EPBD Update: EU Agrees on New Building Energy Efficiency Regulations

Alasco Team

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‍The EPBD Update: Good to know

The existing EPBD was last revised in 2018. On 15 December 2021, the European Commission presented a proposal for an update. This proposal is part of the “Fit for 55” package, which aims to make the EU climate-neutral by 2050.

Why “Fit for 55”?

The package refers to the EU's goal of reducing net greenhouse gas emissions by at least 55% by 2030. This package is particularly important as buildings are responsible for approximately 39% of direct and indirect energy-related greenhouse gas emissions in the EU.

Consequently, 75% of buildings in the EU are not energy efficient. Therefore, the new proposal is a crucial step in implementing the Renovation Wave strategy published in October 2020. This strategy aims to at least double the annual rate of energy renovations of buildings by 2030. It also emphasises the promotion of comprehensive renovations.

Overview of the Key Measures in the EPBD Update

The proposed changes outline a clear roadmap on how the EU can reduce emissions in the real estate sector by at least 60% by 2030 compared to 2015 and achieve climate neutrality by 2050. The key measures are:

1. Minimum Energy Performance Standards (MEPS)

A renovation obligation for the least energy-efficient buildings is now only required for non-residential buildings. Residential buildings are excluded from this requirement. Of course, exemptions from the MEPS can be determined for historical or industrial buildings.

2. Reduction of Primary Energy Consumption

Despite the lack of a renovation obligation for residential buildings, the goal to reduce energy consumption and CO2 emissions remains. The target is to reduce energy consumption for residential buildings by 16% by 2030 and by 20-22% by 2035. For non-residential buildings, at least 16% of the least energy-efficient buildings should be renovated by 2030, and about 26% by 2033.

3. Zero-Emission Buildings in New Construction

From 2030, all newly constructed buildings should not emit any emissions from fossil fuels. Public buildings should meet this standard by 2028.

"The public building sector is now a very important factor because it has a role model function. It must be net-zero in new construction by 2028." (Benedict Marzahn, VP Product at Alasco)

4. Phasing Out Fossil Fuel Heating Systems

From 2025, there will be no more subsidies for fossil fuel heating systems in the EU. By 2040, a ban on this type of heating will come into effect. Germany has already considered this requirement in the Federal Funding for Efficient Buildings (BEG).

5. Requirements for Solar Utilisation

New buildings and public buildings should be designed to accommodate the installation of solar systems. This includes both photovoltaic (electricity generation) and solar thermal systems (heat generation). From 2027, all public buildings should be equipped with solar systems, where feasible.

6. Subsidies for Renovations

At the EU level, various funding sources for renovations will be available: Cohesion Funds, the Recovery and Resilience Facility, and the Climate Social Fund. Additionally, national-level funds will also be available to finance renovations.

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Impact on the Real Estate Industry

Changes are all well and good – but what does this concretely mean for players in the real estate industry?

„From now on, one has to look more closely at the energy efficiency of properties and ask: What kind of building do I have? Do I need to invest money in renovations? Will this increase the market value of the properties and be profitable for me?“ (Benedict Marzahn, VP Product at Alasco)

Owners need to examine the energy efficiency of their properties. Initially, this requires analysing individual assets as well as entire portfolios. Based on the results, owners must invest in energy renovations to improve the energy efficiency of their properties.

Asset managers also face the task of improving the energy efficiency of the properties they manage. They need to prioritise, plan, and implement optimisation measures, such as insulation and replacing old heating systems. Depending on the location of the properties, there are also specific requirements and funding opportunities that asset managers must consider.

Project developers, in particular, need to focus on the new requirements for their projects. They must consider the ban on fossil fuel heating systems and the requirements for solar utilisation. Additionally, they should proactively plan the energy efficiency classes of the properties in development.

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Staying Ahead of Future Legislation

“It is evident that the government is exerting clear pressure and now making it law that renovations must take place by 2030. If the worst 16% of buildings are renovated by 2030, that is still a lot. Of the 3 million non-residential buildings, that’s over 400,000 buildings. But that’s just one side. The other side is that the free market can also penalise those buildings with devaluation that have not been renovated or have not been renovated for a long time.“ (Benedict Marzahn, VP Product at Alasco)

The agreement on the EPBD update may initially involve effort and investment. However, it paves the way for a sustainable and economically profitable future for the real estate industry in the EU. To stay ahead of future legislation and avoid potential devaluation of properties, optimisation measures must be taken NOW.

Not sure where to start? Get an overview of your options with Alasco.

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