The 25th edition of the Krynica Economic Forum (Poland), the “little Davos of CEE”, took place a few weeks ago. After the opening with the Polish, Croatian and Macedonian Presidents on building a Resilient Europe, I took part in a panel organized by “The European Alliance of Companies for Energy Efficiency in Buildings” (EuroACE) on the economics and energy security aspects of renovating European buildings. A most timely topic as most buildings are energy colanders, and hence account for 40% of energy used in the EU – where more then half the energy is imported at a cost of €400+ billion.
EuroACE’s Adrian Joyce reminded us that over 75% of European buildings have a very low performance level, and are a major source of energy waste and economic instability given Europe’s reliance on foreign energy. Yamina Saheb, from the Joint Research Centre of the European Commission, pointed to the economic opportunity for growth, job creation and side benefits like better air quality, health and productivity, key elements for prosperity and wellbeing in a sector that contributes 7% of EU GDP and 12 million direct jobs, adding that an ambitious renovation programme could create another 5 million jobs by 2030.
Oyvind Aarvig, from the Norwegian Ministry of Local Government and Modernisation, stressed the need to renovate existing buildings given that 80% of the buildings in 2050 have already been built. He raised the challenge of urban sprawl and renovating is not enough; we must also increased building density intelligently to create sustainable communities where people want to live. Andre Delpont, from the Bordeaux-Euratlantique Public Planning Authority, concurred that energy efficiency coupled with densification in large-scale urban regeneration projects is key to attracting investors.
The city of Krakow, one of Europe’s most polluted cities because of coal burning, is opting for large-scale energy retrofits aiming to improve efficiency by 50% and co-financing its €500 million program through European Structural Funds. For Witold Smialek, Advisor to the Mayor of Krakow, the biggest obstacle is inability of owners and tenants to contribute their small contribution to the project and that is slowing down progress but in the end, he feels this can be resolved. Over 80% of Polish buildings have more than 25 years and are in need of renovation according to Oliver Rapf, Executive Director of the BPIE, meaning that the economic and social potential in renovating the building stock in the country is enormous. He commended the ambitious works in Krakow as an exemplary project that other Polish cities should replicate.
I commented that appropriate building technologies, including insulation, windows and lighting, can significantly reduce energy requirements and thereby costs, while boosting energy security in Poland and Europe. Replacing the 6,500 windows in New York’s Empire State building with energy efficient windows was one of the key elements that helped reduce energy consumption by 43% and saved $4.4 million annually with a payback of 3 years. The potential for the renovation of buildings, both in Poland and in the world is enormous.
Energy Utility Resistance
Attila Nyikos, from the Hungarian Energy and Public Utility Regulatory Authority, warned that reduced energy consumption meant lower revenues for energy utilities, as they must amortize massive fixed costs on a lower sales volume leading to higher energy rates for consumers, adding that occupants suffer while buildings undergo renovation works. He gave examples where owners refused free renovations because they wanted to avoid the inconvenience.
- When renovating a district, densification is key to attracting investors
- Selecting the right timing for an energy retrofit and implementing integrated solutions is crucial to improve ROI
- Multiple benefits can be important drivers (air quality, etc.) an inspire ambitious projects
- Mixing local and EU funds is an effective answer to lack of upfront financing
- To release the significant potential tied up in the existing building stock in Poland (and in the EU!) t is time to act. We need to start the work now (with proper planning), without delay!
Another important consideration is the need to align the interests of all parties involved. It is obvious that energy utilities will not promote effective energy efficiency programs if their profits depend on their volume of sales. Similar dilemmas exist between owners of building and tenants – owners will invest in measures to reduce energy bills if they see a real benefit for themselves. Regulatory measures (decoupling) can overcome such problems and are increasingly being deployed in America where utilities share part of the savings they generate for their customers. This sounds like a good starting for policy makers.