- Buildings Guide
- Policy Guide
- Appliances Guide
In Mexico, low and middle income groups especially benefit from two funding initiatives facilitating energy efficient investments in mainly new residential buildings. While Esta es tu casa (This Is Your Home, TIYH) offers grants for building, buying or renovating low-income homes, which must meet specific energy efficiency criteria, the Hipoteca Verde (Green Mortgage, GM) offers loans incentivising the purchase of energy efficiency technology to a wider target group. For the latter, an evaluation has estimated that homeowners can achieve net savings of close to €1,000 within 10 years. In 2009, both programmes together saved (on average) 48% of electricity and gas compared to houses without such measures. Demand is very high – close to 400,000 GM loans were formalised during 2011, which is almost all new homes receiving mortgages from the INFONAVIT agency. In addition, the TIYH programme released almost 100,000 grants in 2010. The fact that both, TIYH and GM, can be combined is a particular advantage to both measures. They are also assumed to have positive effects on the construction industry and the technology supply industry, as well as on the government’s budget due to avoided energy price subsidies. Further projects, some supported by the international community, enhance the Mexican policy package making low-energy homes appear feasible in Mexico in the not so distant future.
In 2009, 16.7% of Mexico’s final energy demand (SENER, 2009) and 26.7% (26.1% in 2010) of the electricity demand (CFE, 2011) came from the residential sector, which also showed the highest growth rate for electricity consumption with an average 4.0%/yr between 1999 and 2009. Esta es tu casa (This Is Your Home, TIYH) and the Hipotecas Verdes (Green Mortgage, GM) programme counter this trend, which may become even more dramatic due to population growth and the rising usage of appliances.
The TIYH, operated by Mexico's National Housing Commission (CONAVI), offers grants to public and private sector employees with a permanent monthly income not exceeding €500. However, employees must have contributed a share of their salary to the National Housing Trust Fund (INFONAVIT) every month. The final grant sum depends on various criteria. For example, grants for new houses are fixed at €3,450 (~20-25% of the price for a low-income home).
The GM scheme, on the other hand, provides loans to private sector employees, who have made contributions to the INFONAVIT, which is also responsible for the management of the programme. Loans may range from €1,050 up to about €2,100 in order to add various energy (and water) saving technologies to a respective household. The technologies addressed include thermal insulation, reflective coatings for walls and roof, solar water heaters (SWH), CFLs, refrigerators, water saving faucets, etc. and have to comply with minimum energy efficiency standards.
Close to 400,000 GM loans were applied for during 2011 (INFONAVIT 2012, p.1), up from 164,000 in 2010. Since 2011, all houses financed by INFONAVIT are obliged to incorporate efficiency measures under the GM scheme. In addition, the TIYH programme provided almost 100,000 grants in 2010.
GM and TIYH can also be combined meaning that low-income households can receive funding from both programmes. This reduces their total costs and especially the running costs for housing even more, due to the use of energy- and/or water-saving measures. This, in turn, improves the overall living situation of low-income groups, especially as the net benefit is calculated to be around €1,000 within 10 years. Moreover, thermal comfort improves as well. While households in hot climate zones saved an average of 1,554 kWh annually on electricity, households in temperate or semi-cold climate zones are estimated to have saved 3,114 kWh/yr in gas. According to INFONAVIT (2012),
• almost 500,000 tons of annual CO2 emissions (0.79 tons per home),
• almost 400 GWh of electric energy, and
• almost 500 GWh of LPG
have been saved by 630,000 GM homes being supported between 2009 and May 2011. Furthermore, it is assumed that both measures bring considerable dynamics to a) the construction industry and b) the technology supply industry (e.g. suppliers of insulation material, solar collectors, etc.) and their respective labour markets due to increasing demand. Both measures are innovative financing schemes dealing with challenges particular to an emerging economy and enhance the well-being of the lower-income groups. Last but not least, although there is no economic benefit/cost analysis from the perspective of the national economy known, it can be assumed that the programmes are highly cost-effective both at the national level and for the state’s budget due to the high percentage of state subsidies (about 60%) for domestic electricity rates and the relatively low involvement of the state for providing loans at reduced interest rates to INFONAVIT.
