1
Developing a ‘flagship’ to decarbonize the building sector Key elements for the flagship analysis What is a flagship? Key transformative investment opportunities that are priorities for climate action in sector Flagship analysis is accompanied by a set of recommendations for financing and reforms to implement then Example: “add XX thousand solar rooftops by 2025” or “help XX cities decarbonize their district heating & cooling networks by XX”
• Assessment of the progress that can be achieved by the Recovery and Resilience Plan (RRP) against the respective investment needs baseline, discussion of the gaps and how they can be closed through modifications in the RRP and/or the National Energy and Climate Plans, provision of a critical review considering the 2030 and 2050 targets/ relevant strategies • Assessment of contribution for GHG emission reduction
• Review of cost-effectiveness and investment needs (in order to achieve 2030 climate targets) • Reforms: Identify the existing regulatory and non-regulatory barriers to investment in flagship technologies and identify key enabling reforms • Finance: Identifying the role of public and private sector finance to enable implementation of flagships. Opportunities from RRP and EU Green Deal: what's missing and what can be covered by national government or promotional banks
3
4
Flagship overview: energy savings in family houses By By 2030, 2030, a a total total of of 280,00 280,00 single-family single-family houses houses have have been been deeply deeply renovated renovated and and the the rate rate of of deep deep renovations single-family houses increased 40,000 houses/year. renovations ofof single-family houses is is increased toto 40,000 houses per year. Rationale behind the target For single-family houses, the ambitious renovation scenario of the CZ Long-Term Renovation Strategy* estimates deep renovations reach the level of 5 mln. m2 of floor area annually by 2030. The average floor area of a single-family house is about 125 m2 , which equals an annual rate of 40,000 renovated houses/year by 2030.
Investment needs • Total investment needed for the period of 2021-2030 is €12 bn (CZK 310 bn) • Assuming 25 - 30% of public funding is needed to stimulate the total investment needs, €3.2 - 5 bn (CZK 80 - 90 bn) of public funding will need to be mobilized until 2030 in investment subsidies or financial instruments • An additional €3 bn are necessary to fund technical assistance and information campaigns • Current levels of public funding into the building sector (e.g. RRP €747 mln (CZK 19 bn), EU ETS: €1.6 bn (CZK 40 bn)) are insufficient to cover public investment need • Annual investment need in 2030 can be estimated at €1.4 – 1.6 bn (CZK 35 - 40 bn)** (meaning approx. CZK 10+ bn of public funds)
Greenhouse gas emissions savings • The flagship will lead to GHG emissions savings of approximately 4 Mt CO2 cumulatively by 2030 compared to 2021 levels, with 0.44 Mt CO2 saved annually by 2030 • Estimated CO2 emissions from single family houses are 13.76 Mt CO2 in 2021 → reduce to 9.78 Mt CO2 in 2030
Generally, to achieve the flagship target, both the rate and depth of renovations need to be increased by a factor of 2 or rather 3 within this decade. *which corresponds to Progressive scenario in 1 and Hypothetical scenario in the CZ Long-Term Renovation Strategy2 ** There is a non-linear uptake in the renovations in the scenarios.
5
Flagship overview: Investment needs By 2030, a total of 280,00 single-family houses have been deeply renovated and the rate of deep renovations of single-family houses is increased to 40,000 houses per year. Total investment needs to transform the building sector • For the residential buildings, over €16.2 bn (CZK 405 bn) and roughly €24.2 bn (CZK 605 bn) for the whole building stock are needed between 2020-20302 • €12.4 bn (CZK 311 bn) needed between 2020-2030 in hypothetical scenario leading to 32 - 45% CO2 emission reduction for single-family buildings2 • DG ENER estimates the annual investment gap building renovation to be around €275 bn per year to achieve 2030 targets1 for all EU MS
Role of public vs. private sources in the building sector • Complex renovations are mostly reliant on private financing, but triggered by public programmes • Less than 7% of current building renovations in Czechia are supported by the leading subsidy program (New Green Savings Programme)
What is currently committed in public funding? • RRP – energy efficiency improvements for public buildings €300 mln (CZK 7.5 bn) and for residential buildings €760 mln (CZK 19 bn) • National programmes – NGSP financed by EU ETS, valued up to €156 mln (CZK 4 bn) annually2
Investment needs for flagship • A doubling of current investment is needed to meet the progressive scenario in buildings renovations, or a tripling of current investment to align with the hypothetical scenario of 55% emissions reductions in buildings by 2030 and a 100% reduction by 2050.
6
Flagship overview: implementation Overall priorities • Internalisation of energy efficiency as CZ government‘s strategic priority and allocation of adequate capacity ensuring implementation • Improved framework policy: stricter building laws/codes for new buildings
Reform 1 - Enhancing the uptake of financial instruments • Sufficient public funding for the new period for the renovation of single-family buildings using available European and national resources (highly important, but currently not adequately addressed) • Sufficient commercial funding using innovative financial instruments
Reform 2 - Systemic support to a project development assistance: two-step advisory to quality project preparation • Support the independent preparation of quality projects, thereby creating a pipeline of investment-ready actions (currently the key missing and needed element)
Reform 3 - Information campaign to enhance the uptake of financial instruments • Complementary information campaign on the opportunities and benefits of quality building renovation (crucial supporting activity)
7
Background information: Current state of energy consumption in buildings Energy consumption and GHG emissions from buildings Accounting for up to 34.6% of national GHG
emissions, the building sector plays a central role in achieving climate targets.
→ The building sector accounts between 10%1 and 34%2 of national GHG emissions, depending on whether the building stock’s electricity and district heat consumption is included in the buildings sector or the electricity/district heating sector → Estimates show that climate-specific investments in buildings (i.e., energy efficiency, renewable energy and fuel switch) are critical to achieve climate targets3 → Reduction potential for the national building stocks’ CO2 production in 2050 ranges from 27.6 - 52.0% depending on the scenario without considering the uptake of building-integrated photovoltaics (BIPV), and from 43.6 - 86.9% when factoring in the rapid uptake of BIPV2
8
Background information: Current renovation rates → Single family houses represent 65% of the building stock (32% of the floor area)1
Energy efficiency can be improved in approx. 70% of Czechia’s building stock
→ Building efficiency (i.e., improved insulation and fuel switches) can be improved in approximately 70% of Czechia’s building stock2 → Differentiation between residential & non-residential buildings is necessary due to legislative differences (lax laws for residential buildings) → 25% of single-family houses and 40% of multi-apartment buildings had undergone some level of renovated in 2019 (LTRS)
Renovation levels in 2014 – 2018 (LTRS)4 deep 20%
low 35%
moderate 45% Data source: CZ LTRS, 20204
→ Stable and long-term support programme for single family buildings (Green Savings Programme) is run by the government, however, only 7% of renovations are supported through the Programme3 → High share of self-help (DIY) and step-by-step renovations leading to little information about the quality of renovation3
→ But the deeper the renovation, the higher the satisfaction with the results as well as an increased number of co-benefits 3 9
Background information: Czech building stock by type Czech building stock by type, 20201 1,800,000
300,000,000
1,600,000
number
1,400,000
250,000,000
area (m2)
1,200,000
200,000,000
150,000,000
m2
1,000,000 800,000
Flagship target for deeprenovated single-family houses by 2030
600,000
100,000,000
400,000
50,000,000 200,000 0
0
Single family buildings
Multi-family buildings
Non-residential buildings Data source: CZ LTRS, 20204
10
Policy context – National Energy and Climate Plans (NECP) National Energy and Climate Plan (November 2019)1 → The CZ NECP estimates the total investment needed to reach the 2030 energy efficiency target (Art. 7) at €20.5 bn (CZK 524 bn) in the period 2021–2030, of which public aid €6.1 bn (CZK 156 bn) and the remainder by private stakeholders (households, commerce, industry). → Entails all energy efficiency measures, not only buildings, but also transport, industry, etc. → Aims to improve energy performance of buildings through mainly legislative, fiscal and behavioural measures → CZ Long-term renovation strategy only published after NECP (April 2020, see next slide)
European Commission (COM) assessment of the NECP2
Contribution of energy savings of policy measures to CZ energy efficiency target* as presented in NECP1
Regulatory and information/ behavioural measures 20% Fiscal measures 4%
Grants and other financial instruments 44%
Voluntary agreements 32%
→ Policies to reach the EE target considered credible, but insufficient → Existing financing sources are described; however, future financing sources for building renovations remained unclear in the NECP.
