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tenant dilemma
Energy Policy 63 (2013) 355–362
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Energy Policy journal homepage: www.elsevier.com/locate/enpol
Sustainable renovation of residential buildings and the landlord/tenant dilemma Björn Ástmarsson, Per Anker Jensen n, Esmir Maslesa Technical University of Denmark, DTU Management Engineering, Produktionstorvet Building 424, DK-2800 Lyngby, Denmark
H I G H L I G H T S
There are plenty of opportunities to overcome the landlord/tenant dilemma. The principal/agent problems can only be overcome with a package solution. An array of different tools must be integrated and used in cooperation. Legislative changes, financial incentives and better dissemination of information.
art ic l e i nf o
a b s t r a c t
Article history: Received 18 March 2013 Accepted 9 August 2013 Available online 3 September 2013
The landlord/tenant dilemma arises when the interests of landlords and tenants misalign and is one of the greatest barriers hindering the development of sustainable renovation of residential buildings in Europe. The aim of this research is to investigate how regulatory changes and contractual solutions can help solve the landlord/tenant dilemma in relation to sustainable renovation of residential buildings, and how the general awareness of sustainable renovation can be increased. Particular focus is on whether tools like energy performance contracting and energy labeling can help solve the landlord/tenant dilemma. The research was done in relation to the specific situation in Denmark, but theory, information and experiences from other countries were included. The results show that there are plenty of opportunities to overcome the landlord/tenant dilemma, but principal/agent problems can only be overcome with a package solution. In the Danish national context the package solution must consist of legislative changes, financial incentives and better dissemination of information. Therefore, an array of different tools must be integrated and used in cooperation to overcome the dilemma. & 2013 Elsevier Ltd. All rights reserved.
Keywords: Sustainable renovation Residential buildings Landlord/tenant dilemma
1. Introduction Buildings account for approximately 40% of Europe's total energy consumption (EU, 2010) and because of their long lifetime many are and will become energy inefficient and technically obsolete. Sustainable retrofitting and renovation, also known as energy renovation, is therefore of great importance. The energy inefficiency of a large part of the current building stock is consequently a great contributor to the current climate changes. In addition, the building sector is expanding and is therefore likely to increase its energy consumption (EU, 2010). Thus reducing energy consumption in buildings is vital, not only for the environment, but also to minimize energy dependency. There are vast opportunities to take financially profitable measures to improve energy efficiency which are not being realized in current n
Corresponding author. Tel.: þ 45 45251674. E-mail addresses: [email protected] (B. Ástmarsson), [email protected] (P.A. Jensen), [email protected] (E. Maslesa). 0301-4215/$ - see front matter & 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.enpol.2013.08.046
markets. With rising energy prices, which increase the economic importance of energy consumption and a shift in mentality towards energy efficiency, the awareness of the subject has increased significantly in recent years. The greatest problem is however to convince decision makers such as building owners, property investors and facility managers to implement profitable solutions. The questions are therefore how can building owners/facility managers be motivated to renovate buildings for better energy performance, how can sustainable retrofitting and renovation be brought to the market, and how can sustainable retrofitting and renovation be further motivated by economic reasons? The answers to these questions can vary a lot depending on the owners, the occupation and types of buildings and the national context. This paper therefore focuses on Danish rented residential buildings where one of the main barriers is the landlord/ tenant dilemma. The aim is to give an understanding of why the problem occurs and how it can be overcome. There is however no one simple solution to the dilemma and therefore many concepts, tools and solutions have to be considered.
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A amount of research has been made on why sustainable retrofitting and renovation is not being realized. The research has mainly focused on identifying barriers to sustainable retrofitting and renovation, which has led to the conclusion that the problem is not a lack of technical solutions but rather due to informational barriers and lack of economic incentives. One of the largest barriers is the landlord/tenant dilemma which can be both informational and economic. CONCITO (2011), Denmark's green think tank, in 2011 published a report on the dilemma. The report recommended regulation and policy changes to overcome the problem. The findings of this paper are not intended to replicate the results of the CONCITO report but rather build on it by focusing on some of the specific tools that can be used to overcome the problem. The European Union (EU) has encouraged the use of energy labeling and energy services to achieve energy efficiency in buildings. Consequently, energy labeling and Energy Performance Contracting (EPC) and ESCO (Energy Service Companies) concepts (in the following grouped together as ESCO) have been developing and gaining importance in the Danish renovation market. This paper will therefore mainly focus on how these established tools along with a few prospective tools can help in overcoming the landlord/tenant dilemma. Hence, the research questions are how can regulatory changes and contractual solutions help solve the landlord/tenant dilemma? How can ESCO contracts help solving the landlord/tenant dilemma? How can energy labeling help solving the landlord/tenant dilemma? And, how can the general awareness of sustainable retrofitting and renovation be increased?
2. Methodology The landlord/tenant dilemma occurs when a landlord and a tenant have difficulties in agreeing upon a common strategy for energy-efficiency improvement of a property. In Denmark, tenants typically pay for the energy consumption of the property, which highly depends on the condition and the infrastructure of the building and how it is used. As the landlord does not pay for energy consumption, he has few incentives to invest in the energy efficiency of the property. However, sooner or later, energy renovations are required, and in most Danish private-owned buildings investments in energy renovations are made by the landlords, but fully financed by the tenants through rent increase. As tenants are not the property owners, most of them are having difficulties in seeing why they should fully finance something that does not only benefit them. On the other side, landlords are claiming that most of the benefits of energy renovations are going directly to the tenants, and use that as an argument for increasing the rent. The challenge here is to find the “right” balance between landlord's and tenant's interests in a specific case, and figure out how much value for money different parts really obtain after the energy renovation is completed. The above-mentioned problem was researched by investigating the background of sustainable retrofitting and renovation of buildings and the landlord/tenant dilemma in relevant literature. The theoretical framework is based on organizational economics including the principal-agency theory and related concepts (Milgrom and Roberts, 1992). Based on the aforementioned CONCITO report and suggestions by the EU, possible solutions to overcome the problem were investigated. To build upon the information obtained through the literature research, seven interviews were conducted in the spring of 2012 with several parties who could provide information and insight into energy renovation and what parts of the theory could be used in practice. The selection of the interviewees aimed at gaining information and opinions from various parties with experience and knowledge about the tools and methods that can possibly overcome the landlord/tenant dilemma. The interviewees
comprised of a consulting engineer, a representative from the think tank CONCITO, a representative from the Danish Property Federation, an ESCO contractor, a researcher, a representative of a municipality with an ESCO contract and a representative from a housing association with an ESCO contract. The interviews were semi-structured with a list of themes and questions prepared for each interviewee but some questions were omitted and new added during the interviews to provide open discussion on the topic. Research is additionally consolidated by 10 interviews carried out in connection with ACES, a European project about the promotion of sustainable retrofitting and renovation in the early stages (Jensen et al., 2013). Finally, a case on ESCO in a Danish municipality was studied to give insight into the pros and cons of ESCO in general and to reveal the strength and challenges of the concept to see if it is adaptable to residential housing.
3. Literature review 3.1. Retrofitting and renovation of buildings Retrofitting of buildings is the process of replacing or adding parts of the building shell or installations while renovating is restoring the looks and performance of building parts to their original state or better. The need for renovation arises when buildings start to age, because of deteriorating materials and other external influences such as weather. The building's initial quality, use and maintenance also significantly affects, when the need for renovation arises. In addition, if buildings are not maintained sufficiently there can be an accumulated need for renovation. Lastly, renovations can be initiated when buildings need to be improved or transformed to meet the demands of new occupants or operations. Energy renovation is renovating and/or retrofitting with the aim of improving the energy performance of a building, i.e. sustainable retrofitting and renovation of a building. In addition to lowering the energy consumption, energy renovations should guarantee the market value of the buildings with rising energy prices and increased requirements in building regulations (BiD and GI, 2011). In northern Europe heating and electricity account for the majority of buildings' energy consumption, therefore most energy renovation measures aim at improving the buildings' performance in relation to thermal losses and electricity consumption. These measures include e.g. improving the thermal insulation of building components, replacing windows and glass, replacing technical installations, changing energy supply, and improving the operation of the building (DTU-BYG, 2010). 3.2. Stakeholders The primary stakeholders in sustainable retrofitting and renovation of buildings are the owners, facility managers and occupants. The building owner will have to invest in the renovation and is compensated with the increased value of the building and possibly higher rent income. The occupant(s) will get lower energy consumption and hence a lower energy bill, in addition the indoor air quality and comfort are likely to improve. If the occupant is a tenant the rent will probably rise to pay back the owner's investment. The government is also a stakeholder as its goal is to decrease the carbon footprint of the state. The government might though have to spend some money to initiate the less profitable renovations. In Denmark, energy suppliers are obliged to contribute to significant annual savings and can therefore gain from energy savings. However, less energy consumption means less income for them. With increased energy renovations the building and renovation industry gets more production and sales, and consultants and contractors get more work. Increased renovations
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would probably also spur research and development in the field. Reduction of energy consumption also benefits society as a whole as it decreases energy dependency while improving the building stock. Increased production, research and development are also likely to lower prices of the products and improve the quality (BiD and GI, 2011). 3.3. Reducing energy consumption The reduction of energy consumption in buildings has been proposed as a hierarchical process. For example, Xing et al., (2011) propose that firstly the building envelope should be retrofitted to higher standards, secondly energy efficient equipment installed and finally renewable power should be microgenerated on-site with smart grid connections and control. The energy renovation itself is a big step towards an energy efficient building. However, without taking the behavior of the occupants and the operation of the building into account there are no guarantees for achieving the desired energy efficiency. 3.4. Barriers There are a few barriers hindering the development of sustainable retrofitting and renovation in buildings. In the Danish building renovation market these barriers can generally be divided into economic and informational barriers. The most significant economic barriers are lack of financial incentives and life cycle perspectives. In addition, there is a ‘Chicken or the egg’ problem which happens because development of standard solutions, tools and methods does not take place due to lack of demand. Without demand there are few economic incentives to develop the tools and methods further. The most important informational barriers are too little political consciousness, lack of overview and common direction amongst the main stakeholders and lack of overview of the potential for energy renovations and where to prioritize. Lastly, new constructions get more attention and are considered more exciting than renovations (Advice A/S, 2011). Because of these barriers, many cost effective energy efficient investments are not being made. This would not be a surprise if the investments were relatively few or if there was only a small energy saving potential (Brown, 2004). Instead these barriers create a difference between the level of the actual energy efficiency and the possible level of cost effective higher efficiency. This difference is often called the efficiency gap (IEA, 2007). The efficiency gap not only has financial repercussions for energy consumers but also environmental and macroeconomic consequences (Brown, 2004). A combination of the aforementioned barriers creates the landlord/tenant dilemma which is one of the largest contributors to the gap. 3.5. The landlord/tenant dilemma The landlord/tenant dilemma occurs when the landlord provides the tenant with the housing, appliances and installations but the tenant pays the energy bills. The landlord does not want to invest too much money in energy efficiency while the tenant wants to lower the energy costs (IEA, 2007). The tenant (principal) pays the landlord (agent) rent for using the property. The tenant typically also pays for the energy consumption of the property which is controlled by the condition and infrastructure of the building and how it is used. As the landlord does not pay for energy consumption there are few incentives to invest in the energy efficiency of the property. This does not change even though energy prices rise and therefore the energy consumption is in some way isolated from the energy prices (IEA, 2007). No single regulation or informational instrument alone will solve the problem. Therefore there is a need for a package solution that
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addresses the problem in its national context and within its sector. In the Danish context CONCITO (2011) suggested that the landlord and tenant need to agree on how the cost of energy renovations should be divided, energy renovations should be directly funded/ subsidized to improve the economic benefits, barriers in the legislation should be removed to balance the incentives of the landlord and the tenant, and a reliable, independent preliminary consultation should be guaranteed for both landlords and tenants. In addition it is recommended that the least profitable projects should be the most subsidized and the municipalities should be a central actor in coordinating and funding energy renovations.
