There are more than 200 million old, energy-inefficient buildings in Europe. According to RAP, fewer than 1% are renovated in an average year and even then most retrofits are cosmetic. Yet only “deep renovations” – typically defined as delivering at least 60% energy savings – make a real difference to utility bills and greenhouse gas emissions. This type of energy renovation means systematically upgrading insulation, windows and heating and cooling systems. And it also requires a simple, convincing system so that building owners, businesses and public authorities are able and willing to act.
This is what the Renovation Wave sets out to do. Start with minimum energy performance standards: just like emission standards for cars, the idea is that a building can only be sold or leased if it meets an agreed energy performance standard. This is already happening in the Netherlands, for example, where 2 million rental homes are on track to being energy class B by next year, and all offices must be C class by 2023.
The big advantage of performance standards is that they are relatively straightforward to explain and implement. EU member states are already assessing the energy performance of their building stock. Improvements in energy classes can be tracked with before and after audits. And like energy labels on refrigerators and washing machines, standards make immediate sense to owners and tenants. This is the way to deliver the all-important deep renovations.
Meanwhile, the best way to implement energy performance standards is to make them as financially attractive as possible. One of the ironies of the Covid crisis is that it has swept away opposition to a bigger, greener EU budget. On top of the core seven-year budget, member states have agreed a special new €750bn recovery fund. Precisely 37% of that must be used for green investments, which would mean €100bn for buildings if the money is shared out according to each sector’s share of carbon emissions.
Size matters here, but the way the recovery money is spent is even more important. This is why the interplay between finance and technical assistance, the third major component of the Renovation Wave, is so important. At EU level alone there is already a long list of extremely smart funding mechanisms for building renovation. One example is “first loss” pieces, in which EU funds are used as guarantees to cover potential defaults on energy efficiency loans. This reduces risk and allows local banks to offer lower interest rates.
There are also layered financing structures combining grants, low-interest loans and households’ own savings. And there are big-business operations, in which the European Investment Bank offers pension funds and other institutional investors AAA ratings and attractive returns if they co-invest in renovation projects.