Cities Policy - 16/November/2021

The neighbourhood approach to decarbonisation

Thousands of buildings across Europe will need to be renovated on an unprecedented scale if climate and greenhouse gas reduction targets are to be met. Lawmakers’ minds are turning to how best to undertake the Herculean task

Working with similarly-minded neighbours would create economies of scale to reduce upfront costs of renovation and renewables


TOOTHLESS RULES EU regulations for renewables usage in buildings are not maximising their potential

ADVISORY SERVICE Easily accessible bodies to advise consumers on refurbishment options would increase demand

KEY QUOTE The neighbourhood approach is going to be essential and it’s probably the next step in realising this vision of an integrated energy system


 

They are statistics that bear repeating: 40% of the EU’s energy supply is soaked up by the buildings sector, which produces about 36% of greenhouse gas emissions. It is why the sector is often labelled a “sleeping giant” by members of the climate and energy community.

In Europe, around 75% of the building stock is classed as energy inefficient but most of it will still be in use by 2050. Despite the constant uptick of renewable energy capacity, it alone will not solve this particular problem.

The EU’s Green Deal has an entire chapter dedicated to buildings in recognition of the problem. Under the European Commission’s Renovation Wave programme, the goal is to at least double the percentage of buildings renovated every year—currently barely scraping above 1%—by the end of the decade.

While these policies hold huge potential, upfront costs and time demands are substantial. Entirely refurbishing a large building is an expensive undertaking that takes a long time to complete but even partial renovation still requires sizeable planning and initial capital outlay.

So if the works are not done correctly or the resulting energy performance level is not fit for purpose or future-proof, renovations risk becoming somewhat of a zero-sum game. The EU is likely to set minimum standards for energy performance and materials to reduce that risk.

In order to help split the cost and maximise the impact, mass renovations are starting to be looked at as a form of collective infrastructure project for cities and towns, rather than simply an obligation that individual building owners must fulfil at some point in the future.

 

NEIGHBOURLY PLANS

Lawmakers, city planners and other officials involved with trying to make the Renovation Wave’s goals a reality are considering a neighbourhood approach to get it done. It is a form of planning that can build economies of scale and address the diversity of the building stock while keeping the people who actually own and live in buildings firmly within the loop. According to a report by the European Parliament, published last year, neighbourhood and community action will be essential in greening Europe’s building stock, especially if it is boosted by new tools called integrated renovation plans (IRPs).

The author of that report, Irish MEP Ciarán Cuffe, insists that, “The neighbourhood approach is the best way forward,” and that citizen-led renovation projects in Belgium and in the Netherlands, “Can be emulated throughout the EU member states.” Cuffe points out that such a strategy includes local authorities, as well as yielding other energy transition benefits, such as building out e-charging infrastructure and folding energy storage into the mix. Not only does the approach promise to win local support right from the beginning, making widespread renovations more likely, but other sectors such as power and transport also stand to benefit.

Energy expert Miguel Herrero Cangas, an advisor with trade body SolarPower Europe, agrees that, “The neighbourhood approach is going to be essential and it’s probably the next step in realising this vision of an integrated energy system.” He explains that by planning beyond one single building, renovations can take into account which buildings are more suitable for rooftop solar panels, which can accommodate green roofs and where energy storage can be installed.

“When you start bringing this all together and improving distribution grids so that buildings can actually share electricity or enable transport electrification then you start seeing a good picture of what the future neighbourhood could be,” Herrero Cangas adds.

The head of the International Union of Property Owners (UIPI), Emmanuelle Causse, insists that is why a neighbourhood approach “makes more sense than, for example, imposing the installation of renewables on each and every single building”, because it allows for potential links between different infrastructure and energy types to be identified.

 

FLAWED REGULATIONS

Local-level planning will also provide a clear assessment of the energy options available and which could be brought online in the future, boosting the chances of getting more renewable energy into buildings and making a carbon-neutral power system and buildings sector more likely, Causse adds.

However, Herrero Cangas warns that planned EU regulations are not maximising their potential, by only imposing an indicative 49% target for renewable energy in buildings. This goal, which as things stand is not binding, only applies to consumed energy, whereas a target that would also take into account power generated onsite would stimulate more community-level energy projects, he adds.

That benchmark will be part of upcoming negotiations between the EU institutions in the coming months, as policymakers aim to broker an agreement on the new renewable energy and energy efficiency directives.

 

SUFFICIENT RESOURCES

Money is quickly becoming available for renovations via European Investment Bank schemes and the €800 billion Covid-19 recovery fund that the 27 EU member states will share out over the next few years. National governments have been encouraged to devote a significant portion of their respective slices of the fund to building renovations, as they have the potential to boost employment numbers and have a substantial green impact.

According to US-based consultant firm McKinsey, EU climate policies could create a net increase of 1.1 million jobs in the building sector alone, which would be an increase of about 9%. Brook Riley, of insulation manufacturer Rockwool, suggests that, “A share of the billions of euros being allocated to renovation in the recovery plans should be used for workforce training and for advising households and businesses how to renovate well.”

The logic goes that so long as there are sufficient resources available, both in terms of finance, materials and human capital, renovation can be tackled as a large-scale collective infrastructure project, in the same way railways or roads are built. For that to be possible, all the industries involved in the sector need to be given sufficient time either to increase their workforce or source the materials and equipment needed to ramp up renovations to the level envisaged by the Renovation Wave.

