation and share the profits’.”

At regional events, like such as the one held last week in Prague and in Copenhagen on 19 May 2017, the Commission is hoping to bring together Member States to discuss such success stories, Hodson says countries have a “real appetite” to learn good practice from their neighbours. “There are models for which you provide a framework so good practice can be disseminated. The more we do this work, the more success stories we find.”

But private funds aren’t just going to throw millions at a renovation projects because it’s something that the Commission wants to see it happen. So, how do you sharpen their appetite? “We are creating demand through the 30% energy efficient target. However, there is also a whole ‘derisking’ underway. We need to help finance understand data on what has been the effective result of energy efficient interventions. We are working with them on standardised contracts and working with project sponsors on aggregation. For instance, to renovate a thousand schools rather than one, takes out the risk and creates a product the financial community is prepared to work with.”

Of course, the big issue is how are the Member States going to create the triggers that drive the proposed 1.5% cuts in energy use every year until 2030? Hodson says Member States have a framework in place and need to consider what their future energy system will look like in terms of supply and efficiency.

“The decarbonisation roadmap to 2050 is a powerful part of the package. Agriculture will still have greenhouse gas emissions—we don’t have solutions to that—and industry will continue to have heavy fossil use so the two sectors that have to go down really nearest to zero are power generation and buildings. Member States need to make a plan to get there. We don’t see low carbon energy and low energy use as in competition with each other because both are going to be needed in 2050.”

Then there is the good and bad news for energy efficient building renovation. Although the proposed Energy Performance Building Directive has tools to ensure that when buildings are renovated, they are renovated to a good standard, there is still work to be done on the speeding up the rate at which people decide to make energy efficient improvements.

Still, trigger points are anticipated at significant points in a building’s life, for example when a tenant moves out and a landlord has to carry out a renovation. “It’s just that more of these trigger points will be needed to lead to deep renovation. This aspect will have to play a bigger role over the next decade.”

The package of proposals places considerable emphasis on technological innovation in smarter homes. “The technologies allow me to tell my heating system to switch on when I’m on my way home are the ones that will enable the financial sector to say we can prove that we’ve altered the amount of energy you use.”

The knock-on impact of a major energy efficiency drive is also a boost for the construction industry, says Hodson. He believes the proposals will create a major demand for highly skilled manual labour and hundreds of thousands of new jobs.

“So, I’m the guy fixing roofs? What does the package mean for me? It means I need to improve my skills. My customers are going to want me to tell them about a wider range of things to be done. Even if they don’t, I can sell more to them, which means I will need to know the payback time of these things. I need to be able to demonstrate what the impact will be if I show the different mixes of things. I will also be concerned with ensuring these things are installed as well as possible to guarantee real performance.”

And ultimately the foundations of any energy efficiency measures are rooted in quantifiable real performance. If you can’t measure it, you can’t manage it. And when that finance fund comes calling at home promising wonderful ways to share energy efficiency savings you really want to know how big your goldmine could be.

The Clean Energy Package is currently being discussed by the European Parliament and EU Member States in the European Council.

Download Knauf Insulation’s positon on the package here