4. Tools and solutions 4.1. Mandatory energy savings The European directive on energy end-use efficiency and energy services in 2006 encouraged to enhance the implementation of energy services and energy efficiency measures by making it compulsory for energy supply companies to participate in the measures (EU, 2006). In 2006 all Danish energy companies responsible for providing and distributing electricity, natural gas and district heating and the oil companies were obliged to contribute to 2.95 PJ of energy savings every year. In recent years the mandatory savings have been increased and this has become the main economic incentive for energy renovations in Denmark (CONCITO, 2011). The companies achieve the savings by for example advising on energy savings and directly funding energy renovations. They are however not allowed to profit from the savings and therefore the clients of the companies end up paying for them through the energy price. The achieved savings have to be as effective and cheap as possible and are therefore benchmarked to see how the energy companies are performing. Savings in fossil fuel energy sources with long lifetime get the highest benchmarking factor as they have the biggest environmental influence. 4.2. The Danish rent act The rent in most Danish residential buildings built in 1991 or earlier is determined by the rules about ‘value of the premises’ or ‘the cost related to the operation of the building’. These rules are complex and based on estimations which can make the determination of rent very difficult. These rules also mean that landlords are missing incentives to implement energy efficient measures even though they are profitable and therefore contribute significantly to the landlord/tenant dilemma. General maintenance of the building is usually the responsibility of the landlord. The rent can therefore not be increased because of the cost of maintenance, but it can be if the value of the premises is being improved, i.e. with major renovation. Energy savings can therefore be interpreted as improvements for the tenant. It is however not clear how much the rent should or can be increased (CONCITO, 2011). Associations of building owners, landlords and tenants agree that improving the legislation is necessary to enhance implementation of energy efficient measures. The main recommendation is to make it easier for the landlord to increase the rent to pay off the investment and instead the tenant will get all the benefits of the energy savings. The model assumes that the landlord and tenant will agree on a rent increase when the energy efficiency measures are implemented and the rent will decrease again to the value of the premises when the investment is paid off. What the associations cannot agree on is how much the rent can be increased and if a minority of the tenants can appeal the rise in rent (CONCITO, 2011). In October 2012 the Danish minority government made an agreement with a majority of political parties in the parliament
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about introducing new laws with the purpose to overcome the landlord/tenant dilemma. This new legislation has not yet been introduced, so it is uncertain whether it will have the intended effect. 4.3. Green leases An alternative solution is for the landlord and the tenant to enter a green lease. In the green lease the landlord and the tenant make a voluntary agreement to decrease the consumption of heating, cooling, electricity and water. This usually means that the tenant beforehand accepts higher rent for a period of time and gets the benefits of energy savings instead. The specific requirements of green leases can include agreement on improvement of the leased premises, requirements for the operation of the premises and requirements for the use of the premises. The lease should eventually lead to reduced costs for both parties, a better image for the landlord's company (and possibly the tenants), a better compliance with future legislations on energy consumption and increased communication between landlord and tenant. A baseline for the agreement could be the energy label of the premises and the suggested improvements in it (Jonasson, 2008). In general, green leases require cooperation between the landlord and the tenant and the alignment of their incentives. 4.4. Responsible property investment The green lease can be a part of the landlord's Responsible Property Investment (RPI) strategy. The concept of RPI encourages property investors to consider the triple bottom line (economic, environmental and social sustainability) as a part of their decision making process about acquisition, management and sale of buildings (UNEP FI, 2011). Property investors can however find it hard to include sustainability in their decision making as there is lack of tangible evidence that it increases the value of the property and many sustainability rating tools cannot be used to compare one building to another (Burrows, 2011). The property investor can though use RPI when acquiring a real estate. In selecting the property, the investor can rely on the building's energy label, green building certifications and due diligence as RPI considerations of evaluating the investment. Finally, green leases and green building certifications can be considered a RPI issue in managing the investment (UNEP FI, 2011). 4.5. Energy labeling The Danish energy labeling scheme (EMO) is a part of the national implementation of the European directive on the energy performance of buildings (EPBD). The recommended improvements in the label should both cover measures to be implemented with major renovations and measures to improve individual building elements. The label should also instruct the owner or the tenant of the building where to get further information on the improvements and should not last longer than 10 years (EU, 2010). According to Danish law all buildings are supposed to be energy labeled. Smaller buildings are to be labeled when they are sold while buildings larger than 1000 m2 are always supposed to have an energy label. The label is usually valid for 10 years. However, if the energy consultant finds savings with payback time of less than 10 years which account for more than 5% of the energy use, the label is only valid for 7 years (Energistyrelsen, 2012). There are though no consequences if buildings are not energy labeled. The purpose of the label is for building owners, tenants and buyers to see clearly the condition of the building regarding energy efficiency and create incentives for energy saving improvements and renovations (Ea Energianalyse, 2008; CONCITO, 2011).