* under Art. 7 of the EED Data source: NECP, 20191
11
Policy context – CZ 2020 Long-Term Renovation Strategy Long-term Renovation Strategy1
EU Commission (preliminary) evaluation2
→ Published in April 2020 (after publication of NECP)
→ Unambitious target (especially given the mainly follow-up of existing measures, lack of quantification of savings and impacts)
→ Utilizes the “optimal” scenario of decarbonisation and energy efficiency in the building stock → Does not use the maximum decarbonisation potential, but is deemed “realistic” by the Ministry of Industry and Trade (MoIT) → Acknowledges the need for increased renovation rates → The LTRS presumes deep renovation increase to 85% in the “hypothetical” scenario and 40% in the “optimal“ scenario in 2030 → Goal of reducing GHG emissions by 40% by 2050
→ Areas for improvement: → provide more specific estimates of impacts (including wider benefits) of the individual measures or groups of measures, and implementation and promotion of the measures → further specify the trigger points for renovation → further explore measures to address energy poverty / vulnerable households → development of advisory tools such as one-stopshops
12
Policy context – Recovery and Resilience Plan Building renovation in RRP3 → The RRP includes three sub-targets for buildings: energy efficiency measures, replacement of out-dated/carbon-intensive heating sources and educational measures on energy efficiency in buildings → Component 2.2 - Investments into energy efficiency improvements for public buildings (total budget €300 mln (CZK 7.5 bn) under auspices of the Ministry of Industry and Trade) → Component 2.5 - Investment into energy efficiency improvements in residential buildings (total budget €760 mln (CZK 19 bn) under auspices of the Ministry of the Environment) →
Also includes gas boilers in family homes (potential conflict with DNSH)
→ Acceleration of the building permit process envisaged
Relation of RRP/MFF to the flagship → Relatively high budget devoted to energy efficiency in buildings compared with other CEE countries1,2 → →
→
Increase in allocation to buildings renovation – 85% more than in the previous MFF1 These funds will be combined with funds from EU ETS revenues (national and in Mod. Fund), European Structural and Investment Funds (OP Environment and OP Competitiveness), altogether it sums up to about €5.2 bn (CZK 130 bn) for building modernization for the coming decade The estimated needs for the Progressive Renovation Scenario is estimated at about € 6-8 bn (CZK 150 - 200 bn)
→ Additional funds are needed, however, setting up the right criteria and administrative requirements for renovation programmes should be prioritised → Renovation programmes for all types of buildings (residential, public and commercial) are in place but the combined renovation rate and depth needs to double or triple within this decade →
For single-family houses that means mainly increased quality and extent of each renovation which are so far mostly done by DIY and financed from personal savings 13
Policy context – Measures in the Recovery and Resilience Facility Pillar (from RRP)
Reforms
2.2 Reducing energy consumption in the public sector Estimated cost: €324 mln (CZK 8,100 mln) -
2.5 Renovation of buildings and air protection Estimated cost: €631 mln (CZK 15,775 mln)
Renovation wool in the residential sector - Improving the legal, administrative and economic framework for the development of renewable energy sources - Support for community energy
Investment (from RRP)
Targets (from RRP)
2.2.1 Implementation of energy saving measures to reduce the energy performance of buildings owned by public entities : €129 mln (CZK 3,225 mln)
2.2.1 ~75% contracting of projects by Q4 2023; reduction of energy consumption by 390 TJ by Q1 2026
2.2.2 Realize measures to improve the energy performance of government department buildings: €113 mln (CZK 2,825 mln)
2.2.2 reduction of energy consumption of state buildings by 216 TJ by Q1 2026
2.2.3 Implementation of energy saving measures in the reconstruction of public lighting systems: €82 mln (CZK 2,050 mln)
2.2.3 ~80% contracting of projects by Q4 2024; reduction of energy consumption by 286 TJ by 2026
Corresponding CSRs Climate (from 2019 & 2020 Tagging (in country report) RRP) CSR 3 (2019): Focus -100% eligible investment-related economic policy on low carbon & energy transition, including energy efficiency, taking into account regional disparities. CSR 3 (2020): Focus investment on the green transition, in particular on […] clean and efficient production and use of energy.
Evaluation Green Recovery Tracker: very positive BankWatch: 100% green agenda Green Recovery Tracker: very positive BankWatch: 100% green agenda Green Recovery Tracker: positive
2.5.1 New Green Savings Program 2030 (hereinafter NZÚ 2030): Support for the renovation and revitalization of buildings in the housing sector: €333 mln (CZK 8,325 mln)
2.5.1 reduction of energy consumption by 1200 TJ/year by Q3 2024; reduction of energy consumption by 4021 TJ/year & reduction of CO2 emissions by 631 kt/year by Q4 2025
COM assessment: high relevance CSR 3(2019): Focus -100% eligible investment-related economic policy on low carbon & energy transition, including energy efficiency, taking into account regional disparities.
2.5.2 NZÚ 2030 program: Support for replacements of unsuitable heat sources and separate RES installations: €283 mln (CZK 7,075 mln)
2.5.2 reduction of energy consumption by 186 TJ/year & reduction of CO2 emissions by 91 kt/year by Q3 2023
COM assessment: high relevance
2.5.3 Pre-project preparation and enlightenment: €16.2 mln (CZK 405 mln)
-
BankWatch: 100% green agenda Green Recovery Tracker: likely effect but not assessable (support for gas boilers in family homes – carbon lock-in)
-100% eligible
Green Recovery Tracker: very positive
-0% eligible
Green Recovery Tracker: very positive
14
Policy context – New Green Savings Programme → Supports the renovation of single-family houses & buildings → Considered as a best practice1
cannot find 2% other A3 6%
→ Financed from the revenues generated under EU ETS, running since 20092, as a continuous programme with long-term predictability and stable criteria since 2015
7%
A0 26%
Renovation projects paid out through NGS in 2017 – structure3 50,000 45,000
Average eligible costs (EUR) Number of applications %
40,000
1,400
Share of subsidy on eligible costs 1,199
35,000
1,600
1,523
EUR
A1 22%
1,200
1,198
1,000
30,000 25,000
800
20,000
600
43%
15,000 10,000
A2 37%
32%
400
41%
32%
192
5,000 0
200
Depth of renovation4 Note: A0 – A3 are depths of renovations supported by the New Green Savings programme, from the lightest (A0) to the deepest (A3)
0
A0 - shallow
A1 - shallow
A2 - mild
A3 - deep Data source: Valentová et al., 20173
Data source: Chance for Buildings, 20214
Investment barriers Complex renovations are reliant on private financing, but triggered by public programmes Investment Needs Long-Term Renovation Strategy1
€6.7 bn (CZK 168 bn) by 2030 in optimal scenario
→ The investment in renovation of buildings needs to roughly double to align with the progressive scenario, or triple to align with the hypothetical scenario, which is on track to 55% emission reduction target by 2030 and climate neutrality by 2050 Public and private climate and energy investment in buildings sector in 2017 (CZK bn)3
Chance for Buildings2 €12.1 bn (CZK 310 bn) by 2030 in progressive scenario leading to 25% - 38%* CO2 emission reduction €14.3 bn (CZK 365 bn) by 2030 in hypothetical scenario leading to 32% - 45%* CO2 emission reduction
*Depending on the development of BIPV
Image source: Valentová et al., 2019 3
16
Financing barriers → Financing of renovation costs3,4,5 → Most investments are under €7,800 (CZK 200,000) in survey among all single-family home-owners vs. majority over €40,000 (CZK 1 mln) for NGS applicants The EU building market is typically top-down and supply driven, with a discrepancy between the offered products and the end-users‘ needs and affordability1 Deep renovations are complex: “one cannot pick up the phone and insulate the house in two weeks“2
→ Own resources in survey among all home-owners vs. co-financing: →
70 % own resources vs. 38% mortgages among subsidy recipients
→ 40% respondents would do deeper renovation/additional measures if pre-financing or soft loan available Ownership of single-family houses6
→ Step-by-step renovations prevalent3 → 60% of renovations are step-by-step (piecemeal), rather than complex → main reason behind this is the lack of finances and preference of utilizing own financial savings, which can usually support separate measures, rather than complex projects
→ Lack of diverse financial mechanisms – reliance on investment subsidy through NGS7,8
municipality/ state 1% residential cooperative 0.1%
co-ownership of apartments owners 4%
natural person 95%
Data source: CZSO, 2021 6
17
Investment barriers - Administrative and capacity barriers → Single-home owners often renovate on their own to avoid administrative issues (i.e. building codes) and without any public support such as subsidies1 → Only 7% used the state subsidy scheme (NGS Programme) for renovation (according to a survey of 825 respondents) 2 → Only 23% of non-NGS programme users used a specialised construction company vs. 60% under the NGS Programme2,3 → Low share of consultation of deep renovation experts prior to renovation2,3 → 50% learned about the renovation from a craftsperson or construction company, followed by acquaintances → 70% of NGS subsidy recipients consulted an energy expert prior to project start → Complicated application process for certain building renovation grant programmes (according to a 2014 BPIE study)4 → This has significantly improved since 2014 (the administrative process has been streamlined) → Nevertheless, the perceived administrative burden can be high and discouraging - next to actual decrease of the administrative burden, promotion of further simplification is a key for success → Ensuring low administrative burden could persuade 40% of the ones who have not used the New Green Savings Programme
Information barriers → Lack of knowledge about the programmes and consultations → Home-owners do not know about the New Green Savings programme (16%)2 → Home-owners mostly get information from the family, friends and from the craftsperson, only to a lesser extent from energy experts 18
Reform 1: Financing – Enhancing the uptake of financial instruments Current New Green Savings Programme (2021 – 2027)1 → Best practice example of a stable, long-term programme for residential buildings with revenues from EU ETS2
RRP needs to be a top-up, not a replacement of other public support programs for renovations.
