Making a case for socially targeted renovations

The basics

In Hungary, and across Central and Eastern Europe (CEE), policies to boost ‘cleaner’ and/or ‘green’ energy and improve energy efficiency are failing to reduce energy poverty and missing opportunities to lower greenhouse gas (GHG) emissions. 

The parliament building in Budapest

Aiming to advance the transition to ‘cleaner’ and lower cost heating sources, in 2013 Hungary launched a massive campaign to connect natural gas networks to more dwellings. To stimulate uptake by citizens, the government also set fixed prices for gas.

Ten years on, the current energy crisis is exposing how existing policy comes up short against stated targets.

Notably, in 2022, the gas price cap was partially removed. An unanticipated effect quickly emerged: as gas prices rose, more people switched back to using their wood stoves for heating (at least partially), which triggered a dramatic increase in firewood prices.

In reality, nearly half of the poorest households in Hungary still rely on firewood for heating. As they are most likely to live in the least efficient homes, equipped with old and inefficient heaters (e.g. small iron stoves), they need more energy to achieve thermal comfort.

Even before the price cap was removed, firewood prices increased steadily while gas prices remained fixed. That means those who have no option to switch now pay substantially more for the source that was supposed to be phased out. To make things worse, the market price fails to reflect the physical labour and time costs associated with harvesting and preparing wood. Or the societal costs linked to higher local air pollution (both indoors and out) from burning. 

Deep renovation of such homes is the surest way to lift people out of energy poverty. But research carried out by Anna  Zsófia Bajomi, who recently completed her PhD at the Polytechnic University of Milan and is now a Policy Officer at FEANSTA (the European Federation of National Organisations Working with the Homeless), uncovered key clues as to why current approaches at the EU level fall short.

Thanks to extra funding from the ‘Energy Poverty in Early Career’ (EPEC) grant from the Fuel Poverty Research Network (FPRN), Bajomi was able to carry out interviews with key stakeholders.

In short, four overarching factors undermine progress in Hungary and CEE countries:

  • Current policy considers firewood to be a ‘green’ and ‘renewable’ source of energy. In fact, it accounts for a large share of Hungary’s progress in relation to EU renewable energy targets.
  • Funding for renovations is targeted to deliver the highest impact in the least amount of time. Organising renovation loans for higher income groups is FAR easier and cheaper than accompanying and supporting groups who are more financially and socially vulnerable.
  • Requirements outlined in EU directives related to energy efficiency and tackling energy poverty are too broad and too weak, which makes relevant national actions difficult to enforce.   
  • In CEE countries, lack of institutional frameworks is a major barrier to effective renovation strategies.   

Overall, Bajomi found that green and social goals often seem to be conflicting – with green often getting priority.

For more detailed analysis of the situation in Hungary and CEE, underlying policy failures, and recommendations arising from Bajomi’s research, click above to access the ‘In-Depth’ version of this blog.

In depth

Insufficient policy frameworks. Low stringency within existing policy. Conflict between environmental and social policy. Lack of political will.

Any of the four problems outlined above can be a barrier to deep energy renovations to tackle energy poverty. Together, they create a substantial roadblock.

In Hungary, where dwellings in general have a high energy need for heating, use of firewood is overrepresented among the least efficient dwellings – and associated with a range of disadvantages.

To identify barriers to socially targeted deep energy retrofit programmes, Anna Zsófia Bajomi interviewed (in 2020) actors working for energy efficiency lobby groups and the European Commission, as well as NGOs working on energy efficiency and energy poverty. Collectively, they identified two overarching issues in Hungary (and other Centra and Eastern European [CEE] countries): use and classification of firewood, coupled with inefficient heating devices; and ineffective renovation policy.

Use and classification of firewood, inefficient heating devices

At present, about 15% of households in Hungary rely on solid fuel heaters. Many people choose firewood as it provides a sense of independence from utilities and reduces the risk of indebtedness to energy suppliers. When homes have both gas and firewood heating installed, it also provides a flexible option. The household can balance consumption between the two fuels based on respective prices and available budget.

Woman putting a well dried log into a glowing wood burning stove.

