EU Cohesion Policy Energy Investments ‘Not Cost Effective’

by | Jan 15, 2013

The European Court of Auditors has concluded that the EU’s Cohesion Policy investments in energy efficiency were not cost effective, according to a report published yesterday.

The Cohesion Policy is a European Union regional policy that provides a framework for financing a range of projects intended to encourage economic growth in member states.

Since 2000, the EU, through its Cohesion Policy funds, spent about €5 billion ($6.7 billion) for co-financing energy efficiency measures in member states.

After assessing whether the energy-efficiency investments were cost-effective, the European Court of Auditors determined that the funds were not well spent and that the planned payback period for the investments was 50 years on average — and up to 150 years in certain cases.

The audit was carried out in the Czech Republic, Italy and Lithuania. These countries had received the largest contributions from the Cohesion Fund and European Regional Development Fund for energy efficiency measures for the 2007-2013 programming period, and had also allocated the highest amounts to projects by 2009.

The audit looked at four operational programs and a sample of 24 energy-efficiency investment projects in public buildings.

The court found that the projects selected by member state authorities for financing did not have rational objectives in terms of cost-effectiveness, i.e. cost per unit of energy saved. Their objectives were to save energy and improve comfort, but they were not selected for financing on the basis of their potential to produce financial benefits through energy savings.

Instead, the buildings selected were typically regarded as being “ready” for funding if they were in need of refurbishment and their documentation complied with the requirements, according to the audit.

According to Harald Wögerbauer, a member of the European Court of Auditors and lead author of the report, none of the projects had a needs assessment of an analysis of energy-savings potential. The member states used the money to rehabilitate public buildings and energy efficiency was — at best — a secondary concern.

To improve investment in energy efficiency, the court recommends that the Commission make the Cohesion Policy funding for energy efficiency measures subject to a needs assessment, regular monitoring. It also suggests using performance indicators, a transparent project selection criteria and standard investment costs per unit of energy to be saved, with a maximum acceptable simple payback period.

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