Heating and cooling (H&C) is the EU’s biggest end-use sector, comprising 50% of final energy consumption, 80% of which is used in building systems that rely on fossil fuels for 2/3 of energy demand (3/4 for heating alone), half of which are currently considered beyond their service lifetime.[i][ii]

H&C is at the intersection of several longstanding EU strategies and instruments being revisited and updated to meet the more ambitious climate goals set under the European Green Deal, namely the EU strategy on H&C, the EU Renovation Wave, Energy Performance of Buildings (EPBD), Energy Efficiency Directive (EED), Renewable Energy Directive (RED II), Emissions Trading Scheme, (ETS II), and Industrial Emissions Directive (IED).

  • EU strategy on heating and cooling (H&C) was issued as part of the sustainable energy security package adopted in February 2016, prioritizing sustainable and efficient H&C in buildings, energy efficiency in industry and better integrating H&C into the electricity system.[iii]
  • EU Renovation Wave lays out three policy and financing priority areas; (i) energy efficiency in public buildings, (ii) tackling energy poverty, and (iii) accelerating the decarbonization of H&C.[iv] RED II, EED and the EU ETS aim to deliver faster and deeper renovation for better buildings which naturally contributes to the decarbonization of H&C. Under RED II and EED, members states are required to submit comprehensive assessments (CAs) for decarbonizing H&C systems to the Commission, citing the potential for efficiency, renewables and waste heat. Local authorities and utilities should have an important role in creating the necessary regulatory framework, market conditions and skills to prepare a robust pipeline of projects that will modernize H&C systems. Therein the Commission encourages public authorities to consider using energy and CO2 taxation to promote the switch away from fossil fuels.
  • EED identifies large potential of high-efficiency cogeneration and district heating and cooling to reduce primary energy demand. Efficient district heating and cooling means a system using at least 50% RES, 50% waste heat, 75% cogenerated heat or 50% of a combination of this energy and heat. Only these efficient systems or efficient individual H&C supply options should be taken into consideration in a CBA as an alternative to the baseline. Promoting high-efficiency co-generation and the use of heating and cooling from waste heat and renewable energy sources. Member states are to carry out a comprehensive assessment of the potential for high-efficiency cogeneration and efficient district heating and cooling DH&C. [v]Like the EED, EPBD set minimum performance standards but do not require any acceleration of replacement rates nor choosing more efficient outcomes above the minimum.
  • RED II is a cornerstone if the F55 package, raising the headline EU RES target to 40% by 2030, a significant increase from the 32% established by the Clean Energy Package Renewable Energy Directive (RED) before it. It includes:[vi]
    • Buildings – a new benchmark of 49% RES by 2030
    • Industry – a new benchmark of 1.1% annual increase in RES
    • H&C – existing indicative 1.1% annual increase becomes binding on member states
    • DH&C – indicative 2.1% annual increase in RES H&C
  • The 2018 EPBD stipulated that member states should adopt measures ensuring the performance of installed, replaced, or upgraded technical building systems like space heating, air conditioning or water heating, is documented as part of certification and compliance checking. The EGD-aligned revision is expected in Q4 2021.
  • ETS II is the proposed extension of the current ETS to include the building and transport sectors. The social impact arising from higher CO2 prices with the creation of a Social Climate Fund. This Fund should be used by member states to support their measures and investments to increase EE of buildings through renovation and decarbonize the H&C of buildings.[vii]
  • IED applies to EU air quality policy since it is designed to prevent air pollution at the source. However, its effectiveness could be easily undermined by exemptions granted to member states and relevant installations, for example setting less stringent emission limit values is BAT would lead to ‘disproportionately higher costs’ compared with the environmental benefits, or a special derogation until 2023 for district heating plants. According to the European Commission, from the 2014-2021 budget Member states allocated some EUR 2 billion to air quality projects, but for example, in the case of Sofia none of the projects targeted emissions reductions from the domestic heating sector.[viii]

Fundamentally, the EED revision should strengthen the capacities of public authorities to prepare, finance and implement comprehensive H&C planning and coordination with renovation projects. It sets the framework for H&C planning as far as identifying energy efficiency and renewable energy potential by member states, providing monitoring policies and measures to exploit this potential, which directly support the achievement of the RES target in H&C set out in Article 24 of RED. Planning measures for H&C under the EED are synchronized with the NECP timeline, which is meant to facilitate consistent assessments of the potential for renewable energy sources and use of waste heat under RED.[ix]

While EED has helped increase the significance and awareness of H&C across member states, the overall impact has been low mostly due to lack of follow-up given to the findings from the comprehensive assessments (according to Article 14) and wide use of permitted exemptions. As such, Articles 23 and 24 of the revision lay down stricter planning and follow-up of these assessments, including stronger promotion at local and regional levels. They also introduce minimum requirements for efficient DH&C systems, broader cost-benefit requirements and obligations on reuse of waste heat. Furthermore, the European Commission advises member states to set up national competence centers advising local or regional energy agencies on especially complex issues like DH&C. It also suggests member states promote the upgrading heating systems as part of deep renovations for 2050 carbon neutrality, a combination of heat demand reduction and covering remaining demand with a carbon free energy source.[x]

Moreover, the 2018 JRC review recommended future member state CAs should include the drivers of future demand, e.g. effect of existing energy policies, changes in building stock, population change, changes in GDP and changes in industry demand. The European Commission should consider working in closer collaboration with member states to overcome core challenges, share best practices and provide a more detailed description of the scope of analysis and reporting standards

READ MORE IN THE ATTACHED PDF BELOW

[i] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L0844&from=EN

[ii] European Commission, A Renovation Wave for Europe – greening our buildings, creating jobs, improving lives, October, 2020

[iii] https://www.europarl.europa.eu/legislative-train/theme-resilient-energy-union-with-a-climate-change-policy/file-eu-strategy-on-heating-and-cooling

[iv] European Commission, A Renovation Wave for Europe – greening our buildings, creating jobs, improving lives, October, 2020

[v] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32012L0027&from=EN

[vi] https://ec.europa.eu/info/news/commission-presents-renewable-energy-directive-revision-2021-jul-14_en

[vii] European Commission, Proposal for a Directive of the European Parliament and of the Council on energy efficiency, July 2021

[viii] Karamfilova, Ekaterina, et, al. EU Policy on Air Quality: Implementation of Selected EU legislation, European Implementation Assessment, European Parliament Research Service, January 2021

[ix] European Commission, Proposal for a Directive of the European Parliament and of the Council on energy efficiency, July 2021

[x] European Commission, Proposal for a Directive of the European Parliament and of the Council on energy efficiency, July 2021