For a climate-friendly heating sector, improving building insulation is crucial

According to a study commissioned by Agora Energiewende and the European Climate Foundation, the most cost-effective and feasible way to achieve a climate-friendly heating sector is to enhance building efficiency, particularly through retrofitting with improved insulation. About 1% of the building stock is outfitted with improved insulation each year. This rate of retrofitting needs to double for a successful clean-energy transition in the heating sector, the study finds. While the greatly increased use of P2X synthetic fuels as a substitute for natural gas and heating oil represents a possible alternative pathway for decarbonising heating, this would cost German households some 8.2 billion euros a year more than a decarbonisation pathway based on improved building efficiency. It is also uncertain as to whether a sufficient volume of e-fuels will be available. The study, which originally appeared in German, is now available for download in English.

The study examines the most cost-effective way to achieve the goal of reducing greenhouse gas emissions from the German building sector from its current level of approx. 120 million tonnes of CO₂ per year to 70 million tonnes of CO₂ by 2030. It identifies improved building efficiency as a crucial foundation for the deployment of the entire range of technology options available to enhance the sustainability in the heating sector – from heat pumps and local heat networks to solar thermal systems and P2G technology.

Efficiency is the key to technological neutrality

“Efficiency is the key that will allow Germany to achieve its binding climate protection targets at low cost. After years of dithering in the building sector, it makes no sense to focus exclusively on individual climate-friendly heating technologies. The clean-energy transition in heating will only succeed if all technologies are deployed across the board, in tandem with more efficient buildings. In this connection, an essential prerequisite is ambitious government policy aimed at improving building efficiency,” says Dr. Patrick Graichen, Director of Agora Energiewende.

Energy-efficient buildings reduce the cost of energy production and distribution. By contrast, the alternative strategy of seeking to achieve climate targets solely by using synthetic fuels, without first working to improve building efficiency, would be a climate policy blunder, the study finds. Synthetic fuels are not currently available in sufficient quantities, and they are expensive. Furthermore, over the long term the industrial, shipping and air transport sectors are likely to swallow a considerable volume of available supply.

In addition to improving energy efficiency, higher insulation standards almost always augment the value and comfort of a retrofitted building, the study notes. “A draughty house is a draughty house, regardless of whether it is heated with climate-friendly fuels. But high-quality insulation can transform that house into a place of comfort for its inhabitants. Thus, in addition to its benefits for the climate, improved insulation can reduce heating expenses while also augmenting quality of life,” says Graichen.

Five different scenarios were considered in the study: The Efficiency² scenario reflects the extremely ambitious efficiency strategy that was elaborated by the Federal Ministry of Economics (BMWi) in 2015, but not backed up with policy measures. There are also three Efficiency-plus-X scenarios, which forecast a realistically ambitious level of energy efficiency in combination with the expanded deployment of renewable energy, heat pumps and synthetic fuels. The last scenario forecasts a low level of ambition in efficiency in tandem with very high shares of synthetic fuels. The researchers estimated the overall economic costs for each of these scenarios and compared them with the BMWi scenario. While the first four scenarios are associated with very similar cost levels, the low-efficiency scenario that relies on expanded use of synthetic fuels leads to significantly higher economic costs.

Feasibility is essential for success

In addition to considering economic costs, the study assesses the feasibility of each given scenario. Specifically, the researchers evaluated the viability of each development path. “If we don’t take efficiency seriously, heating will become more expensive for everyone, and we will also become much more dependent on synthetic fuels, which will have to be imported on a permanent basis in large quantities. While e-fuels represent an important element of the sustainability equation, they will not be available in abundance. Accordingly, we should encourage energy-oriented refurbishment on a massive scale, as is done in the Netherlands and UK,” says Graichen.

The 136-page study, titled “Building sector Efficiency: A crucial Component of the Energy Transition”, was jointly undertaken by the Institute for Energy and Environmental Research, the Fraunhofer Institute for Energy Economics and Energy System Technology, and the consulting company Consentec. It is available for download free of charge below. The study’s underlying assumptions and modeling results are presented in detail.