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 June 21, 2024
 
Welcome to ASHRAE's European Policy and Funding Update! This monthly publication features information on policy and funding-related activities of interest to ASHRAE members in Europe. Archives of previous updates are available from the ASHRAE European Policy and Funding Updates webpage.
EU Regulatory Updates
 
EU financial instruments and models for heating and cooling
 
On 17 May, the “Study on current energy sector investment instruments and schemes” in the Heating & Cooling (H&C) sector was published as part of the Investors Dialogue on Energy – an initiative launched under the auspices the Directorate Genera for Energy of the European Commission in 2022 as a multi-stakeholder platform gathering experts from energy and finance sectors in all EU Member States to assess and upgrade financing schemes. The study identifies LIFE programme, Horizon Europe, Connecting Europe Facility, InvestEU Programme, Just Transition Mechanism, Cohesion Fund, Modernisation Fund, and the European Regional Development Fund (ERDF) as the key EU funding instruments for the decarbonization of the heating and cooling sector.
 

 
15 EU Member States call for publication of Heat Pump Action Plan
 
On 14 May, a group of 15 EU Member States (France, Ireland, Spain, Luxembourg, Latvia, Austria, Denmark, Estonia, Greece, Lithuania, Slovakia, Slovenia, Malta, and Portugal) called for the Commission to swiftly adopt the Heat Pump Action Plan. Initially due in early 2024, the publication of the Plan was delayed by the Commission until after the EU elections. In the joint paper, the 15 countries requested a quick ramp-up of renewable energy technologies such as heat pumps and industrial heat pumps to be integrated into district heating. Moreover, the paper calls for a clear direction for the update of renewable solutions for low- and medium-temperature industrial heat applications and smart deployment of waste heat. Finally, the countries request a revision of the EU Heating and Cooling Strategy from 2016 to bring it in line with the upcoming 2040 targets.
 

 
REHVA releases its manifesto for 2024
 
On 29 May, the Federation of European Heating, Ventilation, and Air Conditioning Associations published its manifesto for sustainable, healthy, and affordable buildings. The manifesto emphasizes the crucial role of buildings in achieving the EU’s 2050 carbon neutrality goals. Among the key principles are prioritization of energy efficiency and the use of renewable energy sources, implementation of decarbonized heating and cooling systems and the use of low carbon construction materials, high indoor environmental air quality, the digitalization of buildings, and adoption of environmentally and cost-effective technical solutions. The manifesto also underlines the importance of a comprehensive approach, viewing buildings as active energy producers with smart technologies and energy storage systems, aiding in the decarbonization of the energy sector. It advocates for a unified European "common language" with shared indicators for energy and indoor environment performance.
 

 
Euroheat & Power study shows district heating is 30% more affordable than individual heat pumps
 
On 24 May, Euroheat & Power, the international network promoting sustainable heating and cooling solutions, released a study on district heating. District heating networks have emerged as a more cost-effective solution for urban areas compared to individual heat pumps, according to recent research by Berenschot in The Hague. The study reveals that district heating is almost thirty percent cheaper than heat pumps when considering all social costs. These networks not only offer significant cost savings but also alleviate the burden on electricity grids, offering a dual benefit to densely populated cities.
 
Key findings of the research include:
 
Cost Efficiency: Households connected to district heating networks can save up to fifty percent on their heating expenses compared to those using individual heat pumps. This substantial saving is due to the collective nature of district heating, which benefits from economies of scale and centralized energy production.
 
Electricity Network Relief: By reducing the reliance on electric heat pumps, district heating networks help to decrease the load on electricity networks. This is particularly important in urban areas where the power grid might otherwise be strained by high demand from numerous individual heat pumps.
 
Reduced Fossil Fuel Dependence: District heating networks typically use a variety of energy sources, including renewable options, which can significantly cut down on fossil fuel consumption. This diversification of energy sources contributes to environmental sustainability and energy security.
 
