The Energy Performance of Buildings Directive – about the upcoming wave of building renovation in Poland

So far, the increasingly stringent requirements for the energy efficiency of buildings have only applied to newly built properties, but the newest EU law will also affect existing buildings. The main objectives of the revision of the Energy Performance of Buildings Directive (EPBD), known as ‘Buildings Directive’ are to substantially reduce greenhouse gas emissions and energy consumption in the EU building sector by renovation of all existing buildings (both residential and public). The draft amendment to EPBD is currently in trilogue negotiations (between the EU Parliament, the EU Council and the European Commission), the publication of the final shape of this directive is expected in the first half of 2024, and its entry into force will take place in 2026.

According to EPBD, in the near future every building in Poland will have its own energy performance class, similarly as in case of household appliances and electronics. The energy class of building will be determined by how much energy the building consumes during the year (for heating, ventilation, hot water preparation, cooling and lighting) and how much it costs. The EPBD introduces energy classes of residential buildings from the best A+ to the worst G, which will correspond to the 15% worst-performing buildings in the national building stock (the so-called ‘energy vampires’). The Ministry of Economic Development and Technology plans to introduce such a building division system already in 2024.

PICTURE 1. ENERGY PERFORMANCE CLASSES OF BUILDINGS PROPOSED BY THE POLISH NATIONAL ENERGY CONSERVATION AGENCY FOR SINGLE-FAMILY AND MULTI-FAMILY BUILDINGS (BY EP INDICATOR IN kWh/SQM YEARLY)

source: Summary of the annual conference of the Renovation Wave 2023 on energy classes and one-stop-shops (https://falarenowacji.pl/)

The introduction of the energy classification of buildings will provide a number of benefits for houses and dwellings owners. First of all, it will allow to know the actual energy condition of buildings and plan renovations that will translate into a better quality of life, energy savings and lower property maintenance costs. In accordance with the revision of the EPBD, the energy performance class of the building will be provided in each advertisement for sale or rent, thanks to which the potential buyer or tenant will be aware of the monthly energy bills and the costs of possible renovation in the future. The cost of heating a building with an energy class A may be even 6 times lower in comparison to a building with an energy class F or G, so knowing the energy class will have a significant impact on the transaction prices of properties or rents and on exposure time of properties on the market. In addition, in case of the highest energy classes, it will be possible to obtain a lower mortgage interest rate. The system of energy performance classes is already successfully operating in most European countries, e.g. in Belgium, the Netherlands, Ireland, France, Germany, Norway, Denmark, Italy and the UK.

However, the aim of the amendment to EPBD is not to introduce the energy performance classes of buildings, but to systematically improve them until the elimination of buildings with the worst energy efficiency. Therefore, the EPBD requires non-residential and public buildings to achieve at least energy efficiency class E by 2027 and class D by 2030. Residential buildings would have to achieve the same classes by 2030 and 2033 respectively. Next years, buildings should achieve higher and higher classes and by 2050 the entire national building stock should be transformed into zero-emission and climate-neutral, that in practice means the need to renovate almost all existing buildings in this perspective (except for those that already meet the highest standards).

EU countries may decide to exclude certain groups of buildings from the new rules, e.g. monuments and other protected buildings, buildings with a floor area less than 50 sqm, residential buildings used for less than four months a year or public social housing, where renovations would lead to rent increases that cannot be compensated by saving on energy bills. Despite this, several million Poles are awaiting forced renovations.

Moreover, buildings would have to meet the minimum energy performance standards set out in EPBD at the time of their sale or rent, so houses and dwellings in multi-family buildings from the lowest classes will not be able to be sold or rented without having previously upgraded them in terms of energy. Over the next 10 years, this will apply to buildings from class E, F and D. The owner planning to sell or rent such a property will have two options: sale before the date of entry into force of the amendment to the EU directive or investment raising the energy class of the building, e.g. thermal modernization.

Buildings built in the 21st century have relatively high energy efficiency, but older buildings are characterized by very high energy demand indicators and require thermal modernization. In particular, this applies to single-family houses, where solid fuel boilers are the primary source of heat. Currently, about 70% of the 6.870 million Polish residential buildings (single-family houses and multi-family buildings) require modernization, and about 16% of them, i.e. 1.1 million (with over 2 million apartments), are the so-called ‘energy vampires’ qualifying for the lowest energy performance classes, which are responsible for the consumption of one third of the total energy used in all Polish buildings. Owners of these properties will not be able to sale or rent them, if they are not upgraded to a higher energy class earlier.

TABLE 1. AGE STRUCTURE OF HOUSING STOCK IN POLAND BUILT BEFORE 2002 AND THEIR ENERGY DEMAND INDICATORS

source: Inhabited Buildings. National Census of Population and Housing 2011, Statistics Poland 2013

The proposed revision of the EPBD raises a lot of controversy in the European Union, mainly because of the scale of the project. The implementation of EU requirements will require the mobilization of huge financial resources, both private and public. According to the assumptions of the ‘Long-term building renovation strategy’, investment expenditures for the renovation of buildings in Poland until 2050 (thermal modernization and replacement of heat sources) will amount to approximately PLN 1.5 trillion. On the other hand, there are benefits in lower maintenance costs of properties and an increase in their value, as well as improve in air quality and better health of residents. At the same time, the entire Polish economy will benefit, because according to the estimates of the Renovation Wave association, the implementation of the renovation programme may contribute to the creation of approximately 100 thousand new jobs in the construction sector and 200 thousand jobs in sectors that provide materials and services for construction sector. So plans are very ambitious, but they seem to be right.

Agnieszka Pilcicka
Senior Real Estate Market Analyst