In 2010, the energy efficiency of housing had been improving significantly in Lithuania over the previous ten years in part as a result of the JESSICA I program to implement energy efficiency renovations.

However, the energy consumption was still much higher than the average in the EU or old Member States. Around 60% of the more than 38,000 multi-apartment buildings in Lithuania still required some form of energy refurbishment due to having inefficient heating systems and equipment, and poor building insulation. About 66% of the population lives in multi-apartment buildings that were built before 1993, and 97% of those multi-apartment buildings are privately owned. This means a majority vote by the home-owners is needed to begin renovation of the building. In addition, homeowners often lacked the experience or financial capacity to implement renovations. This created challenges wide-scale renovation efforts to gain momentum. Low income home-owners also did not have sufficient incentive to improve energy efficiency, because these households were eligible for heating costs compensation. Although the Lithuanian Government had attempted to implement renovation programmes, these were relatively expensive and were discontinued. An assessment report in 2014 identified the need to renovate approximately 7,000 multi-apartment buildings, which would cost more than €1.3 billion. Public funds alone are not sufficient to meet such a financial demand, so that an instrument that uses public funds more efficiently was required.

Finally, a key challenge of setting up a new renovation programme was to raise public awareness of the benefits of renovations, so that home-owners would become more engaged.

The multi-apartment Buildings Modernisation Programme (“the Modernisation Programme”) is one of the main instruments of the Lithuanian Government to implement energy efficiency renovations.

During the 2007-2013 programming period it was financed by JESSICA Holding Fund Lithuania (“JESSICA I”). JESSICA I was a revolving financial instrument, which blended EU and national funds to bridge the financing gap for energy efficiency projects in Lithuania. JESSICA I primarily offered preferential loans for energy efficiency modernisation. The preferential loans were issued at a 3% fixed interest rate with maturity of a 20 years. In addition, homeowners were initially eligible for up to 40% subsidy upon reaching certain energy efficiency goals after the renovation. Eventually the size of the subsidy decreased as the Modernisation Programme gained popularity.

Furthermore, low income households benefited from additional support from municipalities that covered their monthly loan payments. Under JESSICA I, €265 million (consisting of EU structural funds, Lithuanian national funds, private contributions and revolved reflows) has been fully committed and over 1,000 multi-apartment buildings across Lithuania have completed energy efficiency modernisation renovations.

All of Lithuania’s 60 municipalities have participated in the Modernisation Programme. JESSICA I enjoyed wide public support at national and municipal level, and attracted domestic attention and international recognition as a successful financial instrument for energy efficiency in housing. The Modernisation Programme was recognised as strategically important in view of the impact of energy efficiency measures on energy demand reduction and thus indirectly on energy security and independence.

In addition, the programme had a positive effect on job creation and economic growth. Hence, the Lithuanian Government was eager to continue with the Modernisation Programme.