How at home is the EU with energy efficiency? The new energy efficiency directive and the role of housing

In June this year, the Commission published a proposal for a new Energy Efficiency Directive (EED), the follow-up from the February 2011 Energy Efficiency Plan. This has been widely criticised by environmental organizations for allowing states to opt to take measures other than compelling efficiency savings to achieve energy savings among final customers,  and stipulating only ‘minimum energy performance requirements’ rather than ‘best practice’. It does not provide sufficient means and tools to meet the EU’s 20 per cent energy saving target (by 2020). Europe is on track to miss this target by more than half and that means missing savings of more than 200 million tonnes of oil equivalent.

Diagram from the presentation given by Ms Eva Hoos, DG ENERGY, European Commission

On 12th September, QCEA attended a conference entitled “New Directive – New Energy for Housing? – Clearing the way for local, participatory energy transition” to hear the latest debates on how the directive stands up to the challenge of making Europe’s homes energy efficient.

The Context: The EU is heavily dependent on other countries for energy – 84 per cent of Europe’s oil is imported from outside the EU – and 2.5 per cent of Europe’s GDP is spent on these energy imports – €270 billion on oil imports, €40 billion on gas imports, per year. Since Fukushima, nuclear energy has become much less of a politically viable option in many EU Member States. Renewables are, of course, a part of Europe’s energy strategy, but there is also a need to seriously decrease the amount of energy wasted so as to rely as little as possible on energy imports and undesirable fuels.

Much of Europe’s housing stock was built in the 1950s and 60s, when energy was cheap and plentiful (and climate change was as yet unfamiliar), and therefore not built to be energy efficient. Energy poverty is also an increasing problem in Europe. One definition of energy, or fuel, poverty is when a household needs to spend more than 10 per cent of its income on gas and electricity bills, for all energy requirements including an adequate standard of warmth. Fuel poverty is not clearly defined in every European country, but similar problems are noticed: unpaid energy bills, people disconnecting their homes from energy suppliers themselves and health problems related to lack of access to adequate fuel. The main causes of fuel poverty are:

  • inadequate energy efficiency of the home (e.g. inappropriate heating provision and inadequate insulation);
  • low income (including loss of benefits due to state austerity measures);
  • high fuel costs (increasing and unpredictable prices);
  • social vulnerability (older people living alone after their children have left home, people with disabilities or medical problems, etc., who need adequate heating and fuel for other domestic purposes but who have limited income and limited access to assistance).

Fuel poverty can mean living in cold, damp housing which may lead to serious physical and mental health problems, the most severe consequence being winter deaths (especially among elderly people). It is not a marginal problem, especially in new Member States: as energy costs become unbearable on top of other housing costs, there is a growing number of EU citizens facing a “heating or eating” dilemma. In 2008, there were around 4.5 million fuel poor households in the UK (using the 10 per cent of income definition). In Hungary 80 per cent of Hungarians spend more than 10 per cent of their income on paying their energy bills, 15 per cent are unable to heat their homes to the required level, and fuel poverty causes approximately 1500-2500 deaths.

The benefits of energy efficiency in buildings (when this leads to energy savings) are clear in terms of tackling climate change, because the energy we don’t use doesn’t produce greenhouse gas emissions (or other unacceptable wastes). But energy efficiency in buildings is also crucial for tackling fuel poverty. Many inefficient homes waste more energy than they utilize (inefficient boilers, heat loss through windows, lofts, walls, etc.,), and so retrofitting of homes to become energy efficient can significantly reduce the amount of energy needed to heat homes, and therefore cut fuel costs. It is estimated that the average household can save €1000/year through energy efficiency measures. For those in fuel poverty, more energy efficient homes will enable them to afford adequate levels of comfort, and for the overall inefficient housing stock there are substantial energy savings to be made.

Diagram from the presentation given by Mr Tudor Constantinescu - DG ENERGY, European Commission

One of the main considerations at the conference was what measures at EU level could help to facilitate what must be local mobilization to reduce energy consumption and get retrofit programmes off the ground, in order to reflect the diversity (housing stocks, climate, cultural, social and economic contexts) within Europe. It is important to think about these interacting factors which influence energy consumption and conservation, as illustrated in the diagram above.

Energy Ambassadors: The Energy Ambassadors project uses interventions by professionals who work with the public in a healthcare or social service capacity to promote sustainable and practical solutions to fight fuel poverty and generate energy savings in households. Creating and maintaining collaboration between energy specialists and social workers, to ensure the appropriate technical knowledge, advice and follow up is provided, was identified as the key to success in this project. In Bulgaria, the focus was on the impact of cheap and simple measures and conserving energy through changes in behaviour. This is a familiar message but how much difference can it really make? On example, in Sofia capital region, suggested a big difference – social workers found that the same people who were washing their clothes at 90 degrees and setting indoor air temperature at 25 degrees were living in fear of energy bills that they couldn’t pay. There was a lack of understanding about the link between temperature and cost, and energy ambassadors helped consumers to make this link. Clearly education is a large factor here, but so too is national context. Like many central and eastern European countries, energy supply was heavily subsidized in the Soviet era, with the result not only of low energy efficiency, but of little understanding of the value or cost of energy.