In general, newer buildings have the best energy label due to increased requirements from building regulations and improvements over time in tools and methods in the construction industry. Consequently the biggest possible improvements are found in older buildings. The energy label can clearly be used as an instrument to spur energy renovations by showing what improvements can be implemented and the effect they can have. There are though more ways to use the energy label to encourage building owners to implement energy efficient measures. A lack of financial incentives is one of the main barriers for energy renovations. One way to use the energy label would be to make it obligatory before building owners could get direct subsidies or other financial incentives. Alternative financial incentive could be to tax houses based on the energy label or the CO2 emissions calculated in it. This could spur energy renovation but it could also have adverse social effects for low income households unless it is linked with income taxes. 4.6. ESCO Energy service companies (ESCOs) are companies that develop, install and possibly finance performance based projects aimed at increasing energy efficiency (Jensen et al., 2011a, 2011b). The term ESCO can however, in spite of the EU definition, be understood differently between countries (Bertoldi et al., 2010). In the Danish national context ESCOs mainly use energy performance contracting (EPC). The ESCO concept gives a possibility to radically upgrade the building stock. It offers the resources to gain high energy savings without possessing the skills, knowledge or capacity to do it inhouse. In addition, some energy saving measures are getting more and more technically complex which require even more specialized knowledge which can be provided by ESCOs. The ESCO concept also goes further than the traditional consultation and implementation of energy renovations by making the financial benefits of the project dependent on its outcome (AlmenNet, 2011). ESCO projects in residential housing are rare and applying the concept in the residential housing market poses many challenges. First of all ESCOs are reluctant to guarantee savings in residential housing as it is hard and expensive to control human behavior. The transaction cost of ESCO contracts therefore mean that the required sizes of houses and/or energy bills need to be larger than most residential housing offer (AlmenNet, 2011; Bertoldi et al., 2006). There have however been some attempts to adapt the concept to the residential market. ESCO-light is a Danish concept with the aim to make energy renovations easy to do and the information about energy savings reliable which should give the building owner a project with stable costs and a confidence in gaining savings. The key part of the model is to get actors on the market, such as financial institutions, energy suppliers, installation firms, contractors, etc., to join hands and offer their services to house owners. There are though no clear answers to which ESCO-light form works best, as energy renovation projects and the main actors in it can vary a lot (Energistyrelsen, 2010). There is some interest in using the ESCO concept in the Danish social housing market. For social housing the energy renovations have to be profitable for both the tenants and the administration of the social housing department. The investments are therefore paid back with energy savings and possibly combined with savings in maintenance. People living in Danish social housing have generally low income and are thus very sensitive to any increase in rent. The democracy of the tenants in social housing (AlmenNet, 2011) requires the communication between the administration and the tenants to be very good. Hence an ESCO solution can be a good way to give credible and trustworthy information to the tenants. The private rented housing generally has greater barriers for energy renovations than
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social housing. The alignment of incentives is not as common as in the social sector and the types of owners are not as identical (BiD and GI, 2011). In addition, a minority of occupants opposing renovation can easily delay the project. ESCOs can also be reluctant to guarantee the energy performance because the behavior of the occupants has too much influence. This means that the transaction costs will be too high for the ESCO. Therefore the EPC model is only applicable for very large residential buildings or large customers with multiple buildings. Then all tenants will have to agree to a rise in rent or with a green lease. It is therefore necessary to find ways to reduce the transaction costs of ESCOs in order to reach small and medium clients in private rented housing. Project bundling is one way to do that as it better suits the business model for the ESCOs and gives a better mitigation of risk. It can however prove difficult to reach a joint agreement between all the building owners for actually implementing the project (IEE, 2011). Another solution might be to adjust the EPC model to reduce the transaction costs. That could make it more feasible both for the building owner and the ESCO. Replacing the guarantee phase with a guaranteed energy label could be the answer (IEE, 2011). The energy label would however need to have more economic value and reliability for the building owner to replace the guaranteed savings. The tenants could then be given a seminar in the operation of their premises and would be responsible for their own energy consumption. Delivery Contracting (DC), also known as Energy Supply Contracting could also be feasible for the residential sector. The ESCO then commits to supplying a set of energy services for a given price. An example could be a delivery of 21 1C indoor temperature during the contract time for an annual amount of money. The ESCO could then implement energy efficiency measures to expand its profits during the contract time. This contract model does not require as much baseline consumption as EPC to be profitable (Bertoldi et al., 2006). Aside from the high transaction costs compared to the energy savings the private renting sector is also hindered by a lack of stability. Tenants only live in the apartments for a limited time and in multi-apartment housing the duration of leases can vary a lot. It is therefore hard for ESCOs to propose long term contracts. This could however be overcome by connecting the energy service contract with the premises rather than the client (IEE, 2011). Third party financing operators (TPFO) with payments attached to the energy bill rather than the owner of the building could improve the feasibility of EPC in residential housing. The TPFO could structure the financing and outsource the implementation phase to relevant market actors (IEE, 2011). An example of a TPFO framework for housing used as inspiration in this study is the Green Deal, which was introduced in the UK in October 2011. The framework attaches the investment in energy efficiency to the building rather than the owner. The Green Deal is based on a successful pilot study called PAYS and is designed with customer needs in mind. Therefore there are no upfront costs for the building owner and the investment is paid back through the energy bill (DECC, 2012).
5. Discussion and proposal 5.1. Evaluation of possible measures Return on investment is the main motivation for building owners and facility managers. The availability and security of profitable energy efficiency investments are therefore imperative for increasing energy renovations. Rising energy prices are constantly increasing the profitability of energy efficiency improvements and also increasing the amount of profitable investments. However, price signals alone are not enough to increase energy renovations in the private
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rented residential sector as many of the consumers, who also pay for the energy, have no say in the efficiency of energy using equipment. The most effective way forward seems to be increasing legislative requirements and labeling of products. The legislation is changed to overcome economic barriers and create financial incentives while the energy labeling helps with informational barriers. This means amongst other things tightening the building codes and increasing the number of energy labels of products. Additional information programs can then be used to encourage building owners and occupants to implement energy efficient measures to exceed the given standards. The interviewees agreed that the tools (ESCO, energy labeling, etc.) give increased focus on what could and needed to be done in order to achieve goals, which increases the possibility of success. The interviewees also agreed that legislation is needed to overcome the problem although not all agreed on how the legislation should be structured due to different interests. In order to be able to achieve the goals of energy savings and consequently carbon emission reduction in buildings, governmental institutions and municipalities have to lead by example and show private building owners the successful ways to achieve the energy efficiency and how they can be effectively implemented. The institutions and municipalities can create demand by gaining experience, knowledge and trust in the desirable concepts, tools and solutions and subsequently share it with other market actors. Increased demand in the market can spur the development of the tools and methods which could then lead to even better solutions. The quality, reliability and implementation of energy labeling can increase the demand on the client side. The visibility of the energy label is therefore important for both landlords and tenants. An efficient initiative could be making the energy label a mandatory attachment to every lease so both landlords and tenants would have the same information about the premises. If both parties are aware of the investment required to improve the energy consumption and what the calculated savings will be, it could significantly reduce the amount of asymmetric information (Milgrom and Roberts, 1992). Sufficient quality of the label is also imperative to provide landlords and tenants with information of equal quality about the condition of the leased premises. In addition, if the numbers for the actual energy consumption of the building are available, it is easier to realize if the calculated savings and proposed improvements in the label are realistic. This can create a demand from tenants for energy renovations and a platform for an agreement on a green lease or energy efficiency improvements between the parties. The mandatory energy saving scheme is the main economic incentive for renovations provided by the Danish government. Changing the scheme to emphasize on energy renovation of buildings could be effective. This could be implemented as a TPF framework in line with the Green Deal in the UK mentioned in Section 4.6. Instead of a certified consultant from the TPFO, an energy label could be used as a prerequisite for each project. The energy supply companies would then be the TPF providers and cooperate with other companies to implement the improvements. This would require some legislative changes to oblige the energy supply companies to achieve certain savings within the residential building sector and also to include the payment to the TPFO through the energy bill. This can in some way help financial institutions in seeing energy savings as a secure source of income. The savings are though not guaranteed and therefore the client is still responsible for his own behavior. An alternative solution would be to change the benchmarking system of the mandatory energy savings. It could be changed so residential buildings would have a higher factor than commercial or industrial buildings. This could be taken even further by increasing the factor on non-profitable measures in buildings with the poorest energy
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performance. This could prevent companies from only taking the low hanging fruits in energy efficiency investments. An increased factor on the houses which require non-profitable solutions to improve the energy performance could also be added to the aforementioned TPF framework. Improving the legislation around the rent act seems to be imperative to overcome the landlord/tenant dilemma on the Danish residential renting market. The legislation needs to give clear indication of how much landlords can increase the rent and make some sort of tenant democracy when accepting or rejecting the proposed rise in rent. It was, as mentioned in Section 4.2, decided in the autumn of 2012 to modify the rent act in order to solve the landlord/tenant dilemma, but it is still to be seen if the new regulation will have any major effects on energy renovations of private rented housing. Independent of that, there is always the possibility of landlords and tenants entering a voluntary green lease. The market for green leases is however unlikely to evolve without demand from tenants. In Australia, where the market for green leases is strong, it developed because authorities led by example and obliged public institutions leasing premises to enter green leases (Jonasson, 2008). From there on tenants in private rented buildings started to request green leases. Danish government institutions and municipalities could therefore be central actors in creating this demand in the private sector. The energy label could also be very important regarding green leases by suggesting a green lease as an attachment to the current lease. The suggestion would include a certain amount of rise in rent for a given payback time. When the improvements are paid back the green lease would be terminated. ESCO contracts could be a very useful tool to achieve energy savings in rented residential buildings. The main reason for lack of ESCO activities in residential housing is too high transaction costs. The transaction costs arise because of difficulties in guaranteeing the energy consumption as it takes away the occupant's incentives for reducing energy consumption. One possibility to decrease the transaction costs is for the ESCO to guarantee a certain improvement in the energy label. Then the risk of the actual energy consumption would lie with the end user. It must also be taken into account that the Danish ESCO market is young and in its early stages of development and therefore further development is likely. The knowledge about the concept is increasing and municipalities and private
companies are gaining positive experiences. The trust in the concept is consequently increasing. With increasing demand the ESCOs might start offering more types of ESCO contracts, such as DC or EPC without the guarantee to decrease the transaction costs and appeal to a wider client base. The TPF approach could be a way to increase this even further and could also spur activities for local SMEs in municipalities. The energy label does not seem important for many landlords at the moment. The main reason is probably the fact that there are no repercussions if a building is not energy labeled. Integrating the label into energy renovation tools could prove imperative to give it increased value for the stakeholders. The energy label in private rented housing could be oriented both towards landlords and tenants in the way that all suggested improvements would include how much the rent should rise and how much savings the tenant would get if the improvements were implemented. It should subsequently also be included in a new rent act to make it easier for both the tenant and the landlord to implement the improvements if the label clearly states their profitability. The landlords would not be able to deny request for energy efficiency improvements from tenants if it was reasonable according to the energy label. Making premises which do not meet minimum energy efficiency requirements unavailable to lease is also an option. The landlords would then be obliged to meet the minimum requirement or at least implement all profitable measures suggested in the respective building's energy label. A TPF solution as mentioned before could make this a reasonable option for landlords as it would not require their financial capacity. One of the main tools in the guarantee phase of ESCO contracts is the monitoring of the energy consumption. The monitoring gives an overview and awareness of the energy consumption and is vital for maintaining the savings. It can be very difficult for households to get an overview of their energy consumption when it can only be seen quarterly or annually. Improving the visibility of energy consumption would therefore give the occupants an increased awareness. Seeing the energy consumption up to date could give occupants a sense of how their user behavior influences the energy consumption. Consequently, it could be a platform for ESCO projects without guarantee where the occupants themselves monitor their own energy consumption which would move some of the transaction costs over to the occupant.
