The revised Energy Performance of Buildings Directive (EPBD) aims to decarbonise Europe’s building stock by 2050, focusing on renovating the worst-performing buildings while introducing zero-emission standards for new constructions. It places a spotlight on the whole life cycle emissions from buildings, renewable energy generation, smart technologies, sustainable transport and finance.
The revised Energy Performance of Buildings Directive 2024/1275
A staggering 40% of all energy consumption in the European Union (EU) is attributed to buildings, making the built environment the single largest consumer of energy and source of emissions[1]. It is an indisputable fact that improving the energy efficiency of buildings will have a key role in meeting the EU’s target of carbon neutrality by 2050[2].
The European Commission has predicted that it would need to nearly double the rate at which existing buildings are renovated to meet its ambitious goals[3]. This can only be achieved with ambitious policies that drive energy efficiency in new and existing buildings, along with provisions for financing the improvements. The revised Energy Performance of Buildings Directive (EPBD), which came into effect on 28 May 2024, includes upgrades to the regulatory framework designed to drive renovations across all Member States. It focuses especially on improving the worst-performing building stock, while also offering flexibility considering the diversity of building stock throughout Europe.
The strengthened policies also focus on whole life carbon emissions, renewable energy, smart technologies, sustainable transport and finance.
Who will this apply to?
The directive applies to a wide range of stakeholders, including:
- Member States: Each country in the EU must develop national trajectories and Building Renovation Plans that align with the directive’s goals for decarbonising the building stock by phasing out fossil fuels, improving building performance and maximising renewable energy generation. They must also address remaining barriers, such as financing, training and attracting more skilled workers.
- Financial institutions: The directive aims to mobilise private investment by developing a comprehensive portfolio framework for voluntary use by financial institutions for funding energy renovations. The provision of access to the EPC database is anticipated to improve the availability of information and improve the quality of data available to help unlock private funding.
- Real estate companies: Non-residential buildings will be subject to Minimum Energy Performance Standards (MEPS) aimed at renovating the worst-performing structures.
- Construction industry: Companies involved in building and renovation will need to adapt to new standards and regulations.
- Tenants: Safeguards will be introduced to protect tenants from “renovictions” (de facto eviction related to a significant increase in rent following renovation works).
- Homeowners: Individual homeowners are obligated to renovate. However, the directive aims to provide support to vulnerable households. Building Renovations Passports are also anticipated to provide reliable and personalised renovation roadmaps to building owners planning a staged renovation of their building.
Here are the core themes of the revised policy, along with the dates to watch out for.
1. Member States to develop Building Renovation Plans for the renovation of existing buildings
85-90% of existing buildings in the EU are expected to be standing in 2050 and a substantial number of these buildings are not energy efficient[4]. The current rate of retrofit, as per the European Commission’s estimates, is very low and is rarely aimed at improving the energy performance of the buildings. Therefore, the revised EPBD directive focuses on renovations of existing buildings while addressing the heterogeneity of Europe’s building stock.
Member States are expected to develop Building Renovation Plans that will contain national strategies for decarbonising the building stock, both residential and non-residential, by 2050 and address barriers such as financing, training and upskilling. This will need to be applied to both public and private sector properties. The first drafts will be submitted by December 2025 and will be pivotal in the decarbonisation of the EU’s built environment.
There are different requirements for residential and non-residential buildings that each State must meet. Each Member State will adopt its national trajectory for residential buildings to reduce average primary energy use by 16% by 2030 and 20-22% by 2035. At least 55% of the decrease must be achieved by renovating the worst-performing buildings.
Member States must gradually introduce Minimum Energy Performance Standards (MEPS) for non-residential buildings to renovate 16% of the worst-performing buildings by 2030 and 26% by 2033 in the form of maximum energy performance thresholds. Member States would be free to exclude certain categories of residential and non-residential buildings, such as historic buildings, from these obligations. Member States must also protect tenants from the risk of eviction due to significant increases in rent following the renovation works.
The EPBD does not mandate an EU-level date for phasing out new fossil fuel boilers, but Member States will have to set out policies and measures about phasing out fossil fuels in heating and cooling, with a view to phasing out fossil fuel boilers by 2040. However, under the new EPBD directive, standalone boilers powered by fossil fuels will not be eligible for public support as of 2025.
Member States must also include requirements for the deployment of solar installations in all public buildings, major renovations and roofs of car parks to ensure that renewable energy generation is maximised.
The availability of this data will also enable financial institutions to support renovations.
2. Real estate industry to prepare to transition to zero energy buildings (ZEBs) by 2030
All new public buildings must be ZEBs as of 1 January 2028 and all other buildings as of 1 January 2030. ‘Zero emission building’ means an energy-efficient building, with zero or very low energy consumption. It must have zero on-site carbon emissions due to fossil fuels and produce zero or very low operational emissions. Measuring whole life carbon emissions for all new buildings will also be mandatory and will be disclosed on the EPC.
All new buildings must be solar-ready, i.e. must be ready to host solar installations on the rooftop without the need for significant expenditure or renovations and all ZEBs must aim to meet 100% of their primary energy demand from renewables, generated on-site or nearby, where technically feasible.
The ZEBs must also be equipped with measuring and control devices for monitoring and regulating indoor air quality. This also applies to all major renovations.
3. New template for EPC ratings to benefit building owners, buyers and tenants, financial institutions and public authorities by increasing the availability of reliable data
Renovations can be extremely beneficial for building owners due to savings in energy bills post-renovation. However, there is a lack of reliable data on the current and predicted energy use of buildings post retrofit. This creates a deficit of trust in homeowners and tenants regarding the actual savings they can achieve.
