Talking point
Higher energy efficiency for buildings: important building block for Germany's energy turnaround

December 4, 2012

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The energy turnaround can only be implemented if companies and households use energy more efficiently. This is the political consensus. In the framework of the energy turnaround, there are concrete targets: for example, energy consumption is to be reduced by 50% by 2050. Politicians are seeking to reduce energy consumption in the transport sector by 40% and primary energy consumption in buildings by 80% until 2050. The refurbishment rate of existing building stock is to be raised from currently below 1% to 2% per year. These are ambitious targets.

Especially increasing the energy efficiency of buildings requires particular attention. About 40% of energy demand and roughly one-third of CO2 emissions in Germany are attributable to buildings. Enormous energy-saving potential remains in this area. While higher standards for energy efficiency can be achieved relatively easily in new buildings, the refurbishment of existing building stock poses the much bigger challenge. After all, roughly 70% of the existing building stock – i.e. roughly 28 million flats – was erected before 1978, the year when the first Thermal Insulation Regulation came into force.

aEnergy-efficient refurbishment in Germany needs to accelerate faster to achieve the goals set. But what are the factors that determine whether the refurbishment rate rises? According to various surveys, real estate owners are not fully aware of savings and benefits that can be delivered by energy efficiency refurbishments. For example, a recent forsa survey shows that even among owners who carried out a refurbishment in the last 5 years only 23% used professional energy consulting. At the same time, they would clearly appreciate better quality control: 72% of refurbishers think that a check-up ex post makes (much) sense – but less than one-fifth had actually carried out tests.

Thus, further intensive education on the subject remains important and is also in line with the plans of the Federal Government. The main problem, though, is the question as to whether and under what conditions energy-efficient refurbishment really pays off. Factors such as the age of the building and its state before refurbishment clearly affect the savings to be made in relation to the costs. As far as owner-occupied housing is concerned, factors such as age, income or family situation of owners play a part as well. Experience shows that energy refurbishments are often carried out in conjunction with a change of ownership or in the context of conversions that were planned anyway. Furthermore, owners are more likely to push through more extensive modernisations at a younger age, as the expenditure can only pay for themselves over a longer period. This is clearly an important point to consider in an ageing society such as Germany. What is more, heating systems in many cases only get replaced when the old system does not work anymore, even though the amortisation period of the investment should on average be shorter than for insulation work on roofs and facades. Furthermore, for privately rented flats and houses, the question whether the landlords can get their tenants to pay their fair share of the investment in energy-efficiency refurbishment is of major importance.

According to estimates of the Institut der deutschen Wirtschaft, in the area of residential buildings only about one-third of all energy-efficient refurbishments pay off; with financial assistance, the share increases to two-thirds. The major share of financial assistance in Germany has so far been provided by the KfW Bankengruppe. Between 2006 and 2011, the KfW provided funding of EUR 7.8 bn for energy-efficient renovations. According to the BMVBS (Federal Ministry of Transport, Building and Urban Development), this led to an investment volume of EUR 112 bn. At EUR 1.5 bn per year from 2012 to 2014, financial assistance available is currently higher on average. The importance of these subsidies is beyond doubt. However, politicians could do more on this front: the possibility to write off refurbishment costs, which is currently being discussed, would give the market more momentum. It would be particularly interesting for owners who do not want to use borrowed capital. So far, the introduction has failed as a result of the resistance of the federal states – i.e. because of ultimately limited public budgets. In this context, politicians should become more aware that a recalibration of funding – e.g. away from subsidy funding of renewables in the framework of power generation (which currently has no effect on the budget) to a more broad-based increase in energy efficiency – would make it possible to reach the targets of the energy-turnaround  more quickly and more cost-efficiently.

Financial assistance is an important element in boosting the energy efficiency of buildings. However, a differentiated, enhanced instrument is required which addresses the issue of energy-efficient refurbishing in its various facets. Although there are many options, we would like to present three approaches at this juncture:

  1. As the IEA (International Energy Agency) underscores in its recently published World Energy Outlook, it is crucial to make energy efficiency visible. For this purpose, it is helpful to improve the metering and steering of energy consumption (e.g. via smart metering) and to calculate and clarify the economic benefit of measures (consultancy concepts).
  2. Refurbishing can also be accelerated by improving the framework for private business models. In Britain, for example, the Green Deal is designed to help households and businesses increase the energy efficiency of properties. This package provides that accredited suppliers inspect the building, make financing available and carry out refurbishing. The investment is refinanced via the savings materializing through the higher energy efficiency of the building. In Germany, such concepts, for which the economic efficiency of the project is a precondition, are used, for example for public buildings, such as hospitals, administration buildings or office buildings.
  3. Another important approach is the extension of refurbishment concepts from individual buildings to neighbourhoods and city districts which provides for a comprehensive and consolidated approach and captures economies of scale. In this respect as well, there are already approaches emerging which still have to prove themselves in practice, though. Concepts exceed building insulation and include energy production, control technology and power grids.

These examples show that comprehensive, creative solutions are needed which require the cooperation of public and private agents to finally accelerate the energy turnaround in the area of energy efficiency as well. It is also apparent, though, that a large part of the energy efficiency potential in existing building stock cannot be exploited without government support. However, more transparency should be brought into the current maze of available programmes in Germany as well.




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