→ Formerly for single family buildings only (+public buildings), newly added multi-apartment buildings
Reforms/updates needed: → Continue support for construction of new buildings in energy passive standard and additionally for reducing energy consumption, to enhance combining other environmental/adaptation measures (e.g., water conservation, green roofs, etc.) all in one project → Increase in the uptake of the programme, information campaign (see Reform 3) and high-quality, efficient technical assistance needed (see Reform 2)2 → Keep the continuity in financing + ensure the sufficient inflow of financial resources to cover the expected demand → See box
Box: Financing of NGSP • Anchored in Act No. 383/2012 on greenhouse gas emission allowance trading conditions3 • Art 7, para 5 and 6 state that 50% (up to 4 bn CZK/annually) of revenues is used for State Environmental Fund • Expected absorption CZK 6 – 7 bn/yr for single and multi-family residential houses – accordingly to progressive scenario in LTRS (or more in hypothetical scenario) 19
Reform 1: Financing – Enhancing the uptake of financial instruments → Additional financing mechanisms
Dedicated (soft) loans with public guarantee should complement the subsidy programme to allow for upgrade in renovations.
→ To address the fact that deeper renovation is mainly prevented by lack of finance and general low share of debt financing of renovations1 → Higher trust for “public” or “state” provided loans1
→ Option 1: Public guarantee for dedicated commercial loans to co-finance the renovation (pooling) → Out of 4 possible scenarios, a portfolio guarantee for commercial banks, similar to “Expanze“ by National Development Bank (former Czech Moravian Guarantee and Development Bank) was identified as the preferred one by ISFC and Chance for Buildings2 → Possible combination with interest rate subsidies to further sweeten up the product for clients → Advantage – the NGSP provides energy assessment → Guarantee instruments play a more significant role in mobilizing larger amounts of private finance than loans/grants or equity3 → Improve the financial affordability of additional building renovation measuresconfidence in “public“ loans than commercial loans
20
Reform 1: Financing – Enhancing the uptake of financial instruments Option 1: Public guarantee for dedicated commercial loans to co-finance the renovation (pooling) Possible scenarios of the scheme faciliation1
Image source: ISFC and Chance for Buildings, 20211
Suggested parameters of Scenario 2A1 • Portfolio guarantee offered by the CMZRB to financial institutions
•
Cover up to 80% of the principle of provided loans and up to 10% of loan portfolios.
•
No commission for the guarantee
•
Funded by the NGSP programme
•
Interest subsidy covered by CMZRB or SEF
21
Reform 1: Financing – Enhancing the uptake of financial instruments → Option 2: Using energy savings from renovated buildings, banks can help boost acceptance and, therefore, take-up of these financial instruments →
Higher confidence in “public“ loans than commercial loans
What support from the state would motivate you to carry out a more thorough renovation?1 Base: renovated a family house in the last 5 years, N=405
Clearly yes
Dedicated (soft) loans with public guarantee should complement the subsidy programme to allow for upgrade in renovations.
100% 80% 60% 40% 20%
8% 7%
Rather yes 12%
16% 30% 2.15 39%
8% 16%
25% 2.28
39%
Neutral
Rather no
13%
11%
11%
11%
19%
21%
2.45 23%
34%
2.45 29%
29%
0% Higher subsidy for deeper renovation
Zero-interest loan by state institution
Zero-interest loan by Assisstance with project commercial institution preparation and energy optimization by state institution for free and w/out support to investment
Clearly no
Average 5
17% 17%
40% 3.75
2.96 28%
15%
4 3 2
21%
32%
17%
6% 7%
State support to technical supervision
Other
1
Data source: Chance for Buildings, 20211
0
22
Reform 1: Financing – Enhancing the uptake of financial instruments
Dedicated (soft) loans with public guarantee should complement the subsidy programme to allow for upgrade in renovations.
→ Option 2: Using energy savings from renovated buildings, banks can help
boost acceptance and, therefore, take-up of these financial instruments → Higher confidence in “public“ loans than commercial loans
→ Additional financing mechanisms → Address the fact that deeper renovation mainly prevented by lack of finance and general low share of debt financing of renovations1 → Higher trust for “public” or “state” provided loans (Ibid.)
23
Reform 2: Systemic support for project development assistance – two-step advisory ensuring quality project preparation → How should it work? → 1st step - Initial consultation – 3 – 4 hours of expert’s time with a simplified initial energy assessment, fully paid by public programme
Addressing large prevalence of lowquality, DIY, step-bystep renovations
→ 2nd step – Deeper consultation – 2 – 3 days of work with an on-site visit and an energy performance optimisation study as an outcome. Paid by public programme (e.g., 75% public financing and 25% client financing (i.e., ca. €500-600 public/€150-200 private financing shares for a typical single-family house)
Types of projects from consultations1 Insulation 1%
Technology measure 18%
→ The challenge of a stable customer base and expert database… → can be overcome by the prerequisite stability and announced longterm duration of the support to allow the market to adapt (availability of experts) combined with information/promotion campaign (see Reform 3) → Good practice in the New Green Savings programme as a stable and predictable investment support programme (see Reform 2) → Workshops and trainings for the experts to unify the quality of consultations and advice
Other 7%
Subsidy application 52%
EPC 22%
Currently, roughly 30 - 40 % of consultations lead to a subsequent project Note: EPC = Energy Performance Certificate Adapted from: Valentová et al., 2017
24
Reform 2: Systemic support for project development assistance – two-step advisory ensuring quality project preparation EKIS – Energy consultation and information centre
number of advisors
number of EKIS
number of consultations
400
14000 12000
350
12000
10500 300
9000
333
343
10000
321
311
250
12000
11500
270
7310
200
6000
150
4000
100 50
8000
63
70
80
77
60
60
0
2000 0
2015
2016
2017
2018
2019
Governance → Using and scaling up the network of EKIS (Energy consultation and information centres) in combination with current administration of the New Green Savings programme → Currently ca. 60 EKIS consultation centres with roughly 300 consultants (~20 per region, but regionally uneven distribution) – should be gradually scaled up (see previous slide) →
2020
Data source: MoIT1, Created by authors
Coordination by the Ministry of Industry and Trade with EKIS, but administration by the State Environmental Fund – to link to Green Savings Programme administration.
