European Parliament adopts position on the Energy Performance of Buildings Directive

European Parliament adopts position on the Energy Performance of Buildings Directive

On 14 March the EP adopted its position on the proposed revision of the Energy Performance of Buildings Directive (EPBD). The EPBD is the main piece of EU legislation addressing decarbonisation of buildings, which are responsible for over a third of EU emissions and 40% of energy consumption.

Ahead of the vote, Climate Bonds had called for more ambitious Minimum Energy Performance Standards (MEPS), effectively setting out a trajectory for the worst performing buildings to be renovated. Operational emissions (energy performance) are widely recognised as the largest material contributor to existing buildings’ carbon dioxide inventory.

 The Parliament now goes into trialogue with the Council and its position is:

  • All new buildings should be zero-emission from 2028;
  • Existing buildings will have to comply with MEPS to reach climate neutrality by 2050;
  • Residential buildings will have to achieve a minimum energy performance rating; of Class E by 2030, and Class D by 2033 (EU’s Energy Performance Certificates (EPC) Ratings classes);
  • Non-residential and public buildings would have to achieve Class E by 2027 and Class D 2030
  • Member States will have to set higher standards for those buildings after that date and for the rest of the stock;


Potential introduction of hydrogen into energy mix has risks

To reach this slight improvement on MEPS, Parliament accepted an amendment which potentially introduces significant risk to building decarbonisation pathways. This amendment could allow hydrogen-ready boilers to be exempted from the ban on fossil fuel heating systems by 2035.

By implication fossil-fuel boilers will be accepted beyond the 2035 deadline date. The consequence is that there could be an indefinite delay to the deadline of fossil fuel use. There are also various technical and practical challenges around introducing hydrogen into an existing gas network.

One of the current leading position is that hydrogen be blended with natural gas. An EU Commission research paper finds that the hydrogen share in the blend could be around 5-10% in the immediate future, rising to 15-20% overtime. Such proposals are already being touted as part of hydrogen energy strategies in the UK and Norway. 

However, whether hydrogen blending would lead to a meaningful reduction in greenhouse gas emissions remains questionable. Bloomberg reports that even a 20% hydrogen mix would only result in only a 7% reduction in carbon emissions.

Most existing hydrogen supply in the market still uses fossil fuels during the production process.

A market dominated by fully ‘green hydrogen’ (created using renewable power) is still a long way off.


Hydrogen is not a general solution for heating buildings

Hydrogen is an important energy store and will be vital in the decarbonisation of heavy industries (e.g., replacing coking coal in the production of steel, or as a fuel replacement in the maritime shipping and long-haul trucking transport sectors.)

Successfully achieving a just industrial transition remains challenging enough without diverting scarce green hydrogen to areas such as powering buildings, where better options already exist.

Hydrogen does remain a good option for storing surplus energy, (e.g., continuing to power wind farms in periods of low demand). 

To produce enough surplus green hydrogen to power homes, EU countries would first need to generate enough renewable energy, and then supply the surplus required for heavy industries. To illustrate the point, Ireland achieved its renewable energy target of 40% by 2020 but does not expect to meet 80% until 2030. 

Overly ambitious claims about the merits of future, widespread hydrogen use in buildings is likely to reduce the support for electrification (a proven pathway to decarbonisation).

Various studies have concluded that rapid building electrification and increased energy efficiency retrofits are crucial to meeting the 2050 net-zero Green House Gas (GHG) emissions target. Additionally, continuous investments into existing gas networks advocating the potential for future hydrogen use possess significant lock-in risks.

This expensive pathway to decarbonisation could result in the stranding of gas or hydrogen networks. 

There are very material requirements to upgrade the existing network infrastructure needed to make blending possible. These include upgrades to the pipeline network to account for the leakiness of hydrogen, and new transport and storage facilities. A review of 32 independent studies has found that none recommended hydrogen heating as a feasible option.

Hydrogen is recognised as having an equivalent GHG impact of 11 times that of CO2 (notably less than 80 times of methane, but still not net zero).


Heat pumps and existing renewables solutions already provide viable options

Viable alternatives to hydrogen for powering buildings already exist and remain a strong financial alternative to hydrogen infrastructure. Climate Bonds expanded on this in our paper Accelerating the Fossil Gas Transition to Net Zero:

In most cases, low-carbon hydrogen is not likely to outcompete direct electrification in decarbonising decentralised heating as it is more expensive than electric heat pumps and requires appliance retrofit. Blanket incentives for hydrogen-based decentralised heating would undermine strategic deployment elsewhere in the economy and create inefficiencies. However, it could fill a midterm decarbonisation need for district heating – in instances where waste heat, geothermal, and heat pumps can’t be used.

Currently viable options, such as a mass rollout of heat pumps and solar PV panels, can be pursued immediately, without having to divert green hydrogen from better suited industrial uses. To illustrate this fact, heating a home with hydrogen requires five to six times more renewable sourced electricity than heating the same home with an equivalent heat pump (equivalent to more than 4.5 times more efficient). 


The Last Word: Next for the EPBD and Europe

On 14 March, the European Parliament agreed to phase out fossil fuel heating systems from households, preferably by 2035, and by 2040 at the latest. This agreement is, unhelpfully, accompanied by a provision allowing hybrid boilers in new buildings fired with biofuels, hydrogen or a blend of fossil and renewable gas. 

Climate Bonds thinks that this provision risks locking in fossil infrastructure, absorbing scarcely available hydrogen which could be better used to decarbonise the hard to abate industries and will slow down the transition to fully electrified systems.  

Climate Bonds is urging the trilogue negotiators to remove the hybrid boilers provision and take a firm stand against fossil fuels for EU buildings if they are serious about achieving climate neutrality by 2050. 

'Til next time,

Climate Bonds.