In 2005, the Tunisian Ministry for Industry, Energy and Small and Medium Enterprises and the Tunisian Agency for Energy Management as well as bilateral and multilateral assistance introduced the Prosol (“Program Solaire”) financing facility in order to promote the market penetration of Solar-Water heaters (SWHs). Among other things, incremental costs for households were reduced by investment subsidies increasing the competitiveness of SWHs, awareness-raising campaigns tackled consumer scepticism while suppliers and installers received specialised training as well as state-accreditation. Certification and labelling of SWHs provided information to purchasers (CPI 2012, p.3).
The state-owned German bank KfW provides financial incentives for energy-efficient refurbishment or construction. Investors can choose whether to opt for the soft-loan or the grant-option. While single-measures receive funds, the programme primarily targets whole building approaches (BMVBS 2012).
The Energy Savings Assistance Program of California financially assists low-income groups with improving the building envelope of their home or with purchasing energy-efficient refrigerators, for example. (see )
In Australia the government introduced a programme of providing grants to “consortia of government, business and community organisations as trial approaches to improve the energy efficiency of low income households and enable them to better manage their energy use.” (see)
Mexico’s population is expected to grow up to 130 million by 2050 (INEGI, 2010). The number of households (up to 54 million (INEGI, 2010)), as well as of residential homes (up to 11 million new houses until 2030, (SENER 2011b)) will also increase significantly.
In 2009, 16.7% of Mexico’s final energy demand (SENER, 2009) and 26.7% (26.1% in 2010) of the electricity demand (CFE, 2011) came from the residential sector. Electricity tariffs, as well as LPG, are heavily subsidized, in particular at the lower end of the consumption scale.
The programme ‘TIYH’ supports households with low (although permanent) income levels in building/buying/renovating a house or apartment through a direct grant, thus helping those families in getting a decent and also their own property. The grant for buying a new house requires that it complies with certain sustainability criteria, including energy efficiency standards, therefore reducing operational costs and avoiding negative environmental and social impacts.
Funding through TIYH is only available to employees registered in the social security system (or having at least a banking track record and regular payment capability) with a maximum monthly income of about €500 (five times the minimum salary); for public or private sector employees who have made payments into a housing trust fund, the maximum income level to be eligible for a grant is about €260 per month.
TIYH grants for new housing are fixed at € 3,450 and contribute about 20-25% to the costs for a low-income home with a maximum value of €13,400 (a single-family house) or €16,500 (an apartment in a multi-family apartment house).
The GM scheme is available for all employees of the private sector who have paid savings to INFONAVIT. The GM is a special loan (mortgage) dedicated to adding energy-efficient technologies to the house. The maximum GM amount that is paid in addition to the conventional loan ranges from €1,050 up to about €2,100, dependent on the income level. Since the beginning of 2011, the GM gives flexibility to the housing developers to choose from a range of predefined eco-technologies that in total comply with the minimum monthly cost savings required (about € 12 – 23, depending on the income level). The supported eco-technologies include Solar Water Heaters (SWHs), CFLs, water saving faucets, thermal insulation, among others. The cost savings have been pre-determined for different residential home sizes and climate zones, and are independent from the actual savings.
For low-income households, with a saving account at INFONAVIT, both measures (grant and loan) are being combined.
It is a national measure applied through regional agencies of the National Workers’ Housing Trust Fund (INFONAVIT) and (for TIYH) designed and operated together with the National Housing Commission (CONAVI).
The focus is on the application of certain improvements on the building envelope and the installation of energy- and water-saving equipment. The technologies addressed include thermal insulation, reflective coatings for walls and roof, solar water heaters (SWH), CFLs, refrigerators, water saving faucets, etc. and have to comply with minimum energy efficiency standards.
