Frequently Asked Questions
What is the policy context?
The European Union has set a target for itself to increase its energy efficiency by 20% by the year 2020 and by 27% by 2030.
There are two EU directives when it comes to reducing the energy consumption in buildings: the Energy Performance of Buildings Directive (EPBD, 2010, and to be reviewed before the 1st of January 2017) and the Energy Efficiency Directive (EED, 2012).
EPBD includes regulations on the following points:
- Energy performance certificates for sale or rental of buildings
- Inspection for heating and air conditioning systems
- All new public buildings should be nearly zero energy buildings by 2018
- By 2020 all new buildings must be nearly zero energy buildings
- EU countries must set minimum energy performance requirements for new buildings, for the major renovation of buildings and for the replacement or retrofit of building elements (heating and cooling systems, roofs, walls, etc.)
- EU countries have to define all national financial measures to improve the energy efficiency of buildings
The EED includes:
- The framework for promoting energy efficiency improvements across the EU’s energy system: every year, EU countries are required to renovate at least 3% of the total floor area of buildings owned and occupied by central government.
- EU governments should only purchase buildings which are highly energy efficient.
- Member States must develop long-term national building renovation strategies which can be included in their National Energy Efficiency Action Plans (NEEAPs)
Since 9 July 2015, the total useful floor area requirement was decreased from 500 m2 to 250 m2 for both the energy performance certificates (EPBD, article 12) and the 3% rate of renovations in public buildings (EED, article 5).
Energy efficiency first principle is the acknowledgment that Europe's biggest domestic energy source is energy efficiency. It was first included in the European Commission’s Energy Union Strategy.
As an organising principle, “energy efficiency first”, applies to all policy-making and investment decisions and it includes:
- ensuring that energy saving solutions are not overlooked or undervalued;
- collecting reliable data which will allow to value the long-term economic, environmental and social costs and benefits of energy efficient solutions;
- removing barriers preventing energy efficiency improvements;
- developing and enforcing concrete policies, which will prioritize investment in energy efficiency.
Local authorities serve as example and stimulate innovative instruments for financing energy efficiency, especially in its public building stock and public lighting. A local authority can stimulate further market uptake and development for energy efficiency.
Local authorities benefit from energy efficiency improvements, and as the closest level to citizens, local authorities can encourage them to get involved in this process and support cooperative and citizen-based financing models and benefit from them.
In order to reach the European energy efficiency target, investments need to exceed 100 billion euro annually. Therefore the EU has several support schemes:
- Horizon 2020 - under the 'secure, clean and efficient energy' chapter, different calls focus on buildings and financing topics.
- Project Development Assistance (PDA): ELENA - managed by the European Investment Bank that provides grants (90%) for technical assistance to launch large-scale sustainable energy investments. PDA, under Horizon 2020 (call EE20) available for smaller project sizes (€6-50 million).
- European Energy Efficiency Fund (EEEF) - The Fund operates as a dedicated bank to provide tailor-made debt and equity instruments for local and regional authorities.
- European Structural and Investment Funds (ESIF) - Substantial amounts (€23 billion) are ring-fenced to support the low-carbon economy, depending on the Operational Programme in your area. Building renovation is eligible for funding in the ERDF, Cohesion Fund and ESF. These funding opportunities could also be drawn together through Multi-Fund Operational Programmes.
- The Renovation Loan is an ESIF instrument that aims to combine public and private money for energy efficiency investments between €5-30 million. It provides access to finance at preferential conditions for loans up to 20 years maturity.
- Integrated Territorial Investment instrument (ITI) is another vehicle to leverage ESI funding and provides an option for Member States to combine infrastructure investment in energy efficiency and training staff.
- Private Financing for Energy Efficiency instrument (PF4EE) - Under the EU's LIFE programme, this pilot financial instrument will co-fund energy efficiency programmes.
- European Investment Advisory Hub (EIAH) - As from September 2015, the EIAH will provide guidance on delivering quality projects and investments, reinforcing the use of financial instruments and improving access to financing.
- Enforcing existing European legislation
The EU has set a 20% energy efficiency target by 2020 for itself. However, current indicative national targets put forward by the Member States don’t add up to reach this target. Due to many exemptions, requirements for Member States annual savings are reduced to 0.8%.
The Energy Efficiency Directive and Energy Performance of Buildings Directive will be reviewed in 2016. The EU can use this momentum to authorize rigorously enforcement of the legislation and better monitoring of the progress.
A simple, harmonized and consistent system for monitoring and reporting climate and energy legislation, based on binding templates, would increase transparency and enforcement.
- Better technical assistance
Local authorities are leading by example and are developing new innovative financing models to increase renovation rates, mobilize necessary capital and create public-private partnerships. As the closest level of governance to the citizens, local authorities are able to get citizens engaged in energy efficiency. Yet, local authorities have limited access to finance because conditions to obtain technical assistance often exclude small- and medium-sized local authorities. More support in bundling projects between local authorities would allow them to reach critical investment sizes and set up bankable projects.
- Removing financial and legislative thresholds
The fiscal consolidation strategies affect the capacities of local and regional authorities in certain Member States to launch investments. The regulatory frameworks (European System of Accounts, neutrality and “debt consolidation rules”) could better support public energy efficiency investments, and ensure right risk assessments and long-term capital requirements for investments. Legislative frameworks could support further development of Energy Performance Contracting markets, citizen-based financing, green bonds and other instruments featured by CITYnvest.