Technical Assistance in Recovery Plans: the Wealth-Enabler for Buildings

Building a green and sustainable economy means spending a lot of money. There isn’t a shortage of climate cash with the Recovery Fund – the real challenge will be spending it fast, and properly! Thankfully, there is help available for renovation through Technical Assistance – and the Commission’s RECOVER Taskforce has just made it easier for Member States to include it in their Recovery Plans.

Op-ed by Adrian JOYCE, Renovate Europe Campaign Director

 

‘Want to retrofit hundreds of thousands of buildings but don’t know where to start? Need help setting up project workflows? Then you NEED technical assistance. Available now from all good European Commission directorates.’

The EU does not often run advertisements or infomercials like the entirely fictional one in the previous paragraph. Maybe it should.

In the coming years, hundreds of billions of euros will be on offer, especially through the EU’s Recovery Fund.

But as is always the case with EU funds, blank cheques are not simply handed out. Project pitches have to be made, necessary hoops have to be jumped through and proper due diligence done. And with the Recovery Funds in particular, the money will have to be committed fast – by 2023 latest.

Therein often lies the problem. For energy renovation in particular, EU Member States have been leaving money on the table, simply because they are ill-equipped to apply for it properly.

We risk a situation where money from the Recovery Fund goes to waste, despite the ‘Renovation Wave’ being identified as Flagship Programme by Commission.

This might be because of a lack of expertise in different ministries, a lack of experience in applying for money in certain sectors or even linguistic barriers. Technical Assistance essentially coaches project applicants in how best to realise their ambitions.

As the old parable goes: “give a man to fish and he’ll eat for a day; teach him to fish and he’ll eat for a lifetime.”

That’s exactly what Technical Assistance is: a wealth-enabler for buildings.

Scale of the challenge

Given the scale of the challenge set by the EU’s energy efficiency, renewables and overall emissions targets, Technical Assistance is going to be a necessary outlay for project planners.

Decarbonising the economy is going to be a work in progress up to and beyond 2050, when the EU plans to be absorbing as many emissions as it produces. Hitting the net-zero goal will mean spending hundreds of billions of euros – and spending them well – every year.

The most pressing opportunity comes in the form of the pandemic Recovery Fund plans, which governments have to submit to the Commission by end of April in order to tap into €750 billion in grants and loans.

Those plans will have to be well-formulated to unlock the money, especially the loans – and particularly given the tough politicking that erupted between Member States when the Recovery Fund was being negotiated. The level of scrutiny will be high.

The Czech National Recovery Plan is among the good examples that other countries should aim to replicate, as its draft document allocates a significant chunk of money to Technical Assistance for building renovations.

New opportunity in Recovery Plans

In a bid to encourage others to follow suit, the Commission’s special RECOVER Taskforce has just made it easier for Member States to do just that: they can now create specific budget lines just for Technical Assistance in their Recovery Plans, without needing to provide details upfront on exactly how the money will be used (this can come at a later stage).

It comes late in the day as the National Recovery Plans should be submitted by end of April, but it’s not too late for Member States to act on this by modifying their budgets and including a specific line for Technical Assistance for buildings in their Recovery Budgets.

Member States only have a few weeks to get their Recovery Fund requests in.

It is an investment that is worth making, as without support, there is little chance that all the money on offer will actually make it into the renovation projects so sorely needed by society.

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Renovate Europe Calls for MEPS in its EPBD Roadmap Response

Renovate Europe suggests that both the regulatory measures proposed in Option 3 and the non-regulatory measures proposed in Option 2 must be synchronised in the most effective way in the context of the upcoming revision of the EPBD to boost the rate and depth of renovation across the EU.


“Don’t let our most valuable assets crumble away”

Our buildings are worth trillions of euros, yet fears about how to fund renovations are stalling the sector’s green progress. There is plenty of cash out there looking for a home, you just need to know where to look, writes Adrian JOYCE.

It is human nature to look after things we find valuable, be it a nice watch, a car or a home. But, whereas motorists are prepared to shell out cash to keep their vehicles roadworthy, building owners hesitate when it comes to maintaining their abodes and offices.

That is despite buildings being by far the globe’s most valuable asset class, worth some €150 trillion. The vast majority of them will still be standing in 2050 but to make it that far and to ensure our climate targets can be met, those buildings will need serious work.

The European Commission has set a target of 35 million buildings renovated by 2030 but an annual green investment gap of up to €275 billion has left many – including the Commission itself – to wonder where exactly all that cash is going to come from.

Those figures may seem daunting but there is ample money available to revamp those buildings, reduce their carbon footprint and improve human health. Two factors that, now more than ever, are absolutely essential to modern life.

But channelling that available money into building renovation is another story – building renovation may tick all the right boxes, but unfortunately it won’t flow there naturally without a few nudges along the way.

So where to start looking for the cash?

The first port-of-call is the loans and grants offered by the European Commission under its Next Generation EU programme, which has been designed to help governments drag their economies out of the pandemic-induced doldrums.

Funds will only be dispersed if governments intend to spend the cash on long-term, sustainable projects. The Renovation Wave is a poster child in that regard, with 30% of the overall budget earmarked for climate goals and ‘Renovation’ recommended specifically as a flagship priority.

Once the cash starts flowing from Brussels later this year, it should create a chain reaction. Next-Gen EU funds will not be enough to get the job done alone, so anyone that gets a taste for renovation will have to turn to lenders like the European Investment Bank.

The EIB is also on an environmental kick and is in the middle of aligning its loan books with the Paris Agreement. While the cash on offer is lower, its loans can come hand-in-hand with perks like technical assistance.

