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«Brussels, 16.2.2016 COM(2016) 51 final COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL ...»

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EUROPEAN

COMMISSION

Brussels, 16.2.2016

COM(2016) 51 final

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN

PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL

COMMITTEE AND THE COMMITTEE OF THE REGIONS

An EU Strategy on Heating and Cooling {SWD(2016) 24 final} EN EN

1. INTRODUCTION Heating and cooling consume half of the EU's energy and much of it is wasted. Developing a strategy to make heating and cooling more efficient and sustainable is a priority for the Energy Union1. It should help to reduce energy imports and dependency, to cut costs for households and businesses, and to deliver the EU's greenhouse gas emission reduction goal and meet its commitment under the climate agreement reached at the COP21 climate conference in Paris.

Although the heating and cooling sector is moving to clean low carbon energy, 75% of the fuel it uses still comes from fossil fuels (nearly half from gas). While this strategy will contribute to reducing import dependency, security of supply remains a priority, especially in Member States that rely on a single supplier2.

Heating and cooling and the electricity system can support each other in the effort to decarbonise. It is essential to recognise the links between them and exploit synergies.

This strategy provides a framework for integrating efficient heating and cooling into EU energy policies by focusing action on stopping the energy leakage from buildings, maximising the efficiency and sustainability of heating and cooling systems, supporting efficiency in industry and reaping the benefits of integrating heating and cooling into the electricity system. It is accompanied by a Staff Working Document giving an overview of this complex sector3. The solutions will be examined in the ongoing reviews of legislation under the Energy Union.

A smarter and more sustainable use of heating and cooling is within reach as the technology is available. Actions can be deployed rapidly, without prior investment in new infrastructure, and with substantial benefits for both the economy and individual consumers, provided that (household) consumers can afford to invest or have access to the finance needed to do so.

2. VISION AND GOALS To achieve our decarbonisation objectives, buildings must be decarbonized. This entails renovating the existing building stock, along with intensified efforts in energy efficiency and renewable energy, supported by decarbonized electricity and district heating. Buildings can use automation and controls to serve their occupants better, and to provide flexibility for the electricity system through reducing and shifting demand, and thermal storage.

Industry can move in the same direction, taking advantage of the economic case for efficiency and new technical solutions to use more renewable energy. In this sector, however, some fossil fuel demand can be expected for very high temperature processes. Industrial processes will continue to produce waste heat and cold, as will infrastructure. Much of it could be reused in buildings nearby.

While this is a vision for the longer term, big gains can be reaped immediately.

1 COM(2015) 80 final.

2 See accompanying Proposal for a Regulation concerning measures to safeguard the security of gas supply and Communication on an EU strategy for liquefied natural gas and gas storage.

3 SWD(2016)24. Sources for the data in this document can be found there.

–  –  –

With the EU targets for 2020, renewable energy is growing. In their National Renewable Energy Action Plans, each Member State adopted a renewable energy target for heating and cooling. Most are on track to achieve them; some are switching faster than planned5.

Renewable energy sources (RES) share of energy used in heating is highest in Baltic and Nordic Member States (ranging from 43% in Estonia to 67% in Sweden). Biomass is the most widely used renewable energy for heating today, representing some 90% of all renewable heating. The Commission will propose at the end of 2016 a bioenergy sustainability policy, which will take into account the impact of bioenergy on the environment, land-use and food production.

4 684 Mtoe of primary energy.

5 COM(2015) 293 final.

–  –  –

45% of energy for heating and cooling in the EU is used in the residential sector, 37% in industry and 18% in services. Each sector has potential to reduce demand, increase efficiency and shift to renewable sources.

Barriers to energy renovation of buildings Buildings (and people living in them) are the first consumers of heating and cooling. Space heating accounts for more than 80% of heating and cooling consumption in colder climates. In warmer climates, space cooling is the most important - and is growing.

Buildings frequently lose heat or cold due to poor quality. Two thirds of the EU's buildings were built when energy efficiency requirements were limited or non-existent; most of these will still be standing in 2050. Big savings can be made through simple renovations such as insulating the attic, walls and foundations, and installing double or triple glazing6. These are cheapest when they are done as part of other building works. Nature-based solutions, such as well-designed street vegetation, green roofs and walls providing insulation and shade to buildings also reduce energy demand by limiting the need for heating and cooling.





Different forms of building ownership require different measures to drive energy-efficient renovation.

Around 70% of the EU population lives in privately owned residential buildings. Owners often do not undertake cost-efficient renovations because they lack awareness of the benefits, lack advice on the technical possibilities, face split incentives (for instance in multi-apartment buildings) and have financing constraints.

In privately-owned rented buildings – a large share in some countries – the main challenges are split incentives, tenancy rules and finance. Incentives are 'split' in the sense that property owners have little incentive to invest if the tenant pays the energy bill. Some countries have 6 Given the long lifetime of buildings, it is essential to encourage design improvements that will reduce their environmental impacts and increase the durability and recyclability of their components in line with the Circular Economy Communication (COM(2015) 614 final).

4 systems under which lower energy costs due to energy efficiency improvements can be used to justify an increase in the rent.

Buildings owned by public bodies, including social housing, account for a considerable share of the stock. Buildings like schools, universities and hospitals are highly visible and often energy intensive.

The main challenge for renovation of public buildings is shortage of funds. Energy Performance Contracting7 and Energy Service Companies (ESCOs) can offer technical assistance, expertise and access to capital. In the US, it is standard practice to involve ESCOs in refurbishing public sector buildings, and the sector has revenues of more than USD 6 billion. In the EU, this market is underdeveloped.

