Affordable Housing through District Heating

In the context of the upcoming Renovation Wave and the Dutch ambition to achieve the country’s climate objectives, on 18th September, our member, the Dutch Association for Housing Corporations, AEDES and Housing Europe co-organised a studio webinar with key EU policymakers. The event was also presented as part of Housing Europe's initiative, Our Homes, Our Deal,  illustrating how the public, cooperative and social housing sector is already leading a Just Transition.

"We need social innovation, public investment and we need good examples. And I am here, looking at Starter Engine. You can set the example. In return, Europe can help with financial and technical assistance to spread this all over Europe," the Head of Commissioner Timmermans' Cabinet, Diederik Samsom said. Commenting on the potential scale up of sustainable projects, he further added: "the ingredients are clear: you need renovation, sustainable heat, you need to coordinate the projects and most importantly, you need to convince the people living there. People who have lower income and who are not busy with climate change."

If appropriately funded, social housing can be the first mover and a catalyst of a just energy transition, the chairman of the AEDES, Martin van Rijn further explained. He also stressed that social housing providers in the Netherlands who own one-third of the housing stock in the country can contribute in terms of volume of the housing stock and the necessary organisation.

Scale, cost-neutrality for tenants, a trust-based government model and the involvement of neighbourhoods have been used as a foundation of the initiative, the Director Energy Transition & Public Affairs at Eneco, Ron Wit stressed. Ciaran Cuffe, Member of the European Parliament (MEP) for the Irish Greens and author of the report “Maximising the energy efficiency potential of the EU building stock”, stressed the potential of the StarterEngine to tackling energy poverty should be used as an opportunity to inspire action beyond the Netherlands. “This will help the vulnerable to people who live in homes that are not in good condition and hard to heat” MEP Cuffe pointed out.

To wrap up the session, Sorcha Edwards, Secretary General at Housing Europe recommended for the Renovation Wave Strategy to use projects working on the ground as a sounding board while paying special attention to the diversity of housing across the continent and solutions to more sustainable homes. The Pillar of Social Rights can also bring social progress and innovation, our Secretary General said.

Replay the webinar.

Get to know the Starter Engine project with this short video.

The report below offers you a detailed summary of the event.

In her State of the Union speech on 16 September 2020, President of the European Commission Ursula von der Leyen presented her vision for a Europe emerging stronger from the pandemic and leading the way towards a new vitality. It then became clear that the European Commission is determined to increase the 2030 target for emission reduction from 40% to at least 55%. 

There is consensus that investing in building renovation can be an important part of the green recovery: creating jobs and cutting emissions at the same time. However, several questions come up: how is this done without raising the cost for tenants? how can we get support for communities? what is the optimal balance between energy efficiency measures and switching to renewables? and what role can social housing providers play?

Making homes more sustainable involves challenges that go far beyond the implementation of technological infrastructure. A just and social energy transition implies getting tenants and home owners on board with the technologies that will shape their homes. This is why transparent financial models that clearly break out the economic responsibility of all actors involved in the process become essential.

In this high-level webinar we looked at how the heating companies approach this challenge hand in hand with social housing providers through the StraterEngine project, a large-scale renovation project born in the framework of the Dutch Climate Agreement that aims to make 100,000 social homes free of natural gas in the period between 2019 and 2022. About half of these homes will be connected to heat networks, mostly in urban areas where this technique is already widely used. This offers the opportunity to take a major first step at relatively low social costs.

In residential areas, heating networks are an effective system to provide collective heating. However, such a large project requires the involvement of many parties from housing associations and municipalities to heating companies. This is how the Starter Engine framework started, to build heating networks in a collaborative effort while taking affordability, security of supply and sustainability into account. In this project, the social housing stock provides the scale and social commitment needed for the energy transition to be inclusive for low-income groups, large scale and cost-efficient.

