3. Finance, Regulation and law

This topic will tackle several important issues related to the retrofit challenge such as the high upfront investments, the cost sharing problem, and the high heterogeneity in local regulations in Switzerland. Financial and regulation issues will be handled in terms of supportive building standards, support programs for the building retrofit and the switch to renewables. Based on new forms of a public-private partnership, complementary instruments for financing energy renovations and switch to renewable heating will be developed, tested and evaluated. Necessary adjustments of the regulatory framework will be indicated.

3.1 Innovative financial solutions for building retrofit

Issue/Challenge
Recent years have shown that existing subsidy programs and mortgages with preferential interest rates are not sufficient to significantly accelerate energy renovation. Energy-efficient renovations can be profitable over the lifetime of the building components, but there is a lack of adequate financing instruments for many private homeowners. We propose a public-private partnership (PPP) where the public sector covers the (long-term) risks associated with energy renovations and banks provide affordable energy loans to homeowners. Renowave-Solution 3.1 aims to provide a framework, both economic and legal, that allows to design new financial instruments which are attractive for all stakeholders and targeted to the specific needs of homeowners that intend to renovate.

Description
Development of a framework that allows to establish new financing instruments for energy renovation where the public sector provides a guarantee.

• Policy design: structure and governance of a public-private partnership that provides energy loans to private homeowners, involving our implementation partners in the banking sector, further financial institutions, SMEs in the construction sector and the public sector.
• Risk assessment: Risk modeling to assess potential risks for the public sector.
• Legal requirements: Clarify regulatory design and show legal adjustments necessary for implementation.
• Demand analysis: Assess demand, acceptance, costs and benefits of new financial instruments based on a survey among homeowners and a data analysis.
• Tool development: Provide a tool for municipalities and cantonal governments that allows to identify target groups and to assess the impact of additional financing instruments.
• Link new financing instruments to new business models in the context of energy renovation.

3.2 Multifamily building fuel switch: business models and strategy for the public sector

Issue/Challenge
Multi-family houses represent the largest residential heating demand in Switzerland. Air-to-water heat pumps (HP) are crucial for the decarbonization of this sector, but their adoption has been very slow due to a series of barriers. Amongst others excessive risks for investors and contractors have been identified: insufficient experience & lack of standardization; lack of structures to allocate inherent risks adequately; lack of attractive business models for investment. This work package aims to find solutions how a public organization can mitigate these risks and accelerate the adoption process.

Description
Elaboration of decision-making tool for public institutions to effectively support the transition to heat-pumps in MFB.

• Main focus: innovative PPP business models, defining role of the public, and involvement of SMEs, enabling adequate risk-sharing
• Stakeholder analysis: barriers and drivers to HP adoption in non-renovated multifamily buildings (investors, contractors, public agency, etc.).
• Business models blueprint: different business model strategies for public agencies that can help accelerate the adoption of HPs
• Different (policy) frameworks: description and assessment of different business models in response to different framework conditions with focus on risk management, risk sharing for stimulating the development of a complex, not yet functioning market. Synthesize decision-making tree.
• Funding opportunities and public guarantees: evaluate funding opportunities, possibly involving public guarantees, to facilitate the switch to HP (e.g. pension funds). Elaborate best practice.

3.3 Supportive Legal Framework for building retrofit of the Swiss building stock

Issue/Challenge
So far, there are no legal publications on energy-efficient building renovations. The legal analysis is crucial because, until now, energy-efficient building renovations have been facing an enforcement crisis. This is also due to the federal structure and interdisciplinary nature of regulations, which let the legal framework appear unclear. The research identifies regulatory obstacles and incentives to promote energy renovations.

Description
Two legal publications outline the legal framework for energy-efficient building renovations. The first examines the concept of energy-efficient renovation, detailing measures for energy production, energy efficiency, and promotion. It explores the constitutional distribution of competences and federal regulations, including legislative mandates and subsidies. The study covers inter-cantonal technical law (MuKEn 2014) and cantonal implementation, emphasizing legal foundations and specific measures. It also discusses federal and cantonal laws related to spatial planning, construction, and environmental aspects. The civil law section addresses property and tenancy laws. The second research focuses on state support, including obligations, subsidies, and securing state measures, linked to SP 3.1 and SP 3.2.

3.4 Triage of value-preserving and value-adding investments in building retrofit

Issue/Challenge
Qualitative (soft) criteria such as comfort and well-being do not offer any direct, financial benefit, e.g. savings in energy costs. Nevertheless, they have a significant influence on the market value of a property and thus on investment decisions. The goal of this SP is to yield information which helps evaluate the value of these soft criteria in quantitative terms.

Description
Refurbishment tasks are defined and divided up using the BKP construction cost plan (BKP1/BKP2). Further, SIA-standards and norms also used to evaluate individual impact factors (comfort and energy). As an output, qualification and quantification of qualitative (soft) criteria will help evaluate these factors for the planification of retrofit operations.