Type of Measure: IrishPolicy
Principal Sector: Buildings
Main Emission Target: CO₂GHGₛPM₂.₅
Policy Focus: Energy
Status of Implementation: Planned
EU Climate Relevance: Non-ETSRED

Summary

The built environment accounted for 12.7% of Ireland’s greenhouse gas (GHG) emissions in 2017, with Irish homes requiring 7% more energy and emitting 58% more Carbon Dioxide than the EU average. As the SEAI point out in their Residential Roadmap 2050, the current housing stock is expected to persist into 2050. As evidenced by Figure 1, most new builds have good energy performance, with the majority of homes built since 2010 boasting A grade Building Energy Ratings (BER), however, older dwellings perform poorly.

 

Figure 1: BER grade by year of Construction

Figure 1: BER grade by year of Construction

Source: Generated by author using BER data obtained June 2019

Low replacement rates and the relative stasis of the housing stock, suggest that a deep retro fit of existing properties will be required for Ireland to bring building energy performance in line with the rest of Europe and meet 2030 energy efficiency targets. The Marginal Abatement Cost Curve (MACC) outlined in the Irish Governments 2019 Climate Action Plan (CAP) recognizes the retro-fit of oil boiler homes to B2 BER standard as a cost effective abatement measure. The retro-fit of gas and solid fuel heated homes to B2 standard represent a cost prohibitive, but necessary measure for Ireland to achieve non-ETS and Renewable Energy Source (RES) targets. Indeed, retrofitting forms a large part of the Project Ireland 2040 plan to transition to a low carbon society, with an acknowledgement that an extensive renovation of the building stock will be required to facilitate this. The 2017 Deep Retrofit Pilot scheme, ran by the SEAI, attempted to assess the funding and incentive intricacies of a widespread retrofit program, with a view to rolling out a full program in 2020.

Implementation

The 2017 Deep Retrofit Pilot Scheme offered grants of up to 50% for capital and management costs to homes upgrading from a C to at least an A3 BER grade. Such improvements were estimated to significantly reduce the energy requirements of buildings as well as producing energy efficiency gains and changes in consumer consumption. By 2030, Ireland is tasked with reducing GHG emissions 40% (from 1990 levels); increasing renewable share to 32% and improving energy efficiency by 32.5%. Retrofitting of the current housing stock would represent significant contributions to achieving these targets.

The CAP, commits the Department of Communications, Climate Action and Environment (DCCAE) to the phase out of funding for shallow retrofits, recognizing the necessity for more robust action. Outlined in the CAP is the plan to retro-fit 500,000 homes to B2 BER grade and replace 600,000 gas or oil boilers with heat pumps by 2030. This will require that grant schemes and financing options are developed, implemented, delivered and effectively integrated. Such programs, are likely to follow the format of the pilot with the SEAI keen to apply the learnings from that scheme with requirements to be altered to reflect the desire to move to B rating as opposed to strictly A grades.

Such targets, will however place huge demands on the construction sector, which may not have the implementation capacity to carry out such a vast retrofit of the housing stock. The SEAI (2017) estimates, that deep retrofit measures will support some 10,000 jobs in Ireland however, as of 2020, only 17 service providers had delivered retrofits under the pilot program. In a case where the market moves from retrofitting 5,000 homes a year to 50,000 homes a year, skilled labour shortages will need to be filled. Training programs and incentives will need to be run parallel to any retrofit program.

 

Funding

While the pilot scheme was funded to the tune of €21.2m, the SEAI estimate that a retrofit program equal to the required abatement levels and the necessity to decarbonize the Irish housing stock, will cost €35 billion over 35 years. It is unrealistic to expect the entirety of this expense to come from government funding and as such alternative financing schemes to facilitate retrofits will be required. Walls (2013) assesses the efficacy of some financing approaches, comparing zero-interest loans and subsidies on their ability to deliver emission reduction and their cost. Loans of 50% off of the upfront cost of EE installations are cost effective however uptake is low as the requirement to repay the loan within 3 years does not adequately incentivise individuals to undertake the retrofit. Subsidies of 50% of upfront costs do not face this problem, and in terms of emissions reductions are the most effective policy. However, the failure to recoup the grant makes such subsidies costly policies for governments to implement.

