Political, Economic, Social, Technical, Environmental and Legal Analysis of the Hellenic Heating and Cooling Sector

Abstract

This work provides the policy and economic analysis of the renewable heating and cooling sector in Greece. The novelty of this study is that it unveils the different policy instruments and incentive structures in promoting renewable heating and cooling adoption, and it analyses the social, cultural and technical barriers to the adoption of renewable heating and cooling systems in Greece. To this end, a PESTEL (Political, Economic, Social, Technical, Environmental and Legal) analysis is performed, with a view to demonstrating the factors that affect Greece’s progress against the National Energy and Climate Plans (NECP), the decarbonisation of the heating and cooling sector and finally, the alignment with the long-term energy strategy. Overall, the results of this analysis show that the heating and cooling sector is still greatly dependent on the use of fossil fuels. However, there are more opportunities than barriers for the deployment of the renewable heating and cooling sector in Greece; opportunities arise from the ambitious political goals that are harmonized with those of the EU, targeting climate-neutrality by 2050.

1. Introduction

The heating and cooling (H&C) sector is responsible for a major part of the EU’s energy demand, representing roughly half of the total final energy consumption. Most of the energy demand for H&C is for heating, although cooling demand is increasing [1]. In Greece, the heating demand represents 73% of the total energy consumption in residential buildings. The remaining 27% represents the electricity demand, of which only 5% is used for space cooling [2].

The decarbonisation rate and uptake of renewables in the H&C sector have been relatively slow. This is also evident in Greece, as the heating and cooling demand is still covered to a large extent by imported carbon-intensive fossil fuels. It may be true that lignite has been rapidly phased out, but unfortunately, natural gas and oil still form the backbone of heating systems. Indeed, in 2022, the share of primary energy from fossil fuels was 80% while the share of renewable energy sources was only 20% [3].

The role of H&C in the EU’s energy transition is recognized under various legislation acts and plans, such as the European Green Deal, the Fit for 55 package, the REPowerEU plan and the recent provisional agreement to reinforce the EU Renewable Energy Directive. The agreement has raised the EU’s binding renewable target for 2030 to a minimum of 42.5%. In line with the EU, Greece has adopted relevant legislation acts, the most recent being the National Climate Law, the Action Plan to Combat Energy Poverty, the National Energy and Climate Plan and the National Long-term Strategy. Furthermore, the implementation of the Recovery and Resilience Plan is expected to play a pivotal role, also in the sectors of energy efficiency and renewable energies.

The heating and cooling sector has undergone substantial changes in recent years. This is due to strong efforts towards decarbonisation and security of energy supply, imposed by the aforementioned regulatory requirements, but also due to technological developments, mainly in heat pumps, solar and geothermal systems, electrical renewables like photovoltaics in combination with storage technologies but also more innovative technologies like thermolectrics, desiccant and sorption systems [4,5,6]. It is a reciprocal relation that links technologies and policies: the former are driven by the requirements set by the latter, yet, at the same time, the development of the former enables the formulation of more ambitious regulatory goals. Still, it is a complex relationship, since it is also influenced by financial and social factors. The economics of heating and cooling systems affect their acceptability by the final consumers, whilst environmental attitudes can influence the decision-making process of policies. As research, but also experience over recent years, has shown, trying to impose an extremely ambitious policy, which may lead to unacceptably high investment costs for households, may backfire and lead to the rejection of an otherwise sound measure, like the replacement of conventional oil- or gas-fired boilers with heat pumps or renewable energy systems. Such a measure may be feasible over its life cycle, but the initial investment cost cannot be easily borne by the households if not subsidized in some form, and this may lead to controversies, as the recent law on heating systems in Germany showed [7].

It can, therefore, be helpful to try to determine and assess the six main factors that have an impact on the cooling sector, namely, the Political, Economic, Social, Technical, Environmental and Legal ones (the PESTEL factors), in order to assess the rate of implementation of the heating and cooling legislation. The weight of these factors, and the way in which they are linked to each other, has a profound impact on the binding commitments towards the energy transition. This work attempts to unveil these factors in the Hellenic region through an in-depth desktop research.

2. PESTEL Analysis

2.1. Methodological Approach

In order to assess such a complex situation from the perspective of the heating and cooling market, the use of tools from the management area is a common approach. In 1967, Francis Aguilar, in his seminal work “Scanning the environment”, introduced the PEST analysis, covering the Political, Economic, Social and Technical parameters, which represent external factors that cannot be controlled by a company or sector of the economy [8]. Since then, the analysis has been expanded to include Environmental and Legal factors and has become a widely accepted tool for the building sector, as well as sectors linked to it, in our case the heating and cooling sector [9,10,11].