Service buildings, such as banks, offices and shops, make up a quarter of the stock. Energy consumption per square meter is on average 40% higher than in residential buildings.

Electricity consumption is particularly high with complex systems for lighting, air conditioning or ventilation. This sector also consumes most of Europe's space cooling8.

Refrigeration demand is high in supermarkets (where it typically accounts for more than 40% of energy consumption) and data centres (25-60% of operating costs).

Lack of expertise and training affects all sectors. Too few professionals have the required expertise in energy efficient construction and in efficient and renewable energy technologies.

Architects can incorporate advanced design and construction materials and smart technologies into all aspects of buildings, from insulation to lighting. But installers are the “market makers” for many technologies.

On average, Europeans spend 6% of their consumption expenditure on heating and cooling;

11% cannot afford to keep their homes warm enough in winter. Consumer choice is limited by a lack of information on actual energy consumption and costs, and often by lack of financial means to invest in the most efficient technology. It is difficult to compare technologies and solutions on the basis of lifetime costs and benefits, quality and reliability.

Financing Despite the compelling economic rationale, there are few attractive financial products for building renovation.

The EU budget for 2014-2020 significantly increased its contribution. The European Structural and Investment Funds (ESIF) will allocate some EUR 19 billion for energy efficiency and EUR 6 billion for renewable energy, notably in buildings and district heating and cooling, around EUR 1 billion for smart distribution grids, and funding for research and innovation based also on priorities chosen in the national or regional Smart Specialisation Strategies. The Horizon 2020 research and innovation programme will allocate EUR 2.5 billion for energy efficiency and EUR 1.85 billion for renewable energy. Furthermore, due to the European Fund for Strategic Investments based on the EU guarantee, mobilisation of at 7 Energy Performance Contracting allows energy upgrades to be funded from cost reductions. An ESCO implements a project to deliver energy efficiency or renewable energy, and uses the cost savings/renewable energy sales to repay the costs.

8 The service sector consumed 96 Mtoe of final energy in 2012 for heating and cooling. Space heating accounted for 62% of this; cooling for 19%; hot water for 14%; and process heating for 5%.

5 least 315 billion EUR of additional investment is expected. Boosting investment in sustainable energy projects is one of strategic priorities of EFSI and some of them have been already approved.

But public finance neither can nor should play the primary role. The energy efficiency market must mature and become fully investible. As confirmed in the report from the Energy Efficiency Financial Institutions Group (EEFIG)9, project promoters and investors still need to understand and trust that energy cost savings lead to additional available cash-flow and better energy performance leads to higher asset values. The Commission will address these issues under the 'Smart Finance for Smart Buildings' initiative, in cooperation with EEFIG, as announced in the Energy Union Strategy.

Heating and cooling equipment

Almost half of the EU's buildings have individual boilers installed before 1992, with efficiency of 60% or less. 22% of individual gas boilers, 34% of direct electric heaters, 47% of oil boilers and 58% of coal boilers are older than their technical lifetime.

Decisions on replacing old appliances are typically made under pressure, when the heating system breaks down. Comparison of prices between solutions, as well as information on how their existing system performs, is not easily available for most consumers. This leads them to continue using older, less efficient technologies.

In some parts of Europe, up to three quarters of outdoor fine particulate matter pollution is attributable to household heating with solid fuels (including coal and biomass). The Commission has initiated infringement procedures on ambient air quality10 against several Member States, referring two cases regarding persistently high levels of fine particulate matter to the European Court of Justice in 2015. The Commission warns about the negative impact on air quality from the use of coal (lignite) and boilers and stoves with poor emission standards11 for heating as healthier solutions are available, easily accessible and more efficient and cheaper in the long run.

Ecodesign and energy labelling requirements for space and water heaters came into application in 2015. The sale of inefficient boilers is now banned. Consumers see efficiency ratings – both for single technologies and for packages that include the use of renewables. The transition that these measures are expected to foster should bring annual energy savings of 600 TWh and CO2 emission reductions of 135 million tonnes by 2030. At the same time, emissions of air pollutants will also be reduced.

The new Regulation on fluorinated greenhouse gases12 will also accelerate the refurbishment of heating and cooling. Climate-friendly refrigerants offer great energy saving potentials, but 9 EEFIG (www.eefig.eu) was set up by the European Commission and the United Nations Environment Programme Finance Initiative in 2013 to increase energy efficiency investments across the EU.

10 Directive 2008/50/EC.

11 In some Member States the use of biomass in households contributes to more than 50% of their national emissions of particulate matter.

12 EU Regulation 517/2014.

6 require for some applications an update of existing standards to ensure their safe use. To that end the Commission has initiated the process of reviewing the relevant European standards.

A good time to replace an old heating system is when a building is refurbished.

Transformation to an efficient building makes it possible to shift to heat pumps, solar or geothermal heating or waste heat. These appliances save costs. Heat pumps can turn one unit of electricity or gas into 3 or more units of heating or cooling, while solar thermal does not need fuel input for heating. In addition, there is a number of innovative highly efficient technologies that quickly approach market-readiness, such as stationary fuel cells.

Figure 3: Efficiency rating of new space heating appliances13 A wide range of renewable heating and cooling solutions is available and scaling-up the market would reduce their price. The Energy Labelling Directive (2010/30/EU) states that Member State incentives for products such as heaters need to aim at the highest performance levels. In line with the G20 2020 statement about inefficient fossil fuel subsidies, the Commission is calling on Member States to focus incentives on non-fossil fuel based heating and cooling technologies.



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