Currently, EPCs in the EU vary across the Member States and do not cover all building typologies. The divergent EPC schemes make it difficult to compare and assess the data.
The revised EPBD aims to use EPC ratings to solve this issue by making them “clearer, more reliable and visible”[5]. They will be based on a common template across all 27 Member States with mandatory information regarding energy consumption and whole life emissions (mandatory for all new builds from 2030), along with voluntary data such as integration of renewables, electric vehicle charging points and indoor air quality measurement devices.
The certificates will be required at more trigger points than current practice, such as point of sale, major renovation, renewal of rental contract etc. to ensure data transparency between owners and occupiers.
In addition to the revamped EPC certificates, the Member States will have to develop databases containing energy consumption for all buildings. This will help public authorities and financial institutions in facilitating renovations.
Building renovation passport schemes will take the EPC a step further and provide reliable and personalised renovation roadmaps to building owners to enable a staged renovation.
4. Member States to develop plans for Building Renovation Passports (BRPs) to set out the renovation roadmap for property owners
The European Commission recognised the need for deep retrofits, while ensuring that the property owners have the necessary information and data available to enable effective financial planning and decision-making. Thus, they have introduced Building Renovation Passports. This will be a document “outlining a long-term (up to 15-20 years) step-by-step renovation roadmap to achieve deep renovation for a specific building.”[6].
This can be seen as an extension of the Energy Performance Certificates (EPCs) and therefore, Member States have been advised to allow both to be drawn up jointly, while the BRPs would remain voluntary for the time being, to ensure that they do not become a burden on the property owners.
Availability of data is key to decarbonisation. However, achieving the ambitious goal of renovating the EU’s worst-performing building stock, while ensuring that new buildings are zero energy, will require an efficient combination of public and private financing.
5. Unlocking public and private finance for the renovation of worst performing buildings
The directive mandates that National Building Renovation Plans must enable the deployment of sufficient national-level finance and help leverage private investment at scale.
There must be a focus on the measures and policies empowering vulnerable households through the alleviation of energy poverty and affordability of housing. The revision should also contribute to mobilising support from financial institutions, with an increase in lending volumes. This will be strengthened by the access to the EPC database.
These policies will enable property owners to offset the cost of renovations through public funding, grants, incentives and support from financial institutions.
Key impacts of the revised Energy Performance of Buildings Directive (EPBD) on the real estate industry
Non-compliance with the EPBD can attract hefty fines and cause delays in construction, major renovations and sale of properties. It can lower the property values for inefficient building stock with low EPC ratings. On the other hand, meeting the requirements of the EPBD will help ensure that the EU’s building stock is energy efficient with low operational costs and improved living conditions. Some key takeaways are:
- Decarbonising the building stock: The goal is to achieve a fully decarbonised building stock by 2050, necessitating renovations of the worst-performing building stock. This will lead to increased demand for a skilled workforce and sustainability services in the real estate industry.
- Minimum Energy Performance Standards (MEPS): The MEPS will require non-residential buildings to meet specific energy performance thresholds. This will drive renovations of the worst-performing buildings. However, these will be defined at the national level, due to which the energy performance thresholds will not be comparable between countries.
- Zero emission standards for new builds: All new buildings will need to be zero emission by 2030. This shift will increase construction costs initially but will enhance property value and reduce the operating costs and emissions from buildings.
- Phasing out fossil fuels: Member States are to define the requirements to phase out fossil fuels by 2040.
- Building Renovation Passports: They will outline a long-term step-by-step renovation roadmap to achieve deep renovation for a specific building. This will help remove the barriers to renovation such as lack of knowledge about what to do and in which order.
- Increased renewable energy integration: New buildings will be required to incorporate renewable energy solutions and Member States will need to make provisions for maximising renewable energy. This will reduce the reliance on the grid and increase the supply of low carbon energy.
- Electric vehicle (EV) infrastructure: The installation of EV charging points in new and renovated buildings will enhance the adoption of electric vehicles.
- Strengthened transparency through EPCs: Enhanced Energy Performance Certificates (EPCs) will provide clearer and more reliable assessments of energy efficiency across the 27 Member States, making better quality data available to property owners, tenants, financial institutions and public authorities.
- Lifecycle emissions consideration: New regulations requiring lifecycle carbon emissions disclosures for new buildings will increase transparency and impact construction choices. However, this has not been mandated for renovations, which can have high embodied carbon emissions. Furthermore, there is no mention of the approach to demolition of existing buildings.
- Funding mechanisms: With significant EU funding earmarked for energy renovations, the real estate industry can leverage the investment for upgrades, making renovations more feasible. This could stimulate the renovation market.
- Indoor environmental quality: Improved standards for indoor air quality in new and renovated buildings will enhance occupier satisfaction and health.
- Compliance and regulatory changes: Real estate stakeholders will need to adapt to new regulations and compliance requirements, necessitating investment in education and resources to ensure adherence to the EPBD’s goals.
There is a clear shift towards prioritising energy efficiency and demand reduction, in parallel with energy generation. At Greengage, we recognise the pivotal role renovations will play in decarbonising the continent, while ensuring that all new buildings meet net zero standards. We can support asset, fund and portfolio-level audits to develop decarbonisation strategies, while integrating smart technologies that further help optimise energy efficiency and living conditions.
This article was written by Akshita Gupta.