Quality check and evaluation
Map of the EKIS
Image source: MoIT1
→
Templates and guidelines for the consultants
→
Quality control of the consultations and advice
→
Set up reporting, monitoring and evaluation
→
Regular workshops and training for consultants 25
Reform 2: Systemic support for project development assistance – two-step advisory ensuring quality project preparation Suggested financing → Current financing of consultations under EFEKT Programme - subsidy of €280,000-360,000 per year (CZK 7–9 mln) through EFEKT programme → Average subsidy €32 – 36 (CZK 800 - 900) per consultation (ca. 60 minutes in the current programme) → RRP devotes €20 mln (CZK 500 mln) over 2021 – 2026 to “Support for awareness, education, training, pre-project preparation”, i.e., €3.3 mln (CZK 83 mln) per year → ~10 times more than current support in EFEKT programme → If assuming CZK 3,000 subsidy per 1st step consultation and CZK 15,000 per 2nd step consultation → results in e.g., 10,000 “light” (1st step) and 3,000 “thorough” (2nd step) consultations per year (without taking into account administrative costs). → Expected rate of “realisation” of the projects in short-term (i.e. going from 1st step consultation to 2nd step consultation is about 30% which is in line with the current data1 → The expected absorption capacity needed is roughly 40% higher (mainly due to higher needed uptake of 2nd step consultaitons) as calculated by2, thus the available financing from RRP may not be sufficient → Additional long-term financing should come from national sources: Either from a boosted EFEKT programme (its new programming period starts 2022) or national EU-ETS auctioning revenues (the same financing sources as for the New Green Savings investment programme) 26
Reform 2: Systemic support for project development assistance – two-step advisory ensuring quality project preparation Synergy opportunities → Building on the existing network of EKIS (see Governance section) → Cities in Covenant of Mayors – integral to Sustainable Energy and Climate Action Plans (SECAPs) → Local Action Groups - Option to use up the network of Local Action Groups (LAGs) to team up with the local EKIS → Cities with energy management → Hobby markets – represent an untapped potential both meeting the DIY specifics of the Czech environment and concentrating on the owners decided on renovating their home
Case example: WoonWijzerWinkel (NL)1 Large store or a warehouse, where the shoppers can get acquainted with the technologies and products, and have a personal contact option to ask for tailored advice and further assistance at the spot.
The concept will be replicated by the Innovate project in e.g. LV, SE or BE.
Pilot case by the Passive House Centre (CZ)2 → Running project on Financial instruments to support renovation of single-family houses → Testing a model combining energy advice/consultation and financing scheme (Green Savings Programme complemented by soft loans) → Building on the EKIS network to test the main challenges, barriers, and opportunities of the system 27
Reform 2: Systemic support for project development assistance – two-step advisory ensuring quality project preparation One step further → Linking the consultations to financing through one-stop shops
Best practice: Reimarkt (NL) →
Private company combining services of small and local providers
→ Background and benefits Especially well-suited for (fragmented) single family housing market
→
Enhanced by EED, EPBD and Renovation Wave
→
→
Enhance building renovation in the residential sector, “bridge the gap between the users and the construction supply side, and (…) move potential clients through the last steps of decision”1
Five physical stores and one online
→
Solutions for a variety of houses
→
Offers inclusive of financing strategy in which it plays central role to provide financing to owners who would otherwise not qualify
→
Can help direct the renovation to higher levels
→
Catching owners at their “life events”
→ Opportunities: can be linked to the network of cities in Covenant of Mayors, the existing system of EKIS (see also Reforms slide 62) → Financing: Technical Support Instrument of the Recovery Plan, the EU City Facility and the Project Development Assistance Facility under LIFE2
Additional aspects: • Packaging of interventions • Digital pre-visit planning
Source 1
One stop shops may cover about 10-15% of the desired renovation rate per year 1
→
28
Implementation: Financing instruments and reforms Reform 3: Information campaign – Enhancing the uptake of financial instruments → Communicate the multiple benefits of deep renovation → Key decision factors for renovations are not energy savings, but higher standard of living, technical status of the houses, and financial savings1 → For deeper renovations, the “other” benefits (e.g., increase in value of the property, higher comfort of living) are more proclaimed2
→ Communicate the need to and benefits of using the services of energy experts → Addresses the fact that the renovations are generally carried out by self-help (50% of renovations)
→ Communicate the existence of the New Green Savings Programme and lower administrative intensity → 16% of respondents do not know about the NGSP at all1 → 40% are discouraged by perceived administrative intensity, but are likely to change their mind1
→ Building on the existing platforms – chytravolba.cz, usporysrozumem.cz, EKIS 29
Reform 3: Increased support and framework reforms → Clear prioritisation of energy efficiency → Anchor the Energy Efficiency First principle in the update of the State energy policy → Currently mainly looking at the supply side → One of the key recommendations of the IEA Country Assessment1
→ Internalise energy efficiency as Government’s strategic priority and allocate adequate government capacity to ensure its implementation
→ Framework policy: Stricter building laws / codes for new buildings (residential and non-residential) → Now used mainly for a new-build, though an EU-wide regulation on minimum energy performance standards for existing buildings (certain types, at certain trigger points) is yet to come → This further underlines an importance of functioning financing programmes as only that will ensure sufficient public acceptance of the above regulation
30
Implementation: Financing instruments and reforms → Investment needs financing →
Investment needed for building renovations estimated at €12 bn (CZK 310 bn)1
→
Public funds required to induce the investment estimated at 25 – 30%, €3.2 - 5 bn (CZK 80 – 90 bn) in 2021 – 2030
→
→
€760 mln (CZK 19 bn) from RRP, €1.6 bn (CZK 40 bn) from EU ETS national revenues amounts to a current financing gap of €781 – 1100 mn (CZK 20 – 30 bn) however, this is not the key barrier to be addressed.
→
Depending on the final agreement of the Fit for 55 Package, the Social Climate Fund could also play a role
Private funds required: €8+ bn (CZK 200+ bn) in 2021 – 2030 (Reform 1) →
Combination of own funds of the single-family house owners and commercial loans (see Reform 1)
→ Project development assistance financing (Reform 2)* →
First step assistance – estimated financial need €1.6 mln (CZK 40 mln) annually (100% financed from public funds)
→
Second step assistance – estimated financial need €4 mln (CZK 100 mln) annually (75 % financed from public funds, 25 % financed by clients)
→
Administrative costs of the technical assistance programme (estimated at €400,000 (CZK 10 mln) annually)
→
Summed up, this translates into €0.06 bn (CZK 1.5 bn) for 2021 – 2030 →
Assigned funds in RRP amount to €0.02 bn (CZK 0.5 bn) for 2021 – 2026. The rest could be financed from national resource, not 100% secured currently.
→ Information campaign (Reform 3) →
Investment needed – generally, the more financing available, the higher the outreach
→
Ideally in the level of €6 mln (CZK 150 mln) annually (recommended by PR specialists)2, i.e. roughly €0.06 bn (CZK 1.5 bn) until 2030
→
Investment not secured not all. Sources from national budget. *Minimum estimates that are not adjusted for inflation, etc.
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Conclusions – Energy savings in family houses → There is a reasonable rate of renovation in single-family house segment in Czechia, however, the depth and quality of renovations needs to be substantially scaled up. →
Most renovations are of low scale, without sufficient project planning and carried out by self-help.
