The very same energy bill that puts a household under financial strain may prompt it to replace its windows, insulate its roof or replace its boiler. The energy crisis therefore does not simply destroy economic activity in the construction sector; it shifts it.

In an analysis published on Wednesday, European Central Bank economists Desislava Rusinova and Marco Weissler describe this shift. Soaring energy prices are driving up the cost of materials and labour, undermining confidence and potentially making it harder to secure a mortgage. This is therefore slowing down the construction of new homes, whilst increasing the economic appeal of energy-efficiency renovations.

This second effect is by no means insignificant. Specialised activities – electrical installations, plumbing, heating, air conditioning and finishing works – account for 75 per cent of construction activity as measured by the ECB. In the five largest economies of the euro area, electrical, plumbing, heating and air-conditioning installations alone generated 40 per cent of the value added in this category in 2023.

Renovation is offsetting the decline in new-build construction

The refurbishment of existing buildings is one of the driving forces behind the recovery in output in the sector, whilst new-build construction continues to decline. It is therefore helping to cushion some of the impact on property developers and builders.

This trend had already emerged following the invasion of Ukraine. Imports of Chinese solar panels into the eurozone almost doubled following the 2022 energy crisis and have since remained at a high level. At the same time, their average import price fell by two-thirds: from nearly 5,000 euros per tonne in 2023 to around 1,700 euros in 2026.

However, the eurozone remains almost entirely dependent on China for this equipment. In 2025, China accounted for 97 per cent of the volume and 95 per cent of the value of imported photovoltaic panels and modules. Falling prices are therefore making solar power more attractive, but this relies on a highly concentrated supply chain.

The latest surge in prices triggered by the war in the Middle East appears to have given the movement a new lease of life. In Germany, 64,000 households and businesses applied for public funding between March and May 2026 to renovate the building envelope. This is 16 per cent more than a year earlier. Applications relating to heating systems rose by 40 per cent.

An extra 100 euros, 0.8 per cent more willingness to renovate

The ECB’s consumer survey allows us to track the same trend at household level. Between February 2023 and February 2024, the proportion of homes that had undergone energy-efficiency refurbishment rose by ten percentage points. In February 2026, 14.5 per cent of respondents planned to undertake such work over the following twelve months.

The relationship measured by economists is precise, though it does not in itself establish a causal link: a €100 increase in the monthly utility bill is associated with a 0.8 percentage point higher probability of renovation. Households heated by gas or oil also report more renovation plans than those already using a renewable energy source.

The work then appears to have achieved its intended effect. In 2024 and 2025, households that had renovated their homes reported an average increase in their utility bills of around 9 per cent during the following heating season, compared with 11 per cent for those that had not carried out energy-efficiency renovations. However, the figure includes other items, such as water, telecommunications and electricity, and therefore does not represent a pure comparison of heating costs.

Across the eurozone, the proportion of homes heated by gas or heating oil fell by 3.5 percentage points between 2023 and 2026, reaching 56 per cent. The countries most reliant on these fuels generally saw the sharpest declines.

The new lease of life for the Klimabonus Wunnen

This analysis lends particular significance to the new Klimabonus Wunnen 2026–2030. Following the adoption of the draft bill by the Chamber of Deputies on 15 July 2026, the Minister for the Environment, Climate and Biodiversity, Serge Wilmes, outlined its main provisions.

The scheme provides for a 15–20 per cent increase in grants for energy-efficiency refurbishment works. This temporary increase applies to projects for which an application for approval in principle is submitted between 1 January 2026 and 30 June 2027, with an invoice issued no later than 31 December 2030.

An additional subsidy of 2,000 euros is available for heat pumps installed in existing residential buildings and ordered between 1 January 2026 and 30 June 2027. The grants will now be paid as lump sums, regardless of the capacity of the systems.

Energy advisory grants are also being increased by 300 euros for a detached house and by 500 euros for a block of flats. These grants apply to renovation works for which an application for approval in principle is submitted before 30 June 2027.

The new provisions apply retrospectively to investments invoiced from 1 January 2026. For sewerage works, expenditure may remain eligible until the end of 2035, provided that an initial application for approval in principle was submitted between 2026 and 2030.

From 1 January 2027, the pre-financing scheme already available for solar photovoltaic systems will be extended to heat pumps and energy-efficiency refurbishment works. Households will then no longer have to pay the full cost of the investment up front: the contractor will deduct the grant directly from the invoice before being reimbursed by the government. Use of this scheme will remain optional.

The timetable reflects the fact that Luxembourg’s housing stock remains heavily reliant on gas. In a publication from July 2024, Statec estimated that there were around 20,000 residential heat pumps installed in the country. Its conditional projections predicted that this figure would exceed 150,000 by 2050, covering around 80 per cent of residential heating. Gas would then still be used in 5 per cent of homes and heating oil in 2 per cent. The number of new heat pumps installed each year would rise from nearly 4,000 in 2025 to over 6,000 in 2050.

Energy-efficient refurbishment thus becomes a tool with a dual purpose. In the short term, it supports a construction industry that is not currently undertaking new projects. In the longer term, it reduces the exposure of households, inflation and the economy to future fluctuations in oil and gas prices. With the extension of the European carbon market to include buildings from 2028, the cost of continuing to use fossil-fuel heating systems is also likely to become more apparent.