Foreign schemes to promote energy renovation .1 The UK – Green Deal

26 and building professionals about materials, design, common energy levels and possible improvements. Here it is possible for the owner to get information early in the process and it can be used as a tool for the building professional to explain their ideas to the customer.

Figure 14 – Example from the website SparEnergi.dk showing an SFH with interactive buttons providing information on different building components.

Source SparEnergi.dk

2.2.5 Foreign schemes to promote energy renovation

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In 2015, funding for the project was stopped by the new Conservative Government, because only about 15,000 loans had been taken out. This is very few compared to a building stock of about 14 million houses in need of renovation and the initial ambitions of the scheme.

According to an online energy-saving advice community (TheGreenAge, 2015), the main flaw of the scheme was ‘the Golden Rule’. It was meant to save the house owners from large repayments, but in reality it created an upper limit to the amount house owners could borrow, because it all had to be paid by the energy savings alone and within a limited number of years. This drastically limited the possibility for extensive renovations.

Pettifor et al. (2015) investigated how the Green Deal affected house owners by questioning them four months prior and seven months after the launch. They found that house owners do not distinguish energy efficiency from other kinds of renovation of their houses, so the Green Deal should not have been limited to energy improvements. The focus solely on energy savings meant that a lot of house owners lost interest, because their focus was on necessary maintenance.

Another problem was the upfront cost to get a Green Deal assessment, which had to be ordered before the house owner knew whether anything could be done within the limits of the scheme. This left many dissatisfied, because they paid for assessments that turned out not to reveal any opportunities within Green Deal. Even more people lost interest before they got started due to the cost of the assessment. Furthermore, only a limited number of improvements were eligible within the scheme. All this limited the number of Green Deal renovations that were actually carried out.

Lastly, some people were worried that a Green Deal might affect the saleability of their house. The Green Deal was attached to the house and not the owner, so it would be taken over by the new house owner, which might put some people off buying.

2.2.5.2 USA – PACE

One place where a renovation scheme has affected the saleability of houses is the USA. The PACE programme for residential houses was introduced in 2009 (Headen et al., 2011). It allows the house owner to receive 100% funding for eligible energy improvement, and repay the loan through their real estate tax bill. This way, the house owner has no upfront investment, which can often be an obstacle to energy renovation. The loan stays with the property, thereby making sure that the investment is paid for by those who benefit from the improvements. Moreover, the length of the loan must not exceed the useful service life of the improvement, and the increase in property tax should not exceed the expected savings on the energy bill.

This programme ran into problems because the two largest American mortgage loan companies, Fannie Mae (Federal National Mortgage Association, FNMA) and Freddie Mac (Federal Home Loan

28 Mortgage Corporation, FHLMC) announced that they would no longer buy mortgages on houses in the PACE programme. This was because PACE had first-lien status, meaning the PACE loan would have to be paid before the mortgage in the case of foreclosure (Federal Housing Finance Agency, 2014). For a new buyer to obtain a mortgage for the house in connection with a sale, the past owner would probably have to pay off the PACE loan before selling (Wise, 2016). This example shows that even standard economic procedures can work as a hindrance. However, the programme has so far contributed $2237 million to upgrade 104,000 homes, where 59% of the improvements were energy efficiency upgrades, while the rest were either renewable energy or water saving (PACENations, 2016).

2.2.5.3 Germany – KfW

The KfW is a large, state-owned development bank that supports sustainable development in a number of ways. They assist house renovation through cheap loans and they also supply grants for ambitious renovations that do more than the average renovation. The more energy the renovation saves, the larger the grant available. They also support individual improvements, but a combination of improvements resulting in a larger renovation will generally make it possible to get a larger part of the budget covered by a grant – up to 30% for the most extensive renovations (Galvin and Sunikka-Blank, 2013; KfW programmes for private customers).

Schröder et al. (2011) evaluated these KfW initiatives from a British perspective. They described how the KfW programmes managed to promote the energy-efficient renovation of about 9 million houses between the 1990s and 2010. They report that, in general, the KfW has been a success story due to a number of factors:

 A combination of regulation, information and support to create a framework for energy renovation

 Favourable terms for loaning money and subsidies that promote ambitious solutions

 Providing qualified expert advice and installation, thereby ensuring a positive result

 Subsidies for renewable energy paid only after investments in energy efficiency have been made

 Focus on a ‘whole building approach’ to energy saving, also where improvements are implemented over time

 Support for the innovative and experimental, spreading awareness of new successful solutions

 Using public buildings as good examples

 Consistently shaping public opinion and behaviour in favour of the benefits of energy efficiency

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Galvin and Sunikka-Blank (2013) also compare the German experience with that of the UK. Their aim was to look into the German goal of reducing carbon emissions by 80% between 1990 and 2050, and how it is connected to the economic viability of the mandatory savings in the Energy Saving Regulations. They claim that while there may be many benefits from energy renovation, it will not be possible to achieve the energy-saving goal through this measure, because the savings obtained are often less than those calculated, and it would take a massive amount of super-efficient renovation to achieve the goal. They also suggest that the Government should stop promoting thermal renovation by claiming ‘it pays for itself’ and instead focus on some of its other good qualities. In another paper, Galvin (2012) criticises the German policy focus on extensive renovations with a very low energy consumption. While subsidies support renovation to a higher level than new houses, the same regulations stop people implementing small improvements. While the intention may have been to promote major renovation, the result is often that people do not renovate at all because all the available solutions are simply too expensive and large-scale.