The ‘renovation revolution’ required to tackle building emissions

Slashing carbon emissions in Europe requires an ambitious renovation revolution that transforms the buildings we live, work and learn in. That is the conclusion of Climate Group’s new handbook, published in collaboration with major corporates Carrier, CBRE, Danfoss, Rockwool, Siemens, Signify and Velux.

The handbook lays out the essential steps to increasing collaboration between governments, businesses and financial institutions in order to drive up annual renovation rates in European buildings – delivering on the EU’s ambitious climate goals and the COP28 energy efficiency pledge.

Europe’s renovation rates are stuck at 1% per year, while deep renovations, which can reduce a building’s energy consumption by at least 60%, are at just 0.2%. That is far below the 2.5% rate recommended by the International Energy Agency (IEA) in order to achieve net zero by 2050.

The handbook, How to deliver a renovation revolution in Europe’s buildings, considers several persistent barriers that are hampering the widespread roll-out of energy renovations – namely financing issues, skills shortages, out-of-date data and lengthy permitting processes.

Sam Kimmins, director of energy at Climate Group, says: “At the current pace and scale, it would take at least a century to renovate Europe’s existing building stock into homes, offices and public buildings fit for the 21st century.

“The energy performance of buildings directive (EPBD) in the EU presents a huge opportunity for a renovation revolution that slashes Europe’s emissions. So it is critical that we meet this moment with bold ambition. It is time to double the annual rate of energy renovations in Europe to meet the COP28 pledge on energy efficiency.”

Jordan Marshall sat down with Kimmins to discuss the report.

JM: Can you tell me about your role and how you got to where you are today?

SK: My role encompasses our work on renewable electricity through our RE100 project, 24-7 carbon-free energy project, and our energy efficiency portfolio, which covers the renovation revolution project that we will be talking about today.

I have been working in sustainability for around 28 years and quite early on I realised that there’s a lot of work that needs doing to support industry’s need to shift to a more sustainable footing – and I wanted to be part of that.

I have moved across different sectors. I have done 10 years in construction sustainability, and built environment sustainability, but have also been moving across aviation, shipping and the pure energy sector.

Can you explain the aim of the handbook and how it forms part of the renovation revolution project?

All EU member states are required to put forward their plans for how they will tackle business energy problems in buildings this year. The handbook is really to help governments, the construction industry, the design industry and financiers understand how they can really make the most of this directive and how they can really unlock renovation.

We know that there have been many attempts to increase renovation rates, some more successful than others, but we have still not achieved the rates that we need to.

So we took some of the lessons from the past and some of the lessons learnt by the companies we work with to look at how we can make this as effective as possible. Let’s seize this opportunity.

What are some of the key barriers outlined in the handbook that have hindered progress? 

The renovation rate has remained stuck at around 1% per year. Putting that in simple terms, it would take 100 years to renovate the entire European building stock, at which point you would need to do it again.

So, we need to accelerate that to the 2.5% rate recommended by the International Energy Agency to achieve net zero by 2050.

There are a few key barriers that the organisations we’ve been working with have identified. First of all, financial constraints. The money isn’t going into projects at the rate needed to enable renovation.

Secondly, there is a challenge around labour shortages for the key skills required for the new types of work needed to upgrade buildings. This includes areas such as high insulation rates and installation of heat pumps. 

Thirdly, there is a lack of up to date information on Europe’s building stock, so people simply don’t have the data to understand what the priority buildings are, what the priority methods to fund are, and what the priority parts of buildings that we need to be upgrading are.

Without the data, ultimately it is really hard to determine where our money is best spent.

There’s also a lack of awareness about the benefits of renovation and misaligned incentives between property owners and tenants, which are all hurting the energy revolution renovation rollout.

So, the handbook sought to identify those challenges, but look at some of the top level ways in which we can start to address them.

If the EU aims to more than double its annual energy renovation rate by 2030 what sort of strategies could help accelerate this process, while ensuring that the quality and sustainability of renovations at the same time?

First of all, I’d say addressing data is key. We need to be making sure there’s more data collection about the performance of buildings and as this will really help to prioritise which buildings should be renovated first.

This is because it ensures there’s good evidence-based decision making, and good monitoring of performance, as this allows organisations to prioritise which buildings and which interventions to focus on. That’s the first thing.

Secondly, is embedding energy efficiency into corporate ESG standards and ESG programmes, so that it’s firmly on the agenda for companies. This means that when a renovation happens, it also includes energy within that.

There’s also a step to take in linking up different parts of the change agenda. For example, we know that EVs are being rolled out at a pretty rapid rate, and EV infrastructure is being rolled out at a pretty rapid rate.

That requires new permitting for the new electricity connections, the upgrades of the grid, and what not. Well, linking that to the upgrades you need to, for example, electrify your heating that can save basically having to double dip into the permitting pool and can save bureaucratic costs and also save actual work costs.