Table 1 Suggested changes/adaptation of tools and anticipated effects. Tool/action Rent act
Changes/adaptation
Anticipated effects
Give landlords the possibility of increasing rent based on energy saving Landlords get increased incentives for energy renovations and clearer possibilities in energy label. Tenant democracy—majority can accept changes. guidelines on how much the rent can increase. A single tenant cannot stand in the way of the improvements unless he is the only tenant. Increased attention and participation of the energy supply companies in Mandatory Assign a certain amount of the savings to the residential building sector. Increase benchmarking factors on non-profitable measures. the residential building sector. Increased incentives to subsidize non-profit energy measures. savings Green lease Public institutions and municipalities obliged to have green leases in rented Gained experiences with green leases and subsequently demand could be premises. Create a standard green lease based on improvements in energy created. Decreases transaction costs of making a new green lease and gives an example of how a green lease can be structured. label and make it available to the public. Energy label Repercussions for not energy labeling buildings when they are supposed to Larger share of the building stock is labeled. Improves the overview of the be labeled. Shortening the interval between audits. building stock's energy consumption and potential savings and increases energy consumption awareness and decreases imperfect information between landlords and tenants. EPC Encourage ESCOs to offer EPC with guaranteed energy label improvement to More projects will be initiated in smaller buildings as long as the energy decrease transaction costs. label is considered reliable. TPF Establish a TPF framework similar to the Green Deal where the energy label Increased energy renovations in smaller buildings and increased involvement of SMEs. is the first analysis and energy supply companies offer the financing or cooperate with other companies to do so. Building owners more eager to act sustainably and enter green leases. RPI RPI network to enhance benchmarking. Voluntary RPI program with tax incentives. Information Increase the use of building automation systems in residential homes for Increased awareness of residential energy consumption and consequent measurement and monitoring energy consumption. increase in interest in energy efficiency measures.
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5.2. Model proposal Most of the aforementioned tools and solutions are already established in the Danish market and/or are in development and growth. It is probably more effective to change and adapt the existing tools to increase knowledge, trust, reliability and usability rather than to introduce new unknown concepts. As stated earlier in this paper a package solution is necessary to overcome the landlord/tenant dilemma. Table 1 shows suggested changes and/or adaptations of the tools and the anticipated effects. The proposed model assumes that the energy label can be used as a base for most of the tools. It is therefore imperative that the label's quality is sufficient and that building owners, occupants and energy renovation specialists trust in its content. The TPF framework would not have to be so different from the current ESCO-light framework. However, it needs the possibility of paying the investment through the energy bill to increase interest from possible TPF financers and be entirely financed by a third party. In addition to relying on the energy label, many of the tools are interdependent. For example a TPF framework would be incentivized by mandatory energy savings and the proposed savings based on the energy label. Increased demand for green leases and EPC in rented residential housing is dependent on if and how the rent act will be changed.
6. Conclusion The gravity of the landlord/tenant dilemma in Danish residential housing is evident. There are numerous factors creating the dilemma, and the existing rent act seems to be one of them. In the autumn of 2012 it was decided to modify the rent act in order to solve the landlord/tenant dilemma, but it is still to be seen if the new regulation will have any major effects on energy renovations of private rented buildings. The development of the rent act, mandatory savings and the energy label can be seen as critical factors in overcoming the dilemma. The other solutions described here are all based on one or more of these three tools. Especially changes of the rent act are crucial for growth and development of energy renovations in private rented residential buildings. The lack of integration of the energy label and the absence of repercussions for not implementing it means that it is not valued properly by many stakeholders in energy renovations. Increasing its value by integrating it into other tools and financial incentives could enhance its implementation and increase general knowledge about energy efficiency measures. It subsequently could create the possibility of exchanging the guarantee phase of an EPC with a guaranteed energy label, thus lowering transaction costs. However, there is also a need for improved knowledge about the ESCO concept as some seem to think that it is only a financing model. ESCO should rather be seen as a way to increase the contractor's incentives to deliver a successful project. Green leases are relatively unknown on the Danish market due to lack of demand. The lack of demand probably comes from lack of clarity and knowledge about the concept. With demand the concept could use the energy label and ESCO to fulfill the conditions of the contract. Encouraging property investors to implement RPI strategies could also spur development in green leases, energy labeling and ESCO. Not all landlords can be considered property investors. Therefore there is a need for an initiative which helps the landlords with less financial capacity. A TPF framework could reach these ‘smaller’ landlords and connecting the payment to the property rather than the payer might be a crucial step in its success. However, all of the possible improvements will be for nothing if the building's occupant behaves irresponsibly. Many occupants know how their behavior can affect
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the building's energy consumption but most lack the visibility and tangibility of it. Seeing the energy usage in real time could increase occupants' awareness of how their behavior specifically influences the energy bill. With increased awareness the occupants might seek further information about energy efficiency improvements and consequently increase demand for energy renovations. There are plenty of opportunities to overcome the landlord/ tenant dilemma, but principal/agent problems can only be overcome with a package solution. In the Danish national context the package solution must consist of legislative changes, financial incentives and better dissemination of information. Therefore, the aforementioned tools must be integrated and used in cooperation to overcome the dilemma. Since this research was performed the EU has released a directive which encourages member states to implement many of the suggestions in this paper such as exemplary role of public bodies' buildings (article 5), energy audits and energy management systems (article 8), and metering (article 9). References Advice A/S, 2011. Renovering på Dagsordenen: Interessentanalyse. PowerPoint. GI og Bygherreforeningen. Available from: 〈http://bygherreforeningen.dk/index. php?option=com_content&view=article&id=1115&catid=207&Itemid=138〉 (retrieved 09.02.12). AlmenNet, 2011. Energirenovering og ESCO i den Almene Sektor. Available from: 〈http://www.almennet.dk/aktuelt/nyheder/esco-og-energirenovering〉 (retrieved 08.04.12). Bertoldi, P., Hinnells, M., Rezessy, S., 2006. Liberating the Power of Energy Services and ESCOs in a Liberalised Energy Market. European Commission DG JRC, University of Oxford and Central European University. Bertoldi, P., Marino, A. & Rezessy, S. Energy Service Companies Market in Europe – Status Report, 2010. European Commission DG Joint research Centre, Institute for Energy. Available from: /http://publications.jrc.ec.europa.eu/repository/bit stream/111111111/15108/1/jrc59863%20real%20final%20esco%20report%202010. pdfS (retrieved 30.03.2012). BiD and GI, 2011. Hvidbog om Bygningsrenovering. Et Overblik Over den den Eksisterende Viden og de Væsentligste Studier af Renoveringseffekter. Bygherreforeningen og Grundejernes Investeringsfond. Available from: 〈http://bygherrefor eningen.dk/index.php?option=com_content&view=article&id=1114&catid=207 &Itemid=138〉 (retrieved 04.02.12). Brown, M.A., 2004. Obstacles to energy efficiency. Encyclopedia of Energy, vol. 4. Elsevier Inc., Amsterdam. Burrows, C.R., 2011. Responsible Property Investment. Environmental Social and Governance Issues, Influencing Decision Making for Commercial Property Investment. An Australian Perspective. Master thesis. Queensland University of Technology. CONCITO, 2011. Grøn byfornyelse. Fra paradox til potential ved energirenovering af private udlejningsejendomme. Available from: 〈http://concito.dk/files/doku menter/artikler/rapport-_groen_byfornyelse_feb._2011_pressemeddelel ser—gr-n-byfornyelse-kan-l-se-paradoksproblemet_4_3304631096.pdf〉 (retrieved 04.02.12). DECC, 2012. Energy Act 2011. Department of Energy and Climate Change 2012. Available from: 〈http://www.decc.gov.uk/assets/decc/11/policy-legislation/energy %20act%202011/3211-energy-act-2011-aide-memoire.pdf〉 (retrieved 27.4.12). DTU-BYG, 2010. Energirenoveringstiltag—katalog. R-223. Available from: 〈http:// www.byg.dtu.dk/upload/institutter/byg/publications/rapporter/byg-r223.pdf〉 (retrieved 06.02.12). Ea Energianalyse, 2008. En vej til flere og billigere energisparelser—Evaluering af samtlige danske energispareaktiviteter. Energistyrelsen. Energistyrelsen (2010). ESCO-LIGHT, Fremme af energibesparelser i private boliger. Available from: 〈http://www.ens.dk/da-DK/Info/Nyheder/Nyhedsarkiv/2010/ Documents/ESCOLight_afrapportering_juni2010.pdf〉 (retrieved 04.03.12). Energistyrelsen (2012). Energimærkning. Available from: 〈http://www.ens.dk/ da-DK/ForbrugOgBesparelser/IndsatsIBygninger/Energimaerkning/Sider/Energi maerkning.aspx〉 (retrieved 24.04.12). EU, 2006. Directive 2006/32/EC of the European Parliament on energy end-use efficiency and energy services, and repealing Council Directive 93/76/EEC. Official Journal of the European Union Vol. 49, L114. EU, 2010. Directive 2010/31/EU of the European Parliament and of the Council on the Energy Performance of Buildings. Official Journal of the European Union Vol. 53, L153. IEA, 2007. Mind the Gap. Quantifying Principal-Agent Problems in Energy Efficiency. International Energy Agency. IEE, February 2011. Boosting the Energy Services Market in Europe. Experiences and Recommendations from IEE Projects. Conclusions—IEE Workshop Brussels. Jensen, J.O.; Hansen, J.R., Nielsen, S.B., May 2011a. ESCO in Danish municipalities: experience, innovation, potential. In: Proceedings of the 6th International Conference on Energy Efficiency in Domestic Appliances and Lighting.
