Riga Energy Agency (REA) is the first local energy agency in Latvia and the country’s key player in promoting, consulting and advising the Latvian capital’s local decision makers as well as its inhabitants – one third of the entire Latvian population – on the rational and sustainable use of energy.
The agency is confronted with some substantial challenges, not least in the field of residential housing which consumes up to 36% of Riga’s energy – making households the city’s largest energy consumer group. Improving energy efficiency in this sector is a primary concern for the REA, as the big majority of Riga’s housing stock was built during the post-war soviet period of the country, between 1960 and 1990, in the form of standardized condominiums that were constructed as cheaply as possible and lacking any consideration for thermal stability or other energy-conserving characteristics.
The improvement of these condominiums is the main focus of the REA given that most of them are in urgent need for renovation not just from an energy standpoint but because of their overall state of degradation. Latvia’s cold and long winters entail six-month long heating periods and therefore high heating expenses, so that increased energy efficiency has a significant potential to decrease both consumption and costs for residents.
About 75% of Riga’s population lives in these multi-apartment buildings, whereby the residents can be generally divided into three groups: young families who are primarily renting flats, silver-age, and retirees. This composition poses a certain challenge; especially retired residents are reluctant to invest into energy refurbishments as they do not wish to carry such a heavy financial burden this late in life. While access to finance is not a major barrier in Latvia, motivation for energy refurbishments is low among homeowners as a priority is given to other household expenses which compete with energy efficiency measures. Therefore, the REA has come to the conclusion that residents’ income has to be increased in order to incentivize energy retrofits.
Out of this reasoning the Riga Energy Agency has developed a business model for a municipal revolving fund to provide low interest rate loans to homeowners’ associations for energy renovation of condominiums under the INFINITE SOLUTIONS project. However, this model is not yet operational and it does not address another major barrier obstructing deep energy refurbishment of homes: the opaque and uncoordinated renovation market in Latvia.
Currently the market in Riga is composed of five ESCO companies working for energy efficiency refurbishment projects in condominiums, a majority of which are SMEs. There is a general negative attitude towards the construction sector in the population characterized by very little trust in the quality of the performed works. Independent advice and collaboration with partners selected by the municipality for the high quality of their work is crucial to overcome this mistrust.
For this reason the City of Riga is working with INNOVATE to set up a One-Stop-Shop where citizens can obtain all necessary information on renovation programs offering co-financing options. To popularize the renovation process among homeowners, the city and the REA plan to establish a EUR 500,000 subsidy fund helping to finance a pilot project for energy retrofits.
To advertise energy refurbishments, the strategy is to focus on the fact that deterioration of the buildings requires deep renovations in any case, which can easily be combined with energy efficiency measures. Therefore, when making decisions on the scope of renovations, homeowners should consider their return on investment based on extra costs related to energy efficiency measures compared with normal market-practice renovation measures.
Different stakeholders, such as housing companies, the municipal financial department and construction bureau, have already come together to form a special commission established by Riga’s City Council with the responsibility to develop the One-Stop-Shop program.
Key business partner
Riga City Council