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Government to cut utility bills in public buildings first

Energy efficiency efforts in the European Union will include, among others, the mandatory renovation of 3% of public buildings owned by the central government from 2014.

Despite the season start heavy with member states’ debt burden, it is business as usual in the European Union. In its first plenary session this September, the European Parliament passed an energy efficiency directive that probably will make a difference in Europe’s energy scene. Unlike its predecessors, the new package contains binding targets that countries will have to meet. Among them is an annual 1.5% energy cutback to be achieved by end-users, the renovation of 3% of public buildings owned by central administrations, and energy audits for all large firms every year. Politicians and experts alike have questioned how effective these measures will be, as several parts of the draft have been watered down. Yet what they all agree on is that passing such legislation was more than timely in a Europe packed with inefficient energy systems running mostly on imported energy. The new directive is expected to remedy the above problems, with the added benefit of creating jobs and savings on the way.

From January 2014, member states will need to renovate 3% of the total floor area of heated and cooled buildings of more than 500 sqm that are owned by their central governments. Originally, the measure was meant to take in all public buildings (e.g. schools and hospitals run or owned by local governments). “Renovating every public building would cost the country HUF 200 billion annually, an enormous burden under the current economic environment,” Hungarian MEP András Gyürk told the Group of the European People’s Party. Having accepted that argument, decision-makers altered the legislation to affect central public buildings only.

In Hungary, buildings owned by the central government account for less than 5% of the country’s energy expenditure, said Tamás Pálvölgyi, associate professor at the Budapest University of Technology and Economic (BME), so their impact is limited (although some other estimates put the amount as high as 10%). But renovating these buildings is a great means of setting an example and shaping the general mindset. “We cannot underestimate the impact on the rest of the industry,” said Diana Ürge-Vorsatz, professor at the Central European University and director of the Center for Climate Change and Sustainable Energy Policies (3CSEP), who cited examples from the United States and Germany. In these places, after undertaking government assignments, construction companies went on and looked for new clients, which resulted in a second wave of renovation in private homes.

Though the directive enforces a 3% annual renovation rate, it leaves the details of implementation to national governments. That is, they can decide to what depth and in what order to renovate public buildings. The XY group led by Ürge-Vorsatz made a number of studies on what impact different levels of retrofitting would have on savings and employment. The group outlined several scenarios from very basic to deep renovations. After studying renovated buildings, they found that small modifications like changing windows or installing a new heating system have little long-term effect on savings. 

These changes translate to a 20-40% renovation, but energy savings often do not materialize, the expert claimed. “People just become more laid-back, leave the door open longer, and set the room temperature slightly higher under the belief the new insulation allows for that. But in doing so they lose that little edge.” Ürge-Vorsatz, and most of her colleagues, therefore recommends a renovation of at least 50% or higher. “At the 70-80% level, investments yield returns. At such levels there is no need to install a new heating system or change pipelines: the building itself saves enough energy.” She goes even further. “In a consciously-planned public building in Hungary, there is no need for heating, not even in winter. Practice shows that, with adequate insulation and a heat exchange system, the heat generated by people and machines is sufficient.” (Unfortunately, new building plans put the emphasis on heating rather than insulation and shade. As outside temperatures continue to rise, this will likely cause problems in the future.)

When it comes to the amount of renovation made every year, however, studies find a rate under 3% is more beneficial to the economy. “The impact on the labor market and prices are more favorable when renovation is made at a slower pace, at around 2% a year,” she said.

Ranking raises interesting questions, too. What criteria will governments use to rank buildings in need of restoration? They may begin by picking buildings that require less investment but offer more return, but that is hardly in line with the principles of sustainability. “We are not supposed to leave the brunt of the work to our children or grandchildren,” Pálvölgyi explained, “It would go against the reasoning of sustainable future.” Alternatively, governments could prefer the projects that promise to create the highest number of jobs.

No matter which option the Hungarian government favors, it first needs to do an inventory of its building stock. There is currently no exact data on the number, age and condition of the various types of state-owned buildings. Studies are done based on estimates. “Only in possession of that data can we decide responsibly what to do with our housing stock: whether to retrofit or pull down inefficient buildings,” Pálvölgyi said. The new energy directive requires countries to submit such an inventory by January 2015, so in two years’ time, Hungarian experts will probably have a better idea of what they have to work with.

What they already know is hardly encouraging. Out of 4.3 million buildings, roughly 2.2 million are family houses built in the 1970s, with square floor plans, thatched roofs and extremely poor energy systems. “The specific energy expenditure of the so-called Kádárkocka (Kádár cube, named after the country’s socialist president during the period) is at least twice as much as that of panel (block) housing.” That should give a hint to legislators of what to revamp next. The directive requires member states to submit a plan as to how to make all existing housing energy efficient by 2050. The target of saving 110 petajoule a year by 2020 could be met if 100,000-150,000 houses were retrofitted annually, the expert calculated.

However, as long as the financing scheme is not clear, goals will remain unfulfilled, Gyürk claimed. “There are numerous funds at both EU and national level available but paying the required contribution makes it hard to access these.” So the inclusion of an innovative payment option in the energy package – based on a Hungarian initiative – is a great leap forward. This allows member states to sell their excess carbon quotas and use the money obtained to meet their efficiency goals. “With the quotas, a country can substitute contribution. This will help undertake projects that promise substantial savings even during the crisis.”

Still, many MEPs claim that savings in energy consumption do not necessarily translate into savings in costs if investments hamper the growth of recovery efforts. Edit Herczog, Hungarian MEP of the Progressive Alliance of Socialists and Democrats grouping in the European Parliament, uses the example of dieting and exercising. “Nothing is as promising as the first 24 hours of a diet. And there is hardly anything as disappointing as when one realizes they also need to exercise to lose weight. So the next challenge for governments is to devise a system that is sustainable and will deliver results without compromising existing ones.”