Diederik Samsom, Head of the Cabinet Timmermans’, opened the session as one of the founding members of the Dutch Climate Agreement between electricity, industry, built environment, traffic and transport, and agriculture. The agreement is based on the principle that reducing carbon emissions must be feasible and affordable for everyone. According to Samson, the StraterEngine is at its essence decentralised, consensus-driven and based on mutual cooperation, a set of features intrinsic to the European DNA and that make its governance model replicable to other European contexts beyond the Netherlands.

“It was clear from the start that if you want to make a difference on the 7 million buildings in the Netherlands, you have to start with the over 2 million dwellings owned by social housing corporations because that is the scale that is needed”

Diederik Samson, Head of Cabinet Timmermans’

While the COVID crisis put all European economies on hold and the climate goals set by the European Green Deal into question, the clear determination to recovery from the crises left by the pandemic also presented Europe with opportunity to build back a green society. Against the thinking of many, sustainability and economic growth can indeed go hand in hand in a combined path thanks to technology and the great cost reductions in the renewable energy sector in the last decades.

In this context, the EU Green Deal had to be adapted to the new demand for recovery: all elements from the investment plan that focused on employment and growth were put at the forefront and were given priority. The Renovation Wave was of them.

“We have an excellent opportunity here – to combine the need for a fast recovery with the need for a sustainable future, and this is provided by the Renovation Wave. Let’s make this a truly European project and work on it together for the next few years.”

In his speech, Samson highlighted that the European Union is there to provide energy transition with the public investment ingredient, financial help and technical assistance needed to spread models such as the StarterEngine all over Europe.

“If we now start retrofitting 210 million buildings in Europe and if we do that fast, we deliver enormous amount of jobs and also economic growth while at the same time providing the owners or the people living in those houses a lower energy bill which is important in times of diminishing purchasing power.”

Diederik Samson

Martin van Rijn, chairman of AEDES (the Dutch Association for Housing Corporations), introduced the the three-fold approach of the Dutch Climate Agreement for sustainable housing: (1) the StaterEngine in the short-term (2022) to get 100,000 homes off natural gas; (2) the district approach in the long term, municipalities have to set “Transition Visions” to remove entire neighbourhoods from natural gas: and (3)  a governmental study on the financial viability of the social housing sector to meet the Paris Agreement and Renovation Wave targets for 2050.

If appropriately funded social housing can be the first mover and a catalyst of a just energy transition. The sector has the volume and the organisational level required, as demonstrated by the StraterEngine. 

Overall, in the Netherlands homes are mostly heated by gas. In fact, Dutch legislation pretty much gas-based and district heating is a relatively new alternative. The StarterEngine is bridging this regulatory gap by covering the conditions for the transition to district heating and at the same time kick-starting the district approach as well.

Ron Wit, Director Energy Transition & Public Affairs at Eneco, stressed the four most relevant agreements entailing the StraterEngine framework:

1. Focusing on scale. In the Netherlands, it is the social hosing sector the one providing an organised scale. The start should take place in cities with an existing heating network where the costs are relatively low.
2. Cost-neutrality for tenants. Tenants will not pay more than their gas bill at the moment they switch to the sustainable heating option.  This essential to get the tenants support in the project.  The total cost of the project should be based on a “cost price plus” basis, offering a reasonable return rate for the heating company and a decent cost for the housing sector.
3. A trust-based governance model. A transparent business model that offers an insight into the costs, benefits and risks that stakeholders are committed to.  
4. Getting all the neighbourhood involved. the surrounding neighbourhood of the social housing stock where the district heating is connected. Private owners in the area benefiting from district heating will be presented with the same energy offer to make scale and to reduce average cost of the project.

The key starting point of the district approach in the Netherlands is that municipalities are required to draft a Transition Vision for 2021. In these, they will set out what districts will be removed from natural gas, in what time and what alternative should be implemented.

“The content of the StarterEngine is not translatable but the process is. Starting with the Climate Agreement at national level, and then commitment of all parties and negotiating the interest of every party. In every region, the content will be different.”