Despite these advantages, many households are not yet benefiting from the potential savings and efficiencies offered by district heating. This gap underscores the need for more robust support and investment from heating companies to increase connections and expand the reach of these networks. In summary, the Berenschot study highlights the multifaceted benefits of district heating for urban areas, including lower heating costs, reduced pressure on power grids, and decreased fossil fuel dependency. For cities looking to improve their energy efficiency and sustainability, investing in district heating networks appears to be a compelling strategy.
 

 
EU National Updates
 
EHPA reveals the list of European countries where the electricity price works for heat pumps
 
On 31 May, the European Heat Pump Association (EHPA) published a news piece laying out the correlation between electricity prices and heat pumps. EHPA argues that in many countries, the running costs of heat pumps are still higher than those of fossil boilers, which is linked to electricity prices being several times higher than those of gas. Although heat pumps are nearly three to five times more energy efficient than boilers, even this is not always sufficient to make up for a far higher electricity price. To achieve a quick return on investment and motivate people to purchase heat pumps, the cost of electricity should not exceed double the price of gas.
 
Electricity costs can be reduced by shifting taxes and levy away from electricity bills, implementing carbon pricing, and offering consumers the option to switch to lower or variable electricity tariffs if they choose flexible, renewable heat pumps.
 
Additionally, financial tools, government support, private sector financing, and various business models are crucial in helping consumers manage these costs and benefit from the energy savings provided by heat pumps.
 
Thus, the EHPA calls for an urgent need to protect low-income households from high energy prices and support their access to cleaner and, ultimately, more affordable heating and cooling solutions like heat pumps.
 

 
EHPA identifies barriers and solutions for financing heat pumps
 
On 24 May, the European Heat Pump Association (EHPA) published a report identifying the key barriers and solutions to financing heat pumps. One of the key barriers to be addressed to facilitate the widespread adoption of heat pumps is the overall heat pump costs. To reduce costs and encourage adoption, strategies include raising awareness of total cost ownership (TCO) and side benefits, offering subsidy programs and financial incentives as well as aligning economic incentives with decarbonization goals. Moreover, the EHPA recommends addressing operating costs and closing the electricity-to-gas price ratio through measures such as shifting taxes and levies away from electricity bills, introducing dynamic electricity tariffs, and carbon pricing mechanisms. The association also calls for addressing the upfront costs. It identifies that one of the main challenges is the higher initial investment required for heat pumps compared to traditional fossil fuel alternatives. Thus, strategies such as industrialization of production processes and standardization of solutions, financial incentives (including grants and subsidies, reduced VAT rates for heat pumps, and tax exemptions), and innovative business models such as Heat-as-a-Service (HaaS) can be potential ways to mitigate these barriers.
 
Finally, the EHPA acknowledges the industrial heat pump deployment is one of the key issues to be tackled. As industrial sectors, accounting for a substantial share of energy consumption face high upfront costs and market standardization challenges, the EHPA recommends addressing these issues through targeted financial mechanisms, increasing investment in high-temperature heat pumps, implementing new business models and addressing the electricity-to-gas price ratio to reap their full potential.
 

 
 
Unconvincing progress on UK decarbonisation
 
The UK Public Accounts Committee (PAC) stated that it is not convinced that current progress on the government’s goal to achieve 600,000 heat pump installations per year by 2028 matches its ambitions. In its report entitled Decarbonising Home Heating, PAC argues that consumers still face too much complexity and confusion to make informed decisions about installing a heat pump, with a government facing a substantial challenge to increase the sufficient number of trained heat pump installers. The report finds the cost of buying and running heat pumps as a significant barrier to scale-up and, while installation costs have fallen by up to 6% since 2021, costs need to come down much quicker if the government is to achieve its target of a 25% reduction in installation costs by 2025. The report also recommends that the UK Department for Energy Security & Net Zero (DESNZ) should reveal the findings of its evaluation of heat pump take-up among different socio-economic groups by the end of January 2025 and should set out what actions it will take to address the high running costs of heat pumps.
 