→ The flagship is in line with the LTRS and RRP objectives but aims at higher ambitions in order to be in line with the EU-wide decarbonisation targets. → The flagship, therefore, aims to fill the gap by proposing three major reforms/measures: →
Developing innovative commercial (co-)financing scheme to help upgrade to deeper renovation levels in addition to the New Green Savings programme (Reform 1)
→
Systemic support to project development and technical assistance to address the low-quality of current renovations (Reform 2)
→
Tailor-made information campaign to help raise awareness on the multiple benefits of deep renovation and the need to use energy experts (Reform 3)
→
Supporting measures entail especially clear prioritisation of energy efficiency (through the Energy Efficiency First principle)
→ The flagship should bring emission savings of approximately 4 Mt CO2 cumulatively by 2030 and the investment needs of the reforms amount to €8+ billion and will be mostly covered through RRP and national revenues from EU ETS → The suggested reforms are in certain stages of preparation but need to be implemented as soon as possible. The timing is favourable, as new programmes are currently being set up. 32
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Annex – Footnotes, abbreviation, glossary Accelerate deep renovation of single-family houses Slide 1 2 3 4 5
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Footnotes and sources -
1 Chance for Buildings, Long Term Renovation Strategy for Czech Republic, Update May 2020. https://sanceprobudovy.cz/wp-content/uploads/2020/06/strategie-renovace-a-adaptace-budovkveten-2021.pdf 2 CZ LTRS, 2020, https://ec.europa.eu/energy/sites/default/files/documents/cz_2020_ltrs_official_translation_en.pdf 1 DG ENER, Financing the EU Renovation wave through financial instruments in combination with grants presentation 2 Chance for Buildings, Long Term Renovation Strategy for Czech Republic, Update May 2020. https://sanceprobudovy.cz/wp-content/uploads/2020/06/strategie-renovace-a-adaptace-budovkveten-2021.pdf Sources: 1 Viktor Hanzlík, Vít Javůrek, Bram Smeets a Daniel Svoboda, Klimaticky neutrální Česko, Cesty k dekarbonizaci ekonomiky, McKinsey Report, 2020, https://www.mckinsey.com/cz/~/media/mckinsey/locations/europe%20and%20middle%20east/czech%20republic/our%20work/decarbonization_report_cz_vf.pdf 2 Lupíšek et al., Czech Building Stock: Renovation Wave Scenarios and Potential for CO2 Savings until 2050, Energies 2021, 14, 2455, 2021 https://doi.org/10.3390/en14092455, + scenarios from the document Potential for utilization of renewable energy sources in buildings (2018) provided by Czech Chamber of Renewable Energy Sources show how much potential building-integrated photovoltaics (BIPV) can have on GHG reductions in the building stock – possibly a good flagship *2nd reference refers to page 16 3 Valentová, M., Knápek, J., Novikova, A, Climate and energy investment map – Czechia. Status Report 2017: buildings and renewable energy supply and infrastructure, Prague: Czech Technical University in Prague, 2019. 4 McKinsey and Company, Pathways to decarbonize the Czech Republic, 2020 MoIT.2019. Survey on the awareness on energy saving measures among building owners. https://www.mpo.cz/cz/rozcestnik/pro-media/tiskove-zpravy/jsou-majitele-domu-motivovani-kesnizovani-spotreby-energie--mpo-si-nechalo-zpracovat-rozsahly-pruzkum-povedomi-o-usporach-energie--246180/ NOTE: Exchange rate of 25 CZK/EUR used, unless stated otherwise Sources: 1 CZ Long-term renovation strategy, 2020, https://ec.europa.eu/energy/sites/default/files/documents/cz_2020_ltrs_official_translation_en.pdf
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2 Viktor Hanzlík, Vít Javůrek, Bram Smeets a Daniel Svoboda, Klimaticky neutrální Česko. Cesty k dekarbonizaci ekonomiky, McKinsey Report, 2020, https://www.mckinsey.com/cz/~/media/mckinsey/locations/europe%20and%20middle%20east/czech%20republic/our%20work/decarbonization_report_cz_vf.pdf 3 MoIT, Survey on the awareness on energy saving measures among building owners, 2019, https://www.mpo.cz/cz/rozcestnik/pro-media/tiskove-zpravy/jsou-majitele-domu-motivovani-kesnizovani-spotreby-energie--mpo-si-nechalo-zpracovat-rozsahly-pruzkum-povedomi-o-usporach-energie--246180/ 4 CZ LTRS, 2020, https://ec.europa.eu/energy/sites/default/files/documents/cz_2020_ltrs_official_translation_en.pdf 1 CZ Long-term renovation strategy, 2020, https://ec.europa.eu/energy/sites/default/files/documents/cz_2020_ltrs_official_translation_en.pdf 1 Czech government, National Energy and Climate Plan of the Czech Republic, 2019, https://ec.europa.eu/energy/sites/default/files/documents/cs_final_necp_main_en.pdf 2 European Commission: COMMISSION STAFF WORKING DOCUMENT Assessment of the final national energy and climate plan of Czechia. SWD(2020) 902 final, 2020, https://ec.europa.eu/energy/sites/default/files/documents/staff_working_document_assessment_necp_czechia_en.pdf 1 Ministry of Industry and Trade, Long-term renovation strategy to support the renovation of the national stock of both public and private residential and non-residential buildings, 2020, https://ec.europa.eu/energy/sites/default/files/documents/cz_2020_ltrs_official_translation_en.pdf 2 European Commission, COMMISSION STAFF WORKING DOCUMENT. Preliminary analysis of the long-term renovation strategies of 13 Member States. SWD(2021) 69 final, 2021. 1 Budovy21, Evropská unie pošle dalších přes 25 miliard na renovace budov [European Union will add further 25 billion to buildings renovation]. Press Release, 2021 https://www.budovy21.cz/evropska-unie-posle-dalsich-pres-25-miliard-na-renovace-budov/ 2 Green Recovery Tracker, Czech Republic, 2021, https://www.greenrecoverytracker.org/country-reports/czech-republic 3 Narodni plan obnovi, CZ Recovery and Resilience Plan, 2021, https://www.planobnovycr.cz/ 1 Budovy21, Evropská unie pošle dalších přes 25 miliard na renovace budov [European Union will add further 25 billion to buildings renovation], 2021, https://www.budovy21.cz/evropska-unieposle-dalsich-pres-25-miliard-na-renovace-budov/ 2 Green Recovery Tracker, Czech Republic, 2021, https://www.greenrecoverytracker.org/country-reports/czech-republic 3 Narodní plan obnovy, CZ Recovery and Resilience Plan, 2021, https://www.planobnovycr.cz/ 1 Broer and Boll, 2021, Long-term renovation strategies as key instruments to guide local renovation https://www.euki.de/wp-content/uploads/2021/03/OurBuildings-Long-term-renovationstrategies-report_final.pdf 2 State Environmental Fund, Annual report for 2019, 2020, https://www.sfzp.cz/o-sfzp-cr/vyrocni-zpravy/ 3 Valentová, M., Knápek, J., Novikova, A., Climate and energy investment map – Czechia. Status Report 2017: buildings and renewable energy supply and infrastructure, 2019 4 Chance for Buildings, Results from the project Příprava nástrojů pro realizaci optimálního scénáře renovace a adaptace budov do 2050 supported by Technology Agency of the CR, 2021, https://starfos.tacr.cz/en/project/TK01010099#project-main (adapted by authors) 1 Ministry of Industry and Trade, Long-term renovation strategy to support the renovation of the national stock of both public and private residential and non-residential buildings, 2020, https://ec.europa.eu/energy/sites/default/files/documents/cz_2020_ltrs_official_translation_en.pdf 2 Chance for Buildings, Long Term Renovation Strategy for Czech Republic, Update May 2020, https://sanceprobudovy.cz/wp-content/uploads/2020/06/strategie-renovace-a-adaptace-budovkveten-2021.pdf 3 Valentová, M., Knápek, J., Novikova, A. 2019. Climate and energy investment map – Czechia. Status Report 2017: buildings and renewable energy supply and infrastructure. Prague: Czech Technical University in Prague. https://ekonom.feld.cvut.cz/cs/katedra/lide/valenmi7/cic2030/reports/cvut-mvalentova-et-al-2019-climate-energy-investment-map-czechia-2017-full-report.pdf Further reading: https://www.euractiv.com/section/energy-environment/news/how-carbon-pricing-is-driving-the-renovation-of-czech-homes/
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http://www.bpie.eu/publication/renovation-strategies-of-selected-eu-countries/ Valentová, M., Dunovski, D., Knápek, J., 2021. Capital Raising Strategy for Czechia: buildings and renewable energy supply. Prague: Czech Technical University in Prague. https://ekonom.feld.cvut.cz/cs/katedra/lide/valenmi7/cic2030/reports/czechia-capital-raising-strategy-2021-02-19.pdf 1 Boza-Kiss, B., Bertoldi, P., Della Valle, N. and Economidou, M., One-stop shops for residential building energy renovation in the EU, EUR 30762 EN, Publications Office of the European Union, Luxembourg, 2021, ISBN 978-92-76-40100-1, doi:10.2760/245015, JRC125380. 