The positive energy neighbourhood (PEN) approach can contribute to scaling up renovations
while engaging local communities in the energy transition. A PEN is characterised by a group
of buildings and public spaces with connected infrastructure, within a geographical area. A
PEN aims for energy-efficient and energy-flexible groups of connected buildings and urban
areas which produce net zero greenhouse gas (GHG) emissions from energy use on an
annual basis and actively manage an annual local or regional surplus production of renewable
energy. This report includes an analysis of the EU policies relevant for underpinning the PEN
approach to building renovations.

The Energy Performance of Buildings Directive (EPBD) explicitly mentions the neighbourhood
approach, sets minimum energy standards, and addresses energy poverty, all of which are
elements of the PEN approach. The Renewable Energy Directive (REDIII) raises renewable
energy targets, promotes renewable energy integration in buildings, and streamlines permit
procedures, which also supports PEN principles and facilitates the procedures for their
creation. The Energy Efficiency Directive (EED) sets energy-saving targets, broadens the
energy efficiency first principle, and prioritises addressing energy poverty. Effective national
implementation is pivotal for PENs to leverage the opportunities presented by these directives.

Harmonised definitions and frameworks for PENs are necessary for assessing progress and
ensuring consistency across Member States. More tailored financing solutions are required
to protect vulnerable households and mitigate energy poverty, aligning with the directives’
focus on social equity. Assessing the social and environmental co-benefits of PENs is critical
for maximising their impact. By addressing these challenges and leveraging the opportunities
presented by the EPBD, REDIII and EED, PENs can emerge as a cornerstone of sustainable
urban development within the EU, contributing significantly to energy efficiency, renewable
energy deployment, and social goals.

Key insights from the EU-level policy framework for EU-level and national policymakers and
the financial sector include:

• A harmonised definition and framework for PENs is needed to enable assessment of progress towards policy goals.
• During implementation, tailored actions and policies are needed to protect vulnerable households and mitigate energy poverty, including supporting access to renovation and renewable energy systems.
• Financing solutions must be better designed to benefit the income groups that need them.
• Assessment methods of social and environmental co-benefits of PENs are needed to enable access to public and private environmental, social and governance (ESG) finance.