The first step was to identify, collect and validate, to the extent possible, data for each of the factors included in the analysis. The second step was to highlight parameters that have a major contribution for each factor and then, in the discussion that follows, to examine the relationship between these parameters. Finaly, conclusions were drawn that can provide the reader with insights into the perspectives of the sector and also act as the initial point for further analysis with tools that enable a quantified approach, like the Strengths—Weakness—Opportunities—Threats (SWOT) analysis.

2.2. Political Analysis

The global financial crisis of the late 2000s, along with structural problem of the national economy, had a devastating effect on Greece, lasting over a decade [11,12]. Following the severe economic crisis resulting in three international bailouts, in June 2023, the conservative party won the elections and was credited with the stabilization of the Hellenic economy. The current political problems are the sharp increase in living cost, bureaucracy and, to some extent, corruption, tax evasion mainly from the self-employed and illegal immigration.

Greece’s energy and climate policy focuses on energy security, improving economic competitiveness and protecting vulnerable consumers [12]. Greece has achieved most of its 2020 energy and climate targets, but now the ultimate goal is to achieve net-zero emissions by 2050. For example, it has managed to lower its share of fossil fuels in its energy supply—from 91% in 2011 to 82% in 2021—and it has achieved a very significant reduction in the share of electricity generation based on lignite, or brown coal, from 60% in 2005 to 10% in 2021 [12].

But apart from those important steps, additional efforts are needed for the energy transition. These efforts are explicitly detailed in the National Energy and Climate Plan [13] and the 4936/2022 Hellenic Climate Law (2022) [14].

The reduction of the fossil fuel share in the total energy supply in Greece is attributed to the decreasing pace of lignite extraction. Indeed, the share of lignite-fired generation fell from 60% in 2005 to 10% in 2021, reducing the carbon intensity of electricity generation. From 2010 to 2021, the share of fossil fuels in energy supply fell from 90% to 82% of total energy supply.

Considering the outlook, Greece’s energy policy focuses on electrification, renewable energy and investments in electricity infrastructure (international interconnections, island connections, upgrade domestic transmission and distribution capacity). Regarding buildings, there is an enormous energy saving potential due to the old building stock [15,16].

The holistic policy framework developed by Greece to meet the 2030 share of renewables, decentralisation, energy communities and self-consumption constitute a good practice [12]. However, in order to realise the full potential of energy efficiency in all sectors, additional efforts are necessary.

Political Situation of the Heating and Cooling Sector

The overall targets for Greece by 2030, as reported in the NECP [13], are as follows:

• Total greenhouse gas emissions should be reduced by at least 40% compared to 1990 (achieved percentage reduction > 42%).
• The share of RES in final gross energy consumption should reach at least 35% and in final gross electricity consumption 61%.
• The final energy consumption should not exceed 16.5 Mtoe.
• The primary energy consumption should not exceed 22.5 Mtoe.
• The cumulative energy savings should be at least 7 Mtoe.
• The energy efficiency should be increased by 38%.

Notably for heating and cooling and energy efficiency, the NECP also foresees the following:

• The share of RES in heating and cooling should reach 43%.
• Annual energy renovation in government buildings should cover 3% of the total surface area.

In order to achieve these goals, it is foreseen to introduce stricter building codes, incentives for thermal renovations and upgrades for Heating, Ventilation and Air-Conditioning (HVAC) systems and devices. These obligations are in line with the latest recast of the Energy Performance of Buildings Directive, EU/2024/1275. The main measures are as follows:

• In 2025, the installation of oil boilers will not be allowed. From 2030 onwards, heating oil will have to contain renewable liquid fuels of at least 30%.
• Obligatory issue of more detailed Energy Performance Certificates (EPCs) following the construction, purchase, rent or major renovation. Until 2021, only 38% of residential buildings had an EPC.
• All new residential and non-residential buildings must have zero on-site emissions from fossil fuels as of 1 January 2028 for publicly owned buildings and as of 1 January 2030 for all other new buildings, with a possibility for specific exemptions.

Measures that have already been applied include the following:

• Every public building built since 2019 and all buildings (public and private) built since 2021 are nearly zero-energy buildings.
• Since 2011, new buildings have been obliged to cover at least 60% of the energy needs for water heating with solar thermal or any renewable energy source more efficient than solar thermal.
• Since 2010, according to the Energy Efficiency Building Regulations, the installation of a PV system on the roof has been allowed only if a solar water heater system exists.
• For industries, the measures are limited to the energy demand audits.

