Overcoming Financial and Market Barriers to Positive Energy Neighbourhoods

Positive Energy Neighbourhoods (PENs) have a huge potential to boost climate-neutral building stock but many barriers need to be confronted. From inflation, lack of funding or financial and construction sectors working in silos, many market barriers need to be addressed so PENs can reach their full potential.

The opportunities offered by PENs are far-reaching : a more climate-neutral building stock, improved comfort and public health for citizens, more climate resilient buildings and helping to alleviate energy poverty and contributing to our energy security. To make our renovation goals a reality while ensuring a just transition, PENs can be a big part of the solution going forward.

However there are still several market barriers to PENs that need to be dealt with. They are threatened by inflation and higher borrowing costs, dissuading citizens from renovation or making it out of reach. PEN pilots rely heavily on public funding, but more substantial private financing will be necessary for PENs to fully develop and scale up.

Sectors working in silos is also a significant market barrier. Construction and finance sectors continue to use different methods to assess investment risk and sustainability performance. PENs would benefit from a common approach for measuring, tracking and reporting projects’ environmental, social and governance (ESG) impacts, at both the building and the neighbourhood level. Extending the EU sustainable finance taxonomy to include both environmental and social criteria could help fully capture ESG benefits and foster investment in PENs.

This policy brief gives an overview of these market barriers to PENs and ways to address them going forward. The full potential of PENs can be realised but only with more guidance, adequate funding and policy support.

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