Real Estate: energy efficiency still firmly on the agenda

In a Communication made by the European Commission on 25th February 2015 the EU Commission provided clear notice that energy efficiency in real estate remains firmly on the law and policy agenda and that we are to expect further developments in this area.

Communication

The Communication handed down by the EU Commission relates to an Energy Union Package. Of course real estate plays a big part in how energy is used and consumed in the EU and for this reason real estate is expressly included. The Communication is entitled “A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy”.

Target

Energy efficiency, across the board but particularly within the real estate and transport sectors, plays a significant part in the EU Commission’s thinking on EU energy policy generally but in particular in relation to energy security and climate change. The EU Commission has an indicative target of 27% energy efficiency by 2030. This is to be reviewed by 2020 with the target perhaps increasing to 30%. This leads the EU Commission to the view that a fundamental rethink of “energy efficiency and treat it as an energy source in its own right”.

Sector efficiency

The EU Commission makes the point that heating and cooling is the largest single source of energy demand in Europe. It also states boldly that “75% of our housing stock is energy inefficient”. From a wider economic and social perspective the EU Commission wants to see Europe exploit its position as a global leader in energy efficiency technology and for energy efficiency to become a driver for exports and produce growth and jobs in the EU.

District heating and cooling

It is notable that district heating and cooling is given specific mention and a promise of a future strategy. The Communication states “Huge efficiency gains remain to be captured with regard to district heating and cooling, which will be addressed in a Commission strategy”.

Innovation and wider economic benefits

This is a major aspect of the EU Commission’s thinking on the energy package as a whole. It intends to set 4 core priorities in this regard. One of these four core priorities, to which the Commission and Member States are to commit, relates to the buildings sector, namely “efficient energy systems, and harnessing technology to make the building stock energy neutral”.

Action Points

The Communication recognises that actions will be required at EU and Member States levels as well as at local and regional levels. Investment and financing models (including small scale financing) are recognised as key issues in need of development.

15 high level action points are set out. Two of these directly relate to real estate and each is broken down into two sub-points. The first action point relates to the 2030 energy efficiency target (see above) with the actions being:

• In 2015 and 2016, the Commission will review all relevant energy efficiency legislation and will procure revisions, where needed, to underpin the 2030 target.
• Member States and regions should make more use of European funds for renovation of housing.

The second action point relates to retrofitting and full use of sustainable space heating and cooling as a means to reduce the EU’s energy import bills, reinforce energy security and cut energy costs for households and buildings. The actions are:

• The Commission will develop a “Smart Financing for Smart Buildings” initiative to making existing buildings more energy-efficient, facilitating access to existing funding instruments.
• The Commission will propose a strategy to facilitate investment in heating and cooling.

Separate report on financing of energy efficiency in buildings

The day following the Communication a report was published by the Energy Efficiency Financial Institution Group (an expert group set up by the European Commission and the UN Environment Programme Finance Initiative). The report contains recommendations on a range of actions relating to the financing of energy efficiency in buildings, including market, economic, financial and institutional actions. The report can be accessed here.

Looking forward

Whilst the Communication is a high level document, there has clearly been much work behind the scenes. The EU Commission leaves no doubt that in its view energy efficiency in the building stock is an important feature of forward looking energy policy. We can expect more policy to follow. Key issues will be if and how investment and finance models develop to support energy efficiency measures.