A revised NECP [17,18,19] is currently under preparation by the Ministry of Energy, Environment and Climate Change. The authors’ access to provisional data indicate that the new targets for the revised NECP could be in the following ranges:

• 54% reduction in total greenhouse gas emissions compared to 1990 (instead of 40%);
• 44% share of RES in final gross energy consumption (instead of 35%);
• 79% share of RES in electricity production (instead of 61%);
• 46% share of RES in heating/cooling (instead of 43%).

Other specific measures for H&C are the renovation of 19% of the building stock, the installation of heat pumps in 19% of residential buildings and in 67% of service buildings by 2030 [19]. Additionally, the natural gas transmission system will have to be mixed with biomethane in a percentage of 12–15%.

For the upcoming NECP, the Greek government has assumed three different scenarios with different targets and investments required, which will all facilitate the energy transition at a different pace [18]. The first scenario gives emphasis both in RES and energy efficiency, the second scenario gives emphasis in RES, while the third scenario gives emphasis in energy efficiency.

Under the most prominent scenario, the revised targets are 990 ktoe from heat pumps (instead of 470 ktoe), 584 ktoe from solar thermal (instead of 500 ktoe) and 758 ktoe from biomass, with the sum of RES targeting at 2357 ktoe (instead of 1870 ktoe) [17]. It is also estimated that EUR 252 million will be spent on industry, EUR 815 million on residential building renovations, EUR 6864 million on appliance upgrades in residential buildings and EUR 120 million on office building renovations.

2.3. Economic Analysis

Greece was still suffering under the prolonged recession when the COVID-19 pandemic hit, but the country’s recovery was much stronger than expected. Due to COVID-19, the Gross Domestic Product (GDP) shrank by 9% in 2020 but rebounded by 5.9% in 2022.

Currently, the Hellenic economy is the 53rd largest in the world and the 16th largest economy in the European Union [20], with a nominal Gross Domestic Product of USD 239.3 billion or USD 22.6 thousand per capita. In terms of purchasing power parity, Greece is the world’s 54th largest economy, at USD 418.1 billion per year or USD 39.5 per capita per year [21]. In 2022, the average inflation was 9.6% [21,22], as it can be seen in Figure 1, but data for 2023 show that this is expected to decelerate.

Greece holds the Eurozone’s highest ratio of public debt with respect to its GDP (Figure 2), reaching a record 213.1% in 2020. In 2022, the public debt decreased by 166%, and forecasts expect further reduction [23]. In the same year, the Hellenic economy achieved a growth rate of 5.9%, experiencing a significant increase in exports from EUR 40 billion in 2021 to EUR 54.7 billion in 2022, as well as in investments from 12.0% to 13.3% [24]. In August 2023, the Consumer Price Index CPI in Greece was 114.3 points [25].

According to the International Monetary Fund (IMF) [20,25], the achievement of the Hellenic NECP targets necessitates substantial green investment until 2030, and this is estimated at EUR 43.8 billion (over 20% of the GDP of 2021). Climate policies are also expected to affect vulnerable social groups (such as rural communities, low-income households and low-skilled workers) in a disproportionate manner and, thus, to pose further challenges to the already weak social protection system. Indeed, the coverage of social protection is relatively poor, while spending on social assistance is one of the lowest in Europe. In such as weak social protection system, investments in climate protection policies may take away funding that could be allocated to vulnerable members of society.

Therefore, crucial social protection reforms are necessary to assist the green transition [26]. The IMF [25] recommends introducing a new carbon tax in non-Emissions Trading System (ETS) sectors, which will be gradually increased over time, so as to finance further green investments. In this way, the climate goals may be achieved, and at the same time, economic growth and the protection of vulnerable groups will be able to happen. A strong social safety and protection scheme should be also considered as a critical part of climate change adaptation.

Economic Situation for the Heating and Cooling Sector

Today, there is an income tax deduction for investments in heating and cooling systems using solar thermal, biogas, biomass, geothermal systems and heat pumps (air, water and ground-source). This deduction is 10% of qualifying project costs up to a maximum of EUR 3 k [12].