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Jensen, J.O.; Hansen, J.R., Nielsen, S.B., 22–23 August 2011b. ESCO in Danish municipalities: basic, integrative or strategic approaches? In: Proceedings of the CFM Nordic Conference. Jensen, P.A., Maslesa, E., Gohardani, N., Björk, F., Kanarachos, S., Fokaides, P.A., 2013. Sustainability evaluation of retrofitting and renovation of buildings in early stages. In: Proceedings of 7th Nordic Conference on Construction Economics and Organisation. 12–14 June 2013, Trondheim, Norway. Jonasson, K., 2008. Grønne lejekontrakter i Danmark? Erhvervsmagasinet Huset. No. 6.
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Contents lists available at ScienceDirect
Energy Policy journal homepage: www.elsevier.com/locate/enpol
Sustainable renovation of residential buildings and the landlord/tenant dilemma Björn Ástmarsson, Per Anker Jensen n, Esmir Maslesa Technical University of Denmark, DTU Management Engineering, Produktionstorvet Building 424, DK-2800 Lyngby, Denmark
H I G H L I G H T S
There are plenty of opportunities to overcome the landlord/tenant dilemma. The principal/agent problems can only be overcome with a package solution. An array of different tools must be integrated and used in cooperation. Legislative changes, financial incentives and better dissemination of information.
art ic l e i nf o
a b s t r a c t
Article history: Received 18 March 2013 Accepted 9 August 2013 Available online 3 September 2013
The landlord/tenant dilemma arises when the interests of landlords and tenants misalign and is one of the greatest barriers hindering the development of sustainable renovation of residential buildings in Europe. The aim of this research is to investigate how regulatory changes and contractual solutions can help solve the landlord/tenant dilemma in relation to sustainable renovation of residential buildings, and how the general awareness of sustainable renovation can be increased. Particular focus is on whether tools like energy performance contracting and energy labeling can help solve the landlord/tenant dilemma. The research was done in relation to the specific situation in Denmark, but theory, information and experiences from other countries were included. The results show that there are plenty of opportunities to overcome the landlord/tenant dilemma, but principal/agent problems can only be overcome with a package solution. In the Danish national context the package solution must consist of legislative changes, financial incentives and better dissemination of information. Therefore, an array of different tools must be integrated and used in cooperation to overcome the dilemma. & 2013 Elsevier Ltd. All rights reserved.
Keywords: Sustainable renovation Residential buildings Landlord/tenant dilemma
1. Introduction Buildings account for approximately 40% of Europe's total energy consumption (EU, 2010) and because of their long lifetime many are and will become energy inefficient and technically obsolete. Sustainable retrofitting and renovation, also known as energy renovation, is therefore of great importance. The energy inefficiency of a large part of the current building stock is consequently a great contributor to the current climate changes. In addition, the building sector is expanding and is therefore likely to increase its energy consumption (EU, 2010). Thus reducing energy consumption in buildings is vital, not only for the environment, but also to minimize energy dependency. There are vast opportunities to take financially profitable measures to improve energy efficiency which are not being realized in current n
Corresponding author. Tel.: þ 45 45251674. E-mail addresses: [email protected] (B. Ástmarsson), [email protected] (P.A. Jensen), [email protected] (E. Maslesa). 0301-4215/$ - see front matter & 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.enpol.2013.08.046
markets. With rising energy prices, which increase the economic importance of energy consumption and a shift in mentality towards energy efficiency, the awareness of the subject has increased significantly in recent years. The greatest problem is however to convince decision makers such as building owners, property investors and facility managers to implement profitable solutions. The questions are therefore how can building owners/facility managers be motivated to renovate buildings for better energy performance, how can sustainable retrofitting and renovation be brought to the market, and how can sustainable retrofitting and renovation be further motivated by economic reasons? The answers to these questions can vary a lot depending on the owners, the occupation and types of buildings and the national context. This paper therefore focuses on Danish rented residential buildings where one of the main barriers is the landlord/ tenant dilemma. The aim is to give an understanding of why the problem occurs and how it can be overcome. There is however no one simple solution to the dilemma and therefore many concepts, tools and solutions have to be considered.
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A amount of research has been made on why sustainable retrofitting and renovation is not being realized. The research has mainly focused on identifying barriers to sustainable retrofitting and renovation, which has led to the conclusion that the problem is not a lack of technical solutions but rather due to informational barriers and lack of economic incentives. One of the largest barriers is the landlord/tenant dilemma which can be both informational and economic. CONCITO (2011), Denmark's green think tank, in 2011 published a report on the dilemma. The report recommended regulation and policy changes to overcome the problem. The findings of this paper are not intended to replicate the results of the CONCITO report but rather build on it by focusing on some of the specific tools that can be used to overcome the problem. The European Union (EU) has encouraged the use of energy labeling and energy services to achieve energy efficiency in buildings. Consequently, energy labeling and Energy Performance Contracting (EPC) and ESCO (Energy Service Companies) concepts (in the following grouped together as ESCO) have been developing and gaining importance in the Danish renovation market. This paper will therefore mainly focus on how these established tools along with a few prospective tools can help in overcoming the landlord/tenant dilemma. Hence, the research questions are how can regulatory changes and contractual solutions help solve the landlord/tenant dilemma? How can ESCO contracts help solving the landlord/tenant dilemma? How can energy labeling help solving the landlord/tenant dilemma? And, how can the general awareness of sustainable retrofitting and renovation be increased?
2. Methodology The landlord/tenant dilemma occurs when a landlord and a tenant have difficulties in agreeing upon a common strategy for energy-efficiency improvement of a property. In Denmark, tenants typically pay for the energy consumption of the property, which highly depends on the condition and the infrastructure of the building and how it is used. As the landlord does not pay for energy consumption, he has few incentives to invest in the energy efficiency of the property. However, sooner or later, energy renovations are required, and in most Danish private-owned buildings investments in energy renovations are made by the landlords, but fully financed by the tenants through rent increase. As tenants are not the property owners, most of them are having difficulties in seeing why they should fully finance something that does not only benefit them. On the other side, landlords are claiming that most of the benefits of energy renovations are going directly to the tenants, and use that as an argument for increasing the rent. The challenge here is to find the “right” balance between landlord's and tenant's interests in a specific case, and figure out how much value for money different parts really obtain after the energy renovation is completed. The above-mentioned problem was researched by investigating the background of sustainable retrofitting and renovation of buildings and the landlord/tenant dilemma in relevant literature. The theoretical framework is based on organizational economics including the principal-agency theory and related concepts (Milgrom and Roberts, 1992). Based on the aforementioned CONCITO report and suggestions by the EU, possible solutions to overcome the problem were investigated. To build upon the information obtained through the literature research, seven interviews were conducted in the spring of 2012 with several parties who could provide information and insight into energy renovation and what parts of the theory could be used in practice. The selection of the interviewees aimed at gaining information and opinions from various parties with experience and knowledge about the tools and methods that can possibly overcome the landlord/tenant dilemma. The interviewees
comprised of a consulting engineer, a representative from the think tank CONCITO, a representative from the Danish Property Federation, an ESCO contractor, a researcher, a representative of a municipality with an ESCO contract and a representative from a housing association with an ESCO contract. The interviews were semi-structured with a list of themes and questions prepared for each interviewee but some questions were omitted and new added during the interviews to provide open discussion on the topic. Research is additionally consolidated by 10 interviews carried out in connection with ACES, a European project about the promotion of sustainable retrofitting and renovation in the early stages (Jensen et al., 2013). Finally, a case on ESCO in a Danish municipality was studied to give insight into the pros and cons of ESCO in general and to reveal the strength and challenges of the concept to see if it is adaptable to residential housing.
