Understanding Europe’s Renovation Wave

The European Commission unveiled a new energy efficiency strategy that could see 35 million buildings renovated and up to 160,000 green jobs created. It is useful to go directly to the EC website to have a better understanding. The following are questions and answers to help us better understand this new initiative.

 

Questions and Answers on the Renovation Wave

  1. Why is the Commission promoting building renovation?

While Europe’s buildings are unique and diverse and reflect the culture of our continent, many of them are also old, and inefficient. More than 220 million buildings, representing approximately 85% of the building stock, were built before 2001 and will mostly still be standing in 2050. They are also unprepared for the ongoing and future changes in our climate, such as increasing temperatures and extreme weather events. Buildings are responsible for about 40% of total energy consumption in the EU and 36% of greenhouse gas emissions from energy. Building renovation is crucial to tackling this energy use and emissions, to meeting the EU’s 2030 emission reduction target and to becoming climate neutral by 2050, as well to increase resilience to climate impacts.

Today, renovation reduces energy consumption of the buildings by only 1% per year. Deep renovations that improve the energy performance of a building by at least 60% are annually carried out only in 0.2% of the building stock and in only a fifth of the cases, energy efficiency is significantly improved.

Renovated homes that are energy and resource efficient will reduce our energy bills while improving our health, comfort and wellbeing. Renovation is an opportunity for the 34 million Europeans who are unable to afford keeping their home adequately warm. Addressing energy poverty is at the core of this initiative and this is why today the Commission also presents recommendations and guidance to Member States on Energy Poverty. The recommendations and guidance aim at making it easier for Member States to define and monitor energy poverty and help spread best practices.

In addition to its ecological benefits, building renovation creates local jobs and stimulates much-needed investments in our economy. The IEA’s recent sustainable recovery report found that, per euro invested, building renovation is our biggest job creator with 12-18 local jobs for every million invested. The Commission estimates the potential for an additional 160 000 green jobs in the construction sector in the EU by 2030.

This is why building renovation is one of the flagships identified for the Recovery and Resilience Facility that will help us build our economy back better. 

  1. What objectives has the Commission set for the Renovation Wave?

The renovation wave aims for more and deeper renovation. Today the weighted average rate of energy renovation is only 1% per year. The Commissions’ target is to at least double this rate by 2030, while increase the average gains in term of energy efficiency. This could lead to renovate 35 million buildings in the coming decade. This can trigger a virtuous cycle between higher demand for deeper renovation and falling costs for smarted and more sustainable products and simpler and faster renovation processes.

The EU building stock is estimated to include 220 million building units. To account for the fact that renovation projects have certain lead times, our projections are for a 1% annual energy renovation rate for 2021-2022, an increase to 1.2% a year in 2023-2025 before stabilising at at least 2% per year in 2026-2029. The rate of renovations that concern the change of heating equipment only will have to reach around 4% in 2026-2030 in both the residential and services sector. The progressive increase allows for the supply chain to adapt and for the proposed funding to be mobilised and absorbed. The increased rate of renovation will have to be maintained with increased depth also post-2030 in order to reach EU-wide climate neutrality by 2050. 

  1. How will the Renovation Wave work? 

The Renovation Wave will use regulation, funding and technical assistance across the whole renovation value chain to meet its targets. A detailed list of actions and the planned timeline for their implementation are included in the annex to the Communication.

Renovation can be held back by barriers at different points in the renovation value chain – from the initial decision to engage in renovation, to financing and completion of the project. For instance, when considering a renovation, benefits from energy savings might be uncertain or poorly explained and understood, especially by the end-users. They can be difficult to measure and monetise. Renovating can also be costly, difficult to organise and lengthy to carry out. Mobilising financing can be difficult, in particular at local and regional level. Public funds are frequently scarce and difficult to blend due to regulatory obstacles and lacking capacity in public administrations.

Kick-starting a large-scale wave requires breaking the hurdles throughout the chain. Three areas will receive special attention: a) tackling energy poverty and worst-performing buildings b) public buildings, such as educational, healthcare and administrative facilities, and c) decarbonisation of heating and cooling. These will be a priority for policy and financing.

  1. How does the doubling of the renovation rate relate to the targets in the Climate Target Plan?

Doubling the energy renovation rate by 2030 is an important contribution to the proposed 55% emission reduction target for the EU. The 2030 Climate Target Plan points to energy efficiency as an essential component for action and identifies renovation as key to closing the energy efficiency gap and delivering further energy savings by 2030.

In line with a net 55% emission reduction target, the Commission expects the actions in the Renovation Wave to reduce buildings’ greenhouse gas emissions by 60% (from 456 MtCO2eq to 161 MtCO2eq), their final energy consumption by 14% (from 374 MtCO2eq to 321 MtCO2eq) and energy consumption for heating and cooling by 18% (from 318 MtCO2eq to 259 MtCO2eq) as compared to 2015.

  1. How much will the Renovation Wave cost and who will pay for it? 

Building renovation is one of the sectors facing the largest investment gap in the EU. To achieve the proposed 55% climate target by 2030, around €275 billion of additional investment in building renovation is needed every year. 

The Communication and the accompanying Staff Working Document provide detailed information and guidance for Member State authorities and stakeholders about the different funding possibilities. These include direct EU budget support for quality building renovations, attracting private investment and stimulating green financing, supporting research and innovation, addressing market barriers and funding technical support services.

