By Kristina Klimovich, Head of Advisory and Consulting, GNE Finance
Home renovation is complex, time consuming, sometimes uncertain and rarely fun. At the same time, energy inefficient, damp, poorly lit and ventilated homes and apartment buildings are impacting our health and wellbeing and result in €200 billion in direct and indirect costs. Plus, in order to reach the 2050 decarbonisation targets, 97% of buildings need to be upgraded. We have a tremendous challenge in front of us, but it is also an opportunity for the eco-system of home renovation stakeholders to come together and design effective home renovation solution(s) with people at the centre of this eco-system.
The IPSOS survey conducted in Bulgaria, France, Germany, Poland and Spain showed that people are willing to renovate their homes to improve thermal comfort, quality of life and decrease energy bills. In our own survey conducted in the City of Olot, Spain, 70% of all respondents reported that lack of financing and of technical knowledge about the complexity of the works prevented them from renovating their homes. Listening directly to Europeans’ concerns and motivations, we need home renovation programs that make the process simpler, people-centric and offer affordable financing.
Last year, I attended the second edition of the C4E Forum in Serock, Poland where I spoke about an innovative financing tool for energy efficiency home renovations. EuroPACE is designed to make home renovation simple, affordable and reliable for all Europeans by combining affordable financing with people-centric technical assistance. EuroPACE offers 100% up-front financing that can be repaid over a long term of up to 20 years. The innovation lies in the collection and repayment mechanism; financing is attached to the property and is repaid regularly with charges linked to a property, thus making EuroPACE a “home-based financing.” Homeowners are offered logistical and technical support throughout the process and access to trained and qualified contractors. Thus, EuroPACE overcomes the main barriers to home renovation -- lack of financing, technical knowledge and complexity of the works. The concept of EuroPACE is inspired by the success of a financing model called PACE or Property Assessed Clean Energy, launched in California in 2008.
The first EuroPACE pilot is launching in Q4 2019 in Olot, Spain. The “EuroPACE Olot” program will be managed by a non-profit foundation, created for this purpose. The goal is to develop a program that can grow and develop in a sustainable way over time, with its own resources and avoiding any consolidation in the public debt, which is one of the main concerns of municipal and regional administrations around Europe. The main goal of EuroPACE Olot is to spur home renovation demand by transforming a stressful, expensive, complex and multi-stakeholder renovation process into a simpler, high quality and a more straightforward process, with tailored support along the way. The program rests on two pillars: people-centric assistance throughout the renovation journey and affordable financing options.
The challenge of EuroPACE implementation lies in attaching the financing to a property – the so-called “home-based financing.” In order to put this mechanism in place, the public administration must recognise that sustainable and energy-efficient home renovation is in the public benefit and put in place administrative collection and security mechanisms for loan repayment. This feature is critical to enable low-risk, long-term financing and make it attractive to private investors. Our research showed that most of EU countries use some form of administrative collection mechanisms, thus making the potential adoption of the EuroPACE viable. At the same time, our research highlighted that enabling this mechanism for home renovation often requires a legal amendment either at national or regional level, as we found out for our pilot in Spain.
The above-mentioned barrier represents an unmissable opportunity for the EU and Member States. EuroPACE enabling policies can be adopted at national level making of the home-based/EuroPACE mechanism a powerful new instrument for energy transition resulting in economic, environmental and social benefits for all Europeans.
Our preliminary legal and fiscal assessment of the EU-28 members showed that the following countries have the most suitable legal framework to adopt EuroPACE: Austria, Belgium, The Netherlands, Italy, Poland, Portugal, and Spain.
Based on this research conducted by CASE, (EuroPACE project coordinator and research leader), Poland demonstrated a strong need for energy efficiency home renovation and broader decarbonisation. One of the highest home ownership rates across the EU (84.2% of dwellings in Poland were privately owned in 2017) is a positive factor which needs to be considered when assessing the market demand for such a type of financial mechanism. This high rate is additionally enhanced by the fact that 68% of Poles consider environmental mitigation important and renovation costs are some of the lowest across the continent. Additionally, the overall energy consumption of the residential sector which is projected to grow together with households’ energy prices (politicians have been warning of this) coupled with ageing housing stock makes it an interesting case. Synergies between the “Clean Air” programme and EuroPACE can be further explored.
When it comes to Romania, several trends have emerged: the country has one of the lowest per household incomes in the EU, one of the highest home ownership rates (97% - far above EU average), and EE measures are seen as a solution which can lower heating bills – a critical issue for Romania given its large share of energy poor households and insufficient heating aids. Plus, lack of affordable financing is often cited as a barrier alongside with the lack of skilled energy services contractors and the overall low quality of rehabilitation works due to ineffective audit procedures. These challenges underscore the need for a strong public-private partnership to design successful and scalable home renovation programmes.
In the subsequent phase of the EuroPACE project, four leader cities or regions will be selected to set up EuroPACE platforms. We are looking for expressions of interest from cities, regions and local stakeholders who can function as project originators. Let’s accelerate home renovation together!