Interplay between projects and firms is intrinsic to the innovation system of the construction industry. Differences between these organisation forms may influence the development and diffusion of innovations in this sector. In this paper we investigate the network effects of the construction sector as a typical project-organised industry in its cooperation with the supply industry of heating systems, known as a typical functionally organised sector. The supply industry is expected to innovate in order to encourage CO2 reductions while the construction industry is urged to purchase the new technology by means of energy policy that is imposed to new construction. Whereas construction organizations are the recipients of innovations coming from the supplying industry, energy policy is addressed at the contractors, not the suppliers. This article concentrates on the network effects between project based construction firms and functionally organized suppliers in the Netherlands, in relation to policies addressed at energy conservation and aiming for innovation in energy techniques applied. By means of interviews with several actors in the field, this complex innovation system and its effect for the development and diffusion of energy innovations is explored. This research demonstrated that communication between decision makers in the design process and suppliers of heating technology is rare and that multiple layers of communication exist in the building process. Notwithstanding the effect that energy performance policy has in reducing energy consumption for heating, cooling and ventilation in building, it can neither be attributed an effect in encouraging communication between contractors and heating technology suppliers, nor affecting innovative behaviour of these two parties.

In 2003 the European Commission introduced the EC Directive on the energy performance of buildings in recognition of the importance of energy savings in the urban housing stock. The Directive gives the member states freedom to design the different elements in practice. The energy certificate for existing buildings demanded by the EC Directive can be used as a communicative instrument, or combined with economic or regulatory principles. The authors discuss the anticipated efficiency and effectiveness of different policy approaches in the application of the EC energy certificate for the urban housing stock. They argue that, although energy certificates as a communication instrument for household appliances have appeared to be relatively successful, the different nature of the building sector may mean that their effectiveness here will be rather limited. The combination of energy certificates with tax schemes seems promising, but will have to be coupled with general income taxes or in housing-related taxes in order to prevent regressive social effects. Combination of the energy certificate with subsidies should be limited, because of the `free-rider effect¿, and subsidies should only cover innovative products at the beginning of their `learning curve¿. Effective results can probably be expected from the introduction of regulations combined with energy-certificate standards, but this requires a rather drastic approach and needs time to receive sufficient commitment, as has been the case for new buildings where there has been a gradual development of energy regulations over the last thirty years. However, an introduction of energy standards for the existing urban housing stock through the EC energy certificate offers great potential in the realisation of CO2 reductions. The introduction of an energy standard, by means of the energy certificate in combination with progressive taxes or other economic measures to reward better and punish worse energy-performance levels, seems an interesting approach that needs further research.

The recent EC Directive on the Energy Performance of Buildings (Directive 2002/91/EC, in short: EPBD) will urge member states to develop and design energy performance regulations before 2006. The international EC Fifth Framework Altener research project Build-On-RES2 was formulated with this objective in mind. The Build-On-RES project aims to develop the methodological and contextual framework to maximise the incorporation of renewable energy sources (RES) in an Energy Performance Method for both new and for existing residential buildings. Build-On-RES started by benchmarking energy regulations in five of the EU member states that have experience of energy performance regulations and scrutinised the extent to which they encourage the use of RES in buildings. In addition to energy regulations, other policy schemes that encourage use of RES techniques like financial incentives and schemes based on communication have been collected and described. On the basis of this collection of existing information, the project is designing a framework to maximise the incorporation of RES in an Energy Performance Method for use by member states that are in the process of (re)designing their (new) energy performance building regulations. This paper describes the results of the Build-on-RES research and presents in short the methodological and contextual framework to maximise the incorporation of RES in an Energy Performance Method.