CHINA: Carbon Neutral by 2060
the business opportunities for EU energy solutions providers
A series of three online workshops jointly organised by ECECP and EnergyPost.eu
WORKSHOP 3: Efficiency First – Session 2
Session Two: Financing Energy Efficiency
10:45 to 12:15 (CET) Tuesday 13 April 2021
The size of the opportunity for Buildings Efficiency is mind-boggling, especially in the area of renovation. How will it be financed? How do we in Europe execute our plans? Will our solutions suit China and vice versus?
Julie Kjestrup
Head of Sustainability, DANFOSS
Peter Sweatman
CEO, Climate Strategies and Rapporteur for EEFIG
Rod Janssen
President, EEIP (ENERGY EFFICIENCY IN INDUSTRIAL PROCESSES)
Matthew James
ENERGY POST
Highlights
Energy efficiency is the fastest way to decarbonise by 2050 – able to deliver about half the greenhouse gas emissions reductions we need, according to the International Energy Agency. Energy efficiency in buildings can provide about 40% of that.
Action needs to be taken now to reach these targets. The technical solutions to renovating buildings to a near-zero emissions standard exist, funding is available through the EU recovery programme and the multiple health, societal and energy-saving benefits are known. Yet, renovations are not happening, and the industry is beginning to lose credibility.
Under the EU’s Renovation Wave, launched in 2020, 3.5 million buildings need to be renovated each year. Only 1% of buildings are currently renovated annually. Only 20% of these renovations are designed to deliver substantial energy savings.
An industrialised, ‘one-stop-shop’ approach – or an “Amazon of Renovation” – is needed to achieve renovations at the scale required and ensure everyone – the architects, engineers, product suppliers and financiers – are working in sync.
Innovative financing solutions are needed to incentivise the owners of buildings to make the huge upfront costs, which may take 30 years to pay back.
Investments are needed to develop the human capacity. An estimated 350,000 accredited project managers are needed to manage these projects – compared to 10,700 currently in Germany, which manages one of the more advanced EU renovation programmes.
This provides a major opportunity for stimulating the economy post-Covid-19, as every €1 million invested in deep renovation produces 18 local jobs.
But some EU states have still not delivered their long-term renovation strategies. Binding targets are needed to enforce implementation, because they are politically unpopular. Politicians don’t want to force voters to make expensive and disruptive changes to their own homes.
If they don’t act soon European companies will lose their competitive advantage and the chance to market solutions abroad. While practices and technology for renovating homes to near-zero emissions standards are more advanced in the EU than in China, China will quickly catch up as it makes energy efficiency a focus for the next decade.
Incentivising deep renovations
- Make data on energy efficiency of buildings more public, because it often isn’t accessible.
- Only 11 member states upload Energy Performance Certificates to a public database – and in far fewer are they made available to building owners and the renovation industry.
- Massive investment is needed in the marketing of renovation benefits: lower energy bills; improved health and wellbeing from living in a warmer, well-lit house with improved air quality; and a higher property value.
- Marketing is needed to advertise the funding available.
- Customers need to be nudged towards action at the right time. Renovation specialists should meet with all new homeowners to start property renovations before they move in.
- The ability to sell and rent out buildings needs to be correlated to the energy efficiency of buildings. It already is to some extent in the UK and Denmark.
- Properties that are not energy efficient will eventually become un-rentable and un-sellable as they are deemed “unsafe” by society.
- EU renovation targets need to be made binding to force governments to commit to politically unpopular plans.
Financing
- Deep renovations cost the same as a new car, on average around €25,000.
- Renovations can be funded through a mix of grants, loans and/or tax-breaks, particularly for vulnerable communities.
- An estimated €1 trillion is needed to renovate the 35 million buildings targeted in the Renovation Wave. The market could be worth €5 trillion over the next 30 years.
- If targets are made binding and banks are made aware of this they will be incentivised to find more creative funding solutions.
- Some European funders, like KFW in Germany, Kredex in Estonia, VIPA in Lithuania, and the Czech Renovation Fund have built a network of agents to deliver and finance renovations. This one-stop-shop needs to be made available across Europe.
- One financing solution could be to offer customers “zero-coupon” money against their property. The interest rate on the loan will not be paid until after 30 years – or when the property is sold, and at a higher price as its energy efficiency rating means it’s worth more.
China
- An estimated $15 trillion is needed for China to reach its 2060 zero-carbon target.
- There is still rapid urbanisation in China. In these regions building new cost-effective, near-zero energy buildings is a higher priority than renovation.
- Construction in China will emit huge volumes of greenhouse gas emissions.
- Europe and China need to work together to decarbonise the cement and steel sectors for both the new-build and renovation industry.
- Building from scratch gives China the opportunity to build smart, sophisticated, wholly-integrated energy efficient urban communities. There is less flexibility renovating old buildings in Europe.
- Citizens will help drive demand for high efficiency buildings. 6% of citizens flag air quality as one of their biggest concerns.
- The EU’s more advanced technologies and processes for buildings renovations opens up business opportunity to sell to China. But the window will soon close as China will quickly develop its own local solutions.
- The increased competition from China, as well as the huge-scale renovations needed globally, will drive down the costs of renovations, as it did with renewable energy.