Under the 2016 Development Law, subsidies and tax breaks are foreseen for investments in solar thermal, biogas, biomass, geothermal systems and heat pumps (air, water and ground-source) built by private enterprises or social co-operatives. There are minimal project costs ranging from EUR 50 k for social co-operatives to EUR 500 k for large enterprises [12]. The financial programmes offered for renewable and more efficient heating and cooling are listed below:

• “Recycle & Change solar water heaters” [27]. This programme provides incentives for the replacement of electrical thermosiphon with a solar thermosiphon. By July 2024, there were 92,902 applications, 67,100 of which have been concluded.
• “Recycle-Change Device” [28]. Through this programme, Hellenic households can receive a subsidy to replace up to three old electric appliances with new ones, including air conditioners, refrigerators or freezers. By July 2024, there were 941,172 applications, 937,490 of which have been concluded.
• “Saving at home” programme [29]. It provides interest-free loans and grants for the installation of renewables and energy efficiency measures. In 2023, there were 31,549 successful applications with a total budget of EUR 422,105,074.
• “SAVE” programmes for the installation of energy efficiency measures and RES in Local Authorities.
• “ELECTRA” programme [30] for the energy update of public buildings. The programme, with a budget allocation of EUR 670 million spanning from 2022 to 2026, supplemented by EUR 250 million from private investments, facilitates comprehensive building renovations. These renovations are aimed at enhancing energy efficiency to achieve a Class B rating and reduce energy consumption by 30%, with the obligatory appointment of an energy manager.

2.4. Sociocultural Analysis

The Hellenic social protection system is considered as weak, compared to those of other EU member states, while the pandemic has further highlighted the importance of addressing assistance to deal with social gaps. Despite recent progress in the income distribution [25], income inequality remains higher than the eurozone average, with sizeable income gaps persisting between different socio-economic groups, most notably by educational attainments, degree of urbanization and age. Indeed, in 2020, the richest quintile earned over five times more than the poorest quintile. In addition, Greek workers with tertiary education recorded 66% higher median income than those with secondary education in 2020. Moreover, Greece has the highest unemployment rate (12%) of high-education population in the eurozone [25]. The income gap between the urban and rural regions is considerably higher than the eurozone average and has been increasing since 2017.

In terms of social protection and assistance, spending on those sectors is one of the lowest in the Eurozone, while the coverage and targeting of social protection are relatively poor and the administration of social assistance needs further simplification and consolidation. Additionally, significant tax evasion is evident among the self-employed.

Sociocultural Situation for the Heating and Cooling Sector

Energy efficiency and RES utilization for H&C enjoy great attention amongst professionals as well as public awareness in Greece [31]. The impact of dissemination and campaigns is reflected in the wide deployment of RES in heating and cooling and the annual sales of heat pumps and solar thermal systems. Indicatively, the Hellenic solar thermal market experienced a positive development, with 18% growth in 2021 and 17% in 2022, a remarkable achievement, considering the after COVID-19 era.

Special attention has to be given to the high levels of energy poverty in Greece. Energy poverty stems from the combination of particularly low incomes with old energy-inefficient housing [16,26,32]. Indeed, in one of the most important energy poverty indicators, the arrears on utility bills, Greece is the first among EU countries, as seen in Figure 3. Greece is also among the first positions in the indicator of the inability to keep a warm home adequately warm, as depicted in Figure 4.

Referring to the building stock, 65% of the country’s buildings were constructed prior to 1980 [16,32], with no significant thermal protection of the building envelope, such as thermal insulation and double glazing. As a consequence, residences present poor energy performance, with almost 67% of the households being classified in the lowest energy performance categories. Furthermore, the significant rise in living space per person has consequently increased energy demand per capita. Additionally, the widespread adoption of air conditioning in recent years, mostly due to the financial incentives, has elevated the overall energy consumption in the building sector, contributing to the country’s peak electrical power loads during summer. Currently, Greece’s building sector accounts for approximately one third of total CO₂ emissions and about 36% of total energy consumption [33].

2.5. Technological Analysis

From 2007 to 2021, electricity served as the primary energy source in buildings, comprising 50% of energy use in 2021. It was particularly significant in residential buildings, accounting for 36% of their energy consumption, and it almost entirely dominated energy demand in the service sector buildings, where it represented 83%. Oil was the second-largest source of energy in buildings (21% in all buildings, 27% in residential buildings). Bioenergy and waste supplied 12% of energy to buildings. Natural gas covered 11% of buildings in 2021, playing a major role in the areas of Athens and Thessaloniki. Solar thermal covered 5.1% of energy demand in buildings, the highest share among the International Energy Agency (IEA)’s member countries, owing to a long track of experience from the early 1970s and a continued policy support for this technology. District heat covered only 0.6% of buildings’ energy demand and coal 0.1%.

In the residential sector, the majority of energy consumption (56.2%) is dedicated to space heating, which is predominantly supplied by diesel and biomass-fired boilers. In contrast, only 4.3% of energy is used for cooling.