This is where the renovation battle can be won or lost. It is of course important to make enough money available but if the beneficiaries do not know how to spend it, then the effort is pointless.

The European Central Bank is poised to play perhaps the most important, yet underreported, role in this green push, as the Frankfurt-based lender looks to chart a more environmental course under its new president, Christine Lagarde.

Nearly €1.8 trillion – about the same as the entire EU budget for the next seven years – is available under its Targeting Longer-Term Refinancing Operations (TLTROs), which consist of negative-interest loans.

As part of its ongoing review, the ECB will look at deploying a green TLTRO. It is of paramount importance that the Bank sees the merit in such an initiative and helps unlock hundreds of billions of euros for renovations. The potential is massive.

Regular banks can also get in on the act. Eurozone residential loans amount to some €4.8 trillion, so lenders could start offering bigger or more attractive mortgages if home owners commit to renovations. This option is particularly good because it would rely on greening existing funds, rather than developing new cash streams.

There is also a source of funding closer to home: personal savings.

The ECB, the Bank of England and other institutions have pointed to the “unprecedented” level of savings that households have achieved over the last 12 months due to the cooling economic effect of the pandemic.

Coronavirus should have taught us by now that long-term thinking and sustainable lifestyles are the smart bet, so anyone fortunate enough to have tucked away a little something extra should seriously consider giving their homes or places of business a little TLC.

Please do not misinterpret all of this advice: the task ahead – fuelling cash into renovation projects – is nothing short of Herculean. The buildings sector is a behemoth and the number of moving parts in the financing machine makes the job more complex still.

The bottom line is that it has to happen given the enormous asset value of buildings. Thankfully, we have the tools to get it done but we need to find ways of using these existing funds better.

Legislation like the buildings and energy efficiency directives which will be strengthened once again later this year can also help.

The investment is, quite simply, worth making.

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Strengthen Article 5 of EED on Public Buildings

Article 5 of the EED currently requires public authorities to renovate 3% of buildings owned and occupied by the central government.  Unfortunately, the limited scope, weak enforcement and availability of alternative measures has resulted in Article 5 having very little impact on the ground. The upcoming revision of the EED is the opportunity to strengthen Article 5 in order to achieve our shared goal of increased rate and depth of renovation across Europe.

 


Briefing 3/2020: Financing Deep Energy Renovation: The Roles Of Policy Action, Public-Private Partnerships And Financial Tools For Private Dwellings

As part of the final month of the #GreenDeal4Buildings campaign, Renovate Europe has produced two complementary briefings looking at the issue of financing deep energy renovation. While this briefing focuses on the need for strong policy, the potential of public-private partnerships, and the particular challenges of financing renovation in the residential sector, a complementary briefing examines ways to leverage funds through the Just Transition Mechanism and carbon revenues.

Within the EU context and existing 2030 energy savings targets, Renovate Europe notes an annual investment gap of €130-200bn. Some 80% of the investment is needed on the demand side, of which 71% must be directed to the residential sector, which is noted as being particularly challenging because the need for both action and financing is extremely granular.

Over the longer term – i.e. to 2050 – boosting the energy renovation rate to 3% annually would achieve the ambitious goal of reducing energy demand in buildings by 80% while drastically cutting carbon dioxide (CO2) emissions. In turn, this would cut total EU energy demand by 30%, reduce energy bills for all consumers, enhance productivity and increase property value and rentals. Such benefits could boost GDP by 0.7% annually; in 2020 alone, that would equal €39bn in additional public finances.

Renovate Europe calls upon EU institutions to ensure that the European Green Deal creates the ecosystem for deep energy renovation, including establishing stability that will eliminate the current ‘stop-go’ dynamic that erodes investor confidence. This includes making energy efficiency a top priority and planning beyond short-term measures.

You can read the briefing in full here.

 


Briefing 2/2020: Financing Deep Energy Renovation: Leveraging The Just Transition Mechanism And Carbon Revenues

As part of the final month of the #GreenDeal4Buildings campaign, Renovate Europe has produced two complementary briefings looking at the issue of financing deep energy renovation. This briefing focuses on leveraging funds through the Just Transition Mechanism and carbon revenues, and a complementary briefing examines the need for strong policy, the potential of public-private partnerships, and the particular challenges of financing renovation in the residential sector.

Calculating the actual cost of renovating 97% of the existing building stock in the EU is no easy task. Various methodologies have been applied, each being met with both applause and critiques. Generally, a realistic number seems to be in excess of €300bn per year for the next 30 years. To drive that number home, it’s helpful to think of this way: ~€1 bn per day, every day until 2050.

While that is a lot, it is worth noting that the International Energy Agency estimates that aggressively implementing energy efficiency on a global scale could – by slashing energy bills, reducing energy imports and alleviating energy poverty – deliver benefits of €500bn per year.

Within the EU context and existing 2030 energy savings targets, Renovate Europe notes an annual investment gap of €130-200bn. Some 80% of the investment is needed on the demand side, of which 71% must be directed to the residential sector. Over the longer-term – i.e. to 2050 – boosting the energy renovation rate to 3% annually would achieve the ambitious goal of reducing energy demand in buildings by 80% while drastically cutting carbon dioxide (CO2) emissions. In turn, this would cut total EU energy demand by 30%, reduce energy bills for all consumers, enhance productivity and increase property value and rentals. Such benefits could boost GDP by 0.7% annually; in 2020 alone, that would equal €39bn in additional public finances.

Renovate Europe calls upon EU institutions to ensure that the European Green Deal creates the ecosystem for deep energy renovation, including establishing stability that will eliminate the current ‘stop-go’ dynamic that erodes investor confidence. This includes making energy efficiency a top priority and planning beyond short-term measures.

You can read the full briefing here.