The PAC is also concerned over the complexity for households to enable them to make informed decisions about installing a heat pump. Moreover, with DESNZ not collecting all the information it needs to monitor progress with installing heat pumps, the PAC advises developing a mechanism for collecting and monitoring data on heat pump installations across all households in England by the end of December 2024 at the latest and publish these on a quarterly basis. Finally, PAC recommends that DESNZ should, by the end of December, outline which types of properties and regions it does not expect to be suitable for a heat pump and what alternative low-carbon technologies are available to them.
 

 
Glossary
EU

EUROPEAN COMMISSION: The European Commission is made up of 27 Commissioners, 1 for each Member State, and represents the interests of the EU as a whole. Every Commissioner is in charge of a Directorate-General (DG) that can be compared to a Ministry at national level. The European Commission proposes legislation in the form of Regulations and Directives and submits them to the Parliament and Council for discussion and adoption.

EUROPEAN PARLIAMENT: The European Parliament is made up of 705 MEPs (see below) that are directly elected by EU citizens in 27 Member States.

MEP: Member of the European Parliament, a co-legislator within the EU that is made up of representatives from political parties throughout Member States.  

COUNCIL OF THE EU: Co-legislator, made up of representatives from Member State Governments. Has a six-month rotating presidency, currently held by the Czech Republic until the end of 2022. 

EUROPEAN COUNCIL: The European Council is made up of the leaders of the EU member states, commonly known as EU27. It defines the EU’s overall political direction and priorities but does not pass laws.

REGULATION: EU legislative act that is binding in its entirety and is to be applied in its entirety across the EU by all EU Member States.

DIRECTIVE: EU legislative act that sets out a goal that all EU Member States must achieve. However, it is up to the EU Member States to adopt their own laws on how to achieve the EU goals enshrined in the Directive. 

HORIZON EUROPE: is the EU’s main and biggest Research and Innovation programme for the period of 2021-2027. The programme has an overall funding of €95,5 billion. The program is divided into three pillars: open science, global challenges & industrial competitiveness and open innovation.  
 
INVESTEU: The InvestEU Programme builds on the successful model of the Investment Plan for Europe, the Juncker Plan. It brings together, under one roof, the European Fund for Strategic Investments and 13 EU financial instruments currently available. Triggering at least €650 billion in additional investment, the Programme aims to give an additional boost to investment, innovation and job creation in Europe.

EUROPEAN GREEN DEAL: is a set of policy initiatives by the European Commission with the overarching aim of making Europe climate neutral in 2050. The plan is to review EU’s energy and climate laws to bring them in line with this ambition. Green Deal also introduces new legislation on the circular economy, building renovation, biodiversity, farming and innovation.
 
FIT-FOR-55-PACKAGE: The European Commission’s work program for 2021 included the revisions and initiatives linked to the European Green Deal climate actions and in particular the climate target plan’s 55 % net reduction target are presented under the Fit for 55 package. The package is compiled of two parts, released on 14 July 2021 and 14 December 2021.
 
REHVA: is the association of European heating, ventilation and air-conditioning associations, based in Brussels.
 
You can find all relevant EU building policy related information in this useful document.

UK

BILL: A bill is a proposal for a new law, or a proposal to significantly change an existing law. A bill may start in either the Commons or the Lords and must pass a series of stages in each Houses. Once the bill has been agreed by both Houses, it receives Royal Assent and becomes an Act of Parliament.

HOUSE OF COMMONS: the House of Commons is the lower house and de facto primary chamber of the Parliament of the United Kingdom. Like the upper house, the House of Lords (see below), it meets in the Palace of Westminster. The Commons is an elected body consisting of 650 members known as members of Parliament (MPs). Members are elected to represent constituencies by the first-past-the-post system and hold their seats until Parliament is dissolved.

HOUSE OF LORDS: The House of Lords scrutinises bills that have been approved by the House of Commons. It regularly reviews and amends Bills from the Commons. While it is unable to prevent Bills passing into law, except in certain limited circumstances, it can delay Bills and force the Commons to reconsider their decisions.
 

 
For additional information on European policy issues, please contact Brusselsoffice@ashrae.org
 
 

 
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