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EU Energy Efficiency: investment targets not achieved; average pay back period exceeds 50 years (in extreme cases 150 years)
The cost of increased energy consumption, the depletion of fossil fuel reserves and the effect of human activities on global climate change are drivers of recent energy efficiency policies. Since 2000, the European Union, through its Cohesion Policy funds, spent almost €5 billion for co-financing energy efficiency measures in the Member States. The European Commission and the Member States are both responsible for the sound financial management of these funds.
The European Court of Auditors has assessed whether Cohesion Policy investments in energy efficiency were cost-effective.
The Court found that the projects selected by Member State authorities for financing did not have rational objectives in terms of cost-effectiveness, i.e. cost per unit of energy saved. Their objectives were to save energy and improve comfort, but they were not selected for financing on the basis of their potential to produce financial benefits through energy savings, but rather that the buildings were typically regarded as being ‘ready’ for funding if they were in need of refurbishment and their documentation complied with the requirements.
“None of the projects we looked at had a needs assessment or even an analysis of the energy savings potential in relation to investments”, said Harald Wögerbauer, the ECA member responsible for the report, “The Member States were essentially using this money to refurbish public buildings while energy efficiency was, at best, a secondary concern.”
The planned payback period for the investments was 50 years on average, and up to 150 years in certain cases. This means that these funds were not spent in a sensible way because the lifetime of the refurbished components or buildings is lower and can, to a large extent, be considered to be lost on the energy efficiency point of view.
Notes to the editors:
European Court of Auditors (ECA) special reports are published throughout the year, presenting the results of selected audits of specific EU budgetary areas or management topics.
This special report (SR 21/2012) entitled “Cost-effectiveness of Cohesion Policy Investments in Energy Efficiency” assessed whether Cohesion Policy investments in energy efficiency were cost-effective. To answer this question, the Court asked whether (i) the right conditions in programming and financing had been set to enable cost-effective energy efficiency investments and whether (ii) energy efficiency projects in public buildings were cost-effective.
The audit was carried out in the Czech Republic, Italy and Lithuania – the countries that had received the largest contributions from the Cohesion Fund and European Regional Development Fund for energy efficiency measures for the 2007-2013 programming period and had also allocated the highest amounts to projects by 2009. The audit included an examination of four operational programmes and a sample of 24 energy efficiency investment projects in public buildings.
The audit concluded that the right conditions in programming and financing had not been set to enable cost-effective energy efficiency investments, and the audited energy efficiency projects in public buildings were not cost effective. This was because the operational programmes audited had not benefited from proper needs assessments to identify the specific sectors where energy savings could be achieved and the options for achieving those savings in a cost-effective manner, thereby justifying the chosen measures and their cost.
The cost-effectiveness concept, or the best relationship between resources employed and results achieved, was not a determining factor when Member States allocated funding to energy efficiency measures and concrete projects. Neither was this concept part of the Commission’s assessment prior to approval of the operational programmes.
Although all the audited projects produced the planned physical output, such as replaced windows and doors or insulated walls and roofs, the cost in relation to the potential energy savings was high. A more important consideration than energy efficiency was the need to refurbish public buildings. While the projects audited aimed at saving energy and improving comfort, they did not generate a good ratio between energy savings and the corresponding investment cost. The average planned payback period for the investments was around 50 years, which is far too long considering the lifetime of the refurbished components and even of the buildings themselves.
Energy audits were either not mandatory (Italy, Lithuania) or, where they were required (Czech Republic), the investment options recommended in the energy audits were far too costly. In 18 out of 24audited projects actual energy savings could not be verified since they had not been reliably measured.
To improve investment in energy efficiency, the ECA recommends that the Commission make the Cohesion Policy funding for energy efficiency measures subject to a proper needs assessment, regular monitoring and the use of comparable performance indicators as well as the use of transparent project selection criteria and standard investment costs per unit of energy to be saved, with a maximum acceptable simple payback period.
Press Officer European Court of Auditors
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