The action targets building new houses - that otherwise would be built and equipped with less energy-efficient devices and components - with increased energy efficiency and environmental standards. This includes: improved thermal insulation, CFLs, A/C units, refrigerators, SWHs, instant gas heaters, water saving faucets/closets and potable water filters. In some cases the appliances have to meet the labelling requirements of FIDE (Trust for Electricity Savings) that are slightly more stringent than the official minimum energy performance standards.
The TIYH grant and the GM loan are de facto introducing component-related energy efficiency requirements for a majority of houses in Mexico that are built through construction companies (so-called formal constructions).
INFONAVIT’s qualification system
INFONAVIT is currently developing a qualification (grading) system with assistance from the German International Cooperation (GIZ) and the British Embassy to rate the energy efficiency and water saving performance of the GM houses. This instrument will help to raise the energy efficiency standard by creating market competition and will inform the house owners about the level of environmental performance of the house they are buying.
CONAVI’s Housing Guideline
In 2011, CONAVI published the 2nd version of the “Código de Edificación de Vivienda” (CEV, Guideline for Housing Construction) in order to promote best practices in housing construction (including energy efficiency standards). The CEV is a reference building guideline that is intended to help local authorities in adapting the municipalities’ building code.
In 2010 several pilot projects for net zero energy homes were realised in warmer climate zones. Those pilot homes realised stricter energy-efficiency measures and then covered their remaining electricity needs by on-site solar panels.
The Interamerican Development Bank (IDB) and the German Development Bank KfW are currently preparing a larger pilot programme for the housing construction of five developers that will follow a similar approach to the GM.
Grants for Solar Thermal Systems
With support from the German International Climate Initiative, Solar Thermal Systems, credited by Infonavit, are subsidized for low-income households. The programme runs from 2010 to 2012 and covers a total of 25,000 systems with a budget of € 2.5 million.
Sustainable and Integrated Urban Development (DUIS)
In 2010, the Mexican Government started a new approach by not concentrating only on individual homes or a housing complex, but applying sustainability criteria on new urban developments. So far 6 projects have been certified, while 17 are in revision. If realized at full scale, a total of 800,000 new homes would be constructed.
The GM is an innovative financing scheme that has allowed a reduction in energy consumption and an increase in thermal comfort in the low-income housing sector of an emerging economy.
The combination of TIYH and GM provides the chance for even low-cost housing to be equipped with energy and water-saving technologies.
The TIYH subsidy and the GM criteria are still not homologated and each programme has its own rules of operation.
The new set of criteria for the TIYH subsidy will be launched in 2012 and a new standard (NOM-020-ENER) setting maximum levels for solar thermal gains of residential buildings came into force in December 2011.
In 2012 INFONAVIT expects to introduce a grading system to rate the houses’ environmental performance, including energy demand. It has been discussed that future incentives could be related to the scale of performance, including energy efficiency.
The policy can be enhanced and energy efficiency further improved. It is potentially attractive for carbon credit financing, such as CDM Program of Activities, or supported NAMA (Nationally Appropriate Mitigation Actions).
This shall be achieved through enhancing the existing GM and TIYH programmes and complement them with new and stricter building codes, improved educational training, capacity building and awareness raising programmes.
Additionally, CONAVI and INFONAVIT are currently in the design stage of a supported NAMA for the Mexican housing sector, where it is intended to relate INFONAVIT’s grading system to a number of scenarios (energy saving goals) so that, with support of foreign investment, the current TIYH subsidies and GM can be expanded both quantitatively and qualitatively.
Mexico has a growing population and an increasing demand for new housing that has accumulated over the last 30 years. This deficit for new housing has created particular conditions.
INFONAVIT is a unique housing fund that has managed to grant over 6 million credits since 1972.
Another housing fund institution (FOVISSSTE) is expected to launch a similar product to the GM. This institution already channels TIYH subsidies to its clients. The affiliates to FOVISSSTE are employees from the federal sector that pay monthly contributions.