2 Valentová, M., Dunovski, D., Knápek, J., Capital Raising Strategy for Czechia: buildings and renewable energy supply, 2021, https://ekonom.feld.cvut.cz/cs/katedra/lide/valenmi7/cic2030/reports/czechia-capital-raising-strategy-2021-02-19.pdf 3 MoIT, Survey on awareness on energy savings among home owners, 2019, https://www.mpo.cz/assets/cz/rozcestnik/pro-media/tiskove-zpravy/2019/5/MPO_pruzkum-povedomi_usporyenergie_zavery-a-doporuceni_2021.pdf 4 Chance for Buildings, Results from project Příprava nástrojů pro realizaci optimálního scénáře renovace a adaptace budov do 2050 supported by Technology Agency of the CR, 2021, https://starfos.tacr.cz/en/project/TK01010099#project-main 5 Ipsos, Uncover the underlying motivations and barriers for energy efficient renovations, 2018, https://europeanclimate.org/wp-content/uploads/2019/11/12-03-19-uncover-the-underlyingmotivations-and-barriers-for-energy-efficient-renovations.pdf 6 CZSO, Census, 2021, https://www.czso.cz/csu/czso/otevrena_data_pro_vysledky_scitani_lidu_domu_a_bytu_2011_sldb_2011 7 Valentová, M., Dunovski, D., Knápek, J., Capital Raising Strategy for Czechia: buildings and renewable energy supply, 2021, https://ekonom.feld.cvut.cz/cs/katedra/lide/valenmi7/cic2030/reports/czechia-capital-raising-strategy-2021-02-19.pdf 8 Zachová et al., How carbon pricing is driving the renovation of Czech homes, 2021, https://www.euractiv.com/section/energy-environment/news/how-carbon-pricing-is-driving-the-renovationof-czech-homes/ Further reading: http://www.bpie.eu/publication/renovation-strategies-of-selected-eu-countries/ 1 Ministry of Industry and Trade, Long-term renovation strategy to support the renovation of the national stock of both public and private residential and non-residential buildings, 2020, https://ec.europa.eu/energy/sites/default/files/documents/cz_2020_ltrs_official_translation_en.pdf 2 MoIT, Survey on awareness on energy savings among home owners, 2019, https://www.mpo.cz/assets/cz/rozcestnik/pro-media/tiskove-zpravy/2019/5/MPO_pruzkum-povedomi_usporyenergie_zavery-a-doporuceni_2021.pdf 3 Chance for Buildings, Results from project Příprava nástrojů pro realizaci optimálního scénáře renovace a adaptace budov do 2050 supported by Technology Agency of the CR, 2021, https://starfos.tacr.cz/en/project/TK01010099#project-main 4 BPIE, Renovation strategies of selected EU countries, 2014, http://www.bpie.eu/publication/renovation-strategies-of-selected-eu-countries/ Further reading: Ipsos 2018, https://europeanclimate.org/wp-content/uploads/2019/11/12-03-19-uncover-the-underlying-motivations-and-barriers-for-energy-efficient-renovations.pdf 1 https://2030.novazelenausporam.cz/ 2 Sunderland, Learning from the Czech Republic on using EU ETS revenues for residential renovations, 2019, https://www.raponline.org/wp-content/uploads/2019/09/rap-sunderland-czechpolicy-brief-2019-sept-final.pdf 3 Zakony Pro Lidi, Zákon č. 383/2012 Sb. Zákon o podmínkách obchodování s povolenkami na emise skleníkových plynů, 2012 https://www.zakonyprolidi.cz/cs/2012-383
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1 MoIT, Survey on awareness on energy savings among home owners, 2019, https://www.mpo.cz/assets/cz/rozcestnik/pro-media/tiskove-zpravy/2019/5/MPO_pruzkum-povedomi_usporyenergie_zavery-a-doporuceni_2021.pdf 2 ISFC and Chance for Buildings, Guarantee and interest subsidy. New Green Savings Programme, Internal material, 2021 3 E3G (Frank Schroeder & Julian Havers), CLOSING THE TRILLION DOLLAR GAP TO KEEP 1.5 DEGREES WITHIN REACH, Table 5, 2021 1 ISFC and Chance for Buildings, Guarantee and interest subsidy. New Green Savings Programme, Internal material, 2021 1 Chance for Buildings, Results from project Příprava nástrojů pro realizaci optimálního scénáře renovace a adaptace budov do 2050 supported by Technology Agency of the CR, 2021, https://starfos.tacr.cz/en/project/TK01010099#project-main 1 MoIT, Survey on awareness on energy savings among home owners, 2019, https://www.mpo.cz/assets/cz/rozcestnik/pro-media/tiskove-zpravy/2019/5/MPO_pruzkum-povedomi_usporyenergie_zavery-a-doporuceni_2021.pdf 1 Valentová et al, Hodnocení dopadů měkkých nástrojů v rámci naplňování cílů energetické efektivnosti [Evaluation of soft policy instruments to support energy efficiency targets], 2017, ttps://www.mpo-efekt.cz/cz/programy-podpory/efekt/publikace/90641 2 Chance for Buildings and Passive House Centre, Podpora projektové přípravy jako způsob vytváření zásobníku investic do kvalitní renovace budov (a výstavby nových) [Promoting project preparation as a way of creating a pipeline of investment in quality building renovation (and new construction)] and adapted by CTU, 2021 1 MoIT EFEKT + EKIS, Energetické poradenství, https://www.mpo-efekt.cz/cz/programy-podpory/efekt/ekis Further reading: Case example of Nieder Austria: https://www.energie-noe.at/team-energieberatung, https://www.energie-noe.at/persoenliche-beratung Case example Nieder Austria - Consulting servies provided by the Energy & Environment Agency of the State of Lower Austria - over 80 consultants in Nieder Osterreich region alone. 1 Valentová et al, Hodnocení dopadů měkkých nástrojů v rámci naplňování cílů energetické efektivnosti [Evaluation of soft policy instruments to support energy efficiency targets], 2017, https://www.mpo-efekt.cz/cz/programy-podpory/efekt/publikace/90641 2 Chance for Buildings and Passive House Centre, Podpora projektové přípravy jako způsob vytváření zásobníku investic do kvalitní renovace budov (a výstavby nových) [Promoting project preparation as a way of creating a pipeline of investment in quality building renovation (and new construction)], 2021 1 Boza-Kiss, B., Bertoldi, P., Della Valle, N. and Economidou, M., One-stop shops for residential building energy renovation in the EU, EUR 30762 EN, Publications Office of the European Union, Luxembourg, 2021, https://ec.europa.eu/energy/sites/ener/files/eu_renovation_wave_strategy.pdf 2 Centre For Passive Houses: Financial Instruments to support single-family houses renovations. Project supported by Technology Agency of the Czech Republic, 2020, https://www.pasivnidomy.cz/financni-nastroje-na-podporu-rekonstrukci-rodinnych-domu/t4743?s=108 1 Boza-Kiss, B., Bertoldi, P., Della Valle, N. and Economidou, M., One-stop shops for residential building energy renovation in the EU, EUR 30762 EN, Publications Office of the European Union, Luxembourg, 2021, doi:10.2760/245015 2 COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS A Renovation Wave for Europe - greening our buildings, creating jobs, improving lives,2020, https://ec.europa.eu/energy/sites/ener/files/eu_renovation_wave_strategy.pdf 1 MoIT, Survey on awareness on energy savings among home owners, 2019, https://www.mpo.cz/assets/cz/rozcestnik/pro-media/tiskove-zpravy/2019/5/MPO_pruzkum-povedomi_usporyenergie_zavery-a-doporuceni_2021.pdf
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2 Chance for Buildings, Communication strategy proposal: Energy efficiency awareness raising campaign. Report on task 3. Development of an energy efficiency awareness raising strategy for the Czech Republic, 2021, SRSS/C2018/046 1 IEA, Czech Republic 2021 - Energy Policy Review, 2021, https://www.iea.org/reports/czech-republic-2021 1 Chance for Buildings, Long Term Renovation Strategy for Czech Republic, Update May 2020. https://sanceprobudovy.cz/wp-content/uploads/2020/06/strategie-renovace-a-adaptace-budovkveten-2021.pdf 2 Chance for Buildings, Communication strategy proposal: Energy efficiency awareness raising campaign. Report on task 3. Development of an energy efficiency awareness raising strategy for the Czech Republic, 2020, SRSS/C2018/046 -
Acronyms BAU
Business as Usual
BEV
Battery electric vehicle
BIK
Benefit in kind
CAPEX
Capital Expenditures
CC
Carbon Capture
CCU
Carbon Capture and Use
CCUS
Carbon Capture, Use and Storage
CCS
Carbon Capture and Storage
CCfD
Carbon Contract for Difference
CDA
Carbon Direct Avoidance
CEE
Central and Eastern European region
CEF
Connecting Europe Facility
CF
Cohesion Fund
COM
European Commission
CSP
Clean Steel Partnership
CZ
Czechia / Czech Republic
DNSH
Do no significant harm principle
EA
Emission Allowances
ECSC
European Coal and Steel Community
EED
Energy Efficiency Directive
EIB
European Investment Bank
EPBD
Energy Performance of Buildings Directive
ESF+
European Social Fund
ESIF
European Structural and Investment Funds
ERDF
European Regional Development Fund
EU ETS
EU Emissions Trading System
GBS
Green Bond Standard
H2
Hydrogen gas-powered vehicles
ICE
Internal combustion engine
IEA
International Energy Agency
JTF
Just Transition Fund
LTRS
Long-term Renovation Strategy
MFF
Multiannual Financial Framework
MoIT / MPO
Ministry of Industry and Trade
MWt
Megawatt thermal
NACE
Nomenclature of Economic Activities
NECP
National Energy and Climate Plans
NG
Natural Gas (fossil gas)
NGEU
Next Generation EU
OPEX
Operating Expenditures
PHEV
Plug-in hybrid electric vehicles
R&D
Research and development
RRF
Recovery and Resilience Facility
RRP
Recovery and Resilience Plan
SMEs
Small and medium-sized enterprises
TA
Technical Assistance
TCP
Technology Collaboration Programme
TEN-E
Trans-European Networks for Energy
TEN-T
Trans-European Transport Network
TJTP
Territorial Just Transition Plan
TWh
Terawatt hours
VAT
Value added tax
ZEV
Zero-emission vehicle
Definitions Agrivoltaics
Blast Furnace
This technology generates renewable electricity through large ground-mounted photovoltaic systems installed on farmland that is simultaneously used for food production. It has the potential to reduce land competition through a dual use of the land. With a suitable technical design, agrivoltaics can increase resilience of crops and agricultural yields beyond just improving land use efficiency. BF
Blended Finance Instruments
Integrated blast furnace is a type of metallurgical furnace used for smelting to produce industrial metals, generally pig iron, but also lead or copper. The strategic use of finance to attract or mobilize additional funds through other EU financial instruments, member state co-financing, or private sector investment to achieve policy objectives. Instruments are often designed to provide financial safety nets or hedge certain risks through e.g. credit insurance facilities.