Ron Wit, Director Energy Transition & Public Affairs at Eneco

Emile Klep, Director of Dutch Housing Association Woonplus, described the experience of the district of Groenoord, Schiedam (Netherlands) in transitioning to district heating. The district was chosen as one of the front-runners in the energy transition because of its high-urban density and proximity to the international harbour of Rotterdam, a big producer surplus energy. In this case, district heating was the best alternative for the energy transitions in the city.

In Groenoord, the StraterEngine framework was used in 3 ways:

• As an accelerator of the energy transition: connecting 6 000 housing units to district heating in a short period of time.
• The subsidy received from the StarterEngine was used for the connection of the housing blocks to guarantee a controlled rent increase for tenants in the neighbourhood. The rent will never increase above their savings in the energy bill.
• The Starter Engine inspired a collaborative approach with other parties: cities, Eneco work in a transparent way to share business case principles.

According to Emile, when developing an effective district approach for the entire neighbourhood it is important that all residents were treated equally. Generally, social housing providers have an investment advantage over private homeowners because of the large scale of their stock. In this sense, a way to guarantee the wider involvement of the neighbourhood is that social housing providers assume the one-off connection costs to provide private homeowners with more investment flexibility to connect to the heating system at their own convenience. This is the so-called “temptation” approach.

Another key element for Woonplus in making the transition to district heating was adopting a “non-regret strategy”, this is connecting to district heating system without talking costly measures or unnecessary for a certain moment in time. The connection to the district heating system has to happen before any further insulation measures. In fact, Emile recognised the combination of both solutions as essential, as well as the order in which they are implemented.

“A key aspect of developing sustainable neighbourhoods is that home owners and tenants do not have the feeling that others are deciding for them. People in the neighbourhood should have a say from the beginning in the technologies to be used and how it will be done. Municipalities not only have to provide the subsidies and the communication but also the democratisation and involvement of tenants and home owners from the beginning”.

Ron Wit, Director Energy Transition & Public Affairs at Eneco

Ciaran Cuffe, Member of the European Parliament (MEP) for the Irish Greens and author of the report “Maximising the energy efficiency potential of the EU building stock”, stressed the potential of the StarterEngine to tackling energy poverty should be used as an opportunity to inspire action beyond the Netherlands. “This will help the vulnerable to people who live in homes that are not in good condition and hard to heat” pointed Ciaran.

In fact, in the framework agreement, a cost-benefit analysis was done for all the heating technologies for all neighbourhoods in the Netherlands. This is important for energy poverty because the most cost-effective technologies are selected for each neighbourhood.

“The technologies will be different in each Member State but the ability to bring different institutions and people together is important. We should have started yesterday; we have to bring people with us on the journey. StraterEnfgine is the perfect analogy, boost things and moving really fast”

Ciaran Cuffe

In the same line, Paul Voss, Managing Director of Euroheat & Power, it makes sense to renovate until it is no longer cost-effective.

Karlis Goldstein, EU Policy Assistant at DG ENER, advocated for a democratic energy transition with solutions that are accessible to all strands of society and encourage behavioural change easily. This is why the involvement of regions and municipalities is very important to engage with citizens. For Karlis, projects like the StraterEngine should pack the complexity of renovation that people discard into a ready-to-go solutions at the doorstep.

To wrap up the session, Sorcha Edwards, Secretary General at Housing Europe, put a stress on the diversity of the social and affordable housing systems in Europe. Not every country has such a strong and dynamic social housing system as in the Netherlands. A just energy transition requires a higher investment in social housing from national, regional and local governments as a vital social right.

Social and affordable housing is at the intersection between social progress and social and environmental innovation. During the COVID pandemic, housing was at the first line of defence. If social and affordable housing is provided with the right framework and support, the sector can bring a transition that is not just environmental but also social.

“Housing is a necessity to be included in society. Shelter allows people to take part in education and be employed. Without quality accommodation people are not included in society.”

Sorcha Edwards, Secretary General at Housing Europe

A recommendation from Housing Europe to the European Commission is to support the practices already working on the ground such as the StraterEngine and avoid a prescriptive approach in the Renovation Wave. Diversity should be embraced with one European strategy and a hundred types of roadmaps.