Between 2010 and 2021, renewable heating and cooling sources in Greece increased from 50 PJ to 67.5 PJ, rising from 19% to 31.1% of the total heating and cooling demand. This growth was primarily attributed to the expanded use of heat pumps, which surged from 3 PJ to 18.3 PJ. Additionally, there was a moderate increase in the use of solar thermal energy, from 10 PJ to 12.7 PJ, and a smaller rise in biogas use, from 0.1 PJ to 1.4 PJ. Despite a decline in the use of solid biomass for heating and cooling from 45 PJ in 2011 to 34.7 PJ in 2021, it remained the largest renewable source in this sector, accounting for 51.4% of renewable heating and cooling in 2021. Heat pumps, solar thermal and biogas followed, representing 27.1%, 18.8% and 2.1%, respectively. Notably, Greece leads in solar thermal heating within the IEA, covering 5% of building demand, compared to the IEA average of 0.6% [12].

Technological Situation for the Heating and Cooling Sector

The total annual electricity demand in Greece in 2021 was 51 TWh, distributed fairly evenly between residential buildings (35%), tertiary sector (32%, including the tertiary buildings) and industry 32%. Peak loads happen in summer (July and August) at approximately 10.5 GW. This is due to increased cooling demand of buildings, but also due to the impact of tourism, when the population of the country doubles and increases requirements for agricultural irrigation. In 2021, electricity covered 50% of total energy demand from buildings: 36% for residential buildings and 83% for the service sector buildings. According to the IEA, these figures reflect a relatively higher use of air conditioning and the notable cooling demand, especially in the tourism industry.

Wide electrification, which includes the deployment of heat pumps, as a key pillar of the renovation strategy, is expected to increase the share in energy demand in the residential sector to 47% in 2030 and to 81% in 2050. Support measures for the electrification of energy demand are taken, such as financial support (subsidies, loans tax breaks) for the electrification of heating and cooling demand in buildings and for renewable electricity generation in buildings.

In Greece, the development of biomass energy projects has been limited, primarily targeting the utilization of municipal waste. As of now, the total installed capacity for biomass energy is 58 MW, distributed across 12 projects, which collectively generated 252 GWh of electricity in 2016 [34].

Conversely, geothermal energy presents a significant potential for exploitation in Greece, particularly for electricity generation. This potential is especially pronounced in several Aegean islands, including Milos, Lesvos and Kimolos, as well as in the northeastern region of the mainland.

Regarding solar thermal energy, Greece is a global leader, covering 5% of its building energy demand in 2020, compared to the IEA average of 0.6%. The solar thermal market in Greece started 40 years ago when all households had electric water heaters for domestic hot water. The Hellenic Federation of Solar Industries EBHE [35] was founded in 1979, and today, it has 22 regular members and 30 associated. EBHE Membership means, among others, that the industry produces locally in its own factory products with certificates, such as CEN and ISO. EBHE has been a founding member of Solar Heat Europe [36].

According to an IEA report [37], Greece was among the top five countries by installed capacity per 1000 inhabitants in 2023. The Hellenic solar thermal market has experienced positive development, with 18% growth in 2021 and 17% in 2022. In 2021, the installed capacity in operation was 3606 MWth, representing 5,152,200 m² of the solar thermal collectors’ area.

As of 2022, the Hellenic solar thermal industry was an export champion [38]. The total exported collectors’ area tripled from 200,000 m² to 600,000 m² in 10 years. Hellenic manufacturers took advantage of the worldwide opportunities, while demand for their cost-competitive and reliable products also grew inland.

According to the SHC Market and Industry Trends in 2020 [39], some factors that helped the Hellenic solar thermal industry to succeed over the years are as follows:

• Established Supply Chain: A number of collector and tank manufacturers were established during or post the energy crises of the mid-1970s. Notably, the national solar thermal industry association, EBHE, was established in as early as 1979.
• Governmental Support: During the 1980s, the Hellenic government initiated campaigns aimed at promoting solar thermal systems, offering incentives such as reduced VAT rates and low-interest loans. These initiatives resulted in a notable increase in installations.
• Early Adoption of Standards and Certification: Greece’s industry actively engages with the European Committee CEN TC 312 and contributes to its corresponding secretariat. With over 100 Greek products holding Solar Keymark certification, constituting 10% of all active licenses, the nation demonstrates its commitment to adhering to international standards.
• High Home Ownership Rate: A significant proportion, approximately 75%, of flats and homes in Greece are privately owned. Greek households exhibit a strong inclination towards investing substantially in their own residences, mainly through loans or financial incentives, aiming for a high level of self-sufficiency. This is exemplified by their reluctance to share hot water lines with neighbours.

Regarding district heating and cooling, there is limited deployment. There are only two major district heating systems in Greece, the biggest one being in the area of Western Macedonia, based on the lignite-fired power plants. Due to Mediterranean climate conditions with the rather short heating period and the respective heating loads, this technology is neither expected to gain significant growth in the forthcoming years nor is its further development foreseen in the revised NECP.

