A tale of three European cities

Article based on research by Francesc Pardo-Bosch, Carles Cervera & Tamyko Ysa

The United Nations predicts that cities will be home to 65% of the world’s population by 2050. Consequently, the pressure on existing resources, including energy, will increase. Housing, education, healthcare, water, waste management, public safety and security are essential services that governments are expected to provide in urban areas.

As calls to address climate change become louder, local municipalities will need to create and implement strategies to ensure financial, environmental and social sustainability in the essential services they deliver.

In their efforts to address climate change, city councils will need to pay close attention to the building sector, the major greenhouse gas emitter in cities which accounts for almost 40% of total energy demand. Thus, improving the energy efficiency of buildings should be a critical element in combating climate change.

The United Nations predicts that cities will be home to 65% of the world’s population by 2050

Francesc Pardo-Bosch, Carles Cervera and Tamyko Ysa from the Center for Public Governance at Esade Business School, analysed the business models of three European city councils (Nantes, Hamburg and Helsinki) to draw lessons from the policies they are implementing under mySMARTLife project, which is part of the Horizon 2020 Research and Innovation Programme.

Specifically, the team from Esade looked at policies for retrofitting housing to improve energy efficiency as implemented by a mix of public-private partnerships – and considered them as case studies.

These research findings may help other cities plan their own implementations.

A tale of three cities

Nantes Métropole

The council is retrofitting existing housing (24 communes in the metropolitan area) and prioritising buildings that are more than 15 years old. The primary objectives are improved energy efficiency, a switch to renewable energy sources, better health and quality of life for the owners/tenants, and household savings through lower energy costs.

Nantes city
The city of Nantes is prioritising energy efficiency (Photo: Giuseppe Rispoli/Twenty20)

The council is also focusing on the 13.7 percent of its population in the low-income household category and aims to retrofit 1,000 low-income households.

Nantes Métropole receives revenue from private owner taxes (including building and planning permits) and short-term EU grants. Financial sustainability is weak however, given that public funding accounts for up to 70% of the council's capital expenditure for the retrofitting project.

Hamburg

The city council wants to retrofit 5,000 houses in its Bergedorf district. The overall objective is to reduce energy demand by 50 percent. The council plans to install insulation and solar energy panels, and replace inadequate fossil fuel heaters with renewable sources. Some retrofitted buildings have been equipped with smart home automation systems that enable owners to control and regulate heating and electrical appliances remotely via smartphones, tablets and laptops.

Hamburg city
The city council of Hamburg aims to reduce energy demand by 50 percent (Photo: JJF Arquitectos/Twenty20)

Management is complex because there is a mix of single and multi-property owners – including multi-property owner housing associations that manage apartments at below-market rental prices for low-income tenants. Owners in general are reluctant to assume the upfront costs of retrofitting. All of Hamburg’s costs, which are not significant, are covered by EU grants.

Helsinki

Helsinki city council is retrofitting 1,323 apartments in housing blocks dating from the 1970s and 80s. The majority of the city’s dwellings were constructed during these decades and some are managed by housing associations. The council works with Helen (a wholly city-owned energy producer and distributor) and local organisations that research and implement interventions.

The energy refurbishment model focuses on improved energy performance through smart home management. In particular, renewable energy production and smart controls are retrofitted. Helsinki does not face large-scale renovations since most of its U-values are already relatively good when compared to European building averages.

Street in Helsinki
Helsinki city council is retrofitting 1,323 apartments in housing blocks dating from the 1970s and 80s (Photo: Maria/Twenty20)

Owners must pay all costs, and contracts are directly made with retrofitting suppliers. The council monitors interventions to measure savings and environmental benefits. The Helsinki municipality receives revenue from owner taxes and EU grants.

Retrofitting strategies

The challenges and risks

Convincing owners to participate and shoulder the costs of the scheme is the biggest obstacle to improving the scale and speed with which retrofitting pilot schemes can achieve their goals. The average cost for retrofitting a property ranges from €150-170/m2, making upfront costs prohibitive, or at least unattractive, for many property owners. Without guarantees or adequate assurance about the payoffs for such investments, the uncertainty of making such a large investment is difficult to allay.

The degree of participation in projects also depends on the type of ownership. Helsinki only deals with single-property owners and housing associations, while Nantes and Hamburg councils also work with multi-property owners. Generally, it is easier to engage single and multiple property owners who manage properties at market rental prices. Housing associations often rent properties at below market rates to low-income tenants.

City councils rely on external funding to implement retrofitting projects

City councils also rely on external funding to implement retrofitting projects. Opportunities to scale up and replicate the schemes are only possible when EU grants enable pilots to be implemented that prove their viability. Coordination at all levels – local, regional, national and supranational – can be lengthy. Legal and regulatory processes must align to ensure that financial incentives are attractive rather than prohibitive.

Collecting and analysing data from interventions is also vital. Each city has a data management platform and team to record statistics for decision-making. But this data also needs to be analysed alongside other demographic indicators and housing data. Integrating data and findings can be tricky.

A wider geographical focus can make implementation and the measurement of results challenging. In Hamburg and Helsinki, pilot projects operate in key districts while Nantes works throughout the region. Given the variation in housing and ownership types, Nantes Métropole struggles to establish clear energy consumption targets. Measuring success may also prove difficult.

The business models of Nantes, Helsinki and Hamburg are all public-private models to varying degrees

The opportunities

The business models of Nantes, Helsinki and Hamburg are all public-private models to varying degrees. The European Commission and city councils act as intermediaries and overseers while private companies (such as energy companies, architects and builders) collaborate with owners and the public sector. Pilot projects demonstrate how public-private partnerships can work.

Helsinki takes this process a step further. Its 4P model (public-private-people partnership) involves owners as key stakeholders. As key beneficiaries and investors, owners are the drivers of processes and outcomes at every stage – from planning and implementation to results measurement.

Finally, buy-in and feedback loops are created with education and training programmes, as well as monitoring by the council. Continuous communication of how a project is working and the measurement of results (according to financial, environmental and social indicators) are essential roles for city councils because more people will support projects that are perceived to be successful. Sustainable cities ultimately depend on engaged citizens.

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