In 2020, the European Commission launched the Renovation Wave initiative, which aims to double the renovation rate of European buildings in the next 10 years and contribute significantly to the decarbonisation of the EU building sector by 2050. Furthermore, it intends to improve energy and resource efficiency and reduce energy bills while improving the health, comfort and wellbeing of all Europeans, including those who can least afford the necessary investments. The question is how this goal can be achieved, as renovating the whole existing building stock to a very high level of energy and carbon performance entails high upfront costs. In different European countries, such costs can range from 1.5% to 3.5% of national GDP per year over the next 30 years.

While the initiative is new, the challenge is not: it has been discussed for more than a decade in several countries. Some of these countries have also made their best attempts to address it; these efforts do not appear to have resolved the issue, however, as the challenge remains. Nevertheless, such experiences may offer very valuable lessons on what worked, what did not, and what improvements can be made in the next steps.

One such experience is the financing of energy efficiency in multi-residential buildings in Lithuania over the last two decades, which has been recognised as a best-practice example both domestically and at a European level. The action was launched by the World Bank pilot project in 1996, with later funding provided from the national public budget, followed by even more funding from the European Structural and Investment Funds (ESIF) and finally by funds from a growing number of private financiers. While the action was designed to help countries meet their greenhouse gas (GHG) emission-reduction commitments, it generated other benefits in the form of jobs, support to small and medium enterprises, higher bank liquidity and a decrease in energy poverty. This process was not without its challenges, however, and some of these persist. This brief discusses these challenges, along with tested solutions and lessons learned, with a focus on energy poverty.

Over the last two decades, Lithuania accomplished a major transformation in the financing of energy efficiency in multi-residential buildings. It shifted from a publicly funded grant-only approach to one in which public funding is used much more strategically to de-risk private investment and provide essential technical assistance and financial incentives at scale. This addressed multiple national priorities, including energy poverty. Each of these strategic elements was a challenge; meeting these challenges has had a significant cumulative impact.

For more details, please have a look at the full brief document.