Notifications
Clear all

Two financial tools (ISDE and NHF) aimed at aiding home owners in the process of making their homes more sustainable in the Netherlands

1 Posts
1 Users
1 Reactions
118 Views
Lucia Zwart
Posts: 1
Topic starter
(@lucia)
Member
Joined: 1 year ago

This case study targets the issue of fossil energy use and associated CO2 emission from residential buildings and the need to save energy in order to lower energy bills, reduce import dependency and to meet (European) climate and energy targets. The social, economic and political context of the policy measures is as follows:
• 7% of home owners in the Netherlands has difficulty to pay the energy bill and does not have the means to take the necessary, expensive sustainability measures.
• With the war between Russia and Ukraine, the fossil energy prices have risen.
• The Dutch government needs to meet the sustainability goals agreed upon in the EU and national climate targets as defined in the national Climate act, which has been translated into sectoral targets including the build environment.

The two policy measures examined in the study aim to reduce fossil energy use in residential buildings by raising the number of renovations (insulation and installation) carried out by home owners. The first policy measure, Investment Subsidy Sustainable Energy (ISDE), is an investment subsidy by which home owners can get a return of approximately 30% on their made investment for sustainable heating systems or insulation materials. The second policy measure, the National Heat Fund (NHF), is a loan at low interest rate focused on similar sustainable measures.
Without these policy interventions, the Netherlands will not meet their CO2 targets. The baseline is that residential buildings in the Netherlands used 293 petajoules of natural gas in 2021 (temperature corrected) and this needs to be zero by 2050.

Both policy measures are being implemented. All home owners can apply for the ISDE through the governmental website and for the NHF there is a specific website. However, the granting process of both the subsidy and the loan are subjected to conditions. In all cases an offer from the installer or (sub)contractor for the renovation measure(s) is necessary, the measure or used heating technology needs to be pre-approved (based on an existing list), and, specifically for the NHF, the home owner needs to be in a “healthy” financial situation.
The home owners need to be aware of the existence of the PAMs themselves, they are not actively approached by the government. However, in most cases the installer/contractor or mortgage advisor will inform the home owner.

Up until summer of 2023, over 140.000 heat pumps in residential buildings have been subsidized through the ISDE subsidy since 2016 and more than 16 million square meters of insulation material in residential buildings have been subsidized through the ISDE since 2021. According to the Nederlandse Organisatie voor Toegepast Natuurwetenschappelijk Onderzoek (Dutch Organization for Applied Scientific Research, or TNO), this has resulted in an approximate energy saving of 760 terajoule per year as a result of the measures taken in 2021 and almost 2.300 terajoule for those taken in 2022 (see figure). Incidentally, we have to specify that for both the ISDE and the NHF the number of applied applications and granted amount decreased significantly in 2021 and then increased to numbers higher than those in 2020 for the year 2022. The drop in applications is most likely due to the peak of the corona-pandemic. The subsequent peak is most likely the result of sparking energy prices due to the war between Russia and Ukraine and the bann on Russian gas. In addition, it might be related to people spending more time at home, working from home, and therefore wanting to increase their living comfort and lower their energy use. These reasons are hypothetical and have not been verified for the ISDE and NHF specifically.

That said, it is unclear what percentage of these taken measures were a direct result of the subsidy. An ex-post evaluation of the ISDE subsidy (SEO, 2019) concludes that the additionality of the policy measure is most probably limited and that many of the home owners would have made the investment without the subsidy. On average, the number of home-owners that applied for an ISDE subsidy after having bought a heat pump is 23% over the last 7 years.

For the National Heat fund (NHF), the number of applications from 2014 to 2019 is over 39.000. The corresponding energy savings have not been estimated in this study. The resulting energy savings would also (partially) overlap with the energy savings estimated for the ISDE. However, the number of applications and granted amount in loans has steadily increased since the start of the state funded loan.
Through the last years, changes have been made to improve both policy measures in order to increase the number of applications. Examples are: simplifying the application process, using easier-to-meet criteria in application, increasing the percentage of the investment covered, altering the type of measures that are covered by the subsidy, raising familiarity with the policy measure through marketing campaigns, and lowering the interest rate of the loan.

However, to what extent these changes have been attributed to the increase in number of applications is difficult to assess due to a changing context. It seems that the influence of the specific configuration of a policy measure on its effectiveness is limited in comparison to the influence of external variables such as energy prices, technological developments and familiarity with the subject due to attention in the media. Furthermore, interactions between different policy measures make it difficult to monitor the effectiveness of a single policy measure.
To conclude this contribution, as soon as the study moves forward, we are going to involve policy makers to divulge the details.