The EU Green New Deal – how does it impact the real estate industry?
The European Union is set to be climate-neutral by 2050 and has implemented an array of new ESG rules and regulations to reach this goal. What does that mean for the commercial real estate sector?
The role of buildings in CO2 emissions is larger than you might guess; research by the EU Commission shows that buildings are responsible for 40%¹ of the energy consumption within the EU and make up 36% of CO2 emissions from energy. This means that changes in the real estate sector will lead to a significant drop in emissions in Europe as a whole – which explains why there are currently a lot of legislative eyes on the sector. Let us explore the most important rules influencing the sector.
To provide support to achieve climate neutrality by 2050, the EU has established a legislative framework: the Energy Performance of Buildings Directive (EPBD III)². The proposed measures aim to increase the rate of innovation and will modernize the building stock – making it more resilient, support better air quality, digitalize energy systems for buildings and support the roll-out of infrastructure for sustainable mobility³. The EPBD III is a supporting document designed to provide tools to work on the Green Deal.
Some countries, however, have taken it a step further and have indeed taken the EPBD III as measures that will be regulated and enforced; an example of such a country is the Netherlands. In 2020, new regulations were implemented stating that Dutch utility buildings with a capacity of 290 kW or more need to be equipped with a buildings automation
– and control system (GACS). These GACS need to be able to⁴:
- Permanently keep track, monitor, analyze and adjust energy usage
- To test the energy efficiency of a building, detect loss of yield, and to be able to inform the facility manager on the possibilities on how to improve
- Make communication possible between connected technical building systems and other appliances. Additionally, systems should be interoperable with technical building systems of different ownership technologies, appliances, and producers
This is the case when a new building is constructed, as well as when one is renovated, and will be enforced from 2026.
EU Renovation wave
2050 might sound far away, but steps must be taken now if we want to ensure that we will hit the marks further down the line. For instance, greenhouse gas emission targets should already be reduced by 55% by 2030⁵, as compared to 1990, in order to be on track.
One of the biggest issues the real estate sector faces is that a lot of old buildings are not very energy-efficient and use old technologies and wasteful appliances⁶. Lights turned on when no one is present or heating the building on days when the office is closed are classic wasteful examples that can be easily prevented. An additional issue is that only 11% of the EU existing building stock undergoes some level of renovation each year, and very few of those renovations address energy performance of buildings⁷.
This threatens the climate neutrality goal, and so the EU has created a strategy for the Renovation Wave, where these outdated and resource-inefficient buildings will be transformed into energy-performing and sustainable buildings. The Renovation Wave contains an action plan with regulatory measures aimed at boosting building renovations. The reason a large focus is placed on renovation over new projects, is that more than 220 million building units were built before 2001 – which translates to 85% of all EU buildings – and the expectation is that 85-95% of the buildings that exist today will still be standing in 2050⁸. More specifically, renovation rates should be doubled in the next 10 years, according to the EU⁹, meaning 35 million renovated buildings by 2030, in order to be on track. Furthermore, the increased rate and depth of the renovation will have to be maintained also post-2030 to reach EU-wide climate neutrality by 2050¹⁰.
If you are looking into renovating your office in the next few years, it is worth exploring how to implement more energy-efficient practices. Although no EU-wide regulations are currently enforced; France, Finland, Denmark, Sweden, and the Netherlands have already introduced regulations on whole-life carbon emissions¹¹, meaning addressing both operational and embodied emissions. The data from these countries is used to explore how regulations for all EU member states can be most effectively implemented.
Smart Readiness Indicator
Large emphasis is placed on not only making the buildings more energy-efficient, but also on how to make use of technology to keep closer track of progress. The EU has published the Smart Readiness Indicator (SRI)¹² as an instrument for rating the smart readiness of a building, with ‘smartness’ being defined as a buildings’ ability to sense, interpret, communicate, and actively respond in an efficient manner to changing conditions¹³. This includes the operation of technical building systems; the external environment and demands from building occupants. The aim of such a framework is to raise awareness of the benefits of smart buildings and make the added value more tangible for buildings users, owners, and tenants.
