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Energy Efficiency in Buildings Policy in GermanyDENEFF - German Business Association for Energy Efficiency
Renovate Croatia
Zagreb, 17th of October 2017
DENEFF? A strong voice for energy
efficiency in Germany!
Introduction
Background
Introducing DENEFF: First German Industry Lobby Group to Comprehensivly Promote Energy Efficiency
3
Members Objectives
• Founded in November 2010 by 10 front-running companies, supported by German Minister of Economics Rainer Brüderle
• First general meeting in February 2011 with more than 40 companies participating, keynote by Minister of Environment Dr. Norbert Röttgen
• Companies
About 150 company members, from innovative SMEs and Start-Ups to international corporations
Frontrunners in providing energy efficiency solutions across all industries
• Politics and science
Advisory board with politicians, scientists, consultants and representatives of civil organisations
Currently ~10 MPs/MEPs and 34 scientists and opinion leaders
25 partner organisations in Europe and overseas
• To accelerate the market development for energy efficiency products and services
• By the means of supporting better political regulation and general market conditions
• In order to create additional jobs, investments and technological progress in Germany (and Europe)
4
1 Network
• Access to a broad network of innovative companies and policymakers in Germany (and EU via partners)
2 Relevance
• More weight for a strong voice for energy efficiency
• Bundling of ideas, innovative capacity and represented economic impact
3 Intelligence
• structured, focused and early intelligence about relevant political processes
• Identification of implications towards business
4 Synergies
• Exchange and networking within the initiative
• Synergies by „Sharing“ advocacy expenses with like-minded companies
Results
Benefits of Membership
Membership Benefits: Better Access, Intelligence and Advocacy
• Sufficient and reliable funding instruments
• Legal frameworks that trigger investments
Better Regulation:
Better Cooperation:
• A confident energy efficiency industry
• Business opportunities for collaboration
6
McKinsey on Energy Efficiency:
„Energy Efficiency is the
economic, ecological and social
imperative of the 21st Century“
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Energy efficiency has been the largest source of energy in the world and driver for economic growth
Source: IEA 2014
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Saving energy is much more than just GHG abatement
IEA 2014
>> Multiple benefits of energy efficiency highlighted by IEA
Source: IEA 2014, DENEFF 2016
9
Energy Efficiency: Our Mission is Key for Economy andSociety of the 21st Century
9
For Society For the Economy
Preventing climate change disasters For the whole economy:
•Sustainable growth
•Less social costs
•More tax incomeReducing dependence on „blood oil“
Limiting „fuel poverty“ caused by increasing prices
For providers of energy efficiency solutions:
•innovations
•revenue growth
•export opportunities
For energy-consuming industries:
•Cost competiveness in global markets
•Positive side effects (process, material efficiency)
Creating new job opportunities
Ensuring energy safety
10
Growth and employment in different EU EE-scenarios
28%
Source: Impact Assessment COM(2014)520 final
EE Target Add. GDP Increase until 2030
35%
40%
Add. Increase of Employment until 2030
11
11
Turnover in the Field of Energy Efficiency is growing: 135 billion EUR in 2015
123
135
116
118
120
122
124
126
128
130
132
134
136
2014 2015
Turnover in the Energy Efficiency Sector in Germany
in billions (projected)
487
535
460
470
480
490
500
510
520
530
540
2014 2015
Employees in the Energy Efficiency Sector in thousand
(projected)
Source: DENEFF Sector Monitor Energy Efficiency 2016
12
12
Factors providing the most important impulses for the sales market
Trend reversal: Political Framework becomes the most important market driver
0% 20% 40% 60% 80% 100%
Development of energy prices (n=156)
Rise in sustainability awareness (n=156)
Technological innovation (n=156)
New customer needs (n=157)
Political framework (n=155)
Factors providing the most important impulses for the sales market
important
moderatly important
unimportant
13
Currently there is a strong framework for
energy efficient buildings in Germany with
carrot, sticks and tamburine. Working well
– partly!
Political framework
14
Energy Efficiency is feasible!
Illustrative example? More than 50% of all
new builts in Germany exceed current (tough)
building codes. For existing buildings
passive house standards are technicallypossible and widely proven!
15
Integrated approach of R&D, incentives, and standards drives market.
Source: gtai.com - Based on data from Fraunhofer IBP
-50
0
50
100
150
200
250
300
1980 1985 1990 1995 2000 2005 2010 2015 2020
Passive
Low-energy
houses
Zero-heating
houses
Plus-energy
houses
Demo
Solar
houses
Minimum
requirements
Practice
WSVO 1977
WSVO 1984
WSVO 1995
EnEV 2002/07
EnEV 2009
EnEV 2014
nZEB
Pri
mar
y En
erg
y D
em
and f
or
Heat
ing [
kWh
/m2
a]
?
Evolution of energy-efficient building in Germany
16
-> Germany uses a mix of requirements, information, and incentives to improve the performance of the building stock
▪ Maximum allowed primary energy needs
in new bldgs – NZEB from 2021 (EU)
▪ Regulation of permitted heat transmission
losses of the building envelope (and of
components after major refurbishments)
▪ Performance standards for building
technologies (HVAC) + mandatory
renewable heating in new buildings
▪ Mandatory energy performance
certificates (EU)
▪ Attractive incentive programs for those
who go beyond minimum standards!