3. Literature review 3.1. Retrofitting and renovation of buildings Retrofitting of buildings is the process of replacing or adding parts of the building shell or installations while renovating is restoring the looks and performance of building parts to their original state or better. The need for renovation arises when buildings start to age, because of deteriorating materials and other external influences such as weather. The building's initial quality, use and maintenance also significantly affects, when the need for renovation arises. In addition, if buildings are not maintained sufficiently there can be an accumulated need for renovation. Lastly, renovations can be initiated when buildings need to be improved or transformed to meet the demands of new occupants or operations. Energy renovation is renovating and/or retrofitting with the aim of improving the energy performance of a building, i.e. sustainable retrofitting and renovation of a building. In addition to lowering the energy consumption, energy renovations should guarantee the market value of the buildings with rising energy prices and increased requirements in building regulations (BiD and GI, 2011). In northern Europe heating and electricity account for the majority of buildings' energy consumption, therefore most energy renovation measures aim at improving the buildings' performance in relation to thermal losses and electricity consumption. These measures include e.g. improving the thermal insulation of building components, replacing windows and glass, replacing technical installations, changing energy supply, and improving the operation of the building (DTU-BYG, 2010). 3.2. Stakeholders The primary stakeholders in sustainable retrofitting and renovation of buildings are the owners, facility managers and occupants. The building owner will have to invest in the renovation and is compensated with the increased value of the building and possibly higher rent income. The occupant(s) will get lower energy consumption and hence a lower energy bill, in addition the indoor air quality and comfort are likely to improve. If the occupant is a tenant the rent will probably rise to pay back the owner's investment. The government is also a stakeholder as its goal is to decrease the carbon footprint of the state. The government might though have to spend some money to initiate the less profitable renovations. In Denmark, energy suppliers are obliged to contribute to significant annual savings and can therefore gain from energy savings. However, less energy consumption means less income for them. With increased energy renovations the building and renovation industry gets more production and sales, and consultants and contractors get more work. Increased renovations
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would probably also spur research and development in the field. Reduction of energy consumption also benefits society as a whole as it decreases energy dependency while improving the building stock. Increased production, research and development are also likely to lower prices of the products and improve the quality (BiD and GI, 2011). 3.3. Reducing energy consumption The reduction of energy consumption in buildings has been proposed as a hierarchical process. For example, Xing et al., (2011) propose that firstly the building envelope should be retrofitted to higher standards, secondly energy efficient equipment installed and finally renewable power should be microgenerated on-site with smart grid connections and control. The energy renovation itself is a big step towards an energy efficient building. However, without taking the behavior of the occupants and the operation of the building into account there are no guarantees for achieving the desired energy efficiency. 3.4. Barriers There are a few barriers hindering the development of sustainable retrofitting and renovation in buildings. In the Danish building renovation market these barriers can generally be divided into economic and informational barriers. The most significant economic barriers are lack of financial incentives and life cycle perspectives. In addition, there is a ‘Chicken or the egg’ problem which happens because development of standard solutions, tools and methods does not take place due to lack of demand. Without demand there are few economic incentives to develop the tools and methods further. The most important informational barriers are too little political consciousness, lack of overview and common direction amongst the main stakeholders and lack of overview of the potential for energy renovations and where to prioritize. Lastly, new constructions get more attention and are considered more exciting than renovations (Advice A/S, 2011). Because of these barriers, many cost effective energy efficient investments are not being made. This would not be a surprise if the investments were relatively few or if there was only a small energy saving potential (Brown, 2004). Instead these barriers create a difference between the level of the actual energy efficiency and the possible level of cost effective higher efficiency. This difference is often called the efficiency gap (IEA, 2007). The efficiency gap not only has financial repercussions for energy consumers but also environmental and macroeconomic consequences (Brown, 2004). A combination of the aforementioned barriers creates the landlord/tenant dilemma which is one of the largest contributors to the gap. 3.5. The landlord/tenant dilemma The landlord/tenant dilemma occurs when the landlord provides the tenant with the housing, appliances and installations but the tenant pays the energy bills. The landlord does not want to invest too much money in energy efficiency while the tenant wants to lower the energy costs (IEA, 2007). The tenant (principal) pays the landlord (agent) rent for using the property. The tenant typically also pays for the energy consumption of the property which is controlled by the condition and infrastructure of the building and how it is used. As the landlord does not pay for energy consumption there are few incentives to invest in the energy efficiency of the property. This does not change even though energy prices rise and therefore the energy consumption is in some way isolated from the energy prices (IEA, 2007). No single regulation or informational instrument alone will solve the problem. Therefore there is a need for a package solution that
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addresses the problem in its national context and within its sector. In the Danish context CONCITO (2011) suggested that the landlord and tenant need to agree on how the cost of energy renovations should be divided, energy renovations should be directly funded/ subsidized to improve the economic benefits, barriers in the legislation should be removed to balance the incentives of the landlord and the tenant, and a reliable, independent preliminary consultation should be guaranteed for both landlords and tenants. In addition it is recommended that the least profitable projects should be the most subsidized and the municipalities should be a central actor in coordinating and funding energy renovations.
4. Tools and solutions 4.1. Mandatory energy savings The European directive on energy end-use efficiency and energy services in 2006 encouraged to enhance the implementation of energy services and energy efficiency measures by making it compulsory for energy supply companies to participate in the measures (EU, 2006). In 2006 all Danish energy companies responsible for providing and distributing electricity, natural gas and district heating and the oil companies were obliged to contribute to 2.95 PJ of energy savings every year. In recent years the mandatory savings have been increased and this has become the main economic incentive for energy renovations in Denmark (CONCITO, 2011). The companies achieve the savings by for example advising on energy savings and directly funding energy renovations. They are however not allowed to profit from the savings and therefore the clients of the companies end up paying for them through the energy price. The achieved savings have to be as effective and cheap as possible and are therefore benchmarked to see how the energy companies are performing. Savings in fossil fuel energy sources with long lifetime get the highest benchmarking factor as they have the biggest environmental influence. 4.2. The Danish rent act The rent in most Danish residential buildings built in 1991 or earlier is determined by the rules about ‘value of the premises’ or ‘the cost related to the operation of the building’. These rules are complex and based on estimations which can make the determination of rent very difficult. These rules also mean that landlords are missing incentives to implement energy efficient measures even though they are profitable and therefore contribute significantly to the landlord/tenant dilemma. General maintenance of the building is usually the responsibility of the landlord. The rent can therefore not be increased because of the cost of maintenance, but it can be if the value of the premises is being improved, i.e. with major renovation. Energy savings can therefore be interpreted as improvements for the tenant. It is however not clear how much the rent should or can be increased (CONCITO, 2011). Associations of building owners, landlords and tenants agree that improving the legislation is necessary to enhance implementation of energy efficient measures. The main recommendation is to make it easier for the landlord to increase the rent to pay off the investment and instead the tenant will get all the benefits of the energy savings. The model assumes that the landlord and tenant will agree on a rent increase when the energy efficiency measures are implemented and the rent will decrease again to the value of the premises when the investment is paid off. What the associations cannot agree on is how much the rent can be increased and if a minority of the tenants can appeal the rise in rent (CONCITO, 2011). In October 2012 the Danish minority government made an agreement with a majority of political parties in the parliament
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about introducing new laws with the purpose to overcome the landlord/tenant dilemma. This new legislation has not yet been introduced, so it is uncertain whether it will have the intended effect. 4.3. Green leases An alternative solution is for the landlord and the tenant to enter a green lease. In the green lease the landlord and the tenant make a voluntary agreement to decrease the consumption of heating, cooling, electricity and water. This usually means that the tenant beforehand accepts higher rent for a period of time and gets the benefits of energy savings instead. The specific requirements of green leases can include agreement on improvement of the leased premises, requirements for the operation of the premises and requirements for the use of the premises. The lease should eventually lead to reduced costs for both parties, a better image for the landlord's company (and possibly the tenants), a better compliance with future legislations on energy consumption and increased communication between landlord and tenant. A baseline for the agreement could be the energy label of the premises and the suggested improvements in it (Jonasson, 2008). In general, green leases require cooperation between the landlord and the tenant and the alignment of their incentives. 4.4. Responsible property investment The green lease can be a part of the landlord's Responsible Property Investment (RPI) strategy. The concept of RPI encourages property investors to consider the triple bottom line (economic, environmental and social sustainability) as a part of their decision making process about acquisition, management and sale of buildings (UNEP FI, 2011). Property investors can however find it hard to include sustainability in their decision making as there is lack of tangible evidence that it increases the value of the property and many sustainability rating tools cannot be used to compare one building to another (Burrows, 2011). The property investor can though use RPI when acquiring a real estate. In selecting the property, the investor can rely on the building's energy label, green building certifications and due diligence as RPI considerations of evaluating the investment. Finally, green leases and green building certifications can be considered a RPI issue in managing the investment (UNEP FI, 2011). 4.5. Energy labeling The Danish energy labeling scheme (EMO) is a part of the national implementation of the European directive on the energy performance of buildings (EPBD). The recommended improvements in the label should both cover measures to be implemented with major renovations and measures to improve individual building elements. The label should also instruct the owner or the tenant of the building where to get further information on the improvements and should not last longer than 10 years (EU, 2010). According to Danish law all buildings are supposed to be energy labeled. Smaller buildings are to be labeled when they are sold while buildings larger than 1000 m2 are always supposed to have an energy label. The label is usually valid for 10 years. However, if the energy consultant finds savings with payback time of less than 10 years which account for more than 5% of the energy use, the label is only valid for 7 years (Energistyrelsen, 2012). There are though no consequences if buildings are not energy labeled. The purpose of the label is for building owners, tenants and buyers to see clearly the condition of the building regarding energy efficiency and create incentives for energy saving improvements and renovations (Ea Energianalyse, 2008; CONCITO, 2011).