According to the EU, for a given building, all smart-ready services are assessed against the following desired impacts of smart buildings¹⁴:
- energy efficiency
- maintenance and fault prediction
- health, well-being, and accessibility
- information to occupants
- energy flexibility and storage
This comes together in an overall SRI score, next to specific scores on each of the 3 key functionalities; optimize energy efficiency and overall in-use performance; adapt their operation to the needs of the occupant; adapt to signals from the grid (for example energy flexibility)¹⁵.
The SRI is currently serving as a framework and toolset to support EU countries looking into making the transition to harvest the potential of smart technologies. Each EU country has the option to decide whether to test and/or implement the SRI. Since it was finalized in December 2020, countries are still in the testing phase to finetune the methodology before it is potentially rolled out as regulation. These countries so far include Austria, Denmark, Czech Republic, and France¹⁶; however, it is still possible for more member states to join. Additionally, public testing took place, which covered 81 unique buildings from 21 member states and has led to the EU stating that “The SRI could lead to a 5% higher final energy savings by 2050, unlocking an increase in investment of 181 billion euro over 30 years compared to a business-as-usual case and up to 32 million tonnes of avoided greenhouse gas emissions per year”¹⁷.
How to navigate the new playing field – main takeaways
In conclusion, there is a lot of movement going on in the realm of sustainability and the commercial real estate sector. What is important to know, is that the EU is placing a large emphasis on reducing CO2 emissions regarding buildings, and regulations are in the making to reduce greenhouse gas emissions by 55% by 2030. A Smart Readiness Indicator is in its first phase to provide member states with tools to make their building stock more sustainable and energy efficient, and some countries are already using the EPBD III as a guideline to implement green regulations.
bGrid can help in several ways to guide you through these new regulations – and those that are about to come up in the next few years – to prevent a last-minute sprint.
- The bGrid system constantly learns from the building and searches for for improvement while optimizing comfort levels
- We are future-proof and can adapt to new regulations or reporting practices all within the existing hardware.
- Our technology is easy to implement and works on the existing light fixtures, meaning it will not slow down your renovation timeline
- The building learns over time from your behavior and adapts accordingly, increasing efficiency as well as comfort
Smart buildings can have a significant impact on the environment but are also cost-efficient for the building users. By having a better view on the usage of your lighting and climate systems, you can save up to 40% on your energy bill¹⁸, and digital technologies such as smart thermostats and lighting control can pay back within 2 years¹⁹.
Curious what bGrid can do to help you save energy and bring your sustainability to the next level? Send us a message at firstname.lastname@example.org and we will work together on a tailor-made solution fitting your needs.
1. Deloitte ESG Real Estate Insights 2021, Article #2
2. Energy performance of buildings directive (europa.eu)
3. Energy performance of buildings directive (europa.eu)
4. Systeemeisen technische bouwsystemen EPBD III | RVO.nl | Rijksdienst
5. EUR-Lex – 52020DC0662 – EN – EUR-Lex (europa.eu)
6. EUR-Lex – 52020DC0662 – EN – EUR-Lex (europa.eu)
7. EUR-Lex – 52020DC0662 – EN – EUR-Lex (europa.eu)
8. EUR-Lex – 52020DC0662 – EN – EUR-Lex (europa.eu)
9. Renovation wave (europa.eu)
10. Renovation wave (europa.eu)
11. The EU must regulate embodied carbon to deliver climate-proof buildings – EURACTIV.com
12. Final report on the technical support to the development of a smart readiness indicator for buildings – Publications Office of the EU (europa.eu)
13. Smart technologies in buildings (europa.eu)
14. SRI methodology (europa.eu)
15. Smart technologies in buildings (europa.eu)
16. Smart Readiness Indicator Newsletter March 2022
17. Final report on the technical support to the development of a smart readiness indicator for buildings – Publications Office of the EU (europa.eu) p. 31
18. bGrid, internal research on bEco
19. SRI Factsheet.pdf (europa.eu)