Fourthly, it is key there is an aggregation of projects.

Small scale, building by building, can be very unattractive to the contractor and very unattractive to the funder.

But if you aggregate those into larger portfolios, you can make them more attractive, you can get better economies of scale, and also start to roll out repeat work for similar buildings so that you can actually achieve more.

You can roll out economies of scale either within the same organisation’s portfolio or by linking portfolios across organisations and having collaborative renovation efforts or public private partnerships to renovate similar types of buildings across a city, region, or country.

How do energy efficient renovations contribute to the broader societal benefit such as energy security, cost savings, and health improvements? Do you think these benefits can help incentivise faster action?

I think we need to think of building renovation beyond just the environmental agenda. We need to appeal to different stakeholders, different funding pots, and different colours on the political spectrum.

Building renovation is a win-win for a number of reasons. It can drive up health in buildings.

In fact, the US is really good at this. A lot of green building work focuses on the productivity and health of workers as opposed to the energy savings because the financial payback for increased productivity of your staff is actually pretty high. It can really may help make the economic case.

Renovation can also help the climate resilience of buildings. We know that the weather in Europe is going to get wetter. We know that our buildings are going to need to withstand different weather conditions.

Let’s upgrade them so they last longer and are a better long-term investment.

We also know that there’s a really strong jobs argument. Renovation will create jobs across Europe and across the UK and it is clear that construction jobs are a great way of boosting the economy.

We also know that saving energy helps energy security, and with energy prices going up and increased energy insecurity due to the ongoing war in Ukraine and other global issues, saving energy is a very good thing to do for energy security and national security.

Finally is the impact on the fuel poverty agenda, and while the renovation revolution handbook is largely is aimed at commercial buildings, it’s equally applicable to domestic buildings, particularly in the housing association sector.

There’s a really compelling case for upgrading homes to reduce fuel poverty and to improve health outcomes and reduce pressure on the NHS.

What would you like to see happen next?

The next step is for each country to pull together their building renovation plans to feed into the EPBD. What we need is for countries and companies to take the recommendations into account in those plans.

When it comes to decision making, we need a robust and comprehensive database of building stock information – such as age, design, construction materials and state of repair. That is essential. It’s going to drive more evidence-based decision making on energy revolutions, something that is currently missing both in the UK and the EU. In fact it’s missing across most of the world.

We need to understand the state of our buildings and be able to prioritise that. We need centralised digital databases and knowledge-sharing platforms to deepen the understanding of the current efficiency of buildings and target areas most in need, and understand which interventions will be most cost-efficient and achieve the best outcomes.

Are there specific roles that you think either companies, government or financial institutions need to play in facilitating collaborative approaches?

One of the key barriers is financing and contracting when there is more than one party involved in a project. It can become rather complex. Financial institutions have a role to play in de-risking and enabling that [to allow for the] sharing of best practice.

Secondly, governments can lead by example. Governments have huge portfolios and really have the potential to lead the way by doing larger scale cross-portfolio refurbishments.

Large developers also have a role to play in just taking the plunge and trying more joint ventures, more multi-stakeholder collaborations.

Everybody has a role to play, but I would say that primarily it’s the finance sector actually providing the capital to have what appear to be more risky projects spread across multiple stakeholders.

Do you think regulation has a role to play?

Absolutely. Support from government in the form of very clear, long-term regulation and initiatives is really important. Previous government renovation programmes have not lasted very long because people didn’t take them up or because people didn’t know about them or there has been a change in direction.

It takes a long time for somebody to gear up to renovate a building. So, if a renovation incentive programme lasts for two years, it can finish by the time somebody’s actually pulled together their plan sufficiently that they can take advantage of that scheme and achieve the renovation.

That is particularly true with larger projects. The bigger the portfolio, the bigger the project, the longer it is going to take to set up.

This means that governmental programmes need to be put in place that have roll-out times between five years and a decade. Incentives for heat pumps, incentives for electrification in other other areas – they need to they need to have long roll-out times.

The second area where government needs to intervene is in the upgrade of the grid. Permitting times for electrification of facilities and projects due to the extra connections, the grid upgrades needed, can be extraordinarily long. They need to be shortened.

We know that the government has already made moves to shorten these, but ongoing work is required to simplify permitting and accelerate grid upgrade so that large facilities can electrify their heating systems, as an example.

What is the key message you want people to take away from the handbook?

The handbook focuses a lot on the EU, but the big message here is that, although we took a real EU legislation, EPBD focus, it is applicable to the rest of Europe outside the 27 member states.

A lot of the challenges that buildings in France are facing are the same in the UK, for example. So there is a broader applicability.

The handbook is designed as a guide to show how governments, corporates and financial institutions can collaborate and learn from one another and implement the changes we need to see in order to hit our climate goals. In short, we need to take building renovation seriously.