Montaigne Institute on thermal renovation sector

The building sector (residential and tertiary) is the largest energy consumer in France, as well as the leading greenhouse gas emitter; large-scale energy efficiency schemes must therefore target buildings. In its September 2013 report entitled “Ambitious energy transition in buildings”, the Montaigne Institute (think-tank led by Laurent Bigorgne) provides a detailed picture of the issues related to buildings’ energy performance and suggests ways of implementing energy efficiency solutions.

Thermal renovation of private housing: the main driver for energy transition

According to estimates by the Directorate General for Energy and Climate (DGEC) included in the Montaigne Institute’s report, private housing alone accounts for 44% of final energy consumption.

A thermal renovation strategy can help reach three goals, the report says: cutting energy bills for households and businesses, securing energy supply and contributing to climate policies. The building sector is thus a significant driver for energy efficiency, considering that the tertiary and residential sectors alone represent 23% of the country’s greenhouse gas emissions.

Report authors recall that this fledgling sector should be supported; they quote consulting firm Carbone 4 studies, which showed that an 8 billion-euro investment in thermal renovation could translate into creating 100,000 sustainable jobs. According to Yannick Perez, visiting professor to Supélec, energy efficiency has three main advantages: it cuts energy consumption, creates long-term employment and enhances the effectiveness of public expenditure.

In order to meet these ambitious goals, various stakeholders provided estimates of the cost of thermal renovation policies: in 2012, the electricity-sector umbrella organization UFE (Union Française de l’Electricité) worked with trade union Gimélec and consulting firm Carbone 4 on costing and concluded that depending on the priority areas chosen, energy efficiency policies could cost 8 to 60 billion euros a year between 2012 and 2020.

Buildings’ energy performance: a four-pronged approach

The Montaigne Institute’s report recommends a four-pronged approach to energy-efficiency upgrading: so-called “active” energy efficiency, awareness and moderation on the part of consumers, energy-saving equipment and good building insulation. Getting all the works done is quite expensive for households, which is why professionals advise that “they should be done according to a pre-established order in order to maximize the benefits of consumer investments”.

Although that precise order is still being discussed by experts, “implementing smart systems in buildings”, i.e. active energy efficiency, certainly yields the best returns on investment. Such systems reduce energy bills all the more as users adopt moderate consumption patterns. To that end, consumers should be made aware of eco-friendly behaviours and incentive programmes should be set up to help professionals and improve “the sector’s microeconomics and systemic conditions”.

Technical progress enables households to rely on “more energy-efficient equipment that delivers the same performance while consuming less”. From heating to lighting, energy systems can be altered and a lot of money saved in many ways.

Finally, thermal insulation helps keep inside temperature stable regardless of seasons. However, the report warns against a “rebound effect”: it was noted that some recent, high energy performance housing units use more energy, which means that energy efficiency solutions can paradoxically lead to more consumption.

Hurdles to the sector’s development

Researchers pinpointed four factors which slow down the overall energy efficiency upgrading process. First, the diversity of the building stock makes it difficult to mainstream large-scale measures. Geography, household income and ownership pattern have a direct bearing on the behaviours and decisions of consumers and housing providers.

Second, professionals are insufficiently trained and organized. According to the energy efficiency survey by Harris Interactive, today only half of them underwent training and barely 30% have a certification. The RGE environmental standard, which will be mandatory as from 1 July 2014, should encourage more building professionals to undergo training.

Third, little is being done for want of consumer and citizen information; indeed citizens and consumers have a crucial role to play in energy efficiency. The goal of the “administrative plan” for energy transition was precisely to improve access to relevant information by creating a single portal consisting of a web of information desks before the reduction in VAT and changes to the Sustainable Development Tax Credit were implemented.

Fourth, report authors stress that financing difficulties slow down energy efficiency upgrading, partly due to the under-pricing of energy resources. A European Court of Justice judgement ruled that the French mechanism for offsetting the additional costs arising from the obligation to purchase the electricity generated by wind turbines falls within the concept of an intervention by the State and is therefore illegal.

Four areas of work and seven recommendations to improve housing stock

The first step would be to quantify “energy efficiency upgrading targets”. Studies suggest that models for return on investment should be established for each category of renovation works, by creating binding and locally adjusted frameworks. They logically recommend that the management of funding as well as the dissemination of information should be decentralized.

Professionals also stress that it is important to help consumers to make an informed choice. Ways of achieving this include energy efficiency audits, co-operating with CNIL (French public agency regulating data protection) and creating professional standards to improve consumer confidence.

The report also contains ambitious proposals on pricing and taxation. First, it advocates free market pricing of energy. Second, it recommends that eco-taxation and carbon market should be further discussed. The bottom line is that energy pricing should enable to both fund energy transition efforts and combat fuel poverty.

By way of conclusion, the Montaigne Institute report calls for a better organization and regulation of the energy efficiency sector. To that end, training should be improved by sharing good practice and eco-conditionality requirements for public funding should be systematized. While these measures should create momentum for all players in the sector, report authors also call for a restructuring of the Commission for Energy Regulation (CRE) into a judicial authority that could effectively prevent state intervention leading to a “distortion of competition at the expense of consumers”.

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