Beyond Zero Energy in European Homes
Where is energy efficiency in buildings headed in Europe? Key trends in Germany, Europe's leading construction market, provide useful insight.
My Berlin neighborhood is buzzing with activity. Several turn-of-the-century apartment buildings are being renovated before winter arrives. One receives only a new coat of paint, but the others are given new windows and a generous layer of insulation before the elegant stucco façade is restored. At least one of them is also being connected to a district heating network.
This is where all the lofty rhetoric about the role of buildings in Germany’s transition toward a more sustainable energy system and the countless dry European policy documents get translated into practice.
The European Union (EU) is the world’s largest construction market, and Germany, thanks to its solid economic performance and lack of a real estate bubble, is the EU’s leading construction market. The country has long been at the forefront of energy-efficient construction, renewable-energy usage, and testing and scaling up building technologies that go on to enter mass markets all over the world.
Driver 1: EU Policy and Regulation
Since buildings account for about 40% of Europe’s final energy consumption, they feature prominently in EU energy efficiency policy and regulation. The EU has issued two major directives that need to be implemented (or “transposed” in EU-speak) into national legislation by all 28 member states.
The first is the 2010 version of the Energy Performance of Buildings Directive (EPBD), which requires all of the states to establish and apply minimum energy performance standards for new and existing buildings. It also stipulates that building energy performance certificates must be issued by experts, published in real estate ads, and made available to potential buyers or tenants during house tours. Furthermore, the EPBD requires the regular inspection of boilers and air-conditioning systems.
EU member states must ensure that all new buildings are near zero energy by 2021 (public buildings by 2019). The definition of near zero energy is left largely to the individual countries. This makes sense, considering the variety of construction traditions, climates, and economic restrictions in the EU, although the directive calls for some level of coordination to avoid ending up with 28 different national definitions that make comparisons and scale all but impossible.
The EPBD also requires member states to develop long-term national building retrofit plans and to deliver regular progress reports to the EU Commission. Although full implementation was due by July 2012, not all member states have yet reached a satisfactory level of implementation.
The EU’s second major policy initiative is the 2012 Energy Efficiency Directive (EED), which is currently awaiting full implementation by all member states. In order to reach the EU’s goal of reducing energy consumption by 20% by 2020, member states should reduce primary energy consumption by an average of at least 1.5% per year from 2014 to 2020.
States can either make energy utilities responsible for effecting reductions or make use of alternative measures, such as government incentive schemes, energy taxes, or other policies. Germany has so far taken the latter approach. In addition, the EED requires central governments to renovate 3% of their buildings annually.
Driver 2: The German Energiewende
Germany has received much attention in recent years for its audacious push toward a more sustainable energy system, which goes beyond the EU’s approach in scale and scope (see Table 1). The German term for this transition is the Energiewende. It rests on two key pillars.
The first is the integration of a growing share of renewable-energy sources, which are replacing nuclear (all plants decommissioned by 2022) and fossil-fuel power plants. The success of this program to date has been remarkable. In the first eight months of 2014, 31% of Germany’s electricity (105.5 terawatt hours) came from renewable sources (wind, solar, biomass, and hydro power), and the country now has more than 1.4 million power plants, including small-scale rooftop PV systems, feeding into the grid.
The second pillar consists of ambitious energy efficiency targets to decouple economic growth from energy consumption. Specifically, Germany aims to halve its energy consumption by 2050 and double its building retrofit rate to 2% per annum in order to achieve an almost climate-neutral building stock by 2050.
Germany’s building stock of 20 million is the largest in Europe. Three-quarters of this was erected before the introduction of energy performance standards in the late 1970s and the bulk of this has not yet been given a significant energy efficiency makeover. It will take decades to renovate it all.
Driver 3: Energy Prices
Germany’s approach to energy efficiency differs slightly from that of the United States. One of the main reasons is that the retail price of energy is much higher in Germany than in most parts of the United States, making energy efficiency investments financially attractive. The utilities are not involved in program administration, and the government incentives do not create the market. They merely support it and are supposed to push consumers over any remaining mental or financial barriers (or toward higher efficiencies than they had initially planned).
In Germany, electricity currently retails for close to €0.30 (US$0.39)/kWh. Natural gas retails at €0.065/kWh (about US$2.45/therm). Figure 1 shows energy prices for 2003–2013. Figure 2 shows end use of energy in German homes. In the context of these prices, it is hard to believe that about three-quarters of all heating systems in Germany are not up to date, and that some old buildings are still being renovated without any energy efficiency improvements.
