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Financing Energy Efficiency

European Commission identifies key challenges and potential solutions

Brussels, 17 April 2014 | Economy, Energy

A review of the latest European Commission report on energy efficiency investments in the housing sector.

By Julien Dijol *

After several months of discussion with representatives of stakeholders from the industry, bank, transport, housing sectors- including CECODHAS Housing Europe- the European Commission has published an interim report on how to increase the supply and demand for energy efficiency investments in the housing sector.

This report takes a pragmatic approach on the different drivers of supply and demand for energy investments and what the member states and the EU can do to increase those investments.

While still until recently the European Commission generally held the view that a minimum of public money should be mobilised to attract the maximum of private investments and that housing providers should play a further role in triggering energy efficiency investments, the report allows to better understand the complexity of the business case for energy efficiency in the housing sector.

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It for instance stresses that market forces will not trigger the necessary investment volume for energy efficiency, thus recognising the role of public finance. In that sense it goes closer to the reality of the housing providers for which energy efficiency investments cannot pay for themselves in the sense that the energy savings are never sufficient (and often lower than expected) to reimburse the bulk of the investment.

Any successful business case for energy efficiency in buildings will have to take the role of public finance into account. Either through the form of grants, or subsidised loans or first loss guarantee, public funds are still a crucial part of all energy efficiency investment models. This is particularly true for the affordable housing sector, whereby the capacity of tenants to contribute to the investments is extremely limited.

Another interesting point in the report is that it identifies regulatory and data related issues that are obstacles to develop an energy efficiency market, in particular via the activities of the Energy service companies. The report calls for instance for removing accounting, reporting and procurement hurdles for investment in energy efficiency as well as for a stability over time of the different legislations related to housing.

Housing Europe, through its various projects, in particular the nZEB project, intends to look at the precise conditions of success of financial models for energy efficiency in the affordable housing sector. There is no one-size-fits all approach of low-carbon finance in the affordable housing sector. Factors such as type of housing tenure, type of rent legislation, potential of energy savings due to climate specificities need to be taken into consideration when reflecting on how to improve the supply and demand for finance so as to trigger the energy transition in the affordable housing sector.

In a further step, Housing Europe will encourage the development of low-carbon finance platform in various countries that would reflect those specificities.

* Julien Dijol is the Policy Coordinator of CECODHAS Housing Europe

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