What can investors welcome in the new EU Clean Energy Package?
Tatiana Bosteels, Director Responsibility & Head Responsible Property Investment at Hermes IM and Chair, IIGCC’s property sector programme
In a move that can only be welcomed, the European Commission’s new Clean Energy Package proposals published earlier this week place energy efficiency front and centre of EU efforts to curb greenhouse gas emissions and meet climate targets. With these proposals, the Commissions seeks to bring the Energy Efficiency Directive in line with the EU 2030 climate and energy framework.
This important step sets a robust pathway for the uptake and finance of energy efficiency across the EU and, coupled with a 30% EU-level binding energy efficiency target, decarbonisation objectives in the national renovation strategies and the extension of the energy saving obligation* beyond 2020, sends a strong signal of commitment to energy efficiency and its multiple benefits.
One welcome measure in the package is the governance proposal to employ 10-year national energy and climate plans alongside long term national renovation strategies (required under the (Energy Performance of Buildings Directive) in order to decarbonise the EU’s building stock by 2050. If well implemented, and if national climate plans include investment plans, these steps offer a significant opportunity to ensure the EU is and remains aligned with the Paris Agreement’s long term decarbonisation objectives and monitoring processes.
However, to promote early action and send a prompt signal to investors, the proposed in-depth assessments of progress to take place every two years must be brought forward to commence before the 2020s. The addition of a clear focus on inclusion and monitoring of energy poverty objectives within the governance process also represents an important chance to address social inequality.
Greater ambition from the Council and the Parliament is essential if EU Member States are to decarbonise swiftly enough to ensure a smooth transition to a low carbon economy and deliver the long term goal set by the Paris Agreement. Moreover, given the current economic situation in Europe and in view of the multiple benefits, such as 900,000 new jobs by 2030, it is vital that Member States take advantage of these processes to set ambitious national framework and policies, and then both monitor and adjust their national programme over time as necessary.
More specifically, the “Smart Finance for Smart Buildings” initiative is a good development that will help unlock private funding for energy efficiency and renewable energy projects and clearly reflects the Commission’s belief that the greatest potential for energy savings lies in the buildings and industrial sectors. As demonstrated in their engagement through the Energy Efficiency Finance Institutions Group, investors are committed to working with EU institutions to support increased leverage of private capital investment into energy efficient real estate.
In particular, we support the greater technical assistance resources proposed in the Clean Energy Package to support project development as well as the aggregation and de-risking work required to clarify energy efficiency investment risks. We also welcome plans for an electronic database of Energy Performance Certificates and the move this signals towards the collection of data recording actual energy consumption. We have long argued - as we set out in a policy paper published last March - that EPCs must be transformed into an electronic building passports, covering operational as well as design performance.
The extension of energy savings requirements to 2030 could also be described as another ‘no brainer’. We also call on Member States and the Parliament to support zero energy standards for all new public and commercial buildings to take effect as soon as possible - ideally from 2020 - alongside requirements for deeper and stronger regulation to retrofit existing real estate.
The focus on the scale deployment of smart metering and the development of a ‘smartness’ indicator for buildings will be other useful policy measures. However, we call on both the Council and Parliament to learn from pilot schemes - that used residential “pay for performance” incentives and on-bill repayment schemes – to ensure the final EU energy package implements the range of innovative initiatives that smart buildings offer.
*Member States will have to continue requiring energy suppliers and distributors to achieve 1.5% energy savings annually.
The Commission’s proposed package will now be officially transmitted to the European Parliament and to the Council of the EU, who will consider and amend the proposal as per the ordinary legislative procedure. IIGCC will monitor progress closely.