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Building restoration sector in Germany: System approaches and challenges for green economic development

The energy efficiency of construction materials has vastly improved in Germany in the past decade. Integrating these innovations into the renovation of old houses will be a key challenge in the coming years. Finding more system solutions also requires stronger coordination of the other businesses in the chain as well as the expertise to offer consultancy on decentralised energy systems, grids and possible integrative renewable energy solutions. The system solutions in construction sector in Germany can be considered to provide for developing countries?

Pressure on municipalities to find system solutions – not only in Germany

Municipalities and private households are two of the largest energy consumers in many developing as well as developed countries. In Germany, 30% of energy is consumed by private households (consumption by industry is around 26%). In many developing countries, private household consumption is even higher. To make matters worse, many cities, consumers and businesses are confronted with rising energy costs. Energy costs have become a locational economic disadvantage. As opposed to passive solutions such as reducing fuel taxes or subsidizing the supply of fuel to counter political unrest, a proactive and innovative approach is needed to find ways to increase the energy efficiency of buildings and private houses.

During study visits on climate change innovations, my colleagues from other countries often praise the environmental awareness and ”green” mentality in Germany which they see when they drive through the countryside visiting solar panel factories or wind turbine installations. I have to explain to them that these measures have rather been developed due to cost pressure and legal restrictions. Most owners of houses that were constructed before the 1980s have invested in a small way in insulation during the past 30 years, not because of their environmental awareness, but because of the high energy costs and the development of new construction materials. Consumers rarely change their habits without any external (cost) pressure being applied unless there is an individual advantage to themselves.

Over the last 20 years, high environmental energy efficiency norms in the construction sector and innovations in insulation materials and heating technology have led to the building of highly efficient new houses in Germany. But the number of old inadequately insulated houses still remains high. This is why the restoration of older buildings has become a key entrance point for reducing the national energy consumption. Germany, like several other OECD countries, has set challenging climate objectives for the coming years. CO2 emissions should be reduced by 40% by 2020, the rate of rehabilitation of houses should be increased from 1 to 2% per year and renewable energy should be more intensively integrated into old houses. Who will be mainly responsible for realizing such lofty objectives? The answer is smaller and larger cities which their rural villages in the surrounding areas. The locations where the smaller territories are situated area also affected most strongly by high energy costs. It is here where stakeholders are being pressured to find solutions. But how?

Looking at and supporting reflection processes for solutions in Germany
Mesopartner is in contact with German municipalities that are facing this challenge. An increase in the restoration of houses alone will not only require a change of promotion tools of the municipalities, but will require new forms of interaction with the households as well as new solutions from the businesses involved in the house construction value chain.

During the past decade many local and national governments in OECD countries have encouraged householders to renovate their houses, for example through favourable credit lines for reconstruction or subsidized consultancy services. These promotion tools have in general focused on individual houses. Despite these incentives, the renovation of houses has still not led to sufficient individual renovation investments. The main reasons are the relatively long cost repayment periods and the short-term rather than longer-term attitude of householders.

In the case of Germany, promotional approaches for individual households will not enable the national resource efficiency targets to be met. Municipalities are being increasingly pressured to look for more systemic solutions. First project examples are starting to provide support for the renovation of whole quarters, residential areas and settlements that were constructed before the 1980s. From the 1980s onwards more and more insulation standards and construction laws were introduced in Germany. To increase the renovation of houses in the coming years it will be necessary not only to reduce costs through joint solutions, but also to integrate more decentralised energy supply systems (e.g. power-heat cogeneration plants) and grids to integrate renewable energies in a more systemic way (through wind, solar or bio and thermal solutions).

Criteria for system solutions
 
First examples of more system solutions in the building restoration sector follow certain criteria that will also be relevant for energy efficiency promotion efforts in many developing countries:
  • Households organize themselves: To find more cost-efficient rebuilding efforts will require joint solutions of several households, even of whole quarters. This is only possible through communication with, and promotion of, networks of house owners. In Germany, cooperatives or networks of households have developed in some areas to renovate their whole quarters. They are supported by the municipalities and through information events and small support incentives.
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  • Group-oriented instead of mainly individual household-oriented promotion tools: Promotion tools to encourage renovation of houses are oriented more towards individuals. From a quarter or suburb perspective this often leads to fragmented solutions and sub-optimal investments. Households invest as long as the cost-benefit ratio is much lower than the investment in a new house. Therefore not always the best solutions with the greatest (and often more expensive) insulation and energy-efficient effects are realized, but insulations that have a short amortisation phase. Solutions for quarters in this respect will lead to the reduction of the overall costs and will also be better able to include more decentralized energy systems with additional longer-term cost advantages for each household. Pilot projects at the municipal level have promoted credit incentives in which groups of households can apply and decide on optimal solutions.
  • Improved facilitation and network management skills: Many municipalities have never approached groups of households. To inform and motivate groups for joint renovation activities requires certain facilitation skills as well new ways of thinking about how to serve and support households. These facilitation services do not have to be provided by the municipalities themselves, but can also be provided by network managers or private facilitators. Nonetheless, the creation of awareness of joint solutions will require strong support from the local public sector.
  • Intensive work and coordination with the business sector in the construction value chain: The business sector in the building renovation sector is also rather used to approach individual households. Construction value chains are very much governed by two different actors in the chain:
    o The key coordinators of the chain. These are in general the architects and construction managers of smaller houses, or the engineering offices of large construction projects, including experts in the fields of heating system solutions and integrative renewable energy aspects. Their role is to coordinate the businesses involved in the chain as well as to provide and ensure the planned construction of the building.
    o Businesses that provide innovative construction materials. These are especially providers of innovations with regard to newly developed insulation materials, heating systems and ICT energy control systems for the house.
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  • Stronger systemic network cooperation and intervention between the leading businesses in the value chain, the supporting organisations with their support programmes, and the policy providers. Mesopartner uses the systemic competitiveness framework and social network analysis tools to help the local stakeholders to connect with each other. A key challenge in this respect is to identify joint solutions for improving locally adopted bottom-up and guiding supportive top-down incentives with the support of local and regional government stakeholders, supporting institutions and business stakeholders (see network picture on the right).
Some learnings so far
The energy efficiency of construction materials has vastly improved in Germany in the past decade. Integrating these innovations into the renovation of old houses will be a key challenge in the coming years. Additionally, the key coordinators in the chain will have to be able to provide solutions for the improvement of quarters and groups of households. Finding more system solutions also requires stronger coordination of the other businesses in the chain as well as the expertise to offer consultancy on decentralised energy systems, grids and possible integrative renewable energy solutions.

A question that Mesopartner is elaborating at present is: What kind of learnings can these attempts at system solutions in the construction sector in Germany provide for developing countries?


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