The decarbonisation of the existing building stock is not only key to achieving climate targets in the European Union – it also represents one of the most powerful untapped drivers of economic growth. An acceleration of renovation activities requires significant productivity gains in the construction sector. Innovation in renovation is crucial to achieve this. However, the need to specifically address innovation in renovation is not yet recognised in policymaking. This study therefore argues that a strategic approach is needed to boost innovation in renovation.  

The transpositions of recently adopted EU policy files, most importantly the Energy Performance of Buildings Directive (EPBD), are important windows of opportunity for EU Member States to direct policy design towards rewarding innovative renovation solutions. Member States should follow a strategic approach which includes three main pillars:  

• Create markets for innovation in renovation through targeted requirements: Regulation is important to create reliable targets for investors, guide investments and generate corresponding market demand. They should be designed to incentivise the deployment of innovative solutions. Most importantly, minimum energy performance standards (MEPS), as outlined in EPBD Article 9, should be implemented in combination with additional incentives to reward innovative solutions and project aggregation. Other key opportunities lie in mandating green public procurement for building renovation in national procurement frameworks, requiring life-cycle assessments, and using digital tools like building information modelling (BIM). 

• Transform the value chain: Policy measures focused on data collection and monitoring – such as the database for the energy performance of the buildings stock (EPBD Article 22) and inventory of public buildings under the Energy Efficiency Directive – will facilitate the digitalisation of the sector. As a result, new business opportunities may emerge. Making good use of digital building logbooks and digital product passports under Construction Products Regulation will further help to link different databases and drive new business models. Public procurement plays a pivotal role here too: Member States should revise their procurement laws to enable digitalisation, e-procurement and performance-based specifications. 

• Develop effective finance solutions for innovation: Financial support to incentivise renovation demand, such as a bonus to top up existing renovation support programmes, will continue to play an important role to scale promising solutions. However, it is important to enable investments by start-ups to develop and scale innovation and SMEs to adopt them. Investments should be de-risked through targeted public financing tools such as grants, venture capital, advanced market commitments, and revenue-based financing. Member States should support early-stage innovation and help businesses – especially SMEs – adopt digital tools.