Building-integrated photovoltaics
BIPV
Building components which fulfil classic functions such as thermal insulation, protection against wind and weather or also architectural functions, in addition to generating electricity.
Basic Oxygen Furnace
BOF
A vessel used to convert pig iron into steel
Building Performance Institute Europe
BPIE
A thinktank on the sustainability and decarbonization of the building sector, founded by the European Climate Foundation and partly funded by Horizon.
Battery Electric Vehicle
BEV
Also called, all-electric vehicle, only electric vehicle, pure electric vehicle, or zero-emission vehicle (ZEV). BEVs use chemical energy stored in rechargeable batteries without secondary sources of propulsion. They do not use internal combustion engines (ICEs) but electric motors or motor controllers. Often BEV refers to light-weight automobiles, but can also include bikes, vans, trucks, etc.
Business-As-Usual Scenario
BAU
A baseline scenario that examines the consequences of continuing development of current trends in e.g. the economy, demographics, technological innovation, climate change and human behaviour. Often refers to an outcome of a scenario analysis, e.g. as a contrast to the outcomes of EUCO scenarios.
Carbon contracts for difference
CCfDs
CCfDs are policy instruments for supporting the deployment of new ultra-low carbon projects by ensuring a guaranteed carbon price to make up the cost-difference relative to a reference technology. They can be designed to reduce the up-front investment cost for developers, give creditors a higher security for their loans and minimize the downstream costs for consumers. CCfDs work to accelerate R&D and ensure new innovative low carbon/deep decarbonization technologies become commercially viable sooner relative to conventional technologies and have a shorter time period required for commissioning.
Carbon pricing
Putting a price on carbon that captures the external costs caused by their emissions. Carbon prices can be set via taxation or cap-and-trade schemes.
Carbon capture, utilization and storage
CCUS
Circular economy
Carbon capture and storage (CCS) and carbon capture and utilization (CCU) technologies that aim to capture CO2 emissions from point sources, such as industrial sources, to prevent emissions from entering the atmosphere. The purpose of a circular economy is to decouple economic growth from the consumption of non-renewable resources. It is a method of economic development that benefits enterprises, society and environment because of its restorative and regenerative characteristics. The circular economy can be achieved via new resource management systems, nutrient flow systems and reverse logistics systems, which makes it possible to return, classify and reuse products. A circular economy follows the 3R principle of Reducing, Reusing and Recycling materials.
Cleaner Transport Facility
CTF
Initiative of the EIB to support the funding of the development and deployment of cleaner vehicles and their needed infrastructure. It is a one-stop shop that provides technical assistance and access to transport-related loans of the EIB itself and grants, loans, debt guarantees of CEF, TEN-T, Horizon and through JASPERS (technical assistance) and ELENA (technical assistance).
Combined heat and power
CHP
Also known as cogeneration, this implies that heat and electricity are produced simultaneously in one process. Use of combined heat and power helps to improve the overall efficiency of electricity and heat production as these plants combine electricity production technologies with heat recovery equipment.
Component (RRF context)
Recovery and Resilience Plans should be composed of reforms and investments grouped into components. A component is a constituent element or a part of the RRP. Each component should reflect related reform and investment priorities in a policy area or related policy areas, sectors, activities or themes, aiming at tackling specific challenges, forming a coherent package with mutually reinforcing and complementary measures.
Concessional loans
Also known as “patient debt”, these are loans that allow more flexibility on the part of the borrower, often in terms of longer maturities, longer grace periods, lower collateral requirements, subordinated debt or technical assistance. Concessional loans are often issued by financial non-governmental organizations or development banks as opposed to commercial banks.
Deep renovation
Achieve a 60% reduction of energy demand in a given building, as compared to 30% for shallow renovations and 40% for medium renovations.
Digital target (RRF context)
Each Recovery and Resilience Plan should allocate at least 20% of the total plan allocation to digital measures.
District heating system
DH
A system where heat is distributed from a central point through a network of insulated pipes fed by various heat sources, such as heat from heat and power plants, excess heat from industry, and heat from fossil combustion. In the future, district heating may be fed by heat and power plants fuelled by (sustainably produced) biomass, surplus heat from industry, and a combination of other renewables such as solar, geothermal, or heat pumps.
Do it yourself (building renovation context)
DIY
The DIY market aims to help customers improve their home without the need for any extra professional help. Oftentimes, these renovations are shallow, low-quality, step-by-step renovations that do not make a substantial difference in lowering energy use of a home.
Do no significant harm principle
DNSH
Principle under the EU Sustainable Finance Taxonomy: there are six environmental objectives to which no significant harm should be done: (i) climate change mitigation, (ii) climate change adaptation, (iii) water and marine resources, (iv) the circular economy, (v) pollution prevention and control, and (vi) biodiversity and ecosystems. For the RRF, technical guidance has been published on the application of the principle.
Direct Reduced Iron
DRI-C/H
Iron ore in the form of lumps, fines or pellets that has the oxygen removed by using hydrogen (H) or carbon monoxide (C)
Electric Arc Furnace
EAF
A furnace that heats material by means of an electric arc, especially for steel-making
Energy Service Company
ESCO
Companies that supply and install equipment that incur energy savings. ESCOs can also arrange the financing of their operation, sometimes tying their level of success to their renumeration.
EURO 7
European emissions standards for petrol and diesel cars. Rounds of proposals and feedback have been completed for a revision and Commission adoption is planned for Q4 of 2021.
European Fund for Strategic Investment
EFSI
Also known as the Juncker Plan. Initiative launched in 2015 by the EIB Group and the COM to boost the economy by mobilizing private financing for strategic investments.
European Investment Bank
EIB
The long-term lending institution of the EU; a public bank owned by the 27 member states, shared based on economic weight at the time of member state accession. Its activities are funded via bond issuance in international capital markets.
EU Climate Law
Aims to write into law the goal set out in the European Green Deal – namely, for Europe’s economy and society to become climate-neutral by 2050.
European Semester
ES
An annual cycle of coordination and monitoring of the EU’s economic policies and national budgets.
EU Emissions Trading System
EU ETS
A cap-and-trade system administered by the EU. Consists of carbon emissions ceilings (caps) that are lowered over time. Companies can buy or sell emission allowances, trading them when needed.
Electric Vehicle
EV
An electric vehicle uses one or more electric motors for propulsion. Can include only electric motors or battery electric vehicles (see BEV) or combustion motors or plug-in hybrid electric vehicles (PHEV).
Flagship
As used in this assessment context, taken as country-specific recommendations for future key transformative investments and policy reforms that can be used to accelerate climate action
(New) Green Savings Programme
(N)GS
The Czech Ministry of the Environment administers this energy savings program in family houses and apartment buildings funded by the State Environmental Fund of the Czech Republic. It supports the reduction of the energy intensity of residential buildings (complex or partial thermal insulation), construction of houses with very low energy intensity, environmentally friendly and efficient use of energy sources and renewable sources of energy (RES).
Greenhouse gases
GHG
Gaseous constituents of the atmosphere, both natural and anthropogenic, that absorb and emit radiation, which together causes the greenhouse effect. Water vapour, carbon dioxide, nitrous oxide, methane, and ozone are the primary GHGs in the Earth’s atmosphere.
Grant
Grants are non-repayable funds that are given from a government, foundation, corporation to a recipient, for specific projects for reimbursement of necessary costs. Grants often require some level of conditions and mandatory reporting of activities and results.
Green hydrogen
Hydrogen that is produced with sustainable energy, most often through electrolysis where water is split into hydrogen and oxygen.
Green Public Procurement
A voluntary instrument streamlining and promoting the sustainable production and consumption of goods and services by the EU’s public institutions with comprehensive and verifiable environmental criteria.