The TIYH and GM combined are directly assigned through INFONAVIT, which avoids third party agents; thus facilitating the implementation.
In principle it can be easy to transfer the P&M if similar situations to the Mexican conditions exist (both demand for new housing and existing implementation actors).
Agencies or other actors responsible for implementation
CONAVI and its regional agencies; INFONAVIT and its regional agencies; several other financing institutions.
The federal TIYH grant is necessary to support the low-income population in acquiring decent homes. However, INFONAVIT has expanded the GM to the total of loans they grant each year (covering all income sectors).
It is expected to up-scale the technology and efficiency standards through the carbon market (CDM Programme of Activities) and supported NAMA from Annex I countries (2012 – 2020).
One important pre-condition for implementing the policy is the development of criteria and indicators for Sustainable Housing urban developments (minimum sustainability criteria) in order to allocate TIYH subsidies.
GM field evaluations are done every year. The monthly savings estimated are verified through field testing, including on-site measurements, interviews and data collection. Therefore, the know-how, procedures and resources necessary for that need to be established.
Policy design: GM’s programme design involved several stakeholders besides INFONAVIT through workshops and consultations: e.g. CONAVI, INE (National Institute for Ecology), CMIC (Association of Construction Companies), CANAME (Commission for Electrical Safety), CANDEVI (National Chamber of the Housing Industry) and FIDE. Most of those institutions are also closely linked to the implementation process by providing feedback and participating in capacity building or executive meetings.
Implementation works as follows: CONAVI published the minimum sustainability criteria (pre-conditions for new sustainable houses). The worker applies for the subsidy through INFONAVIT (or other financing institutions), who then grants the loan for the total cost of the house (including the TIYH subsidy and the GM percentage). INFONAVIT verifies compliance through an accredited agent who checks that the eco-technologies have been installed. The housing developer registers the GM houses on INFONAVIT’s system and if the criteria are met, the funds are released. INFONAVIT oversees the programme implementation.
CONAVI does have a quantified target for the current administration (2006-2012). In 2011 a budget of € 182 million could support about 75,000 homes within the INFONAVIT loan scheme (CONAVI, 2011). In total, CONAVI has provided subsidies of around € 280 million for about 160,000 homes. Approximately 50% of those subsidies went to families with an income of about € 100-200 per month (1-2 minimum salaries).
INFONAVIT has set annual targets for GM with and without TIYH subsidy. In 2010 alone, INFONAVIT’s GM granted almost 170,000 loans, exceeding the target of 150,000 loans (INFONAVIT, 2010). For 2011, the target for GM financing was set at 480,000 loans with a volume of about € 8.9 billion. In total, 614,000 GM loans had been approved by the end of November 2011 since the start of the programme.
Co-operation of countries
Technical assistance and limited financial contribution has been received from Germany, USA, Canada, and United Kingdom in specific projects, targeted at optimizing construction standards with regards to energy efficiency and optimizing the financing and selection of eco-technologies (e.g. pilot projects for zero energy homes realized in 2010). The German Government is providing grant financing for the purchase of solar water heaters within the GM scheme (25,000 roofs programme, 2010-2012).
For the future, it is expected to attract international financing and technical assistance through supported NAMAs (Nationally Appropriated Mitigation Actions) and CDM Programme of Activities, that would help to overcome currently existing financial and non-investment barriers for making houses more energy-efficient.
Actors responsible for design
TIYH has been established by CONAVI (Mexican National Housing Commission – a federal state entity for the promotion of the housing sector).
GM was established by INFONAVIT (National Workers’ Housing Trust Fund – a public-private financing institution to support housing ownership of employees in the private sector).
Actors responsible for the implementation
INFONAVIT (National Workers’ Housing Trust Fund) and other institutions that provide housing credits and hand out TIYH grants.
Implementation is regularly monitored by the on-site visits of certified and registered inspectors. INFONAVIT has all data available for the installed eco-technologies, related costs and pre-determined financial savings per measure.
