Investment opportunities in deep renovation in Europe

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As Europe is discussing the scale of an unparalleled recovery programme to mitigate the damage of the Covid-19 pandemic, it has become clear that renovation of the European building stock would create a triple benefit. It would lead to an increase in economic activity, retaining and creating employment; it would support the achievement of Europe’s climate and energy targets, and it would provide Europeans with better and healthier buildings. The scale of the investment opportunity is enormous, and while large figures for the economic recovery are currently featuring high in the political debate, the question remains what investment is needed to deeply renovate Europe’s buildings.

The total amount to trigger a significant scaling up of the renovation rate and depth is adding up to €90 billion per year, allocated to support mostly deep renovation, advisory services for owners/investors and technical assistance in member states, as well as innovation in serial renovation solutions. This funding would support an annual investment in mostly deep renovation of €243 billion in EU-27.

A significant push for serial renovation is necessary to increase speed and depth of renovation while ensuring a sufficient availability of a skilled workforce. Industrial/serial renovation delivers cost-effective net-zero renovation at high quality by making use of prefabricated building modules, innovative financing and business models, and digitalisation across the value chain.

All figures presented in this paper are related to either medium or deep renovation so that renovation efforts are aligned to the requirements of the Paris Agreement. We are assuming that renovations of some building types will only lead to a medium energy saving due to architectural and/or technical constraints. This makes the decarbonisation of heating energy even more important; however, this investment opportunity is not the topic of this paper. Further, we are not making any assumptions whether renovation measures are implemented in a comprehensive way at a single point in time or whether they are realized in a stepwise approach. Our approach assumes a linear investment over time, meaning that the same amount will be invested in each of the coming years. However, reality will likely be different; we consider our approach sufficient to define which share of the European recovery package should be allocated to building renovation in the current decision-making process.

Renovation activities will only see a significant increase if demand for renovations and supply of business offers from the construction industry match. An economic stimulus package should therefore address both. Our suggestion to allocate a share of the recovery funds to renovation therefore has two pillars: One providing support to owners/investors, and a second providing support to stimulate and scale up serial renovation.

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