The different types of market barriers are best addressed through a series of dedicated initiatives under different financial instruments. For example:

  • The Recovery and Resilience Facility will provide funding for building renovations;
  • Public guarantees to mobilise private investment will be assured under InvestEU;
  • Assistance to regional and local authorities in designing and implementing their plans for building renovations is addressed in the cohesion policy funds under REACT-EU, or through ELENA (European Local Energy Assistance) for project development assistance;
  • Dedicated support to the coal regions in transition for capacity building, upskilling and reskilling initiatives in the field of energy efficiency is foreseen under the Just Transition Mechanism;
  • Horizon Europe will support innovation and development of new technologies, including a dedicated partnership on Sustainable Built Environment (Built4people).
  • Removing market barriers for the uptake of technologies and new approaches to speed up renovation will be supported under the LIFE programme;
  • The Commission is revising the General Block Exemption Regulation to simplify combining EU programmes and instruments, national funds and private funds for renovation projects.

The Renovation Wave will actively support renovation of worst-performing buildings and tackle energy poverty. The Commission will help national, regional and local authorities to use all available financial resources – including grants and subsidies – to focus upfront investments on the most vulnerable. To promote the smart neighbourhood approach in 100 districts, the Commission will launch an Affordable Housing Initiative.

  1. How will the flagship ‘Renovate’ in the Recovery and Resilience Facility help finance the renovation wave? 

The Recovery and Resilience Facility, which is currently under negotiation and which the European Council agreed to endow with € 672.5 billion (37% of which would be targeted to climate-related expenditure), can support renovation investment and energy efficiency related reforms across Member States. In the Annual Sustainable Growth Strategy 2021 the Commission has proposed the European Flagships Renovate and Power Up for coordinated intervention by all Member States, based on projects included in their national Recovery and Resilience Plans.

To sustain the implementation of these Flagships, the Commission will adopt an assessment module on building renovation and energy efficiency to give very practical guidance to Member States on how to prepare reforms and investment projects for renovation under the Recovery and Resilience Facility. Finally, the Commission will strengthen the existing Concerted Actions under the Energy Performance of Buildings and the Energy Efficiency Directives to help Member States exchange good practices and monitor implementation over time. 

  1. Will you just renovate homes, or also public buildings? 

Public and privately-owned social infrastructure, public administrative buildings, social housing, cultural institutions, schools, hospitals and healthcare facilities should lead the way and create a powerful demand for renovation. The Commission will aim to use the power of public procurement for building renovation, also via green public procurement criteria related to lifecycle carbon emissions and climate resilience.

As part of the review of the Energy Efficiency Directive, the Commission will examine by June 2021 the need to extend the scope of the renovation requirements to all public administration levels and to increase the annual renovation obligation. The Commission will also develop comprehensive guidance on sustainable public investment through procurement. 

  1. With so many local barriers to renovation, how can the Commission make an impact with EU-level policies?

Regulations that require buildings to meet a minimum performance standard, e.g. in terms of minimum energy performance or minimum renovation measures, can have a significant impact on increasing the rate of building renovation, and shifting poorly performing buildings towards better performance.

Regulatory tools offer an extremely flexible design to mirror national level priorities, while addressing directly the fundamental barriers to building renovation, such as split incentives between owners and tenants or in multiple owner buildings.

Renovation obligations and standards provide flexibility to Member States and local authorities to design and implement the specific details, which create the best results at the local level.

Broad and inclusive engagement of inhabitants through cooperative structures, such as energy communities, and one-stop shops with a wide variety of useful advice, such district and community approaches can transform entire neighbourhoods and create new business opportunities. Exemplary district renovation projects could be included in the national recovery plans and pave the way to a new wave of decarbonised districts.

  1. What legislative proposals will the Commission adopt next year?

The Commission will review in 2021 the Energy Efficiency and the Energy Performance of Buildings Directives. It will propose to introduce a stronger obligation to have Energy Performance Certificates alongside a phased introduction of mandatory minimum energy performance standards for existing buildings. It will also propose to extend the requirements for building renovation to all public administration levels. The impact assessments accompanying these legislative revisions will consider different options in terms of the level, scope and timing of these requirements.

Performance standards have worked well where they have been introduced. Under the right conditions, they create a reference point for owners, investors, financers and businesses without creating hardship for the most vulnerable in our society.

  1. What is the New European Bauhaus? 

As announced by President von der Leyen in her State of the Union speech on 16 September 2020, the New European Bauhaus will match style with sustainability. It will promote sustainable design and nature-based materials.

This will be an interdisciplinary project, co-steered by an advisory board of external experts including scientists, architects, designers, artists, planners and civil society that will create experimental spaces where art, culture, science and technology can imagine, test and demonstrate new solutions.

The New European Bauhaus will be an accelerator for affordable and aesthetically promising green and digital solutions, technologies and products. The Commission will launch calls for proposals under the next Multi-Annual Framework in all relevant programmes. The “delivery” of the first European Bauhaus’ construction or transformation will start in the second half of 2021.

All Bauhaus’ projects would deal with the built environment as a whole but would focus on different aspects such as climate challenges, accessibility, social cohesion, digital construction, sustainable bio-resources etc, and be in different countries. In a second wave, further Bauhaus’ can be added across the EU and even globally.

From now until summer 2021 the Commission will conduct a broad participatory co-creation process; followed by the setting up of a network of five founding Bauhaus in 2022.

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