Green Bonds
A fixed-income instrument to finance climate-related or other environmental projects, often linked to specific assets like hydropower projects. The first green bonds were issued by the World Bank in 2009. They are often combined with tax incentives to make them a relatively attractive investment. The sustainability of green bonds is verified by third parties.
Financial Guarantee
A financial commitment of third-party (guarantor) to repay a percentage of losses in case a borrower cannot honour his repayments to a credit provider, both interest and principal components. Guarantees are insurance policies that often allow investors some financial breathing space to invest a larger share of their funds.
Heat pump
HP
Investment
Device used to heat or cool building by transferring thermal energy from a warmer to a cooler place or vice versa. The RRF uses a broad concept of investment as capital formation in areas such as fixed capital, human capital and natural capital. This would also cover for instance intangible assets such as R&D, data, intellectual property and skills.
Internal Combustion Engine
ICE
Heat engine in which the ignition and combustion of and fuel occurs within the engine itself, i.e. with an oxidant (usually air) to convert the energy from combustion chamber that is an integral part of the working fluid circuit. ICE can be powered with fossil fuels, biofuels or efuels.
Important Projects of Common European Interest
IPCEI
Special projects that can promote the innovation of a specific technology up to industrial scale on the basis of a common European interest. This allowance is rather new as innovations are generally only regionally allowed as R&D projects to avoid unfair competition between MS. IPCEI’s are currently limited to microelectronics and batteries but an IPCEI for hydrogen technology is being implemented.
Lead market
In innovation theory, a first sub-market where a specific innovation can be early adopted to spur adoption also by other “lag” markets, e.g. by internationalization. Policies to create lead markets are focussed on creating demand for a specific technology or concept.
Lock-in effects
Lock-in effects come into play when there are substantial costs or other barriers for consumers to get a similar product or service from another vendor. Consequently, consumers or businesses become dependent on one provider. Furthermore, lock-in effects may create serious barriers to market entry, therefore undermining fair competition.
Long-term renovation strategy
LTRS
Strategy enacted by the EU (Directive 2010/31) to support the renovation of Member States’ national stocks of residential and nonresidential buildings, both public and private, into a highly energy efficient and decarbonised building stock by 2050, facilitating the costeffective transformation of existing buildings into nearly zero-energy buildings.
Minimum Energy Performance Regulations
MEPR
Performance requirements for any energy-using technology, effectively limiting the amount of energy that may be used for a particular task.
Minimum Energy Performance Standards
MEPS
Regulations that require buildings to meet a minimum performance standard, specified in terms of a carbon or energy rating or minimum renovation measures, by a certain deadline or at a certain point in the natural life of the building, e.g. at the time of sale or when other construction work is undertaken.
Mobility as a Service
MaaS
Denotes a shift away from personally owned modes for transportation towards shared vehicles that can be booked, planned through joint digital channels. Examples for urban mobility include the business models of companies like Uber and Lyft.
Multiannual Financial Framework
MFF
Also called the financial perspective, the MFF is a 7-year framework regulating the EU’s annual budget by setting ceilings of spending for broad policy themes.
National Energy and Climate Plans NECP
EU countries needed to establish a 10-year integrated national energy and climate plan (NECP) for the period from 2021 to 2030 to show how they meet the 2030 energy and climate targets (within the Energy Union governance).
Next Generation EU
The temporary instrument designed to boost the recovery from the COVID-19 pandemic, includes the recovery and Resilience Facility
NGEU
One-stop shop
A facility or location where a “customer” can get all the help they need in one go to reach a certain goal, delivered by one provider at a clear central location with low administrative barriers.
Plug-in Electric Vehicle
PEV
Includes battery electric vehicles and plug-in hybrid electric vehicles. Road vehicles that be charged with external sources of electricity, stored in battery packages.
Plug-in Hybrid Electric Vehicle
PHEV
Hybrid electric vehicle that uses batteries to power an electric motor and another fuel, such as gasoline, to power an internal combustion engine (ICE).
Power Purchasing Agreement
PPA
Quasi-equity
PPAs are long-term contract where a business or public entity agrees to purchase electricity directly from an energy generator, with agreed price terms for the sake of financial stability often for a period of 15 to 25 years. Quasi equity instruments are long-term financial instruments, with multiple variants that fall between debt and equity, including subordinated loans, convertible bonds and preferred stocks. Can be more complicated and costly to administer.
Recovery and Resilience Facility
RRF
Makes €672.5 billion in loans and grants available to support reforms and investments undertaken by EU countries with the aim to mitigate the economic and social impact of the coronavirus pandemic and declared objective to make economies and societies more sustainable, resilient and better prepared for the challenges and opportunities of the twin transition
Recovery and Resilience Plan
RRP
Every Member States wishing to access recovery funding under the RRF has to prepare a Recovery and Resilience Plan.
Reform (RRF context)
An action or process of making changes and improvements with significant impact and long-lasting effects on the functioning of a market or policy, the functioning or structures of an institution or administration, or on progress to relevant policy objectives, such as growth and jobs, resilience and the twin transitions.
Renovation Wave
Comprehensive EU strategy put forward by the EC in 2020 to support climate neutrality, economic recovery through actions in building sector with detailed list of policies, measures and tools that must be put in place to overcome existing barriers to renovation and mobilize all actors, including citizens, local authorities, investors and the construction industry. The strategy has a dual ambition of energy gains and economic growth and aims to double annual energy renovation rates in the next 10 years.
Repayment grant
Grant repayment, i.e. if the project achieves a certain energy performance level.
Retrofitting
Process of adding something new to the original building or structure, aiming to improve the functionality of the building by adding new technology, building systems or equipment, such as heating systems, but it might also refer to the fabric of a building, for example, retrofitting insulation or double glazing.
Scenario
Explain use of scenarios?
SECAP
Sustainable Energy and Climate Action Plan; local authorities which join the Covenant of Mayors for Climate and Energy – Europe initiative commit to submitting an action plan within 2 years of sign-up. This action plan is a key implementation tool. It defines mitigation and adaptation goals and is based on a Baseline Emission Inventory and a Risk & Vulnerability Assessment, which provide an analysis of the current situation.
Shallow renovation
A building renovation that is performed quite often (rate of 3%) with an average energy efficiency ambition level reduction of 32% (in energy use for space heating by 2050 compared to 2010), may fail to treat the building envelope as a whole, and includes a low use of
renewable energy. This type of renovation misses both environmental targets (CO2-emission and final energy savings) while not providing substantial economic advantage compared to a deep renovation. Soft Loan Small and medium-sized enterprises
Loans with no interest or below-market rate of interest. May also have lenient terms, such as extended grace periods or interest holidays. OFten used to encourage investment supporting energy policies and are often complementary to subsidies of fiscal incentives. SMEs
SME status depends on both the size and resources of a private enterprise. SMEs have a workforce of under 250 people and have either an annual turnover lower than €50 million or a balance sheet total lower than €43 million.
Structural reforms
Structural reforms generally refer to liberalizing economic structures in the national context, including making labour markets more adaptable, liberalizing services, altering taxation systems and restructuring the welfare state.
EU Taxonomy for sustainable activities
The EU Taxomony regulates a sustainability-related classification system of financial products. Providers of financial products and services need to use the taxonomy to report the sustainability of their portfolios. To comply with the EU Taxonomy, companies need to prove that their activities make or enable a “substantial contribution” to climate mitigation or adaptation and fulfil the do-no-significant-harm principle for biodiversity, water, the circular economy and pollution targets.
Territorial Just Transition Plans
TJTP
Central element of the EU Just Transition Mechanism, which defines territories in which the Just Transition Fund will be used and outlines challenges in each territory, development needs and 2030 targets.
Total cost of ownership
TCO
The total cost of ownership of a vehicle is typically calculated for financial purposes by companies to determine the direct and indirect costs of owning the vehicle. In this case, it includes the purchase price of the vehicle plus the costs of operating it over an expected period of time.
Twin transition
The green transition and digital transformation
Trigger points (for renovation)
Key moments in the life of a building (I.e. rental, sale, change of use, extension, repair or maintenance work) when carrying out energy renovations would be less disruptive and more economically advantageous than in other moments. Taking advantage of these moments would facilitate investment decisions to undertake energy renovation works.
Trans-European Transport Network
TEN-T
A planned network of roads, railways water infrastructure and airports across Europe, with ten core networks to be completed in 2030 and a larger comprehensive network to be completed in 2050. The ultimate purpose of the network is to ensure the cohesion, interconnection and interoperability of the trans-European transport network, as well as access to it.