Greater access to financing will boost Renovation Wave
- Nov 17, 2020 9:55 am GMT
There needs to be more effort in easing access to financial backing in order to take full advantage of Europe’s Renovation Wave, says Louise White and Reinhard Six from the European Investment Bank (EIB)
To heat, cool and light buildings, we use 40% of the energy consumed in the European Union which results in 36% of the EU’s greenhouse gas emissions. Therefore our buildings will need to be a big part of the solution to achieve the European Commission’s 2030 target of reducing emissions by 55%. The EU will need to reduce buildings’ greenhouse gas emissions by 60% so we need to act urgently to upgrade them.
A colossal 75% of European building stock is not energy efficient, falling short compared to the current applicable building standards. Newer buildings tend to consume 50% less energy than those built even twenty years ago but more than 220 million buildings—around 85% of the EU’s building stock—were built before 2001, and most of these will still be standing by 2050.
Despite incentives to decarbonise buildings and improve standards, there are persistent investment gaps in building and renovation. Deep renovation that brings about sizeable energy savings is seldom carried out as it involves higher investment and increased planning.
Relatively small, step-by-step, individual renovations are the norm, but each year only 11% of European building stock undergoes some level of renovation. These updates, however, rarely address energy performance—the weighted annual energy renovation rate is low at some 1%. Often only better-off consumers include energy efficiency measures during renovation.
The European Commission’s Renovation Wave strategy to decarbonise national building stocks, and to contribute to national energy and climate plans and energy efficiency targets will increase the availability of financing and simplify rules to promote access to this finance. It could help create an additional 160,000 green jobs in the EU construction sector by 2030. More than 90% of companies in these sectors are small and medium-sized businesses, hit hard by the economic impact of the pandemic, so easier access to more funding will be invaluable.
The Renovation Wave strategy also addresses multiple, entrenched problems, including a lack of understanding of a building’s energy use and potential energy savings and renewable options, market failures, lack of expertise by providers of renovation, insufficient workforce and the need for scaling up training and green and digital skills, and regulatory barriers. The new strategy provides solutions with the potential for high social and economic returns.
Simply improving the terms and availability of debt for energy efficiency projects is rarely enough. Many investment opportunities are not taken up even when they offer acceptable payback periods because of the problems and barriers they can encounter.
The European Investment Bank has invested around €13 billion annually since 2014 largely in energy efficiency, renewables and grids. We provide financing and technical assistance to overcome investment barriers through the European Local Energy Assistance facility (ELENA), a joint initiative between the European Investment Bank and the European Commission.
Building on ELENA, the European Investment Bank is working on creating the European Initiative for Building Renovation, which will allow us to provide tailored financial support, ranging from traditional long-term loans to guarantees, equity or receivables financing. The initiative can make it easier to combine technical assistance, project development assistance, loans and grants as a single package to increase the volume and impact of lending for energy efficiency of buildings.
We encourage the setting up of standardised one-stop shops at national, regional and local levels for delivering tailored, independent and competent advice and financing solutions to accompany homeowners and small businesses as they prepare and implement their projects.
The benefits of alleviating these blockages are clear. For those with poor living conditions and in energy poverty, there will be better homes and workplaces that are cheaper to run. Affordable building renovation should create jobs and stimulate the economy, increase social cohesion and make energy performing and sustainable buildings more widely available, with particular positive effects for medium and lower-income households and vulnerable areas.
This will be a crucial element in the global action package, which will address the urgent need for energy efficiencies in heating and cooling, climate resilience, circularity, renewables uptake, pollution cuts and e-mobility infrastructure that are required to achieve the Paris Agreement objectives.
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