As for R&D, the gross domestic expenditure on energy R&D is expected to reach 0.13% of GDP by 2030 (0.06% in 2017), but there is no specific policy document addressing how this will be achieved. According to the NECP [13], R&D in energy efficiency should focus on new building materials and elements, heat pumps and digitalisation, while R&D in industry should focus in energy-efficient heating and cooling, heat and refrigeration recovery and integration of systems. R&D in renewable energy should focus on solar thermal energy for electricity production, heating and cooling, deep geothermal energy and bioenergy. The analysis of the R&D funding for the period of 2014–2020 has shown a fragmented distribution across numerous projects; the average funding is estimated at only EUR 180,000 per year per project. Obviously, this amount can only support desktop, low TRL research and not large-scale demonstration projects.

Regarding the buildings sector [14],

• Commencing from 2025, the installation of oil-fired boilers will be prohibited, with a subsequent requirement, effective from 2030, stipulating that oil utilized for heating purposes must incorporate a minimum of 30% renewable liquid fuels by volume.
• An Energy Performance Certificate (EPC) is mandated upon the construction, purchase, rental or significant renovation of a building. Nevertheless, as of 2021, only 38% of residential buildings had undergone EPC issuance.
• All public buildings erected since 2019, as well as all structures (both public and private) constructed since 2021, are obligated to adhere to nearly zero-energy building standards.
• Since 2011, newly erected buildings have been compelled to satisfy a prerequisite mandating that a minimum of 60% of their energy demands for water heating be met through solar thermal systems or alternative renewable energy sources.

2.6. Environmental Analysis

According to the IEA Climate Resilience Policy Indicator report [40], Greece will face increasing temperatures throughout the 21st century, which will lead to a higher electricity demand in the summer and lower fossil fuel demand in the winter. This increase also poses burdens to electricity security, as it will drive higher demand while simultaneously reducing the capacity of the electricity system to generate and supply electricity.

According to Greece’s risk assessment report [41], elevated temperatures pose significant electricity supply risks. Elevated temperatures not only diminish the efficiency of thermal power plants but also escalate the demand for cooling water. The rapid escalation of peak electricity demand for cooling during extreme heat events can lead to failures, as witnessed in 2017 and 2021, when surging power demands during heatwaves resulted in multiple power outages.

Most of Greece’s socioeconomic activities and vital energy infrastructure, including electricity transmission lines, are concentrated in coastal areas [41].

Greece’s National Adaptation Strategy, adopted in 2016, delineates objectives and priorities for climate adaptation and enumerates potential adaptation measures across all environmental and socio-economic sectors. The implementation of the National Adaptation Strategy will be facilitated through 13 Regional Adaptation Action Plans, tailored to individual regions, which were finalized and approved in early 2024.

Environmental Situation for the Heating and Cooling Sector

Greece’s emissions that do not apply in the emissions trading scheme (ETS), encompassing sectors such as transport, buildings, agriculture, waste and non-energy intensive industry, were subjected to a 2020 target as per the EU Effort Sharing Decision (ESD). Similarly, they are also subject to a 2030 target under the EU Effort Sharing Regulation (ESR). Collectively, the ETS, ESD and ESR frameworks aim to achieve a 20% reduction in EU-wide greenhouse gas (GHG) emissions by 2020 and a 40% reduction by 2030, relative to 1990 levels. In 2020, 43% of Greece’s GHG emissions fell under the ETS, predominantly originating from electricity generation (63% of ETS emissions) and industry (36%) [12].

• From 2011, biomass boilers were allowed to be installed in Athens and Thessaloniki. There was a ban on their installations in those two city centres starting from 1993.
• According to F gas regulations, the allowed refrigerants are R32, HFO mixes and non-synthetic refrigerants (carbon dioxide, HC, R290 and και R600).
• Private companies should calculate and submit an Environmental Footprint Report annually.
• There is an incentives programme for the replacement of low-efficiency boilers with natural gas-fired condensing boilers.

Considering the water usage of buildings supplied by urban water supplies, i.e., excluding remote rural areas, the average drinking water consumption was 138 L/inhabitant and day, a value that is slightly higher than the EU average of 124 [42]. This is due to leakages in older grids, but also due to the lack of non-potable water grids, leading to the use of drinking waters for purposes where this is not necessary. The wastewater treatment is taking place in 284 biological treatment plants that process some 2.37 mn m³ daily [43].