The CAP explicitly advocates for research into three funding approaches:

Salary Incentive Scheme: these are tax incentive schemes which offer grants that are paid back through salary, allowing the recipient to avail of income tax benefits. The CAP calls for the set-up of public and private pioneer programs which would see a process similar to the cycle to work salary incentive scheme applied to home retrofits

Green Mortgages: These are smart-financing policies which aim to address the up-front cost issues of deep retrofits and improving energy efficiency by providing low interest loans for specific environmental projects. The European Investment Bank’s Smart Finance for Smart Buildings initiative allows financial intermediaries, such as banks, to develop and deploy attractive financial products for the energy renovation of buildings.

Pay as You Save: This method, employed as part of the UK green deal, applies behavioural insights to correct for loss aversion in energy efficient investment. Up-front costs are covered by a grant and repayments come from the savings on routine energy bills, with repayments never more than the amount saved. The CAP instructs the SEAI to assess the feasibility of energy suppliers to run such a scheme however, the UK iteration of the scheme was scrapped in 2015 due to low uptake. Comerford et al. (2018) attribute this to a failure to account for the non-monetary costs which inhibit investment such as hassle, time costs and status quo biases.

Costs & Benefits

Residential CO2 can be reduced by 90% through a sustained program of home retrofits (SEAI, 2017). Such a reduction is necessary for Ireland to fall in line with the rest of the EU and ultimately achieve 2030 targets. The MACC outlined in the CAP, describes the cost-effectiveness of retrofitting oil boiler homes with heat pumps as well as conceding that although the retrofit of gas boiler homes is a cost prohibitive measure it is necessary to achieving the aforementioned targets. The MACC succinctly weighs up the environmental benefits of an intervention against the financial cost, in this case deeming a national deep retrofit necessary. An ancillary benefit of the program is in stimulating economic activity with such a program creating an estimated 10,000 jobs in the building and construction sector however as discussed, this is subject to further growth of implementation capacity and training programs in the buildings sector.

References

Comerford, D.A., Lange, I. and Moro, M., 2018. Proof of concept that requiring energy labels for dwellings can induce retrofitting. Energy Economics, 69, pp.204-212.

DCCAE. Climate Action Plan. Dublin, 2019. Available at: https://www.dccae.gov.ie/en-ie/climate-action/topics/climate-action-plan/Pages/climate-action.aspx [Accessed 8 Aug. 2019].

Government of Ireland, 2018. Project Ireland 2040: National Planning Framework.

SEAI. Deep Retrofit Grant, 2020. Available at: https://www.seai.ie/grants/home-energy-grants/deep-retrofit-grant/ [Accessed 27 February 2020].

SEAI. Energy in the Residential Sector, 2018. Available at: https://www.seai.ie/resources/publications/Energy-in-the-Residential-Sector-2018-Final.pdf [Accessed 15 Aug. 2019].

SEAI. Residential Energy Roadmap 2050, 2017. Available at: https://www.seai.ie/resources/publications/Residential-Energy-Roadmap.pdf [Accessed 15 Aug. 2019].

Team, B.I., 2011. Behaviour change and energy use. London: Cabinet Office.

Walls, M., 2013. Policies to Encourage Home Energy Efficiency Improvements: Comparing Loans, Subsidies, and Standards. Resources for the Future Discussion Paper, (12-47).

 

Reference this

Policymeasures.com (2020). Home Retrofits Ireland. Available at: https://policymeasures.com/measure/home-retrofits-ireland/. Last accessed: 10-07-2020.