But the time and effort linked to using firewood are substantial. In rural areas, many men go to the forest to harvest it themselves. But even those who buy from suppliers need to chop and store wood before winter sets in. Carrying logs from storage to stove (or central heater) is often a daily chore, regardless of how bad the weather. For the elderly, the very young and persons with difficulties or disabilities, the workload is simply impossible. 

In turn, many of their heating devices are outdated and difficult to manage. Iron stoves require close attention as they need to be ‘fed’ often – sometimes even at night. Yet they are typically inefficient and provide uneven heat. Traditional masonry heaters often found in CEE homes are somewhat easier. Initially burning a large volume of wood at high temperature, they slowly release heat over several hours, providing even and pleasant warmth.

Hungary includes use of firewood within its renewable energy target: in fact, biomass consumption accounts for over 80% of the target. This approach disregards that burning firewood is a significant contributor to air pollution broadly. In the case of homes using individual heaters (especially if outdated and poorly maintained), it can cause severe indoor air pollution that leads to long-term health impacts for residents. Ultimately, this carries heavy costs to health services. 

Inefficient housing and equipment require deep energy renovations

As noted above, many dwellings in Hungary – particularly those of the poorest quality – have high energy needs. This leads to a situation in which the poorest households need disproportionately higher amounts of energy to heat their homes and spend a higher share of available income on energy.

This is a ten story concrete building full of apartments being renovated with a grey graphite foam insulation. We see the windows and balconies. The building is situated in Budapest, Hungary. The locals call these kind of houses "panel". We are looking at the building through leaves of the surrounding trees.
This is a ten story concrete building full of apartments being renovated with a grey graphite foam insulation. We see the windows and balconies. The building iin Budapest.

Deep retrofit – e.g. installing insulation along with better doors and windows – of the worst-performing dwellings would be the optimal solution to slash heat loss and boost thermal comfort.

Installing a modern and appropriately sized heating system or a more efficient wood stove would be the next logical step. But even those families who do maintain a wood stove could enjoy adequate for a significantly lower volume of firewood. Either heating option would reduce household energy costs and energy-related emissions.

Such energy renovations have been central to EU clean energy transition policies for many years. Recent analysis, however, shows that rate of renovation (across Europe) is far below what is needed or the targets already set. To reach climate targets for 2030, a fifteen-fold increase in the rate deep renovation rates – from 0.1 to 3% – is needed.

Hungary has 4.5 million housing units in total. To align with the EU’s 3% renovation goal, the government set a target to renovate 700 000 dwellings between 2015 and 2020 – or 140 000 units annually. Detailed analysis of the strategy implementation is lacking, but  preliminary reports suggest the overall renovation rate did not surpass 1% and the rate of deep renovations was even lower.

How poor policy can work against set targets

With the Clean Energy Package (CEP) launched in 2003 – often referred to as the 20/20/20 targets – the European Commission set three overarching goals for Member States to achieve by 2020:

  • 20% cut in GHG emissions (compared to 1990 levels)
  • 20% of EU energy coming from renewables
  • 20% improvement in energy efficiency

While most Member States met the emissions reduction and renewable targets, falling short on energy efficiency improvements has had a negative knock-on effect on vulnerable citizens: low progress in eradicating energy poverty.

Across interviews with multiple actors in the energy poverty and energy efficiency space, Bajomi identified several important shortcomings in the 20/20/20 policy framework:

