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Backsolving the residential puzzle

Existing housing stock offers big efficiency wins but also presents the hardest challenges

Discussion around energy efficiency tends to centre on large-scale production of energy for end-users. The demand side is often overlooked in the energy transition discussion, with energy efficiency gains from buildings particularly ignored. Within the sector, residential dwellings have big potential gains, but present challenges that have proved difficult to address.

“There is no way around it—energy efficiency is boring. You are talking about things you cannot see,” says a veteran energy efficiency expert. But that does not make it unimportant or economically meaningless. “The last bit of energy you are not using is the most expensive energy you would been using at that time”, he adds.

According to the US Energy Information Administration (EIA), the residential housing sector alone accounts for 13pc of global energy use, and is expected to rise to 14.5pc of consumption by 2050, the target date for CO2 emissions neutrality under the Paris Accord.

Financing residential energy improvements is also often a challenge

Emissions reductions go hand in hand with energy efficiency, as energy not used has no emissions. The International Energy Agency (IEA) argues that there is considerable potential to increase energy efficiency in buildings. It estimates that by 2040 buildings could be as much as 40pc more energy efficient than they currently are.

Energy efficiency experts argue that the key element in buildings’ overall energy consumption is structural and that installation of more efficient appliances and lighting, while contributory, are not fundamental. They say the challenge to improve energy efficiency is less in new-build structures, which are designed to incorporate the latest improvements; but in older ones. Legislation to govern new structures, such as the EU’s Energy Performance of Buildings Directive of 2018, is easy to incorporate into new, particularly public sector, buildings, but much more difficult to implement in stand-alone private housing.

Where legislated as part of a comprehensive plan, efficiency initiatives have had appreciable success. According to the Oddysee Mure project, which monitors energy efficiency in the EU, Norway, Serbia and Switzerland, the United Kingdom, for example, saw final energy consumption drop by 15pc between 2000 and 2015 as a result of energy efficiency policies. Other OECD countries have adopted similar policies, although improvements vary widely depending on population density and a central government’s ability to implement enacted legislation.

But one industry analyst warns that energy efficiency improvements are often subject to a “rebound effect”, which encourages users to consume more of a product if they are spending less on it. Energy efficiency measures often result in unit monetary savings but volume increases. Such apparent paradoxes more often occur during periods of low energy prices, leading some economists to argue that energy efficiency and conservation measures are best implemented during periods of high prices, when they are more likely to be “baked into” consumption reductions.

Financing residential energy improvements is also often a challenge. Improvement of owner-occupied housing often depends on discovering a formula that is affordable to the owner and, crucially, can be recouped in an increase in the value of the property in the event of the sale of a house.

One such formula, the ‘Green Deal’ in the UK, which aimed to finance energy improvements from the savings made from their installation, was so ignored that it was suspended and is currently under review. Other jurisdictions continue to promote similar offers.

Another challenge is that many efficiency improvements based on ‘smarter’ home technologies such as remote monitoring depend on telecommunications access which is often weak or non-existent in rural areas. The road to reaching the IEA’s projected buildings energy improvements in existing residential housing stock may be very long indeed.



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