The energy performance of housing in Portugal is posing a major obstacle to the country’s climate goals and illustrates the challenges facing us to reduce the 36% of Europe’s emissions that come from buildings. This blog from Portuguese consumer organisation DECO – the first in a mini-series on sustainable housing – shows how Portugal can inspire other countries. Good use of EU budgets can help to accelerate the energy transition while providing households, especially less affluent ones, with tools to reduce their energy bills.

In my country – Portugal – more than 75% of the housing stock (with an Energy Performance Certificate) has a low-ranked energy rating. At DECO, the Portuguese consumer organisation, we see first-hand the direct impact this has on consumers’ quality of life, with people struggling with the heat in the summer and the cold in the winter. Investing in retrofitting is not a priority for most consumers at the moment however, largely due to the lack of support mechanisms, attractive financing offers and general awareness.

But a paradigm shift may be underway. In 2020, the Portuguese Government launched a programme to promote energy efficiency investments. The programme included grants covering up to 70% of the investment, which could include measures to improve insulation, windows, heating, or energy generation. The number of applicants exceeded government estimates.

DECO is now also providing advice to consumers in energy poverty, through a newly-implemented energy support office, an activity part of the STEP project (receiving funding from the EU’s Horizon 2020 programme). Consumers receive advice on what measures to implement, the available support mechanisms in the country and guidance to apply and benefit from these programmes.

Despite the initial success of the government programme, it is still a small drop in the ocean faced with the scale of the problem of energy poverty. Specific measures for citizens in energy poverty, who are unable to make the investments, are missing. Other alternative sources of funding are necessary to fill the funding gaps here. A new funding round is expected in 2021, however. This time, it will carry a significantly bigger budget coming from the Portuguese Resilience and Recovery Plan – part of the European recovery plan – following the COVID-19 crisis.

Apartments in the Portuguese city, Porto

Banking on the Renovation Wave

The lack of green finance products can be an issue in many European countries. However, in Portugal, most banks do already provide loans to help consumers purchase renewable energy equipment, such as heat pumps or solar panels. There is also a legal cap on Annual Percentage Rates (referring to the total cost of borrowing for a year) for consumers buying renewable energy products helping to keep a lid on costs.

There is also a recent green loans project under the Energy Efficient Mortgages project, developed by the European Mortgage Federation and funded by the European Investment Bank (EIB). Some banks have provided loans under the national ‘Casa Eficiente 2020’ programme, co-funded by the EIB – there are limits on maximum amounts and there are reduced interest rates on offer. However, this programme has received criticism since the reduction on interest rates is simply not attractive enough compared to regular consumer credit.

For consumers looking to buy an energy efficient home (or to include energy efficiency works in their home purchase), there are very few green mortgages on offer on the market in Portugal, however; a situation reflected in many other European countries. Only a handful of Portuguese banks currently offer reductions on interest rates or cash-back for loans when buying houses with an A+ or A energy efficiency rating or to fund refurbishments targeting a 30%+ increase in energy efficiency.

Show me the money – making sure funding gets to where it’s needed

Overall, the funding gap for consumers to renovate their homes is now being recognised as a priority by the Portuguese Government and things are beginning to change. Some €300m from the Recovery and Resilience Plan has been allocated to improving the energy efficiency of housing stock, with specific references to energy poverty, which is a first in Europe. However, additional and alternative funding and support mechanisms both public and private, such as green offers and on-bill schemes, will need to be offered so that consumers can enjoy a variety of options to meet their different needs, particularly for consumers in energy poverty.

While Portugal was developing funding programmes before the COVID-19 crisis struck, the question of scale was still an issue. Portugal – and other European countries – have a golden opportunity now to put this right in their Recovery and Resilience Plans. The money is available and national governments should play a central role to make sure it is properly distributed. This will require both financial tools as well as non-financial tools (such as ‘one-stop shops’ to help guide people) to ensure consumers can navigate the funding options and make their home renovation plans a reality.

Posted by Carolina Gouveia