The Directive is concerned with reducing greenhouse gas emissions from buildings and improving their energy performance, to achieve a zero-emission building stock by 2050.

What is the background?

The EU first legislated over 20 years ago in the Energy Performance of Buildings Directive 2002/91/EC, when it noted that energy efficiency was key to meeting the Kyoto Protocol.

The Directive contained features now commonplace: energy performance certificates (“EPCs”) (known as building energy rating certificates in Ireland) and requirements around calculating and setting standards for the energy performance of buildings.

The current Directive is based on a more ambitious iteration from 2010, upgraded again in 2018.

Fit for 55 is now strengthening a significant body of legislation to align with the Paris Agreement. The EU identifies buildings as a priority in the decarbonisation project: they account for 40% of final energy consumption and 36% of energy-related greenhouse gas emissions in the EU. 75% of buildings are energy-inefficient but 85 to 95% of today’s buildings will still be standing in 2050. Two thirds of energy used for heating and cooling comes from fossil fuels.

The Recast Energy Performance of Buildings Directive will shortly be published in the OJEU and enter into force 20 days later, with a two-year transposition period.

What are the key points?

The Recast Directive obliges Member States to put mechanisms in place so that from 2030 all new buildings are zero-emission buildings, and with a view to achieving a zero-emission building stock by 2050.

At a high level, key strands include reducing energy consumption in line with the ‘energy efficiency first’ principle (see more in the Recast Energy Efficiency Directive); phasing out fossil fuels from heating and cooling; and increasing the use of renewable energy in buildings.

A key innovation is that this Directive goes beyond reducing emissions from the use of buildings (operational emissions) and now starts to tackle entire life-cycle emissions.

New obligations highlighted by the EU relate to:

• setting minimum energy performance standards for non-residential buildings, by ensuring they do not exceed maximum energy usage thresholds, to achieve a gradual phase-out of worst performing buildings;
• reducing average primary energy use of residential buildings by 16% in 2030 and 20-22% in 2035, with at least 55% of energy reduction to be achieved through renovation of the 43% worst performing residential buildings;
• requiring national roadmaps to phase out fossil fuel boilers by 2040;
• facilitating deployment of solar energy installations in new buildings, public buildings and non-residential buildings under renovation that requires a permit; and
• facilitating sustainability infrastructure in buildings.

Will the methodology for calculating energy performance change?

The common general framework in Annex I for national or regional methodologies for calculating energy performance is further developed. For example, methodologies must now take into consideration capacity of installed on-site renewable energy generation and energy storage, and building automation and control systems and their capabilities to monitor, control and optimise energy performance.

The Commission will be required to issue guidance on calculation of the energy performance of transparent building elements that form part of the building envelope and the consideration of ambient energy (for example energy extracted with heat pumps).

Will provisions for setting minimum energy performance requirements change?

The obligation around setting minimum energy performance requirements for buildings is currently imposed with a view to at least achieving cost-optimal levels. It will now be set, where relevant, with a view also to achieving more stringent reference values such as nearly zero-energy building requirements and zero-emission buildings requirements.

Will provisions for calculating cost optimal levels of minimum energy performance requirements change?

By 30 June 2025, the Commission will revise the comparative methodology framework for calculating cost-optimal levels of minimum energy performance. Member States must calculate cost-optimal levels of minimum energy performance requirements, and they may take into account life-cycle global warming potential (“GWP”) when doing this.

If a Member State finds that minimum energy performance requirements in force are less energy-efficient than cost-optimal levels of minimum energy performance requirements by more than 15%, they will have to adjust minimum energy performance requirements within two years.

What is a zero-emission building?

There is a new definition for ‘zero-emission building’. It means “a building with a very high energy performance, as determined in accordance with Annex I, requiring zero or a very low amount of energy, producing zero on-site carbon emissions from fossil fuels and producing zero or a very low amount of operational greenhouse gas emissions …”.

A zero-emission building cannot cause any on-site carbon emissions from fossil fuels. Where economically and technically feasible, it must offer capacity to react to external signals and adapt its energy use, generation or storage.

Member States must take measures to ensure that the energy demand of a zero-emission building complies with a maximum threshold, to be revised every time cost-optimal levels are revised, and set at least 10% lower than the threshold for total primary energy for nearly zero-energy buildings on the date the Directive enters into force. There are also maximum threshold requirements for operational emissions.

What is a nearly zero-emission building?

