Encouraging deep renovation of residential buildings is necessary and worthwhile

Hungarian Renovation Wave

The Hungarian Institute of Energy Efficiency (MEHI) has prepared a study entitled Hungarian Renovation Wave on the various benefits of a largescale building renovation program in Hungary. The study is based on a representative residential survey that examined the willingness of Hungarian homeowners to renovate their homes and their sensitivity to the introduction of certain financial incentive measures.

There is now a broad consensus among researchers that energy efficiency is one of the most cost-effective means of achieving climate goals, with many positive spill-over effects in addition to energy savings and emission reductions. Without deep renovations in residential buildings with the greatest potential for energy savings, it is not realistic to achieve energy consumption and emission reduction targets, carbon neutrality by 2050. At the same time, this is the area where no breakthrough has been achieved in recent years, either at EU level or in Hungary. The aim of the study is to assess the magnitude of residential demand for an energy retrofit support program and quantify the benefits related to such a program.

In November 2020, MEHI carried out a representative population survey with the following research questions: 1) which energy refurbishments owners have made on their residential properties over the past five years; 2) what investments they plan to make in the next 5-year period; 3) how they plan to finance it; 4) what motivates them most; 5) and how much more investment would be implemented if certain support and incentive instruments were available.

Research results of the Hungarian Renovation Wave

Summarizing the results, MEHI saw that the number of building energy retrofits has increased significantly in recent years: 57% of respondents have carried out some form of energy efficiency upgrade in the last five years. However, renovations are mostly not done for energy efficiency purposes. Since individual, partial renovations dominate and are typically carried out without a technical or energy plan, the resulting energy savings are not significant.

In terms of renovation plans, the survey suggests a large residential energy efficiency market with a value of nearly HUF 3,000 billion of investment over the next five years. However, it is important to channel this renovation demand in a way that maximises the associated energy savings potential. This could be achieved by introducing a subsidy scheme with conditions that encourage renovators to make complex investments, i.e. subsidies should be conditional on energy efficiency.

The introduction of such a subsidy could, on the one hand, impose an obvious burden on the state, mainly financial, but on the other hand, it could also bring clear benefits in terms of the wider impact of the measures. The study looked at 6 forms of subsidy incentives (grants, VAT rebates, loans and one-stop-shop advice): it assessed the extent to which renovators would start or expand their energy efficiency retrofits as a result of these subsidies, calculated the public finance outcome of these subsidies, their impact on employment and the volume of energy and CO2 savings they could achieve.

Both in terms of the popularity of the different forms of subsidies and the impact on the public finance balance, unexpected results and interesting findings were obtained. All of the subsidy schemes examined in this study are suitable for economic recovery, but the different types have different advantages when analysing their feasibility, monitoring of energy savings, economic whitening or their impact on government revenues. However, for each of these forms, it can be said that if energy efficiency aspects are included in a subsidy, with the main incentive being deeper renovation, then a number of broad positive effects can be expected, in addition to economic recovery, energy and CO2 savings.

According to the survey, the most popular form of a possible support scheme, the 40% non-refundable grant, could encourage the energy renovation of another nearly 1 million homes, with an investment value of more than HUF 1,200 billion, leading to about 30 000 new jobs and 7,5 PJ energy saving per year. While financing deep renovations can be a substantial financial burden for the state, on the other, it entails multiple benefits due to the wider spill-over effects resulting from more ambitious energy efficiency measures.

Based on the results of the survey, the public finance and employment effects of the incentives are clearly positive, budget revenues exceed the volume of public expenditure for some forms of incentives, and investments generated by the support schemes lead to significant energy savings and CO2 reductions. In each case, however, if energy efficiency criteria appear as a condition for deeper renovation, much wider positive effects can be realized in addition to energy savings and less CO2 emissions, such as households’ improved comfort and well-being, reduction of health issues, and increase in productivity.

Considering the significant residential demand for energy renovations, it would be important to carry out renovations in a way that the associated energy saving potential can be exploited as much as possible. To do so, it would be necessary to introduce a predictable, long-term financial support scheme with a non-refundable grant element, and conditions set in such a way as to encourage deep renovations.


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