In this series of articles, we’ll shine the spotlight on some of the individual barriers to the energy transition; first up is the split incentive between tenants and landlords.
Our friends at the ENPOR project have extensively documented the difficulties of tackling energy poverty in the private rented sector, and this barrier exists not only for energy poverty and improving energy efficiency, but also for switching to renewables. Across most of Europe, if you are a tenant and you want to install a heat pump or PV panels, without the backing of your landlord you will have few-to-no options.
This is the “split incentive” issue of the private rented sector: tenants don’t have the rights, or often the financial means, to make long term changes to the property, and in any case it would make little sense for them to invest in a property they do not own. The landlord, meanwhile, has little incentive to invest in switching to renewables or improving the property’s energy performance since the energy bills are paid by the tenant. So what are the solutions?
Some federal states in Germany have taken action on a “solar obligation” for some buildings and rooftops, which should only be considered provided the right regulatory frameworks and incentives are in place to ensure extra burdens do not fall on tenants, and that tenants’ rights are protected in the process.
Meanwhile, the potential role of Energy Performance Certificates (EPCs) should also be considered at both EU and national level. Discussion around legal obligations for landlords placing a home on the rental market has already expanded in this direction in France, where the national energy rating of a building or unit will soon need to be above a certain threshold to make a property available for rent; meaning EPCs act as leverage for improving energy efficiency of rental properties. Similar prohibitions have recently been rolled out in Brussels, where landlords can only adjust the rent in line with national indexation if the dwelling is above a certain energy rating. Such obligations, with proper enforcement, could have a significant effect on ensuring that only energy efficient buildings or units, for instance those sufficiently renovated and equipped with RES, are placed on the rental market, which would significantly improve the quality of Europe’s building stock.
Lastly, a potential work-around would be the expansion of collective self-consumption of renewable energy. Tenants should be allowed to access cheap renewable electricity, whether it comes from solar panels on their building or from another renewable installation somewhere else in the country organised through energy sharing.
Our project partner in Lithuania, LCA, has started a collective purchase campaign to buy a segment of a solar park. When you buy (or rent) a segment of a solar park, you can virtually consume renewable electricity directly in your home. Such remote consumption is possible thanks to smart metering across the grid, without the infrastructure changes usually associated with the switch to renewables. However, while this is a promising scheme and holds enormous potential, taxation reasons in Lithuania mean that the consumer still needs to be a home-owner – so there’s still a long way to go.