Building energy performance policy
17
-> Residential reference building valid 2009-2015.
-> From 2016, new buildings must be 25% more efficient.
Roof/Top Floor
Uref= 0.2W/(m²W)
R= 5 (m²K)/W)
Solar Device for Hot
Water Supply
Mechanical
Ventilation
Exterior Wall
Uref= 0.28 W/(m²K)
R= 3.57 (m²K)/W
Basement Ceiling/Bottom Plate
Uref= 0.35 W/(m²K)
R= 2.86 (m²K)/WBasement Wall Against
Earth or Unheated
Rooms
Uref= 0.35 W/(m²K)
R= 2.86 (m²K)/W
Heating and Hot Water Condensing
Boiler Technology 55°/45°C
Thermal Bridge
UWB= 0.05 W/(m²K)
Windows
Uref= 1.3 W/(m²K)
gref= 0.6
R= 0.77 (m²K)/W
German Energy Efficiency Regulation – more stringent building codes
18
-> 2 billion EUR anually are currently budget for incentives in this field
Energy-Efficient
Buildings & Infrastructure
Construction ofnew buildings
Preferential KfW Loans
Repayment Grants for KfW Loans
Renovation ofbuildings
Grants for EnergyAudits
KfW Loans for Renovation Expenses
Grants for Renovation Expenses
Communities,
Municipalities
Grants for Renovation
Project Mgmt.
KfW Loans for Infrastructure
Upgrades
Federal Gov‘t - Energy Efficiency Incentives
NEW programs since Q2 2016: “Savings meter” and “Competitive Efficiency Tenders”
19
And more to come…
Political framework
20
NAPE (Dec. 2014)
Implementation of EU EE-Directive (Oct. 2012)
Key Instruments forEnergy Efficiency in Industry
Energy audits fornon-SMEs
Energy efficiencynetworks initiative
Fundingprogrammes forenergy efficiency
Competitivetendering
National Action Plan on Energy Efficiency Action Plan (NAPE)
contains central German energy efficiency policy instruments
21
NAPE: Some Highlights (to build on)
Competitive
tender
Efficiency Meter
Guarantees for
EPC
VA: Learning EE
networks
Individual renovation
roadmaps
Labeling for
existing boilers
(incl.)
Btw: NAPE - Not to
be confused with
NEEAP!
22
Despite these efforts (NAPE), Germany will fail to meetlong-term EE targets
23
New Green Book discusses additional political options to close the gap and stimulate EE market
System-optimum by
"Efficiency First"
Quality andQualification
as Enabler
Focus on
(Efficieny-)
Outcomes
Questions• How to put „energy efficiency first“?• Need for an EE-act to set a level
playing field and binding targets?• Additional Instruments:
flexi-tax, obligations?• Role of EU-instruments?• How to vitalize the ESCO market?• Role of digitalization?
English Version available: http://energycoalition.eu/sites/default/files/Green%20Paper%20Energy%20Efficiency.pdf
Green Book Energy Efficieny DENEFF‘s key comments:
Digitalization
24
Many funding programmes support energy efficiency 3
Source: DENEFF 2016
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2017 Federal Elections: DENEFF campaign
25
• Campaign title: „Erste Wahl: Energieeffizienz“
(„First Choice: Energy Efficiency“)
• On-site meetings with MPs and candidates and
other events with decision makers and member
companies
• Meetings with party officials regarding the
electoral programs
• Print & online publications, a dedicated website
and social media activities
26
What´s next
???
27
DENEFF founded „Finance Forum Energy
Efficiency in Buildings“
Key players to involve: financial industry
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Tremendous business potential to engage in energy efficiency in buildings
Source: effin
Annual investments required to achieve targets in Billion EUR
Single FamiliyHomes
Residential Commercial Public Total
77
33
7
34
Major market playersalready exploringbusiness opportunities
3
30
But: Currently little actual investments in energy efficiency measures
Source: effin
Single FamiliyHomes
Residential Commercial Public Total
Actual annual investments in Billion EUR (in 2010/2011)
Required
77
7
3? 0,6
11
Investment Gap: 66
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So why are actual investments so far behind required?
Lack of capital supplyfrom financial sector ?
Lack of capital demandfrom building owners ?
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Both sides have similar „issues“ when investing in energy efficiency – But from different perspectives
Capital Supply (Financial Institutions)
Capital Demand(Buildings Owners)
• Individual buildings / projects• Project acquisition difficult• Know-how intensive• …
• Individual business cases• Searching cost• Set-up Measurement & Verification• Integrate into business planning• …
TransactionalCost
• Difficulty of predicting energy savings• No guaranteed cash flows• Solvency of „user“• …
• No guaranteed delivery of savings• Long payback periods• Future usage of buildings• External factors (e.g. energy prices)• …
Cost of Risk
• No issues in GER due to low interestrates and KfW financing schemesCost of Capital
• Results from CoR and TC of capitalsupply
Brainstorming about potential solutions along the value chain of financial institutions
FinancingProducts
Sales / Marketing
Risk
Process
Energy Savings Plan? Green Funds?
