EU Directive on renewable energy: new opportunities in the construction sector across Europe

Directive (EU) 2018/2001 on the promotion of the use of energy from renewable resources

Overview

The Directive is arguably the most ambitious initiative of the European Union (EU) in an attempt to promote the production and use of energy from renewable resources, and reduce greenhouse gas emissions. The Directive provides a binding target for the overall share of renewable energy consumed in the EU “by 2030 to be at least 32%”.

The target is a common goal to be reached by the EU, with the Directive setting out renewable energy share targets for each Member State, the percentages of which vary.  

National Energy and Climate Plans (NECP)

In light of this Directive, every Member State has presented its draft NECP to the European Commission, explaining what they intend to achieve and how. A translation into English of each NECP (save for that submitted by France) is provided by the European Commission. For the purpose of this article, we have focused only on those initiatives that are relevant for the construction sector.

Belgium, The Netherlands and Denmark

These countries are part of the North Seas Energy Cooperation (NSEC), which aim is to coordinate and facilitate the cost-effective use of offshore renewable energy, particularly wind energy. The NSEC is currently developing plans and best practice in the design of offshore wind tenders.

Both importing countries and exporting countries, will have to further invest in the improvement of the interconnection with the neighbouring countries to supply renewable energy. Consideration will also need to be given by some countries to investing in their own existing public utility infrastructure (for example, the replacement of gas pipelines).

It is anticipated that older buildings will have to be adapted to improve energy efficiency and in some cases demolition and reconstruction will be considered as an option (as identified within some of the NECPs).

Spain

Spain’s NECP proposes 20 ambitious measures that seek to decarbonise the economy. Between 2021 and 2030, total investment required to achieve the objectives set out in its NECP is estimated to be “€236,124 billion”. According to a study carried out by the Spanish Administration, “80% of the investment” is to be made by the private sector and “mainly linked to the deployment of renewables, distribution and transmission networks, and a large part of the saving and efficiency measures”.

The focus of proposed public sector investment (which under the plan is anticipated to be the remaining 20%), is on “energy saving and energy efficiency measures, electrification of the economy and in actions associated with promoting sustainable mobility and modal shift”.

With regard to construction, the plan foresees a notable increase in activity in this sector as a result of the investment in housing upgrades and the development of the infrastructure required to deploy renewables or electric vehicles. The proposals include measures to simplify the administrative and environmental processing for installation authorisations, to help facilitate the construction of generation installations and the infrastructure needed to commission them.

The NECP is “expected to generate an increase in GDP [Gross Domestic Product] of between 19,300 and 25,100 million euros per year”, an area in which the construction and services sectors stand out due to investment in the energy efficiency upgrading of buildings and new investments linked to the change of model.

France

France’s NECP assumes a gradual reinforcement of environmental regulations for new construction, in particular through the introduction of a greenhouse gas emission criterion over the entire lifecycle of the building.

The NECP refers to cross-border interconnections offering the possibility of importing electricity from a neighbouring country in the event of a strain on the national supply, which is an economically efficient solution. The plan shows a significant increase in interconnections.

Regarding the electricity transport network, over the next decade, France’s NECP envisages investment in the network “estimated at an average of €1.5 billion per year, of which €1 billion for the development of the network and €400 million for the renewal of the network equipment”.

Comment

It is clear that significant public and private investment will be necessary to implement the measures provided in each NECP, with new construction projects appearing likely to feature heavily.  

For some older buildings that are not energy efficient (and where it is not cost or energy efficient to make adaptations to them) replacement with the construction of new buildings may be required. As part of a shift towards renewable energy, more wind farms will be needed, as well as the associated plants to transform the energy into electricity, and infrastructure to support the import/export of renewable energy (i.e. to connect countries and regions to the grid). The need for interconnection between the countries (not all countries being able to self-supply), will also necessitate international contractual arrangements and international insurance solutions.

It seems inevitable that the construction projects required as part of the shift towards renewable energy will, at least whilst the works are undertaken, contribute to the production of the type of emissions that they are ultimately, designed to reduce. However, this has to be balanced with the longer-term goal of achieving significant and sustainable reductions in emissions, as set out in the Directive. 

Member States are required to submit their final plans by the end of 2019, with updated plans to follow by December 2023.

Read more in Construction and Engineering Brief - November 2019