EU buildings emissions deal progress, but hurdles remain

The EU has reached an agreement on the phase-out of fossil fuels buildings emissions, which envisages new boilers must be zero-emissions by 2030 and and fossil fuel boilers will be banned by 2040.

While this represents an important step towards reducing emissions in buildings, commentators criticise the ample discretion granted to individual countries on how to achieve the targets amid ongoing financial hurdles.

Under the provisional deal, which was reached between MEPs and member states on Dec. 7th and is now due to be formally adopted, subsidies for standalone oil and gas boilers will end in 2025.

The agreement, which revises the existing EU Energy Performance of Buildings Directive (EPBD), stipulates that member states must reduce their average primary energy use of residential buildings by 16% by 2030 and 20-22% by 2035, although each country can set its own strategy to achieve the goals.

At least 55% of the decrease of the average primary energy use must be achieved through the renovation of the worst-performing buildings.

Buildings are responsible for approximately 40% of EU energy consumption, more than half of EU gas consumption – mainly through heating, cooling and domestic hot water – and 36% of energy-related greenhouse gas emissions.

For the non-residential building stock, the revised rules require a gradual improvement via minimum energy performance standards. 

This will lead to renovating the 16% worst-performing buildings by 2030 and the 26% worst-performing buildings by 2033, the EU Commission said.

To fight energy poverty and bring down energy bills “financing measures will have to incentivise and accompany renovations and be targeted in particular at vulnerable customers and worst-performing buildings, in which a higher share of energy-poor households live,” it said.

Member states will also have to ensure that there are safeguards for tenants, to help tackle the risk of eviction of vulnerable households caused by disproportionate rent increases following a renovation.

Energy consumption in the EU building sector peaked at 15.4 exajoule (EJ) in 2010 and has remained fairly steady in recent years, standing at 13.9 EJ in 2022, according to Rystad Energy.

The new rules “will likely significantly impact the energy efficiency of buildings, reducing losses in the industry quite dramatically,” August Sandal Rolfsen, global energy systems analyst at Rystad Energy told Gas Outlook.

Buildings energy losses will have to be reduced by more than 45% by 2050 to align with Paris Agreement targets, he said.

“This loss reduction will come from a combination of fuel-switching and efficiency improvements resulting from renovations of the building stock.”

“The provisional agreement requires a yearly renovation rate of around 2.5% of European buildings for each country” from 1% per year currently, thus requiring a 1.5% per year increase between 2023 and 2033 resulting in additional investments across the EU totalling 1.2-2.4 trillion euros.

New heating technologies such as heat pumps stand to benefit from the new directive, with energy production increasing from 0.97 EJ today to around 1.4 EJ in 2030.

“The complete phase-out of fossil boilers will cut 5.2 EJ of fossil fuel consumption today, replaced mainly by electricity and ambient heat from heat pumps.”

This will result in wider adoption of electric boilers and electric cooking systems, he said.

While the agreement represents an important step towards decarbonising the boilings sector, a key contributor to EU emissions, the ample flexibility granted to individual countries signals a watering down of ambitions among regulators “particularly in the residential sector which in Italy accounts for over 90% of total” buildings, Francesca Andreolli, senior researcher in energy and buildings at Italy-based think tank ECCO Climate, told Gas Outlook.

Elaborating a long-term plan for the upgrading of existing buildings and promoting adoption of heat pumps, as well as the immediate phase-out of incentives to heating technologies that still rely on fossil fuels are among the priorities, she said.

Solar targets

As part of the measures to tackle boilings emissions, the EU stipulated new buildings must be solar-ready, and installations of rooftop solar panels must be stepped up in existing buildings.

Yearly installed capacity of rooftop solar panels in Europe has increased from 2.91 GWdc in 2010 to 8.3 GWdc in 2022, according to Rystad Energy.

“As one of the focus areas of the EPBD is to increase energy security and reduce the costs of operations of buildings, the EPBD will help improve the need for solar energy in buildings to help drive the increased demand for electricity, both in households and commercial buildings.”

In a low-degree scenario, such as that targeted by the EPBD, electricity consumption in buildings will increase by more than 70% by 2050, contributing to approximately 70% of total energy consumption in the building sector.

“The portion of this coming from rooftop solar is still uncertain, but in relevant regions, a significant amount will likely come from locally produced electricity such as rooftop solar panels.”

The new solar targets represent “a huge milestone to accelerate renewable deployment” and will “strengthen the efficient integration of PV installations into building construction processes” Jan Osenberg, policy advisor at SolarPower Europe said.

However, financing hurdles remain.

To address these, “different financing models can be implemented to remove or lower the upfront costs for customers” he told Gas Outlook.

Some companies “deploy innovative ‘energy as a service’—models to remove the upfront costs for customers: under these models, the company finances the entire PV installation.”

In addition, the EU Recovery and Resilience Facility can be used by member states to finance public rooftop solar PV programmes, he said.

Moreover, “targeted grant programs are a solution for specific cases such as vulnerable consumers or for PV deployment coupled with a renovation.”

The International Energy Agency said public grants could cover up to 20% of installation costs for solar panels in some markets.

Tax reductions on investments are another option, already offered by some EU member states, he added.

The informal agreement now needs to be endorsed by both Parliament and Council in order to become law. The EU Parliament’s Industry, Research and Energy Committee is due to vote on the text on January 23.