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Invest Energy Cost Savings in the Refurbishment of Buildings

Opinions in Germany currently diverge when it is about subsidies in energy-focused building refurbishment. Whereas other kinds of subsidies are often blemished to be combined with unfair competition or protectionism, incentives for the energy renovation of buildings are mostly considered as undisputed. This is not surprising taking into consideration that according to information provided by the German Government, heating costs of public and private buildings are currently making up 40 % of the whole energy consumption and are actually  accounting for 20 % of all CO2 emissions. An almost climate-neutrally heating system is planned to be established in Germany’s whole building stock until 2050 – a very ambitious goal. 690 million euros of funding have been provided in the federal budget 2015 for the energetic renovation of buildings. In 2016, the amount allocated for renewals in heating technology as well as for the insulation of roofs and walls is to be raised up to 1.5 billion euros which is more than twice as much compared to 2015. That is indeed necessary since there has been a gap between the desirable and reality, similar as it happened with of e-mobility.

This is also due to consumers’ behavior of convenience. One reason can be found in consumers’ orientation towards For the sake of convenience, Consumers oriented towards convenience. The oil price which was moving relatively stable around the $ 150 per barrel between 2011 and 2014 has dropped because of the deteriorating global economic outlook, meanwhile the price is barely reaching the level of $ 49 per barrel. Purchase Prices for gas have also decreased by 23 per cent. The following effect was observed: the German Reconstruction Loan Corporation KfW disbursed 3.69 billion euros of funds in 2014, half a billion of euros less than two years before. The money saved on energy costs should have been invested consistently in the refurbishment of buildings. However, many private home owners of the older generation whose outdated properties would need an improved thermal insulation but indeed, regarding to their life expectancy, hesitate investing as those incentives do not seem to pay off anymore. This is a fallacy since there is no guarantee that costs for oil and gas will remain low. In fact experience shows that over the middle and long-term, oil prices will continue to rise. In 1970 the price for one barrel was only 2 dollars. On the one hand the rise in price is due to a scarcity of the natural resources available and on the other hand to the increasing industrial globalization. CO2 emissions, however, remain unchanged regardless whether the barrel of crude oil has cost 100 or 50 dollars. In other words, there are two reasons why refurbishment measures undertaken in the future will make sense, too. Having a house with an up-to-date thermal insulation is not only beneficial to the heirs but has also a positive effect on the environment. A maximum of 30% of repayment subsidies on loans is granted to those who create an energy-efficient home type 55 according to KfW requirements. Then only 55% of the standard energy will be consumed which regarding to the former electricity feed regulation 0f 2007 (EnEV) corresponds to an energy-efficient home type 40. This means that even with the current affordable price of 0.60 euros, a single family home which requires 4,000 liters of heating oil per annum would save 33,000 euros within 25 years. The householder can finance the missing 70% at an extremely favorable rate. Moreover the value of the property will be increased in the long term.  This is reflected in a higher sales price. At the same time rented property is increasingly attractive. Whether it is a single family home or an apartment house: reduced utility costs will lead to lower vacancies and allow higher net cold rents. Investing in energy efficiency is profitable, especially in buildings having a long remaining useful life whose covers would require a refurbishment anyway (regardless of energy-savings), is a worthwhile investment. This applies even more if the oil price will start to rise again upsetting the calculations of over-optimistic energy costs made by property owners in their ad-hoc consideration.