  • Less stringent target made energy efficiency a lower priority. The CEP set stronger requirements and binding targets on Member States for emissions reduction and clean energy.
  • Generalised targets favoured easier, bigger ‘wins’. The CEP allowed Member States to achieve efficiency targets by investing and taking action in any sector. Most opted for sectors, such as transport or industry, where broad action could deliver quick results. The complete absence specific targets for the residential sector, where achieving energy savings is complicated, costly and time-consuming, represents an enormous, missed opportunity.
  • Lack of political will for retrofit programmes. Some Member States have shown low support for stronger residential energy efficiency targets at the EU level or for implementing ambitious renovation programmes nationally.
  • Lack of institutional frameworks, particularly in CEE countries. Several Western European countries have been operating large-scale residential retrofit programmes for many years. In CEE countries, supporting frameworks are only partially established or under development. Opportunity exists for mentoring or sharing good practices.
  • Policy design can make environmental and social aims conflicting, rather than complementary. Most energy efficiency measures can help achieve the environmental goal of lower emissions. Prioritising the social aim of ending energy poverty may have less impact. In fact, the consumption level of energy-poor households might not decrease radically, as they may previously have been under-consuming. Energy renovation makes it affordable for them to access a level of energy consumption that aligns with a more dignified life.
  • Poor quality homes require more work, for higher costs. The homes of low-income households often have structural problems that need to be fixed before energy efficiency measures can be carried out. These increase the complexity and cost of renovations.
  • Market-based financial solutions favour wealthier households. Subsidies to stimulate personal investment in energy efficiency measures are most easily accessed by households that have available capital and attractive credit ratings. The most vulnerable households, in contrast, are often already in financially difficult situations, making them ineligible for energy efficiency loans. Additionally, better-off households tend to have better access to information and can pay for expertise, while low-income households require pre-financed and non-repayable support and more intensive technical support.

Despite higher complexity, the need for more resources, and the potential of lower returns on environmental goals, renovating poor quality homes of low-income households should be a policy priority – particularly within the context of a ‘just, clean energy transition’ in the EU. Various studies show quantifiable benefits for citizens and societies. Reduced energy needs, for example, help lower energy costs, freeing up more available income for other necessities. Improved warmth for children, adults working remotely or in unemployment, and the elderly boosts health and well-being. In turn, this can improve performance at school or work and reduce healthcare costs. 

Recommendations to align social and environmental goals in renovation strategies

With the current energy crisis pushing even more families into energy vulnerable situations, the EU needs to take more aggressive action on deep renovation policies. Based on interactions with other actors, Bajomi suggests the following:

Set more stringent EU energy efficiency targets that include targets for renovating the residential sector and prioritise the worst-performing segments. The suggested minimum energy performance standards are a positive advance but solid institutional and financial guarantees are needed to support implementation.

Make energy efficiency funding proportional and conditional. Stimulus funds for energy efficiency should be structured to ensure proportionally relevant amounts are directed towards renovating the worst-performing residential buildings and those of energy-poor households. Funds for other measures and/or sectors should better reflect the capacity for investment by higher-income groups and other actors.

Ensure institutional frameworks enable delivery of large-scale, ambitious retrofit programmes. Here, the EU has a role to ensure national strategies include effective frameworks for planning, administration, monitoring, financing, information and technical aspects. Where capacity is lacking, the EU should assist national governments.

Integrate renovation plans and heat transition roadmaps. Strategies to switch to clean and affordable heating sources should be aligned with energy efficient retrofitting to ensure demand is minimised and supply systems are optimally sized.

Eliminate disparities in access to information about and financing for renovations. Considering the challenges identified above, stimulating renovation of the dwellings of low-income households requires concrete action in three key areas.

  • Train the right range of local professionals and practitioners. Informing and involving low-income households in renovations presents specific challenges. As such, an effective team should include building and energy experts as well as social workers and other practitioners. Provide easy access to information and expertise.
  • Setting up local one-stop shops’ that offer advice and services related to energy efficiency and/or renovation for free or at very low cost is proving effective in many communities. The services should include active technical support.
  • Tailored financing schemes. To reduce barriers within the financial sector, governments should develop pre-finance schemes and allow a higher-than-average share of non-repayable funding.

Tailored financing schemes. To reduce barriers within the financial sector, governments should develop pre-finance schemes and allow a higher-than-average share of non-repayable funding.

At foundational level, says Bajomi, EU regulation should be strengthened to motivate Member States to take action, monitor impacts and report results. Governments should then establish institutional and financial frameworks for energy retrofits. At both levels, providing clean and affordable heating solutions must prioritise those who suffer most from the negative impacts of solid fuel heating.

Anna Bajomi’s Don’t let energy poverty alleviation goals go up in smoke! project was funded by the FPRN’s Energy Poverty in Early Career programme.