Energy Efficiency in Buildings

03 June 2013 04:00 PM | #Market Research

According to a report by the Committee on Climate Change, buildings were responsible for emitting 70% of the UK’s total CO2 emissions in 2006. This resulted in a total of 400 megatonnes of CO2 being emitted, of which:

Energy Efficiency in BuildingsImproving energy efficiency in buildings is crucial if meaningful reductions in carbon emissions are to be made. The environmental performance of buildings can be improved via several methods. For example “whole system design” incorporates measures that can improve the sustainability of new builds early in the planning/building process. Such measures may also be implemented in existing buildings, although generally at a higher cost. Alternatively, maintenance, renovations and the use of energy efficient devices can improve the environmental performance of both new and existing buildings.

A broad range of measures exist for enhancing energy efficiency in buildings. Factors such as sunlight and vegetation can maximise heating and cooling efficiency. The use of renewable energies such as solar or wind power to reduce fossil fuel consumption, placement of windows, adequate insulation and sealing joints. Alternatively, the use of more efficient devices and appliances such as boilers, hobs and fridges can also reduce a building’s reliance on fossil fuels. There are a whole host of solutions that could be considered in increasing the energy efficiency of buildings. For a detailed overview of energy efficiency in buildings as well as further examples of how buildings may be made more energetically efficient, see the World Business Council for Sustainable Development (WBCSD).

Investing in Energy Efficiency Projects

Energy Efficiency in BuildingsAccording to the Committee on Climate Change, existing building techniques incorporating sustainability yield buildings that are 70% more efficient than those built prior to 1990, with no added costs. Until recently, incorporating energy efficiency measures into building techniques faced a number of hurdles including:

Despite these hurdles, the sector is showing encouraging investment trends. However, unlike low carbon and renewable energy technologies, investment in energy efficiency of buildings is difficult to quantify due to the diversity of solutions available as well as the fact that investment generally comes from within and not from outside investors. Nonetheless, some general investment trends in energy efficiency have emerged. In a report prepared by UNEP and New Energy Finance, it was found that investments in energy efficiency technologies rose by 78% to $1.8 billion in 2007 compared to 2006. Venture capital (VC) and private equity (PE) investments in energy efficiency rose 306% between 2004 and 2007, suggesting the acceleration of interest in the industry. Additionally, 18% of new VC and PE investments in 2007 went towards energy efficiency-only the solar sector received more investment. Although supply and demand side investments were approximately equal, demand side investments were especially dominated by transport and buildings.

Energy Efficiency in BuildingsMuch of the interest can be explained by the McKinsey/Vattenfall graph, which shows that energy efficiency measures are the most profitable method of investing in carbon reducing technologies.  This is explained by the relatively short payback time for these measures and the large abatement potential.

A recent study undertaken by Oxford University’s Environmental Change Institute estimates a potential market of £3.5 billion to £6.5 billion annually within the home energy efficiency sector in the UK. Considering that an estimated £23 billion is spent annually on maintenance of buildings in the UK, little of which is targeted towards sustainable and low carbon solutions, a sizable proportion of this spending is likely to be diverted towards energy efficiency measures as awareness of the need to reduce carbon emissions increases. With approximately 9 million homes planned to be built between now and 2050 in the UK, this will further aid in creating and expanding the potential market for home energy efficiency. Furthermore a team from the University of Nottingham is investigating how best to upgrade the existing British housing stock.  This study will transform a typical 1930s home into a modern, energy efficient house, charting the costs and effectiveness of improvements along the way.  There are some 3 million comparable homes in Britain and the research will identify areas where more modern homes can also make improvements.

In terms of environmental benefits, the International Energy Agency estimates that savings of approximately $386 billion between 2006 and 2030 can be gained from implementing energy efficiency measures. Other factors attracting investors to the energy efficiency sector are the resulting lower operating costs, greater market value, marketability, lifespan and creation of healthier indoor environments which in turn has demonstrated increased productivity of employees.

Industry Drivers

Energy efficiency in buildings has been driven by the following factors:

Regulatory Drivers

Policy Drivers

Financial Drivers