Leaving no one behind: how to enable private finance for renovation with positive energy neighbourhood projects?

Jun 7, 2024

According to the European Commission, 35 million building units must be renovated by 2030 in the EU. How can we ensure that the financial burden doesn’t fall disproportionately on those least able to afford it and that vulnerable households or SMEs are not excluded? On 3 June 2024, BPIE, Europe’s leading independent think tank on the energy performance of buildings, and oPEN Lab partner, hosted an online roundtable exploring this question with experts from policy, finance, research, regional government, and oPEN living labs.

The path to achieving EU climate and energy targets should be equitable and inclusive to leave no one behind in the transition. The EU aims to achieve a fully decarbonised building stock by 2050, which requires a renovation rate of 3% per year and an increased share of deep renovations. Positive Energy Neighbourhoods (PEN) can contribute to this effort.

Victoria Taranu, Senior Researcher at BPIE, introduced the governing principles of PENs and moderated the conversation.

Adrien Bullier, from the European Climate, Infrastructure and Environment Executive Agency (CINEA) of the European Commission presented a review of financial instruments for building renovations and highlighted the role of the public sector in de-risking investments and engaging vulnerable households. It was highlighted that 3,000 billion EUR is needed to realise the 2030 energy and climate targets and public funding will only be 10-20%, thus enabling private financing is essential.  The EPBD encourages Member States to prioritise vulnerable households and use revenue-based parameters when providing financial support (e.g. grants). Guarantees for loans are needed, and the prefinancing of grants is a key issue. One-stop shops (OSS) can make the renovation journey simpler and easier to navigate. OSS are also important because it allows to standardise the projects and have a large-scale approach since aggregation facilitate the financing process for the banks.

Christine Zhou, Executive Director of Global Head of Built Environment & Circular Economy Finance at Bankers Without Boundaries (BwB) pointed out the barriers and bottlenecks for investing in PENs. These include the perceived risk, lack of data, low returns and lack of scale. PENs partly tackle this issue as compared to individual projects, but it still remains a barrier.

Pieter Bosmans, Project Manager at VITO, provided insights from the oPEN Living Lab in Genk. This vulnerable neighbourhood, characterised by a high proportion of renters with relatively low incomes, requires accurate and reliable savings estimates to mitigate the financial risks associated with the business case. The issue of “cherry-picking” arises, as certain technologies, such as photovoltaic systems, are more financially appealing than deep renovations and heat pumps due to the current low cost of gas. In vulnerable urban areas, where investments are already challenging, selectively choosing the most financially attractive components from a comprehensive solution package can render the remaining actions less feasible.

The PEN rollout aims to address these concerns through digitalization and enhanced data access. In a PEN setting, optimizations can be achieved by balancing energy efficiency with renewable energy and harnessing the savings potential of collective solutions. This approach seeks to provide meaningful and reliable savings estimates, thus de-risking the business case and ensuring the viability of comprehensive energy solutions.

Borja Gumuzio, financial analyst at GNE Finance, presented the financing solutions offered within Opengela OSS in Baque Country. He stressed the importance of having tailored financing solutions for vulnerable households, since with a standard personal loan, the majority of the population is excluded from renovations. The solution provided by the local government within OSS is a result of the collaboration with banks and contains blended public grants and subsidies with private loans, to cover different income groups. He highlighted the opportunity of merging urban regeneration with energy renovations.

Finally, Julie Emmrich, Sustainable Finance Lead at the World Green Building Council (WGBC), moderated a panel discussion with all experts, addressing the different approaches to investments and how the multiple social and environmental benefits of PEN can be better communicated to homeowners and investors. In the panel discussion participated also Jannika Aalto from Green Digital Finance Alliance.

You can rewatch the session here.