ADVICE MATTERS

Lawmakers are generally in agreement that there will be enough money to renovate public buildings—which in Europe make up about 10% of the stock—and that the main obstacles will be administrative rather than financial.

For private building owners, the challenge will be accessing incentives, cheap financing, subsidies and other renovation perks, as well as getting the right technical know-how to complete their refurbishments. That is where so-called “one-stop shops” come into play.

Easily accessible advisory bodies boost consumer demand and give suppliers an innovative way to get their products and services to market. Cuffe explains that one-stop shops, “Work on the ground and within communities in order to ensure that they are ultimately responsible for their own renovation projects. This bottom-up approach would be a lot more effective than if we were to solely work off of legislative initiatives in Brussels.”

 

 

The EU’s energy performance of buildings directive (EPBD), due to be updated before the end of 2021, already obligates national governments to make this sort of support widely available. “Member states are required to facilitate access to appropriate mechanisms for accessible and transparent advisory tools, such as one-stop-shops for consumers and energy advisory services,” the directive states.

However, national governments have faced accusations from climate groups and industry associations of failing to implement the EPBD’s tenets. The reviewed rules will later this year likely reiterate their importance. Nevertheless, this brand of technical assistance is getting more and more attention.

Commission officials involved with setting energy policy have suggested that one-stop shops are the perfect tool to roll out the neighbourhood approach and that it is now up to governments to ensure they are funding them properly.

Earlier this year the European Local Energy Assistance (ELENA), a joint initiative with the EIB, got an additional €35 million in EU funding to continue its work with local, regional and national authorities on providing technical support. ELENA has issued grants worth €200 million and enabled investment of more than €7 billion since it set up shop in 2009.

 

TAILORED ASSISTANCE

Public buildings are ripe candidates for mandatory renovation targets, as their management is ultimately the responsibility of governments and other authorities that have the power to fund refurbishment works. For private citizens and companies, it is not so easy. UIPI’s Emmanuelle Causse insists that, “The key to success will be to combine different strategies and to first incentivise rather than impose renovation on owners and occupants.”

She continues: “One way to do so can be to develop a local approach to renovation. Beyond simple economy of scale arguments, it has true potential if it is based on tailored local assistance.” Such assistance includes one-stop shops, peer learning, targeted funding programmes and local tax advantages or rebates that encourage district renovation, with added incentives for areas that act quickly and adopt renovation plans.

Causse says long-term goals and inclusive decision making will make or break some renovation efforts. Who actually decides on the terms of the plan will also be a crucial factor in meeting targets.

 

CASE BY CASE

Different strategies will be needed in different countries, not just because of economic or geographical factors but also because of cultural, historical and political issues that may make certain approaches less likely to work. Hungarian central bank governor György Matolcsy recently stated that he, “Strongly objects to the idea of reigniting central planning in a new area, called green transition.” He was responding to an article in the Financial Times newspaper that suggested sustainable finance needs such a system to work.

In Bulgaria, a flagship renovation programme has been running for more than a decade but has failed to attract many takers. Only a small fraction of buildings have been refurbished as a result, despite the government aiming high with its targets. Fewer than 3000 apartment blocks have been upgraded since the programme began in 2005 and the quality of those refurbishments are questionable, according to experts.

Genady Kondarev from climate think tank E3G explains that part of the reason the programme has underperformed is that grants covering 100% of costs have been issued, rather than relying on co-financing agreements. “The government claimed that there was no other way to get things started. But what they caused was a perverse incentive as people expected that this level of incentive will continue to be given,” he explains.

In reality, many of the renovations have been limited to new window glazing and exterior insulation, with few extra upgrades thrown in, as the budget cannot accommodate more in-depth works. “People had no interest whatsoever in quality renovation works and energy efficiency targets were quite superficial as they only aimed for C grade buildings. There needs to be at least a small contribution from people and a maximum threshold for grants,” Kondarev adds.

 

GRANT LIMITS

A well-designed limit on the costs that can be funded by grants would enable lower-income families to renovate their homes with little-to-no investment on their side while incentivising richer homeowners to invest extra cash in more advanced energy efficiency measures such as heat pumps. This methodology is used by the EU on larger scale projects as a way to increase private investments and to also spur a feeling of ownership, which is essential if further works or investments are needed down the line.

Belgium has launched a few support schemes that have shown promise, including an ambitious plan by the southern region of Wallonia to boost renovation rates to 3% per year—up from the current less than 1% rate—with the offer of 0% interest loans and technical assistance thrown in to help citizen cooperatives.

However, in the communes of Brussels, there are still political bridges to cross, as local authorities are wary of allocating budgets to renovation schemes proposed by councillors or officials hailing from a different political family. Essentially, political leaders are starting to realise that well-executed refurbishments are likely to be popular initiatives that could be a vote-winner in local elections. It is a factor that could hamper progress on large-scale projects.

 

AMBITIOUS PROPOSAL

The European Commission is likely to be ambitious with its proposal for an updated buildings directive in late 2021, with extra focus on tools like minimum energy performance standards and a better definition of what counts as a “deep renovation”.

Without those measures, the Renovation Wave and the top-line targets of the Green Deal itself will be more difficult to achieve and the Commission is in a stronger position now—in terms of climate policy—than it was a few years ago when the current rules were set.

All the ingredients needed to push a neighbourhood approach through energy policies and national schemes are starting to come together. But linking the local-level needs and demand with the support required to fulfil them will be the key to success. •


TEXT Sam Morgan  ILLUSTRATION Masha Krasnova-Shabaeva

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