In general, newer buildings have the best energy label due to increased requirements from building regulations and improvements over time in tools and methods in the construction industry. Consequently the biggest possible improvements are found in older buildings. The energy label can clearly be used as an instrument to spur energy renovations by showing what improvements can be implemented and the effect they can have. There are though more ways to use the energy label to encourage building owners to implement energy efficient measures. A lack of financial incentives is one of the main barriers for energy renovations. One way to use the energy label would be to make it obligatory before building owners could get direct subsidies or other financial incentives. Alternative financial incentive could be to tax houses based on the energy label or the CO2 emissions calculated in it. This could spur energy renovation but it could also have adverse social effects for low income households unless it is linked with income taxes. 4.6. ESCO Energy service companies (ESCOs) are companies that develop, install and possibly finance performance based projects aimed at increasing energy efficiency (Jensen et al., 2011a, 2011b). The term ESCO can however, in spite of the EU definition, be understood differently between countries (Bertoldi et al., 2010). In the Danish national context ESCOs mainly use energy performance contracting (EPC). The ESCO concept gives a possibility to radically upgrade the building stock. It offers the resources to gain high energy savings without possessing the skills, knowledge or capacity to do it inhouse. In addition, some energy saving measures are getting more and more technically complex which require even more specialized knowledge which can be provided by ESCOs. The ESCO concept also goes further than the traditional consultation and implementation of energy renovations by making the financial benefits of the project dependent on its outcome (AlmenNet, 2011). ESCO projects in residential housing are rare and applying the concept in the residential housing market poses many challenges. First of all ESCOs are reluctant to guarantee savings in residential housing as it is hard and expensive to control human behavior. The transaction cost of ESCO contracts therefore mean that the required sizes of houses and/or energy bills need to be larger than most residential housing offer (AlmenNet, 2011; Bertoldi et al., 2006). There have however been some attempts to adapt the concept to the residential market. ESCO-light is a Danish concept with the aim to make energy renovations easy to do and the information about energy savings reliable which should give the building owner a project with stable costs and a confidence in gaining savings. The key part of the model is to get actors on the market, such as financial institutions, energy suppliers, installation firms, contractors, etc., to join hands and offer their services to house owners. There are though no clear answers to which ESCO-light form works best, as energy renovation projects and the main actors in it can vary a lot (Energistyrelsen, 2010). There is some interest in using the ESCO concept in the Danish social housing market. For social housing the energy renovations have to be profitable for both the tenants and the administration of the social housing department. The investments are therefore paid back with energy savings and possibly combined with savings in maintenance. People living in Danish social housing have generally low income and are thus very sensitive to any increase in rent. The democracy of the tenants in social housing (AlmenNet, 2011) requires the communication between the administration and the tenants to be very good. Hence an ESCO solution can be a good way to give credible and trustworthy information to the tenants. The private rented housing generally has greater barriers for energy renovations than
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social housing. The alignment of incentives is not as common as in the social sector and the types of owners are not as identical (BiD and GI, 2011). In addition, a minority of occupants opposing renovation can easily delay the project. ESCOs can also be reluctant to guarantee the energy performance because the behavior of the occupants has too much influence. This means that the transaction costs will be too high for the ESCO. Therefore the EPC model is only applicable for very large residential buildings or large customers with multiple buildings. Then all tenants will have to agree to a rise in rent or with a green lease. It is therefore necessary to find ways to reduce the transaction costs of ESCOs in order to reach small and medium clients in private rented housing. Project bundling is one way to do that as it better suits the business model for the ESCOs and gives a better mitigation of risk. It can however prove difficult to reach a joint agreement between all the building owners for actually implementing the project (IEE, 2011). Another solution might be to adjust the EPC model to reduce the transaction costs. That could make it more feasible both for the building owner and the ESCO. Replacing the guarantee phase with a guaranteed energy label could be the answer (IEE, 2011). The energy label would however need to have more economic value and reliability for the building owner to replace the guaranteed savings. The tenants could then be given a seminar in the operation of their premises and would be responsible for their own energy consumption. Delivery Contracting (DC), also known as Energy Supply Contracting could also be feasible for the residential sector. The ESCO then commits to supplying a set of energy services for a given price. An example could be a delivery of 21 1C indoor temperature during the contract time for an annual amount of money. The ESCO could then implement energy efficiency measures to expand its profits during the contract time. This contract model does not require as much baseline consumption as EPC to be profitable (Bertoldi et al., 2006). Aside from the high transaction costs compared to the energy savings the private renting sector is also hindered by a lack of stability. Tenants only live in the apartments for a limited time and in multi-apartment housing the duration of leases can vary a lot. It is therefore hard for ESCOs to propose long term contracts. This could however be overcome by connecting the energy service contract with the premises rather than the client (IEE, 2011). Third party financing operators (TPFO) with payments attached to the energy bill rather than the owner of the building could improve the feasibility of EPC in residential housing. The TPFO could structure the financing and outsource the implementation phase to relevant market actors (IEE, 2011). An example of a TPFO framework for housing used as inspiration in this study is the Green Deal, which was introduced in the UK in October 2011. The framework attaches the investment in energy efficiency to the building rather than the owner. The Green Deal is based on a successful pilot study called PAYS and is designed with customer needs in mind. Therefore there are no upfront costs for the building owner and the investment is paid back through the energy bill (DECC, 2012).
5. Discussion and proposal 5.1. Evaluation of possible measures Return on investment is the main motivation for building owners and facility managers. The availability and security of profitable energy efficiency investments are therefore imperative for increasing energy renovations. Rising energy prices are constantly increasing the profitability of energy efficiency improvements and also increasing the amount of profitable investments. However, price signals alone are not enough to increase energy renovations in the private
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rented residential sector as many of the consumers, who also pay for the energy, have no say in the efficiency of energy using equipment. The most effective way forward seems to be increasing legislative requirements and labeling of products. The legislation is changed to overcome economic barriers and create financial incentives while the energy labeling helps with informational barriers. This means amongst other things tightening the building codes and increasing the number of energy labels of products. Additional information programs can then be used to encourage building owners and occupants to implement energy efficient measures to exceed the given standards. The interviewees agreed that the tools (ESCO, energy labeling, etc.) give increased focus on what could and needed to be done in order to achieve goals, which increases the possibility of success. The interviewees also agreed that legislation is needed to overcome the problem although not all agreed on how the legislation should be structured due to different interests. In order to be able to achieve the goals of energy savings and consequently carbon emission reduction in buildings, governmental institutions and municipalities have to lead by example and show private building owners the successful ways to achieve the energy efficiency and how they can be effectively implemented. The institutions and municipalities can create demand by gaining experience, knowledge and trust in the desirable concepts, tools and solutions and subsequently share it with other market actors. Increased demand in the market can spur the development of the tools and methods which could then lead to even better solutions. The quality, reliability and implementation of energy labeling can increase the demand on the client side. The visibility of the energy label is therefore important for both landlords and tenants. An efficient initiative could be making the energy label a mandatory attachment to every lease so both landlords and tenants would have the same information about the premises. If both parties are aware of the investment required to improve the energy consumption and what the calculated savings will be, it could significantly reduce the amount of asymmetric information (Milgrom and Roberts, 1992). Sufficient quality of the label is also imperative to provide landlords and tenants with information of equal quality about the condition of the leased premises. In addition, if the numbers for the actual energy consumption of the building are available, it is easier to realize if the calculated savings and proposed improvements in the label are realistic. This can create a demand from tenants for energy renovations and a platform for an agreement on a green lease or energy efficiency improvements between the parties. The mandatory energy saving scheme is the main economic incentive for renovations provided by the Danish government. Changing the scheme to emphasize on energy renovation of buildings could be effective. This could be implemented as a TPF framework in line with the Green Deal in the UK mentioned in Section 4.6. Instead of a certified consultant from the TPFO, an energy label could be used as a prerequisite for each project. The energy supply companies would then be the TPF providers and cooperate with other companies to implement the improvements. This would require some legislative changes to oblige the energy supply companies to achieve certain savings within the residential building sector and also to include the payment to the TPFO through the energy bill. This can in some way help financial institutions in seeing energy savings as a secure source of income. The savings are though not guaranteed and therefore the client is still responsible for his own behavior. An alternative solution would be to change the benchmarking system of the mandatory energy savings. It could be changed so residential buildings would have a higher factor than commercial or industrial buildings. This could be taken even further by increasing the factor on non-profitable measures in buildings with the poorest energy
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performance. This could prevent companies from only taking the low hanging fruits in energy efficiency investments. An increased factor on the houses which require non-profitable solutions to improve the energy performance could also be added to the aforementioned TPF framework. Improving the legislation around the rent act seems to be imperative to overcome the landlord/tenant dilemma on the Danish residential renting market. The legislation needs to give clear indication of how much landlords can increase the rent and make some sort of tenant democracy when accepting or rejecting the proposed rise in rent. It was, as mentioned in Section 4.2, decided in the autumn of 2012 to modify the rent act in order to solve the landlord/tenant dilemma, but it is still to be seen if the new regulation will have any major effects on energy renovations of private rented housing. Independent of that, there is always the possibility of landlords and tenants entering a voluntary green lease. The market for green leases is however unlikely to evolve without demand from tenants. In Australia, where the market for green leases is strong, it developed because authorities led by example and obliged public institutions leasing premises to enter green leases (Jonasson, 2008). From there on tenants in private rented buildings started to request green leases. Danish government institutions and municipalities could therefore be central actors in creating this demand in the private sector. The energy label could also be very important regarding green leases by suggesting a green lease as an attachment to the current lease. The suggestion would include a certain amount of rise in rent for a given payback time. When the improvements are paid back the green lease would be terminated. ESCO contracts could be a very useful tool to achieve energy savings in rented residential buildings. The main reason for lack of ESCO activities in residential housing is too high transaction costs. The transaction costs arise because of difficulties in guaranteeing the energy consumption as it takes away the occupant's incentives for reducing energy consumption. One possibility to decrease the transaction costs is for the ESCO to guarantee a certain improvement in the energy label. Then the risk of the actual energy consumption would lie with the end user. It must also be taken into account that the Danish ESCO market is young and in its early stages of development and therefore further development is likely. The knowledge about the concept is increasing and municipalities and private
companies are gaining positive experiences. The trust in the concept is consequently increasing. With increasing demand the ESCOs might start offering more types of ESCO contracts, such as DC or EPC without the guarantee to decrease the transaction costs and appeal to a wider client base. The TPF approach could be a way to increase this even further and could also spur activities for local SMEs in municipalities. The energy label does not seem important for many landlords at the moment. The main reason is probably the fact that there are no repercussions if a building is not energy labeled. Integrating the label into energy renovation tools could prove imperative to give it increased value for the stakeholders. The energy label in private rented housing could be oriented both towards landlords and tenants in the way that all suggested improvements would include how much the rent should rise and how much savings the tenant would get if the improvements were implemented. It should subsequently also be included in a new rent act to make it easier for both the tenant and the landlord to implement the improvements if the label clearly states their profitability. The landlords would not be able to deny request for energy efficiency improvements from tenants if it was reasonable according to the energy label. Making premises which do not meet minimum energy efficiency requirements unavailable to lease is also an option. The landlords would then be obliged to meet the minimum requirement or at least implement all profitable measures suggested in the respective building's energy label. A TPF solution as mentioned before could make this a reasonable option for landlords as it would not require their financial capacity. One of the main tools in the guarantee phase of ESCO contracts is the monitoring of the energy consumption. The monitoring gives an overview and awareness of the energy consumption and is vital for maintaining the savings. It can be very difficult for households to get an overview of their energy consumption when it can only be seen quarterly or annually. Improving the visibility of energy consumption would therefore give the occupants an increased awareness. Seeing the energy consumption up to date could give occupants a sense of how their user behavior influences the energy consumption. Consequently, it could be a platform for ESCO projects without guarantee where the occupants themselves monitor their own energy consumption which would move some of the transaction costs over to the occupant.