The existing definition is developed further so that a nearly zero-emission building is a “building with a very high energy performance, as determined in accordance with Annex I, which is no worse than the 2023 cost-optimal level reported by Member States … and where the nearly zero or very low amount of energy required is covered to a very significant extent by energy from renewable sources, including energy from renewable sources produced on-site or energy from renewable sources produced nearby”.

What is global warming potential?

Life-cycle GWP is a new calculation that represents emissions embodied in construction products, and direct and indirect emissions from use of the building.

GWP will have to be disclosed in the EPCs of new buildings of a certain size from 1 January 2028, and all new buildings from 1 January 2030.

By 1 January 2027, Member States will publish a roadmap detailing the introduction of limit values on total cumulative life-cycle GWP of all new buildings.

What are the requirements for new buildings?

From 1 January 2030, all new buildings are to be zero-emission buildings. The earlier deadline of 1 January 2028 is set for new buildings owned by public bodies.

Until the application of this new requirement, Member States must ensure that all new buildings are at least nearly zero-energy buildings and meet minimum energy performance requirements. Where public bodies intend to occupy a new building they do not own, they must aim for a zero-emission building.

What are the requirements for existing buildings?

As under the current Directive, Member States must take the necessary measures to ensure that, when buildings undergo major renovation, energy performance is required to be upgraded to meet minimum energy performance requirements in so far as technically, functionally and economically feasible.

Non-residential buildings: Minimum energy performance standards

Member States will now establish minimum energy performance standards which ensure that buildings do not exceed a specified maximum energy performance threshold. Each Member State must set maximum energy performance thresholds such that 16% of non-residential building stock is above a ‘16% threshold’, and 26% is above a ‘26 % threshold’. The minimum energy performance standards must ensure that all non-residential buildings are below the 16% threshold from 2030, and below the 26% threshold from 2033.

Residential building stock: Trajectories for progressive renovation

New obligations require each Member State to establish a national trajectory for the progressive renovation of the residential building stock in line with 2030, 2040 and 2050 targets in the National Building Renovation Plan (see more below).

The national trajectory will be expressed as a decrease in the average primary energy use of the entire residential building stock over the period 2020 to 2050. It must identify the number of residential buildings and building units / floor area to be renovated annually.

Member States must ensure that the average primary energy use in kWh/(m2 .y) of the entire residential building stock: (a) decreases by at least 16% compared to 2020 by 2030; (b) decreases by at least 20-22% compared to 2020 by 2035; (c) by 2040, and every 5 years after, is equivalent to or lower than the nationally determined value derived from a progressive decrease in average primary energy use from 2030 to 2050.

At least 55% of the decrease must be achieved through the renovation of the 43% worst-performing residential buildings.

What are the new obligations around solar energy?

Member States must ensure that all new buildings are designed to optimise their solar energy generation potential.

Relevant permit-granting and grid notification procedures in the Recast Renewable Energy Directive apply.

There are deadlines this decade for achieving roll-out of suitable solar energy installations for various structures (ranging from all existing public buildings of a certain size to certain new roofed car parks).

Are requirements around sustainable mobility developed?

More recharging points, pre-cabling and ducting, and bicycle parking spaces will be required.

Member States must ensure that the recharging points are capable of smart recharging and, where appropriate, bi-directional recharging, and that they comply with certain requirements under the Alternative Fuels Infrastructure Regulation.

Member States must provide for measures to streamline and accelerate the procedure for the installation of recharging points and to remove barriers for tenants and co-owners.

What about smart readiness and data exchange?

The Directive builds on requirements for rating the smart readiness of buildings, including development of a smart readiness indicator. This is seen as particularly beneficial for large buildings with a high energy demand, for the purpose of measuring their capacity to use communication technologies and electronic systems to adapt their operations to the needs of the occupants and the grid.

Data will be important. Member States will be required to ensure that building owners, tenants and managers have direct access to their building systems’ data. No additional costs are to be charged for accessing their data or requesting it to be made available to third parties.

Are the requirements around technical building systems further developed?

Yes, Member States’ obligations to set requirements to optimise energy use of technical building systems are further developed. For example, there are requirements around indoor environmental quality standards and the monitoring of systems’ efficiency.

A new definition clarifies that technical building systems are “technical equipment of a building or building unit for space heating, space cooling, ventilation, domestic hot water, built-in lighting, building automation and control, on-site renewable energy generation and energy storage, or a combination thereof, including those systems using energy from renewable sources”.

What is deep renovation?

Deep renovation is a renovation in line with the ‘energy efficiency first’ principle, which focuses on essential building elements and which transforms a building or building unit: (a) before 1 January 2030, into a nearly zero-energy building; (b) from 1 January 2030, into a zero-emission building.

