Economic viability in thermal retrofit policies: Learning from ten years of experience in Germany

Germany aims to reduce CO2 emissions by 80% by 2050 compared to 1990 levels and has merged this target with mandatory Energy Saving Regulations for thermal renovation of existing homes: the policy uses the criterion of ‘economic viability’, whereby renovations must pay back through the space and water heating fuel savings they produce. This paper explores the extent to which economically viable thermal renovations can contribute to the 80% goal, based on an analysis of Germany’s experience. It finds that the theoretical savings being achieved, based on calculated pre- and post-renovation consumption, are around 33%, while actual savings, based on measured consumption, are likely to be around 25%. The difference appears to be due to the effects of household behaviour. Further, average measured consumption is estimated to be around 150–180 kWh/m2a nationally, and this would have to be reduced to 30–35 kWh/m2a to meet the 80% policy goal. This is beyond the limits of economically viable renovation technology, which currently achieves around 100 kWh/m2a. The paper suggests that policymakers should de-couple the criterion of economic viability from the 80% goal, emphasise other reasons for renovating to economically viable levels, and consider a more systematic approach to facilitate household behaviour change.