2.7. Legal Analysis

The policy landscape in Greece regarding heating and cooling is formed by the following plans and legislations:

• The NECP, with adoption year 2019, serves as the primary document outlining mitigation strategies to attain Greece’s 2030 emissions reduction objective and propel the nation towards achieving a net-zero energy system.
• Greece’s National Climate Law, enacted in May 2022, establishes targets for reducing total greenhouse gas (GHG) emissions by 55% by 2030 and by 80% by 2040, relative to 2005 levels.
• The National Long-term Strategy of Greece [44] delineates emission reduction trajectories designed to align with the EU-wide 2050 target of net zero emissions. Specific measures within the building sector incentivize thermal renovations and the enhancement of heating and cooling systems.
• The National Recovery and Resilience Plan [45], adopted in 2021, supports the green transition through investments totalling EUR 1.3 billion, aimed at energy-efficient renovations of over 100,000 residences, including those belonging to low-income households.
• The Energy Efficiency Obligation Scheme [46], implemented in 2017, mandates certain entities, such as electricity, gas and oil product suppliers or retailers with a market share exceeding 1%, to participate. As of 2022, there were 35 obligated parties. These entities receive white certificates upon achieving verified energy savings in accordance with annual targets.
• The Energy Efficiency Directive (EED) [47] was adopted in 2012 and reformed in 2018.

Legal Situation for the Heating and Cooling Sector

The National Legislation related to Heating and Cooling is listed below:

• The 2022 National Climate Law.
• The 2021 Recovery and Resilience Plan incorporates a “renovate” component, allocated a total budget of EUR 2.7 billion. This segment, constituting the second-largest portion of the entire plan, is dedicated to the renovation and energy upgrade of various building types, including residential, commercial (secondary and tertiary sectors) and public structures.
• The 2021 Action Plan to Combat Energy Poverty establishes a framework for the energy retrofitting of residential buildings belonging to energy-vulnerable households.
• The 2019 Inter-Ministerial Committee for Energy and Climate was established to coordinate efforts across government departments concerning energy and climate-related initiatives.
• The 2019 National Energy and Climate Plan serves as the principal document outlining mitigation measures aimed at achieving Greece’s 2030 emissions reduction target and transitioning the nation towards a net-zero energy system.
• The 2019 National Long-term Strategy delineates strategic pathways for emissions reduction to support the EU’s 2050 target of achieving net-zero emissions.
• The 2017 Regulation on the Energy Performance of Buildings is the primary document specifying requirements and parameters for calculating the energy performance of buildings and issuing Energy Performance Certificates.

The non-financial measures and regulations for building renovation are listed below [48,49]:

• The “Green pilot urban neighborhood” programme for the energy upgrade of social housing.
• Compulsory incorporation of solar thermal systems in newly constructed residential buildings.
• Enhancing the energy efficiency of small- and medium-sized enterprises (SMEs).
• Substituting oil-fired heating systems in residential properties with gas-fired alternatives.
• Energy Performance Certificates as a behavioural measure.
• Over the period from 2021 to 2030, the renovation target aims to refurbish 60,000 residences annually, resulting in cumulative energy savings of 7.3 Mtoe (306 PJ) and the generation and sustenance of over 22,000 new full-time employment opportunities. Considering Greece’s approximately 4.8 million buildings, achieving a 100% net-zero building status by 2050 necessitates a considerably heightened renovation rate of approximately 150,000 buildings annually [12].

The minimum performance level for new buildings and renovations is stated in detail in the Energy Performance in Buildings Directive and its harmonization in the Hellenic legislation with laws 4122/2013 and 4994/2022.

The Comprehensive Assessment of 2021 [13,50] presents a detailed analysis of the existing policy measures for the period of 2021–2030, related to heating and cooling. Translating these into cumulative energy savings, by 2030, it is anticipated that Greece will realise cumulative energy savings amounting to 7229 ktoe (305 PJ) [12]. Within the framework of the Energy Efficiency Directive (EED) plan, energy efficiency obligation schemes are earmarked to contribute 20% (61 PJ) toward the overall cumulative objective. These schemes encompass various initiatives, such as the enhancement of energy efficiency in both public and private buildings, as well as the implementation of measures facilitated by energy service companies and energy managers within public buildings.

3. Discussion

Considering the bigger picture, especially in a top–down approach, developments in the Hellenic heating and cooling sector are positive. Starting from a rather unfavourable position, with a very high dependency on oil- and lignite-generated electricity, the sector has benefited from the accelerated propagation of renewables in electricity generation, the substitution of oil with natural gas and the steady presence of solar thermal systems. The policies adopted over the last decade, as part of the obligation towards the European energy and climate goals, have certainly contributed to these developments, despite the unfavourable economic and social conditions that prevailed throughout the 2010s. Particularly effective was the adoption of the Energy Regulation of Building Regulation (KENAK) in 2010, which led to significant reductions in the heating and cooling requirements and to an enhanced use of solar thermal systems and air-to-air, air-to-water and ground-source heat pumps.