A staged ‘deep renovation’ is seen as a solution to address high upfront costs and hassle when renovating in one go.

Measures aiming to increase deep renovations include enhanced financial and administrative support and renovation passports.

What are renovation passports?

The concern is that a staged deep renovation needs to be carefully planned to avoid one renovation step from preventing subsequent steps.

Renovation passports are intended to provide a clear roadmap for staged deep renovations to help owners and investors plan timing and scope. Member States will be required to introduce a scheme for renovation passports. They may allow for the renovation passport to be drawn up and issued jointly with the EPC.

What does the Directive say about energy performance certificates?

EPCs will be required to detail more information than they do today, as set out in a template in Annex V.

The letter A will correspond to zero-emission buildings, and G to the worst-performing buildings. Member States can define an A+ class for buildings having a maximum threshold for energy demand at least 20% lower than the maximum threshold for zero-emission buildings, and which generate more renewable energy on-site annually than total annual primary energy demand. Life-cycle GWP will be stated in the EPCs for buildings renovated to A+ class.

As is the case currently, the validity of EPCs does not exceed 10 years. Where an EPC below C is issued, building owners would be invited at a future date to a one-stop shop to receive renovation advice.

There are new requirements around the issue of digital EPCs, an EPC database, and access to information and data.

Provisions are further developed in relation to inspection and reporting on heating systems, ventilation systems and air-conditioning systems; independent experts; and certification of building professionals.

What are National Building Renovation Plans?

Member States will be required to establish National Building Renovation Plans to detail the national building stock; to set progress indicators and targets for renovation rates, energy consumption and emissions reduction; and to outline financing measures, investment needs, and administrative resource requirements.

The first draft is required by 31 December 2025 and then every five years as part of National Energy & Climate Plans submitted under the Governance Regulation. They will be assessed by the Commission, the recommendations of which Member States must take due account.

What about financial and technical support?

Member States will be obliged to provide appropriate financing, support measures and other instruments to deliver the investment identified in their National Building Renovation Plans. They will be obliged to make cost-effective use of national financing and EU financing, including the Recovery and Resilience Facility, the Social Climate Fund, the Cohesion fund, InvestEU, and EU ETS revenues.

Member States will be required to promote the effective development and use of funding and financial tools, such as energy efficiency loans and mortgages for renovations, energy performance contracting, pay-as-you-save financial schemes, fiscal incentives like reduced tax rates on renovation works and materials, on-tax schemes, on-bill schemes, guarantee funds, funds targeting deep renovations, funds targeting renovations with a significant minimum threshold of targeted energy savings and mortgage portfolio standards. They will be required to guide investments into an energy-efficient public building stock. They may promote and simplify the use of public-private partnerships.

The Commission will be empowered to establish a portfolio framework for voluntary use by financial institutions to support lenders in targeting and increasing lending volumes. Member States will be obliged to facilitate the aggregation of projects to enable investor access and adopt measures to promote energy efficiency lending products.

Member States will be required to incentivise deep renovation and staged deep renovation with higher financial, fiscal, administrative and technical support and may introduce mechanisms for long-term renovation contracts.

Member States will be required to ensure the establishment of technical assistance, including by establishing one-stop shops to target all actors involved in building renovations. There must be at least one one-stop shop per 80,000 inhabitants, per region, or per one of the other parameters set out in the Directive.

Next steps

Ireland will be required to implement the Directive in domestic law by a date in 2026 (though there is an earlier deadline of 1 January 2025 prohibiting certain support for boilers powered by fossil fuels).

The current Directive applies until repealed two years after the Recast Directive enters into force.

The Directive will have very significant implications for developers, investors, landlords and tenants, who now have a clearer line of sight of the obligations to be transposed in Irish law, and who will wish to factor these into investment strategies and leases. 

The risk of energy inefficiency impacting marketability of buildings is well known, and it is reasonable to predict an acceleration of the current retrofitting trend. This will likely prompt a renewed focus on the contractual arrangements underpinning retrofits, including the contractual incentives for contractors to value engineer proposed design, and the scope to maximise the value of the supply chain in terms of reducing embedded carbon and harvesting the data to vouch for that reduction.

The Directive is now a very detailed instrument comprising numerous mechanisms to drive decarbonisation, and this briefing is not a comprehensive summary. Following through on the scale of change contemplated will require an immense and concerted effort, coordinated at the highest levels of Government.

The Commission will review the Directive in 2028.

The authors would like to thank Michelle Donohoe for her contribution to this briefing.