New Homes: Ever More Efficient
The German regulatory approach to building energy performance is one of sticks, carrots, and information: sticks in the form of minimum performance standards, carrots in the form of generous incentives for those who aim to exceed the standards, and information in the form of mandatory energy performance certificates and social marketing campaigns.
In accordance with both EU rules and Energiewende goals, German federal regulation sets the bar relatively high for the energy performance of new buildings. The requirements have evolved steadily since regulation was first introduced in the wake of the oil price shocks of the 1970s. As heating accounts for about 70% of energy consumption in a German home, the emphasis is on the building envelope and on heating-system performance.
On May 1, 2014, the latest version of the German Energy Saving Ordinance (EnEV) took effect. Like its predecessors, EnEV 2014 follows a reference building approach. This means that it takes as a benchmark a theoretical building that has a certain heat loss through the building envelope and that uses certain standard HVAC technologies. The calculated primary energy performance of any actual new building has to be as good as or better than that of a theoretical reference building of the same size and orientation. Planners and builders are free to choose which materials or technologies to employ in order to achieve the mandated performance level, as the regulation is neutral in this regard.
The basic reference building currently assumes a condensing boiler for heating and domestic hot water, a solar-thermal collector for hot water, a mechanical ventilation system without heat recovery, and a building envelope with moderate heat transmission losses.
The revised EnEV, which fully implements the EPBD, is a significant step toward the near zero energy standard mandated for all new buildings by 2021. The EnEV calls for a 25% reduction in energy use and 20% lower heat transmission losses for all new residential and nonresidential buildings built from January 1, 2016, compared to the current reference building (see Figure 3).
Owners of existing buildings will also have to comply with several new regulations, such as the mandatory replacement of many old oil and gas boilers and minimum roof insulation. When major renovations are undertaken, newly installed components have to achieve a certain performance level. For example, replacement windows would not have to be as good as those in a new building, but should nonetheless deliver major energy efficiency improvements. Germany has a second, parallel law requiring all new homes and public buildings to meet a certain percentage of their space heating needs from renewable sources, usually solar thermal, biomass, or heat pumps. Buildings can also use combined heat and power (local micro-CHP or district heating) or alternatively, take measures to reduce the overall projected energy consumption by 15% (homes) or 30% (public buildings) in order to be exempted from the requirement.
Many people opt for biomass heating, a low-energy house, or a combination of both. This has been a key driver of energy-efficient building in Germany. Policymakers are working on combining the EnEV and the renewables requirement into one regulation for the next step toward near zero energy buildings in around 2019.
Energy Performance Certificates and Incentive Programs
The EnEV makes energy performance certificates (EPCs) for buildings, which are required for the sale or rental of property, more detailed and informative. The EPC data are currently being collected and aggregated by a German government agency. At the time of writing, it is still unclear how the data will be made available to researchers and businesses to enable them to draw conclusions and possibly create new business models. Since real estate has been a seller’s market in Germany for the last few years and the EPCs have been mandatory in advertisements only since May 2014, it is too early to tell if and how they will affect consumer behavior.
The German government supports building projects that plan to exceed energy standards in new or renovated buildings with about €1.8 billion (US$2.3 billion) in funding each year. This is delivered mostly through loans with subsidized interest rates as low as 1%, although cash grants for partial renovations, energy audits, or smaller projects are also disbursed. The more energy saved, the greater the subsidy. Government figures show that this policy generated private investments of more than €34 billion in 2013 alone.
In 2012, the state-owned KfW development bank, which administers the funds, supported energy efficiency retrofit measures in 242,000 residential units, saving 1,700 gigawatt hours of energy. The aggregated savings from 2006 to 2012 amounted to more than 12,000 GWh in more than 1.5 million renovated homes. The figures for new construction are also striking. In 2012, a total of 115,000 new residential units received government support because they were at least 30% more energy efficient than the building code stipulated (already exceeding the requirements of the 2016 EnEV code). This represents 55% of all new units built during the year and a saving of 360 GWh annually.
The KfW classification of a building’s energy performance has become a popular label for selling new and renovated properties. KfW 100 indicates a standard new house built according to EnEV regulations, while KfW 70 indicates a building that uses only 70% of the energy a standard building constructed according to EnEV would use, and so forth for KfW 55 and KfW 40. The latter is roughly equal to a Passivhaus standard in overall performance, and a certified Passivhaus qualifies for KfW 40 financial support.