Smart Meters? It was agreed that although smart meters have potential – to provide the missing link between energy consumption and awareness of it – there are risks too, which must be carefully assessed and addressed before their role-out. Sergio Rossi, from EU funded project ‘Saving Energy in Social Housing with ICT’ had some candid points to make about smart meters. With 10 pilot sites (in France, Spain, Germany, Austria, Belgium and Italy) over 3 years, Rossi looked at the question of whether they are worthwhile, i.e. do they help users to reduce consumption. His answer was, not necessarily! There is a risk that the energy used by these electrical devices (and required in their production) could be greater than savings made, leading to an overall increase in consumption. It is therefore essential that they provide useful information, that can be easily acted upon, about the consumption at any given moment of both electricity and heat. Providing information in, for example, cubic meters of gas used, is not useful. They need to give benchmarks, like the percentage increase from the previous winter, consumption relative to the average, or, what has shown to be even more effective, a comparison with the consumption of neighbours! Seeing long-term change helps motivate people, therefore historical data is important. It is also crucial to avoid duplication, i.e. having two meters to measure the same quantity, once for the energy provider and again for the building monitoring infrastructure. The technology must be combined with face to face advice to help people to understand their energy consumption and think about how to reduce it. Finally, and too often missing from the debate, the importance of data protection – energy consumption data is personal data, and should be subject to the safeguards that this requires, especially where it is collected by private companies.

Inside the "New Directive - New Energy for Housing?" conference room. Photo CC BY Rachel Tansey

Innovactive consumers: The “innovactive” consumer (innovative and interactive) is a phrase which denotes the fact that whilst information provision, for example through smart meters and transparent billing, can help consumers to make informed decisions, it is real citizen engagement and empowerment that is key to energy savings in homes, for example, through the provision of neutral advice and community outreach adapted to needs. One of the more radical views relating to citizen empowerment was that of Vanni Rinaldi, Coordinator of CooperAmbiente, a project which promotes ‘an EU path towards reducing and substituting energy production from fossil fuels to renewables and from a centralized to distributed network’, run by an Italian association of cooperatives, Legacoop. CooperAmbiente is a national programme for community ownership – or cooperative supply – of renewable energy, environment services and products. Rinaldi argued that:

“a dramatic fight has begun between the companies of the fossil era, the centralized producers, and the new players of the decentralized and democratic renewable energies [RE]. The old era companies want to provide us with the RE as they know it – mega wind and solar farms, super high power lines, high capital projects – in other words, the “new” centralized model. They can succeed because they are big, rich, and they have power. We, as consumers, do not like this scenario.

“We want to balance this old centralized and capitalistic system of power, because it has been one of the reasons for the global economic crisis… We want the new decentralized and democratic model to succeed, with new players in the energy markets – associations of innovative consumers. Wind and sun are commons, they are not private goods, and we need to work out new ideas about the fair use of the commons for energy”.

Rinaldi made the point that big companies don’t necessarily like energy efficiency – it means less profit/turnover. Consumers who are innovative in reducing consumption and introducing efficiency models, and take an active role in the new distributed energy markets, via micro-renewables and community power generation, have very little strength in the energy market. In recent years more than 1 million Italian citizens have acted on efficiency, with another 300 000 self-providing energy, but unless these innovactive consumers are organized and protected as part of cooperative associations, they do not have a voice that can be heard against the profit-driven goliaths of traditional energy companies.

Frankfurt – Capital of Passive Housing: The City of Frankfurt was showcased as the “capital of passive housing”, as well as a member of Climate Alliance, Energie Cités, EUROCITIES, and signatory to the Covenant of Mayors. Frankfurt’s targets include 50 per cent CO2 reduction by 2030 (10 per cent every 5 years) and to get 100 per cent of its energy supply from renewable energies by 2050, achieved in part by increasing energy efficiency and savings. Perhaps the most interesting project they described was the training of long-term unemployed people, by the local authority (and partners, including Caritas), to become energy consultants who visit the city’s low income households. Through a combination of energy and water service advice based on current consumption, simple savings installations and advice on behavior change, the project has resulted in more than 1500 households in Frankfurt visited (and 50000 in Germany as a whole as the scheme spread), with average long-term savings of €1100 for the household and €200 for the city. The project has been so successful because it helps meet four objectives:

  • Employment policies: long-term unemployed persons are qualified as energy and water saving advisers;
  • Social policies: low-income households learn to reduce their energy costs which in turn relieves their tight budgets;
  • Educational policies: a group of people in society is being reached and further educated which would probably not have happened otherwise;
  • Environmental policies: the environment benefits from the reduction in CO2 emissions.

Combined Heat and Power: According to Sophie Froning from Euroheat and Power, €380 billion is wasted each year in Europe by not using waste heat (from power plants and industry). At the same time, we spend billions on energy imports, whilst heating and cooling is responsible for half of end use energy consumption. Thus, tackling waste heat is vital for low-energy societies. Because local conditions are so diverse however, tailor-made solutions are required, with a strong role for local authorities in district heating and cooling, where the measure of success must be a long-term perspective on primary energy savings. So far, so good.