Integrated Sales and Consultation Model?
Standardization?
Datamining? Public Participation?
Technology Pooling?
Advanced Risk Assessment?
Single Family Homes Residential RE Commercial RE
Competence Centre for Contracting?
Green Bonds?
Portfolio Analysis & Renovation Roadmap incl. Financial Planning?
Crowdfunding + Contracting?
Public Buildings
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Pilot project single familiy homes: Accessing 26 Mio. EUR additional marketpotential with leveraging customer contact points of a „Bausparkasse“
• Who and where is the target group?• What are the most promising arguments?• How can financial and energy consultancy be connected?
• Target group-oriented approach developed!• Sales power of LBS leveraged!• Communication guidelines & process implemented!
To get there we conducted an structured 4-step-approach
Understanding the customer
1 Identifying/ definingcustomercontact points
2Designingcustomerprofiles
3
Creatingguidelines forsales people
4
35
Pilot project Residential RE: Demonstrating and implementingbusiness case for energy efficiency in residential real estate
• Where are the savings potentials? • How much energy can be saved? • From an investor‘s perspective: What is the first, second,
third step and why?
• Method to analyze savings potential developed!• Portfolio analyzed and structured!• Renovation roadmap developed!
To get there we conducted an structured 3-step-approach
Analyzing andstructuring theportfolio
1
Integrating investor‘sfinancial perspective
2
Developing renovationroadmap
3
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Beside pilot projects, innovative business ideas and initiatives for energyefficiency in buildings are evolving
Low
High
Segment Specific
Depth of Renovation
Single components Full retrofits
effin key insights
There is no silver bullet: Investments in energy efficiency needsegment-specific approaches.
Not a question of availability but allocation of capital: Financiers can become part of the solution.
The market alone won´t make it: A strong and ambitious politicalframework must accelerate the development.
Innovation
Open Source Tools
The project results have been transferred into practical tools
Best Practice Database www.effin.info
effin Innovation Manuals
Second part of the project focused on commercial, non-residential buildings
42
Develop-ment
Currentstatus
Reputational risk Financial risk
FootprintingDivestment/
Directives
Assessment of regulatorytransition risks
Assessment of marketand technology risks
EU CSR-Directive
Spac
e o
fac
tio
nfo
rFi
nan
cial
In
stit
uti
on
s
Types of Risks
Paris Climate Agreement
Article 173 French Energy Transition Law
BMF Financial Market StabilityInitiative
Assessment of physical risks
External drivers
GFSG
Project Stranding
An increasing number of initiatives are bringing 2 degree requirementscloser to financial institution‘s core business
Current activities Activities with the most probable impact
The economy faces great risks of significant changes in the framework conditions:• USA – all coal companies are bankrupt, Oil companies are cutting 400 bln. investment budgets• Car efficiency and clean air standards, increasing stringency of regulations and controls, e-mobility? • Energy transition GER, FR, USA regulations, market desgin, ….; CAPEX-plans – How do companies adjust?
ILLUSTRATIVE
2°C-goals(e.g. Science
Based Targets)
Source: The CO-Firm
FSB
43
Project Stranding
Not investing in energy efficiency can lead to significant financial losses
Source: The CO-Firm
$
Climate risks …• can be material – even in the commercial property sector• are currently not adequately covered by traditional risk
management• can not be quantified by traditional risk management• can lead to a discount of non efficient buildings if
governments will take regulatory actions to achieve a wellbelow 2°C world
• and not investing in energy efficiency can reduce theattractiveness of commercial properties and limit thewillingness to pay of tenants („grey discount“)
… are becoming market and regulatory risks
Stranding risk analysis supports Generali's risk management
44
Project Stranding
Investors are facing the question which portfolio risk materializes from a 2 degree pathway
Source: The CO-Firm
How will a 2 degreereduction pathway impact
commercial propertyportfolios?
• Assessment and financial valuation ofrisk of a partial or full devaluation(„Stranding“) in regard of a two degreepathway
• Assessment of the costs of inaction
• Outlook: Setting reduction targets in linewith climate science („Science BasedTargets)
?
45
End products of the stranding analysis is a specific risk assessment and a financial valuation tool
Project Stranding
Source: The CO-Firm
Specific 2°C-pathway as a benchmark
• Validated 2°C-pathway as the basis for the analysis of climate induced strandingrisks
Specific analysis of a property portfolio regarding assets at risk
• Transparency on asset level regarding potential stranding risks
Financial assessment
• Which energy- and CO2-prices will support a positive business case?
• What are the cost of renovation according to achieve the targets?
$
46
Project Stranding
The tool indicates adjustment requirements and optimal timing on buildingand portfolio level
Quelle: The CO-Firm
At what point in time do I have to modernise mybuilding?
Which budget do I have to spent?
Which part of my portfolio is already on track? Which building and building groups are at risk?
ILLUSTRATIVE
47
Negative press endangers entire
renovation industry in Germany
But fame brings envy…
48
