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Renovating and electrifying buildings strengthens Europe’s economy and energy security


Europe will need to change the way it heats and cools homes to avert a climate crisis and reduce its dependence on fossil fuels. At the moment, energy-inefficient buildings are not renovated fast enough and Europe meets the majority of its heating demand with fossil fuels, with gas boilers being the most used heating technology. 

Electrifying and renovating Europe’s residential buildings can cut gas imports and generate massive benefits for the economy, according to a summary report titled “Building Europe’s net-zero future: Why the transition to energy-efficient and electrified buildings strengthen Europe’s economy” by the European Climate Foundation and the European Alliance to Save Energy (EU-ASE) based on a study by Cambridge Econometrics. 

The report is the result of a year-long process of discussions and analysis between Cambridge Econometrics and an expert panel, which advised on the input data, scenario development and assumptions. The research focused on exploring the environmental, social and economic benefits of various scenarios for reducing fossil fuel consumption in residential buildings in the EU and the UK. 

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By rolling out a wave of climate-friendly renovations and heat pumps in homes, Europe can save the equivalent of a quarter of current Russian gas imports by 2030, significantly reducing its dependence on volatile gas imports and enhancing its energy security. As a result, the annual spending on gas imports is projected to go down by €15 billion within a decade and by €43 billion in 2050.

Upgrading homes could also deliver important social and economic benefits, as Europe recovers from the Covid-19 crisis and households are strained by high gas prices. A shift to energy-efficient and electrified homes would create many thousands of new jobs, boost Europe’s GDP, slash consumers’ energy bills and increase the disposable income of the poorest households.  

There is a clear relationship between the deployment of heat pumps and socio-economic benefits in the scenarios; the larger the uptake of heat pumps, the greater the socio-economic benefits. The transition to energy-efficient and electrified buildings is projected to deliver greater benefits than a shift to green hydrogen for heating.

Key findings

  • Energy imports: The equivalent of 25% (or 1.45 EJ) of the EU’s current fossil gas imports from Russia (~5.5 EJ in 2020) can be saved by 2030 through renovating and electrifying Europe’s residential buildings. As a result, Europe could cut its annual spending on gas imports by €15 billion in 2030 and €43 billion in 2050 and therefore help increase Europe’s energy security.
  • Climate: A large uptake of heat pumps (both in individual heating systems and in district heating networks) is expected to decarbonise Europe’s buildings quicker than relying on green hydrogen for heating. Heat pumps are a mature technology that can be diffused earlier than novel hydrogen boilers. 
  • Health: A shift to heat pumps would lead to a more than a tenfold decrease in NOx emissions by 2050 compared to now. This will help cut air pollution from NOx, which currently causes 40,400 premature deaths in the EU. Using green hydrogen for heating will increase air pollution from NOx compared to electrification since hydrogen boilers emit NOx while heat pumps do not.
  • Energy bills: The average energy bill for heating can be cut in half by 2050 when buildings are renovated and heat pumps become the dominant heating technology. Relying on domestic green hydrogen will lead to energy bills that are higher than in the baseline. 
  • Total cost of owning a heating system: For the consumer, heat pumps, district heating and solar thermal are cost-competitive options due to reduced energy spending, while green hydrogen boilers are the most expensive technology due to high energy costs. 
  • Consumer impacts: The lowest-income households are expected to benefit the most from a switch to heat pumps. In the scenarios relying on domestically produced green hydrogen for heating almost all middle-class and high-income groups lose disposable income due to higher energy costs. Importing hydrogen at lower prices could reduce the negative impact somewhat but it would prolong Europe’s dependence on energy imports. 
  • Economy: Electrifying the heat supply and lowering the need for heating through renovations shows the most favourable GDP impacts, leading to a 0.8% increase in annual GDP in 2030 and a 1% increase by 2050. A transition to green hydrogen heating and a lower renovation rate will lead to lower GDP impacts.
  • Employment: Renovating Europe’s building stock and electrifying the heating supply will help create 1.2 million net additional jobs by 2050, in particular in the construction and power sectors. Relying on green hydrogen heating and low energy efficiency is also projected to lead to additional jobs, but ten times less than in the case of electrification with high energy efficiency. 
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