Multi-speed institutional support
Retrofitting is a topic that is a natural part of the broader questions surrounding energy efficiency and energy “sobriety.” As such, it is the subject of institutional support, with significant disparities on a global scale. The most significant efforts currently seem to be carried out Europe-wide, with the European Commission driving its Renovation Wave strategy around three focus areas: renovating “thermal sieves” to boost energy efficiency, renovating public buildings, and decarbonizing heating systems. The latter priority aims to double the annual renovation rate (from 1 to 2% of the total stock) and is reflected in varyingly ambitious national plans, details of which can be found on the IEA’s website. France is one of the most active EU members on this issue, despite an estimated €10 billion required annually to achieve European objectives. As such, France is introducing various financing levers, from subsidies (Ma prime Renov’) to tax incentives (VAT at 5.5%), as well as advantageous loans (eco-PTZ).
The war in Ukraine creating a retrofitting shock?
The war in Ukraine and the resulting energy crisis has “naturally” brought to the forefront the issue of retrofitting in a context of uncertainty regarding fossil fuels. Many countries immediately sought to reduce their energy dependence, first by turning to renewables, but also by increasing initiatives linked to retrofitting. The IEA explains that after years of slow progress, investments in energy efficiency reached $560 billion worldwide in 2022, a 16% increase compared to 2021.
China’s “demolish and rebuild” cycle
“We can’t be doing large-scale demolition and construction in the name of urban regeneration,” China’s housing minister recently explained. This announcement signals the end of a model based on debt, which is at the origin of the economic crisis that China is currently experiencing. In times of prosperity, large construction companies used to borrow heavily in order to buy up land, destroy the existing land, rebuild, quickly sell and repeat the process with the money generated by the sale for rapid growth. But this model is losing its viability with the economic slowdown. And the change of course involves a colossal renovation effort, mentioned in the Asian superpower’s 14th Five-Year Plan, which covers around 100 million square metres of residential buildings and 250 million square metres of public buildings. In a country where most buildings are multi-owned, it could prove quite tricky trying to coordinate this puzzle.
An Eldorado
In a context of enthusiasm for retrofitting, increasingly restrictive regulatory frameworks and a strong influx of public capital, newcomers and long-established names are scrambling to recover market share. For François Teste du Bailler, chairman of GCC’s board of directors, “renovation will account for half of construction activity in 2030.” Meanwhile, VINCI Construction has opted to industrialise technical components which support efficient and low-carbon energy renovation. Protected sites can be retrofitted by using the REHASKEEN process to retrofit building facades, along with geothermal energy systems which enable the use of non-visible renewable energy systems. What’s more, various startups are getting in on the action, proving to be committed to the cause. According to XAnge, the European market is expected to grow from €58 billion in 2022 to €137 billion in 2027. Energy renovation pure players, like Effy in France, Dryft in Sweden and 1KOMMA5° in Germany are seeing their market cap explode. In a sector that is still looking to standardise energy efficiency indicators, data-related solutions are also enjoying great success. In Ireland, BERWOW identifies the most useful retrofit home improvement options based on data linked to the local Building Energy Rating or Energy Performance Certificate. In the UK, players like Hubb are working to develop digital twins to facilitate renovation. And lastly, the question of skills development is mobilising new players such as Kolverr marketplace or the training provider La Solive.
Renovation and heritage: a complex equation
As retrofitting is becoming more widespread, it currently faces a certain number of obstacles, which go beyond the issue of financing, technology solutions or skills. Resistance is perhaps the strongest in Italy, a country in the midst of a housing crisis. There’s a conflict between imposed retrofitting obligations and the preservation of cultural heritage, two ambitions that are sometimes difficult to reconcile. The question is also being raised in the UK, where heritage retrofit skills need a boost if the country is to protect and decarbonise historic buildings. The opposition can finally take on a political dimension, putting up opposition to Brussels’ proactive policy. German Justice Minister Marco Buschmann thus describes a “hard-to-justify encroachment on property rights.”
On paper, retrofitting presents all the attributes of a miracle solution, yet it remains extremely complex to deploy on a large scale. It requires colossal investments, uncertainty surrounding energy efficiency guarantees and skills that are still too hard to come by. Forced retrofitting also provokes significant political opposition. In this context, salvation undoubtedly requires industrialising processes and structuring a real sector capable of rationalising and optimising efforts that are currently too dispersed.
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