The following co-benefits are applicable:
For determining the baseline, it was assumed (PRONASE, World Bank) that currently only 20% of Mexican houses are equipped with an AC system, but penetration could significantly increase in the future, as the US example demonstrates. It needs to be mentioned that exact figures are lacking, in particular with regard to installation rates of fans and AC systems in low-income homes.
PRONASE expects that with its proposed measures (to which the GM and TIYH belong), the accumulated final energy consumption in buildings (commercial and residential) could be reduced by at least 85 TWh in the period 2010-2030 against the baseline scenario. Again this estimation deems rather conservative, although any saving will be offset by a strongly growing construction sector (Rodríguez-Kuri 2011, p.12, next figure).
There is no known up-front assessment of energy savings related to GM and TIYH measures.
According to PRONASE, the National Programme for the Sustainable Use of Energy 2009-2012 (CONUEE, 2009), the projected final energy consumption in buildings (commercial and residential) in Mexico will increase to 485 TWh by 2030 in the baseline case. An estimated 12% of this consumption corresponds to HVAC, mainly AC and ventilation. The residential sector represents an assumed 81% of the total HVAC consumption in the country; therefore the domestic energy consumption for this purpose alone would be in the range of 47.1 TWh by 2030, if no saving measures are implemented.
The rather conservative scenario calculation by PRONASE assumes that the energy consumption for air conditioning within the Mexican building sector could be reduced by 16% (or roughly 10 TWh) in 2030 against the baseline scenario (Rodríguez-Kuri 2011, p.15, next figure).
have been saved by 630,000 GM homes supported between 2009 and May 2011.
According to some rather incomplete and not fully representative surveys, carried by INFONAVIT, the average household in a hot climate zone saved 1,554 kWh/yr on electricity.
Each household in a temperate and semi-cold climate zone saved 3,114 kWh/yr on gas.
Note: Mexico is divided into 10 major climate zones.
The total number of houses financed by INFONAVIT between 2007 and May 2011 amounts to more than 2.1 million, of which 630,000 have been targeted by the GM (this includes the years of 2007/08 where the GM was not yet fully introduced, but had a pilot status). In 2010, 164,000 homes received a GM loan, while 96,000 also took advantage of the TIYH programme. With 380,000 GM loans in 2011, almost all new homes receiving mortgages from the agency INFONAVIT participated.
Within the TIYH programme, about 870,000 subsidies with a total budget of €1.3 billion have been handed out between 2007 and 2011.
With 600,000 homes expected to be financed by INFONAVIT in 2012, GM loans (eco-investments) could amount to about € 600 million (own estimate).
The actual costs for GM corresponded to 380,000 loans (until May 2011), but no financial figure was disclosed. If approximately 50% of the total available Green Mortgage had been spent (value for 2009), total investment for eco-technologies would be in the range of € 190 million (own estimate).
The TIYH subsidy financed in combination with the GM in the same period was about € 166 million (CONAVI, 2011).
For 2012, the total cost saving through reduced electricity consumption alone and avoided subsidies could amount to about € 100 million for the state budget (own estimate).
The medium repayment period for measures financed under GM in 2010 was calculated to be 4.1 years. With an assumed medium lifetime of 10 years for all measures (and no maintenance costs considered), the net benefit for the housing owner would be in the range of about € 900.
The measures also have considerable benefits for market actors within the supply industry (e.g. insulation material, solar collectors etc.), which have not yet been monetized.
No benefit/cost analysis from the perspective of the national economy is known, but it can be assumed that the measure is highly cost-effective both at the national level and for the state’s budget due to the high percentage of state subsidies (about 60%) for domestic electricity rates and the relatively low involvement of the state for providing loans at reduced interest rates to INFONAVIT.
No ex-post evaluation looking at the macro-economic effects has been undertaken so far.
At the micro-level of the households, the policy is clearly cost-effective for them, with a net benefit of around € 900 (see above).