Table 1 Suggested changes/adaptation of tools and anticipated effects. Tool/action Rent act
Changes/adaptation
Anticipated effects
Give landlords the possibility of increasing rent based on energy saving Landlords get increased incentives for energy renovations and clearer possibilities in energy label. Tenant democracy—majority can accept changes. guidelines on how much the rent can increase. A single tenant cannot stand in the way of the improvements unless he is the only tenant. Increased attention and participation of the energy supply companies in Mandatory Assign a certain amount of the savings to the residential building sector. Increase benchmarking factors on non-profitable measures. the residential building sector. Increased incentives to subsidize non-profit energy measures. savings Green lease Public institutions and municipalities obliged to have green leases in rented Gained experiences with green leases and subsequently demand could be premises. Create a standard green lease based on improvements in energy created. Decreases transaction costs of making a new green lease and gives an example of how a green lease can be structured. label and make it available to the public. Energy label Repercussions for not energy labeling buildings when they are supposed to Larger share of the building stock is labeled. Improves the overview of the be labeled. Shortening the interval between audits. building stock's energy consumption and potential savings and increases energy consumption awareness and decreases imperfect information between landlords and tenants. EPC Encourage ESCOs to offer EPC with guaranteed energy label improvement to More projects will be initiated in smaller buildings as long as the energy decrease transaction costs. label is considered reliable. TPF Establish a TPF framework similar to the Green Deal where the energy label Increased energy renovations in smaller buildings and increased involvement of SMEs. is the first analysis and energy supply companies offer the financing or cooperate with other companies to do so. Building owners more eager to act sustainably and enter green leases. RPI RPI network to enhance benchmarking. Voluntary RPI program with tax incentives. Information Increase the use of building automation systems in residential homes for Increased awareness of residential energy consumption and consequent measurement and monitoring energy consumption. increase in interest in energy efficiency measures.
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5.2. Model proposal Most of the aforementioned tools and solutions are already established in the Danish market and/or are in development and growth. It is probably more effective to change and adapt the existing tools to increase knowledge, trust, reliability and usability rather than to introduce new unknown concepts. As stated earlier in this paper a package solution is necessary to overcome the landlord/tenant dilemma. Table 1 shows suggested changes and/or adaptations of the tools and the anticipated effects. The proposed model assumes that the energy label can be used as a base for most of the tools. It is therefore imperative that the label's quality is sufficient and that building owners, occupants and energy renovation specialists trust in its content. The TPF framework would not have to be so different from the current ESCO-light framework. However, it needs the possibility of paying the investment through the energy bill to increase interest from possible TPF financers and be entirely financed by a third party. In addition to relying on the energy label, many of the tools are interdependent. For example a TPF framework would be incentivized by mandatory energy savings and the proposed savings based on the energy label. Increased demand for green leases and EPC in rented residential housing is dependent on if and how the rent act will be changed.
6. Conclusion The gravity of the landlord/tenant dilemma in Danish residential housing is evident. There are numerous factors creating the dilemma, and the existing rent act seems to be one of them. In the autumn of 2012 it was decided to modify the rent act in order to solve the landlord/tenant dilemma, but it is still to be seen if the new regulation will have any major effects on energy renovations of private rented buildings. The development of the rent act, mandatory savings and the energy label can be seen as critical factors in overcoming the dilemma. The other solutions described here are all based on one or more of these three tools. Especially changes of the rent act are crucial for growth and development of energy renovations in private rented residential buildings. The lack of integration of the energy label and the absence of repercussions for not implementing it means that it is not valued properly by many stakeholders in energy renovations. Increasing its value by integrating it into other tools and financial incentives could enhance its implementation and increase general knowledge about energy efficiency measures. It subsequently could create the possibility of exchanging the guarantee phase of an EPC with a guaranteed energy label, thus lowering transaction costs. However, there is also a need for improved knowledge about the ESCO concept as some seem to think that it is only a financing model. ESCO should rather be seen as a way to increase the contractor's incentives to deliver a successful project. Green leases are relatively unknown on the Danish market due to lack of demand. The lack of demand probably comes from lack of clarity and knowledge about the concept. With demand the concept could use the energy label and ESCO to fulfill the conditions of the contract. Encouraging property investors to implement RPI strategies could also spur development in green leases, energy labeling and ESCO. Not all landlords can be considered property investors. Therefore there is a need for an initiative which helps the landlords with less financial capacity. A TPF framework could reach these ‘smaller’ landlords and connecting the payment to the property rather than the payer might be a crucial step in its success. However, all of the possible improvements will be for nothing if the building's occupant behaves irresponsibly. Many occupants know how their behavior can affect
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the building's energy consumption but most lack the visibility and tangibility of it. Seeing the energy usage in real time could increase occupants' awareness of how their behavior specifically influences the energy bill. With increased awareness the occupants might seek further information about energy efficiency improvements and consequently increase demand for energy renovations. There are plenty of opportunities to overcome the landlord/ tenant dilemma, but principal/agent problems can only be overcome with a package solution. In the Danish national context the package solution must consist of legislative changes, financial incentives and better dissemination of information. Therefore, the aforementioned tools must be integrated and used in cooperation to overcome the dilemma. Since this research was performed the EU has released a directive which encourages member states to implement many of the suggestions in this paper such as exemplary role of public bodies' buildings (article 5), energy audits and energy management systems (article 8), and metering (article 9). References Advice A/S, 2011. Renovering på Dagsordenen: Interessentanalyse. PowerPoint. GI og Bygherreforeningen. Available from: 〈http://bygherreforeningen.dk/index. php?option=com_content&view=article&id=1115&catid=207&Itemid=138〉 (retrieved 09.02.12). AlmenNet, 2011. Energirenovering og ESCO i den Almene Sektor. Available from: 〈http://www.almennet.dk/aktuelt/nyheder/esco-og-energirenovering〉 (retrieved 08.04.12). Bertoldi, P., Hinnells, M., Rezessy, S., 2006. Liberating the Power of Energy Services and ESCOs in a Liberalised Energy Market. European Commission DG JRC, University of Oxford and Central European University. Bertoldi, P., Marino, A. & Rezessy, S. Energy Service Companies Market in Europe – Status Report, 2010. European Commission DG Joint research Centre, Institute for Energy. Available from: /http://publications.jrc.ec.europa.eu/repository/bit stream/111111111/15108/1/jrc59863%20real%20final%20esco%20report%202010. pdfS (retrieved 30.03.2012). BiD and GI, 2011. Hvidbog om Bygningsrenovering. Et Overblik Over den den Eksisterende Viden og de Væsentligste Studier af Renoveringseffekter. Bygherreforeningen og Grundejernes Investeringsfond. Available from: 〈http://bygherrefor eningen.dk/index.php?option=com_content&view=article&id=1114&catid=207 &Itemid=138〉 (retrieved 04.02.12). Brown, M.A., 2004. Obstacles to energy efficiency. Encyclopedia of Energy, vol. 4. Elsevier Inc., Amsterdam. Burrows, C.R., 2011. Responsible Property Investment. Environmental Social and Governance Issues, Influencing Decision Making for Commercial Property Investment. An Australian Perspective. Master thesis. Queensland University of Technology. CONCITO, 2011. Grøn byfornyelse. Fra paradox til potential ved energirenovering af private udlejningsejendomme. Available from: 〈http://concito.dk/files/doku menter/artikler/rapport-_groen_byfornyelse_feb._2011_pressemeddelel ser—gr-n-byfornyelse-kan-l-se-paradoksproblemet_4_3304631096.pdf〉 (retrieved 04.02.12). DECC, 2012. Energy Act 2011. Department of Energy and Climate Change 2012. Available from: 〈http://www.decc.gov.uk/assets/decc/11/policy-legislation/energy %20act%202011/3211-energy-act-2011-aide-memoire.pdf〉 (retrieved 27.4.12). DTU-BYG, 2010. Energirenoveringstiltag—katalog. R-223. Available from: 〈http:// www.byg.dtu.dk/upload/institutter/byg/publications/rapporter/byg-r223.pdf〉 (retrieved 06.02.12). Ea Energianalyse, 2008. En vej til flere og billigere energisparelser—Evaluering af samtlige danske energispareaktiviteter. Energistyrelsen. Energistyrelsen (2010). ESCO-LIGHT, Fremme af energibesparelser i private boliger. Available from: 〈http://www.ens.dk/da-DK/Info/Nyheder/Nyhedsarkiv/2010/ Documents/ESCOLight_afrapportering_juni2010.pdf〉 (retrieved 04.03.12). Energistyrelsen (2012). Energimærkning. Available from: 〈http://www.ens.dk/ da-DK/ForbrugOgBesparelser/IndsatsIBygninger/Energimaerkning/Sider/Energi maerkning.aspx〉 (retrieved 24.04.12). EU, 2006. Directive 2006/32/EC of the European Parliament on energy end-use efficiency and energy services, and repealing Council Directive 93/76/EEC. Official Journal of the European Union Vol. 49, L114. EU, 2010. Directive 2010/31/EU of the European Parliament and of the Council on the Energy Performance of Buildings. Official Journal of the European Union Vol. 53, L153. IEA, 2007. Mind the Gap. Quantifying Principal-Agent Problems in Energy Efficiency. International Energy Agency. IEE, February 2011. Boosting the Energy Services Market in Europe. Experiences and Recommendations from IEE Projects. Conclusions—IEE Workshop Brussels. Jensen, J.O.; Hansen, J.R., Nielsen, S.B., May 2011a. ESCO in Danish municipalities: experience, innovation, potential. In: Proceedings of the 6th International Conference on Energy Efficiency in Domestic Appliances and Lighting.
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