Households in the energy transition: Existing dwellings offer great potential

• Pace of emissions reduction must double to achieve climate targets
• Low-income households in particular occupy buildings requiring upgrades
• Financial aspects main factor for renovation

Households account for more than one fourth of Germany’s energy consumption. Most of this is used to heat indoor spaces, with fossil fuels still the main energy source. Residential buildings therefore play a major role on the road to climate neutrality. Although the buildings sector has succeeded in nearly halving its greenhouse gas emissions since 1990, annual efforts need to be doubled in order to achieve the sector target defined in the Federal Climate Change Act for the year 2030, according to a current analysis by KfW Research.

On the basis of the representative KfW Energy Transition Barometer, KfW Research examined the energy characteristics of existing buildings and looked at which households occupy the dwellings with the greatest need for upgrades. The findings allow conclusions to be drawn as to which households could benefit the most from improved building efficiency and where the greatest potential exists for reducing greenhouse gas emissions. The main findings:

• Lower-income households are most likely to occupy older buildings. The dwellings in the lowest-income group (bottom quartile) are around 16 years older than those in the highest-income group of households (top quartile).
• There is an urban-rural divide in the age of dwellings. The proportion of buildings erected after 1979 is much higher in rural regions than in towns and cities. New buildings are primarily developed in the countryside where the necessary land is available.
• A crucial factor for the energy balance is a building’s level of insulation, in other words, whether its exterior walls, roof and basement ceiling are insulated – possibly as part of an energy-efficient refurbishment. KfW’s analysis revealed a clear correlation between the age of a building and its level of insulation. Buildings in which multiple spaces are insulated are significantly younger than the remaining buildings. Thus, the ones with the best insulation are on average more than 30 years younger than those with the poorest insulation. Lower-income households and tenants occupy buildings with poorer insulation than high-income households and owner-occupiers.
• Financial hurdles are the main reason buildings have not yet been refurbished. Some 25 % of households surveyed for the KfW Energy Transition Barometer reported they could not afford new insulation, and even 30% could not afford new windows. The shares for photovoltaic and solar thermal systems lay between these two figures.

“Germany’s residential housing stock is still far from being climate-neutral. The findings of the KfW Energy Transition Barometer show that there is significant potential for energy-efficient refurbishment of dwellings. This potential must be leveraged. After all, most homes still rely on the burning of fossil fuels, and some of them still have considerable energy efficiency deficits”, said Dr Fritzi Köhler-Geib, Chief Economist of KfW.

To be sure, the current high energy prices and the increasing fall-off in new building activity due to rising interest rates provide scope for giving the energy-efficient refurbishment of the housing stock the urgently needed boost. But not everyone who would like to upgrade their home can afford to do so. Köhler-Geib summarised the core problem: “In many cases, refurbishing a dwelling to make it energy-efficient remains a financial challenge. This is particularly the case in households on low incomes, which have less financial scope and are more likely to occupy buildings that are in need of upgrades”.

It is therefore important to mitigate the heavy burdens caused by increased energy prices in order to give households options and keep the rate of acceptance of the path taken high among the population without concealing the fact that further investment is necessary. “A well-coordinated combination of relief measures, investment promotion schemes and information support appears to be conducive to achieving the climate targets in the building sectors while at the same time reducing households’ dependence on fossil fuels”, concluded Köhler-Geib.

The current analysis by KfW Research can be retrieved from www.kfw.de/fokus

The dataset:
The KfW Energy Transition Barometer is a representative survey of around 4,000 private households in Germany on decisions relating to energy supply and energy consumption. It is published annually. Further information on the KfW Energy Transition Barometer can be found at www.kfw.de/energiewendebarometer.