The Committee of the Regions (right) hosted the conference, with views onto the European Parliament (centre). Photo CC BY Rachel Tansey

The Energy Efficiency Directive is the first attempt to cover waste heat at European level, but one serious concern about the proposal is the possibility that combined heat and power (CHP) could be given a higher feed-in tariff than (and therefore be prioritized over) renewables. If this enabled, for example, new coal power stations that make use of their waste heat to be prioritized over wind or other renewables, throughout Europe, this would be detrimental to climate change mitigation. The problem is that coal with CHP would be a big improvement for countries like Poland, but a significant regression for countries like Sweden or the UK. At European level, whilst it is important to ensure that all Member States are increasing efficiency in line with the need (and target) to save energy, it is equally important that there is enough flexibility in the Directive to avoid regression in those countries that are more advanced in energy production and consumption than others. But the flexibility has to be limited enough to avoid ‘get-out’ clauses (for example, with respect to energy efficiency obligations on energy providers – see below). This is a balance that the current EED proposal has yet to achieve.

ESCOs and EPCs: the business case? Energy efficiency in homes, although it provides savings in the long term, needs funding in the short term. The levels of funds required to make Europe’s housing stock efficient will require both public (EU or Member State) and private (business or household) funds, but the current economic climate makes this a challenge. It is this scenario that has led to the idea of getting Energy Service Companies (ESCOs) to finance energy efficiency projects from the future savings made by lower energy bills. The Energy Performance Contracting (EPC) model is roughly this: a building’s energy performance is assessed; the potential savings from certain efficiency measures is assessed; a contract is drawn up arranging that the investment costs needed for the identified energy savings (paid for by the ESCO) are paid back over time out of the savings made as a result of the energy efficiency gains. The idea is based on several assumptions, including that:

  • the cost of energy won’t increase beyond the levels of savings;
  • more efficient homes will translate into energy savings (and not just higher consumption);
  • a household isn’t already in fuel poverty (i.e. unable to heat or power their homes to sufficient levels) and therefore unlikely to make real savings (rather, the household will be able to live in a healthy environment);
  • a house particular house can be made efficient at a reasonable cost (i.e. it doesn’t require very expensive measures like external wall insulation) so as to ensure a (relatively) reasonable pay-back time;
  • retrofitting will be carried out holistically and to an appropriate technical standard (rather than in an ad hoc way) so that the energy performance of a building really does improve significantly;
  • and, of course, that the contractor (i.e. company) can actually make a profit.

The Energy Efficiency Directive hopes to kick start this ESCO market by putting energy efficiency obligations on energy utility companies, which require them to ensure their buyers actually make energy savings. Article 6 of the EED refers to energy efficiency obligation schemes that require energy distributors or retail energy sales companies to achieve, among their final customers, annual savings of 1.5 per cent of their energy sales, by volume, compared to the previous year. However, there is a last-minute get-out clause at the end of the article that business and industry lobbied very hard for, providing the possibility of Member States using alternative measures to achieve the same amount of savings.

Obliging utilities (Art. 6.1 “Each Member State shall set up an energy efficiency obligation scheme”) to make end-use savings, with appropriate measurement and monitoring, seems to be a way of ensuring that savings are actually made, year on year, with the burden (theoretically) resting with corporate money. However it is hard to see how Member States are obliged to put these obligations in place if they are also able choose to do something else entirely (Art. 6.9 “As an alternative to paragraph 1, Member States may opt to take other measures”). It is QCEA’s position that this equivocation should be removed from the EED. However, concerns remain about the overall vision the EED has. Richard Baines, who gave a presentation about the UK Green Deal, remarked about the future of the energy services market that;

“We need the supply of energy services to be more profitable than the supply of fuel, so that today’s fuel companies aspire to be energy services companies. Without that, today’s fuel-based economies, and societies, might collapse.”

In a way, this sentiment is right – energy savings do need to surpass mere fuel provision as a priority. However, putting profit for big companies at the center of the picture – instead of the center of the picture being the promotion of energy savings behaviour, a Europe of more efficient, warmer homes,  and the overarching need to reduce our energy consumption and therefore climate emissions (and so putting us in a position from which we are able to meet our energy needs with clean, green, renewable energy) – is not the vision of sustainable energy security and economic justice that QCEA is advocating for.

The priority should be people and planet, not profit.

Finally, it remains the fact that being on track to miss a target by more than half (based on Member States’ existing plans) is sufficient evidence to incentivise action now to make that target legally binding. Putting off making the energy savings target legally binding (as the CO2 reduction and renewables targets are) for first one, two, and then three more years is not evidence-based policy making. Reducing our energy consumption is too important to be optional, or to be done only if and when it can be made profitable for the shareholders of big companies.

About Rachel Tansey

Rachel was a QCEA Programme Assistant on Sustainable Energy Security between November 2010 and November 2011.


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