On the other hand, and especially when considering the sector using a bottom–up approach, one cannot fail to notice that there are significant barriers and obstacles towards a faster decarbonization and a more just energy transition. Focusing on the building sector, which, as mentioned above, accounts for a major part of the heating and cooling requirements, it becomes quite evident that the sector and the market, are split into different segments.

There is the majority of old buildings with a rather poor energy performance that need significant investments to be renovated and upgraded, as foreseen by the legal and regulatory framework. The financial incentives given by the government cover a part of these investments, but the rest have to be covered by the home owners. However, the old building stock is usually owned and used by the financially more vulnerable part of the population who are also those most affected by energy poverty. Refurbishing this building stock without putting additional financial pressure on an already stressed part of the society presents a major challenge. Technological solutions like solar thermal systems and heat pumps are certainly there, reliable and trusted by the consumers, but their propagation calls for targeted incentives to lighten the burden of initial investments. Experience has shown that tax reduction measures affect only a small part of households, and certainly not those affected by energy poverty. Direct subsidies, on the other hand, are costly and also tend to lead to an increase in the energy systems’ prices. Effective recycling of carbon tax revenues can be a useful tool to support the green transition in that sense. To some extent, this is already happening by means of the Green Fund established in 2010, whilst the Recovery and Resilience Fund is also expected to contribute towards this aim both for the residential and tertiary sectors.

Then, there is also the tertiary sector, where significant progress has been made. Construction and refurbishment numbers are quite impressive, for example, in the hotel and office subsectors, with new and refurbished buildings presenting high energy efficiency combined with the use of renewables, as shown not only by Energy Performance Certificates but also by Environmental Certificates like (Leadership in Energy and Environmental Design) LEED and (Building Research Establishment Environmental Assessment Method) BREEAM. In the last 5 years, more than 255 buildings have been certified according to those two systems [51].

Furthermore, one must be realistic considering the implementation plans and time schedules. Disruptions in supply chains over recent years show that no sector is safe against external events, whilst shortages in qualified personnel are beginning to be felt in the construction sector. In that sense, the ambitious goals of refurbishing 500 to 600.000 residences by 2030 and having some 10.000 enterprises benefitting from the Recovery and Resilience Fund by 2026 have to be treated with caution. Bureaucratic procedures, especially considering the permits for renovations, have to be sped up and simplified.

One can, therefore, summarize that the climate-friendly policies adopted by the Greek government have already begun to pay dividends. However, the implementation of the policies and regulations has to be accelerated, has to be closely monitored to quantify the impacts and, most importantly, has to be complemented with more social protection measures to make it a just transition.

4. Conclusions

The use of thermal renewables for the heating and cooling of buildings has been for decades a solid option, both in terms of energy efficiency, since it makes sense to directly use thermal energy for thermal applications, and in terms of economics. Still, it is an option that has not been exploited to the expected degree, and in recent years, the use of renewable electricity to cover the thermal needs has tended to win market shares. The reasons for this development are manifold and complex and can, therefore, not be determined with a one-dimensional analysis, focusing either on economics or on energy performance. Hence, the use of tools from the management discipline that address investments in a holistic way makes sense. The PESTEL method, which addresses political, economic, social, technical, environmental and legal aspects, is one of these tools; it has been used for investments in the energy sector and provides answers to two questions: why the market for renewables for heating and cooling has developed in a certain way and which aspects should be investigated to improve the market for these technologies.

As the case study for Greece showed, the technical and environmental parameters are quite favourable, since it is a mature technology proven for decades with a clear positive impact on the environment. The political framework is, at least in theory, also in favour of these systems, since the goals set by the NECP call for the use of thermal renewables. The specific legal aspects need to be more supportive to foster the use of solar thermal systems: the new European Directive that calls for “solar ready” buildings paves this way, but it remains to be harmonized in national legislation and, in particular, in building codes. Finally, there are the economic and social aspects, which depend strongly on the available income and the perception of environmentally friendly technology by the final consumers. The former is related to the overall economic situation, the ownership of buildings, but also to specific measures like incentives and fiscal policies. The latter has to do, apart from legal measures, with how a society valuates the environment and is linked to education and targeted information.

Considering the PESTEL method as such, the case study shows that it is a useful tool, of course with limitations, the most important one being the availability of data. It is here that the steps for future research work can be determined: field studies providing data on the implementation of the legal framework in practice, on the use and actual “as built” cost of systems, are needed to provide an in-depth analysis of the sector and its perspectives for the coming decade.