[COP23] Energy Renovations – the Climate Change Mitigator

2nd November 2017

By Adrian Joyce, Renovate Europe Campaign Director

cop23

The pace of energy renovations must be urgently stepped up with a focus on delivery on the ground if the Paris agreement’s climate goals are to be met, the International Energy Agency has said, as the COP23 summit prepares to open in Bonn. And the best way of doing that, might just be an aggregation mechanism that bundles diffuse projects for investors.

Renovations will be pivotal to the success of the Paris agreement’s goal of limiting global warming to 2C. Buildings account for a fifth of global greenhouse gas emissions, and are among the cheapest mitigation options. Their renovation also produces immediate results.

But experts say that while there have been advances since the Paris COP21, more still needs to be done – and much more quickly.

“At COP21, the language switched from ambition to implementation,” said Brian Motherway, the head of energy efficiency at the International Energy Agency. “I’d like to see an acceleration in that direction, focused on delivery.”

“We have some concerns that while governments are designing policies and frameworks, not enough focus is being put on policy implementation and delivery on the ground,” he added.

The availability of finance, insurance and contractors is still an issue for many involved in energy renovations. “There has been some progress [since COP21],” Motherway said, “but we certainly think that the pace is not what it needs to be if we are going to meet our targets.”

At COP23, a Building Action Symposium on November 9 will offer a key platform to stocktake progress since 2015, with several reports and studies expected.

The key challenge the efficiency industry will have to grapple with is how to speed up revenue flows, according to Oliver Rapf, the executive director of Building Performance Institute Europe.

“One of our sector’s biggest problems is that investment projects are normally small-scale and individual,” he said. “We need to find a mechanism to aggregate these projects and put them into a really big investment pool so that they become more interesting for institutions.”

Analysts say that fixed single ventures such as offshore wind farms often appear more attractive to pension funds and insurance companies than renovation projects, which are often perceived as small-scale, diffuse and complicated.

Returns from energy retrofits are readily achievable but paybacks from a solar park coming online are easier to gainsay than the savings from thousands of foregone energy bills, which may carry a less predictable value.

“The problem here is not availability of capital,” Motherway said. “It’s the gap between the capital and the projects; the way the two sides talk to each other, how projects are bundled, and the right scale for that.”

Investors are often not well versed in the risks and returns of energy efficient renovation projects. Equally, those who deliver them may not understand investor concerns about collateral and risk management. An aggregation mechanism could help to change that.

“Confidence on both sides is an issue,” Motherway explained. “The space in between is about well designed models that have been tested, piloted and built over time to deliver confidence among all actors. I’m talking about something new here – but it is well within our capabilities.”

In countries such as France, efforts are already underway to bundle packages of up to 50 houses in single investment projects to help overcome challenges posed by the relatively small scale of the energy renovations market, and the still-maturing supply chains that they depend on.

A call in the COP conclusions for aggregation mechanisms to be set up – or a statement that the COP parties would do so – would be welcomed across the renovations sector.

“High level signals are important to activate markets and reward early adopters, perhaps using the public sector as a leader or exemplar,” Motherway said.

Another important role of the COP discussions is to share practical experiences and allow governments to learn about what works from each other, so that successful policies can be replicated.

Globally, around two thirds of homes under construction are being built with no effective application of building codes. Their future energy use – and CO2 emissions – are being locked in while policy makers are focused elsewhere.

Again, many in the building sector argue that positions taken in the final COP conclusions could have a broad-based effect on raising the profile of the issue.

“A strong endorsement or requirement that national climate strategies – the NDCs – reflect the potential in the building sector [for reducing greenhouse gas emissions] would also probably generate some momentum,” Rapf said.

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Read more on COP: Paris agreement under threat as Member States try to water down key buildings measures in EPBD