Why building renovation is not yet taking off

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

Energy performance upgrades offer more potential if clustered to larger projects

The renovation of buildings through maintenance and improving its energy efficiency brings a number of advantages including increased comfort for its users, more attractive surroundings, and lower energy bills. However, it requires significant upfront investments and can give rise to conflict between the building owner and, where applicable, its tenants.

At a societal level, meanwhile, building renovation results in fewer emissions, job creation and reduced dependency on energy imports. However, there are challenges. Frameworks must be set to encourage renovation while also protecting low-income households that may find it hard to invest, or—as tenants—to bear higher rents. But wait, building renovation can pay for itself, right? In principle yes, but benefits payoff over time, in different forms and potentially to different people.

We can split renovation costs into two parts. The first are the costs to maintain the building—renewing plaster of the façade or simply fixing a broken boiler. The second are the costs to improve the energy performance of the building when a part is being maintained or exchanged anyway, such as adding thermal insulation during renewal of the wall plaster or the additional costs to install a higher-performance heating system.

These latter costs typically cover themselves through savings on energy bills and, while the first category usually cannot be paid off by savings alone, they lead to increased lifetime, better looks and, together with the improved energy performance, better comfort. These factors ultimately increase the value of the building.

Regulations and support schemes have been put in place at European Union and Member State level to encourage and facilitate renovation of buildings. Buildings are being renovated to higher energy performance as a result, but at only around 1% of the stock per year. This is way under what could be upgraded each year and far less than is needed to help meet environmental and emission reduction targets.

To help speed up the rate of renovation, there are several solutions already available. At a building level, we can try to bring down costs by digitising processes—creating a digital twin of the building—or using more prefabricated systems that reduce labor intense on-site actions. At societal level we can further strengthen requirements and incentives. But there is still more that could be done.

Individual renovation projects are comparably small, custom-made and therefore each different from another. This increases costs. At the same time, building owners struggle to engage in solutions beyond just their building. At a policy level, regulations have the building stock in mind but address the owner of individual buildings. We should go broader.

RENOVATION AS AN INFRASTRUCTURE PROJECT

A lot of the challenges to accelerate the rate of renovation can be better addressed if you consider the similarities of nearby buildings and the surrounding infrastructure.

Here is an example: You own a house with an oil boiler that needs replacement and a badly insulated building envelope. You want your house to be well heated and cosy (uninsulated outer walls feel cold in winter, even if target temperature in the room is reached) while being more environmentally friendly. Investment should be not too high with reasonable returns.

Scenario 1:

• You check options for a heating system: there is no gas connection and no district heat nearby. Alternatives are installing a new oil boiler or switching to a heat pump or wood pellet boiler.
• For the building envelope, you know there are minimum energy performance requirements when upgrading it, but you do not know whether and how far you should go beyond these. You have also heard the optimum depends on the heating system you chose.
• As everything seems quite complicated, you finally chose to replace the old oil boiler with a new oil boiler and keep the rest as is for the time being.
• As a result, little is invested but also little is gained as the envisaged benefits on comfort and environmental performance are not achieved.

Scenario 2:

• A provider is planning with the neighborhood options for renovation, considering different energy infrastructure that might be used, like a local heat grid based on renewables, for instance.
• For the building envelope, the provider prepares energy concepts that show effects of three different ambition levels for typical buildings in the area that give you a first indication for choices.
• After everything is well explained, financially viable and even a bit fun, you finally chose to sign up with the offered local heat concept and commission the execution of your chosen package for the building envelope.
• This results in meeting environmental and comfort targets. While it requires a considerable spend, it is well invested into energy savings and the value of the building.

This is just an example and admittedly over simplified. There are of course many situations in which a building owner can perfectly renovate a single building to high comfort and low environmental impact at reasonable costs. And of course, projects with many stakeholders also have their challenges, to reach agreement and start actions.

However, there is something to gain when looking at renovation as a collective infrastructure project. It helps to build on identified similarities, facilitate options that would not be possible as an individual, scale to higher volumes and reach lower costs than for smaller, very different and scattered projects. And it can help to prepare decisions and actions that otherwise everybody would have to do individually.

This is not a completely new idea. But the energy transition’s possibilities around more connected and sustainable infrastructures make it increasingly worthwhile to rethink, further develop and scale such approaches.

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