Trends and Future Scenarios
New German homes have reached an unprecedented level of energy efficiency and occupant comfort thanks to the push and pull of research, incentives, and regulation. Approaches that 20 to 30 years ago were possible only in pilot projects were introduced into the market with incentive programs for home builders and are now affordable standard practice required by regulation.
The move toward ever-greater energy efficiency means that former niche technologies for low-energy homes—such as mechanical ventilation with heat recovery, low-temperature heat pumps, or windows with triple glazing—are rapidly becoming the de facto standard.
Increasing levels of airtightness make mechanical ventilation an imperative, while better insulation results in higher comfort levels and more options to cover the reduced heating demand using a variety of sources—many of them renewable.
Although mass market penetration means lower costs for each of these technologies, additional investments deliver diminishing returns as buildings approach zero energy use.
There are several trends and imaginable scenarios for the near future.
Scalable retrofits. While pushing new buildings toward zero energy is important, the existing building stock accounts for a vast share of building energy use. Increasing the renovation rate is essential, but it is unlikely that this will be achieved simply by increasing the already high level of public funding. At the time of writing, working groups in Berlin are devising new, creative approaches to overcome split incentives for landlords and tenants with regard to who pays and who profits from energy efficiency retrofits.
The financial and real estate sectors are beginning to introduce securitization models into retrofits in order to attract private capital and remove financial barriers to energy efficiency investments. A growing number of architects and contractors are beginning to position themselves as turnkey project managers to reduce the delay and hassle for homeowners.
Despite the individuality of each home, we also expect to see integrated renovation service providers that have achieved economies of scale and brought down prices in other countries enter the German market.
“Plus energy” houses. The second key trend, which appears to be permanent, is the move toward renewable-energy use. While Germany is home to an estimated 50,000 Passivhaus buildings (50% of the world market share), builders are reporting that many customers now skip this step as well as net zero and go immediately to “plus energy” houses when building a new home. These buildings produce more energy over the course of a year than they consume. A network of Federal Ministry of Transport and Construction pilot projects that are still ongoing popularized the concept. They usually rely on a mixture of very low energy consumption, rooftop and sometimes façade PV, a heat pump, and a large hot-water and/or battery storage capacity.
The market was quick to pick up the concept, so that today German consumers can already chose a prefabricated plus energy house from a manufacturer’s catalog and have it assembled and ready to be lived in within a few months. Freedom from rising retail energy prices and a degree of self-sufficiency are the main draws for early adopters.
The dramatic drop in prices for PV installations and the accompanying feed-in tariffs mean that maximizing own-consumption of rooftop PV electricity has become a much more attractive proposition than feeding into the grid. This is especially true given the high German retail electricity prices. Homeowners are beginning to install battery systems and heat pump or heat storage systems in order to use as much of the electricity they generate as possible. In the winter, and for multifamily buildings, this still poses big challenges, and plus energy concepts for retrofits are still in the pilot stage. However, the plus energy concept has already surprised the German government with the speed of the transition from research to market. Initial projects have also shown that sophisticated systems that use renewables and seasonal energy storage can be a real alternative to insulation improvements in some retrofit projects where the goal is a reduction in primary energy consumption—although in most cases a combination of the two approaches will be advisable.
On the technology side, “big data” can help lower the cost of identifying untapped energy efficiency potential and will make new business models possible. New materials and technologies offer customers cost-effective choices for deep renovation, a simple upgrade of their heating system, or something in between.
One of the least invasive ways to boost building performance is to make energy usage more transparent for occupants and to operate the existing building equipment more efficiently. Germany is already Europe’s largest market for home automation and smart-home applications. Many new players are entering this still-wide-open field as smart-home solutions begin the transition from niche to mass market.
Improved centralized control of networked appliances, devices, and building technologies such as boilers and automatic windows can increase energy efficiency. Smart thermostats will be common in all buildings where oil or gas is used for heating (the vast majority). New power management systems allow for optimal self-use of self-produced PV power, activating electricity-guzzling equipment only when sunshine is plentiful. In addition, power companies are expected to offer flexible rates in the future that will allow smart homes to use electricity when it is cheapest. A strategy for the mass rollout of smart electricity meters in Germany will be announced by the end of 2014.
Home energy management is widely considered the most important feature of smart homes in Germany because it can result in tangible cost savings. Yet the fact that smart-home solutions can combine efficiency and comfort is their key selling point. According to a recent survey, more than half of future homeowners in Germany are willing to spend up to an additional €8,000 on smart technologies for energy efficiency, comfort, safety, and security.
The German policy goals are clear, and consumers are embracing the idea of more-comfortable and -sustainable buildings.
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