Marc van den Berg, global managing director for investments, & Myfanwy Wolf, commercialisation director, at Climate Investment look at the future of energy management.
The climate impact of buildings and construction is well-known to all those familiar with the sectors – accounting for 40 per cent of global greenhouse gas emissions, at most recent estimates.[1] But while the need for action is well known, decarbonising the built environment has proved a consistently difficult challenge – due to barriers such as split incentives between property owners and occupants and, in part, to a long-standing reticence to adopt new technology.
However, in recent years the availability and sophistication of technologies capable of improving the energy management of buildings has undergone profound change. Today, technology solutions are available that can have an immediate impact on reducing both the ‘embodied’ carbon footprint of buildings, which refers to all the emissions associated with construction, along with ‘operational’ emissions, or the energy consumed over the lifetime of a building.
A truly global challenge in scale, heatwaves this year in Asia, Southern Europe and North America have highlighted the need for developers and operators alike to take immediate action to improve buildings’ energy management and start embracing the technologies to do so.
A full spectrum of technology solutions
Although embodied carbon includes all the emissions associated with building materials, cement is the carbon-intensive material responsible for most of these emissions. Indeed, if the cement industry was considered a country, it would be the world’s fourth-highest emitter behind the United States, China, and India.[2]
Existing innovators helping to reduce embodied emissions include UK-based Converge, which uses sensors and predictive artificial intelligence to help contractors optimize concrete mixing and curing to reduce project concrete-related CO2 (when using conventional Portland cement) by 10%[3]. Other innovators, like Canada’s Carbon Upcycling Technologies (CUT), are using technology to upcycle industrial waste and permanently store captured CO2 to create “Supplementary Cementitious Material” (SCM) which partially replaces virgin clinker, reducing cement carbon emissions by up to 60%. Over time, these less carbon-intensive materials also help to create more durable and resilient structures, leading to savings from extended building lifetimes, reduced repair needs and alignment with industry regulations. Building materials innovators like these, alongside logistics and supply chain management platforms, are already commercialised and making an impact today on reducing building’s embodied emissions.
But what solutions are on the table for reducing the emissions from buildings that already exist? It’s an important question given a little under one-third of all global energy consumption comes from the operational activity of buildings, such as heating and cooling.[4] Retrofitting, which involves upgrading existing buildings with new systems or components, has a crucial role to play in this process – for both commercial and residential buildings.
In the former group, software platform technologies like Asia-oriented 75F and France-based Metron are helping operators better understand how their buildings consume energy and what steps they can take to improve efficiency. One solution that’s making an impact across different building-types is US-based Aeroseal, whose aerosol-deployed sticky polymer enables building air ducts and envelopes to be sealed tightly, materially improving energy efficiency. In homes, the solution is delivering lower energy bills with 10-15% typical savings, while in commercial buildings, it can deliver up to a 90% reduction in leaks.
And while this year’s heatwaves have highlighted the importance of immediately deploying cooling technologies delivering energy efficiency, like 75F and Aeroseal, this need is only likely to increase as the world gets hotter. Indeed, global energy demand for cooling is expected to increase by 45% by 2050, driven partly by higher temperatures, but also by rising living standards in those developing regions expected to get warmer.[5]
How we can overcome existing barriers to adoption
Despite the increased availability of technologies for reducing embodied and operational emissions, multiple challenges still need to be addressed to increase adoption and scale deployment by developers and owners.
At a pragmatic level, there is a need for greater dialogue and partnership between technology providers, financiers, building owners, occupants, facilities managers and other groups operating through the building and construction supply chain. Initiatives such as “Buildings Breakthrough”, launched at COP28, which is bringing together public and private sectors players across 28 countries to collaborate on decarbonising the sector, are playing an important role in doing this. Global standards and frameworks focused on adopting a full lifecycle approach to emissions reduction for buildings – such as PAS 2080 and BREEAM – are also helping to bring together the supply chain.
Increased dialogue is also critical for solving the sector’s ‘split incentive problem’, a long-standing roadblock for improving buildings’ energy efficiency. The problem refers to a perceived misalignment on costs and benefits – for example, why should owners invest in retrofitting solutions that lead to lower energy bills for tenants and why should occupants pay to upgrade a building that they only have a temporary lease for? Mechanisms to bridge this divide are increasingly available, for example the Environmental Upgrade Agreements (EUAs) which split the investment costs of energy efficiency upgrades between landlords and tenants, which then both benefit in the form of higher property values and lower energy bills, respectively.
Overcoming the split-incentive barrier enables owners and lessees to move beyond debating who should pay to improve energy efficiency and focus instead on the technology solutions that can achieve this. Realising this shift requires addressing existing knowledge gaps about the availability of these solutions. Indeed, in can be the case that the individuals tasked with implementing net-zero strategies at construction firms, facilities management, or organisations with a large real estate footprint lack sufficient awareness of the solutions on offer.
Energy service companies (ESCOs) and business process outsourcing (BPO) companies are helping to connect the sector to solution providers, but a more concerted effort is needed to increase accessibility. Potential initiatives could include a publicly available directory of technology providers for decarbonising buildings, as has been done for other industries.
The other major knowledge gap to fill is the huge financial incentives on offer from deploying decarbonisation technologies. For developers, reducing construction-related emissions can provide tax relief opportunities and increased property values for increasingly environment-focused investors. Meanwhile for owners and managers, the upfront cost of investing in retrofitting solutions or platform technologies will be mitigated by the savings delivered through increased energy efficiency over time.
A time for immediate action
The need for immediate action to decarbonise buildings is clear– but realising this transition will require the entire ecosystem, including developers, owners, financiers and governments, continuing to collaborate and build impactful partnerships. From less carbon-intensive construction materials to digital and physical retrofitting innovations, technology providers are playing their part in creating deployable solutions that are already having a significant impact on reducing buildings’ carbon emissions footprint. But it’s now to time to increase adoption of these solutions, scale their impact across the globe, and put the built environment on a progressive path to achieving net-zero.
[1] The Climate Action Group https://www.theclimategroup.or...
[2] The Global Cement Challenge, Rhodium Group https://rhg.com/research/the-g...
[3] Savings of up to 50% are possible when using Converge’s solution in conjunction with lower carbon cementitious materials
[4] International Energy Association https://www.iea.org/energy-sys...
[5] International Renewable Energy Agency https://www.irena.org/Innovati...