Editor's Note: To learn more about energy-efficient buildings, check out VERGE@Greenbuild, November 12-13, in San Francisco.
A growing number of companies are realizing the social, environmental and cost benefits of retrofitting their buildings.
Earlier this month, accounting giant Ernst & Young (ERSNP) announced the completion of an energy-efficient lighting system at its New York headquarters. The project – one of the city’s largest light retrofits – will cut the building’s annual energy use by nearly 2.9 million kilowatt-hours and reduce its CO2 emissions by around 2 million pounds.
The market for energy efficient retrofits in commercial buildings -- particularly in energy management software -- is set to grow exponentially. It will nearly double by 2020, according to a recent study by Pike Research. Published last month, the report predicts that the global market for retrofits will increase from more than $80 billion in 2011 to nearly $152 billion by 2020.
The emerging market is shifting away from one-time retrofits to making buildings more efficient on an ongoing basis through software, said Eric Bloom, a senior analyst at Pike. Traditional building companies like Johnson Controls as well as software companies like SkyFoundry are developing software applications that can help building owners monitor energy in real-time and regularly respond to inefficiencies and equipment malfunctions, Bloom said.
“The reality in the building industry is that most of the technology needed to make buildings more efficient has already been developed,” he said. “This will spur a shift from one-time, labor-intensive retrofits to an ongoing stream of small improvement measures that will add up to a more efficient building over time.”
Next page: The most popular – and greatest untapped potential – place for energy-efficient retrofits
The most popular retrofits are those in the publicly-owned market, like public universities, public hospitals and public administration buildings.
“The building owners are more confident that they will in fact own a building through the entire payback period associated with an energy retrofit,” said Bloom.
The greatest untapped potential for energy efficient retrofits lies in privately-owned and retail buildings, he said. Owners of these structures tend to flip buildings more frequently and are therefore less likely to invest in deeper retrofits.
The most common retrofits in privately-owned buildings include lighting system retrofits and lighting control installations, said Bloom. Deeper retrofits with a longer payback period involve measures like replacing chillers and installing better-insulated windows.
The global market
The Pike study looked at the global market landscape for energy efficient retrofits. It analyzed eight different building types and profiled more than 50 industry players.
Western Europe is currently the largest market for energy-efficient retrofits in commercial buildings. According to the study, the region will remain so, but its share of world revenues will decrease from 41 percent in 2011 to 37 percent in 2020.
The second-largest market is in the Asia Pacific. Pike estimates it will jump from 32 percent ($26 billion) in 2011 to 36 percent (nearly $55 billion) by 2020.
Advice to building owners: Invest
With such encouraging data, building owners would be wise to invest. As reported by GreenBiz in March, energy efficient retrofits for buildings could yield more than three times their value and equal about $1 trillion in energy savings in a decade, according to a recent study by Deutsche Bank.
For those wanting to invest but don’t have the capital, there are numerous funding options available. Innovative financing options have recently sprung up, like a new consortium that will make zero-upfront-cost deals for small- to mid-scale retrofits, and property-assessed clean energy (PACE), which adds the cost of the retrofits to a building’s property taxes.