ENERGY RETROFIT MARKET ANALYSIS

The global energy retrofit market size was valued at US$ 111.2 Billion in 2022 and is anticipated to witness a compound annual growth rate (CAGR) of 5.1% from 2023 to 2030. The global energy retrofit market has been witnessing a steady growth over the last few years owing to the number of factors, such as increased consumption of energy, demand for energy efficient solutions, and the modifications to existing buildings. Additionally, large-scale installation of HVAC systems and technological obsolescence of traditional systems used in non- residential buildings can also be a growth contributing factor.

Global Energy Retrofit Market- Impact of Coronavirus (Covid-19) Pandemic:

The economic downturn caused by the COVID-19 epidemic has resulted in a considerable drop in investments in new energy-efficient buildings and equipment. Energy-efficient systems in commercial and residential buildings, such as LED retrofit lighting, HVAC retrofit, window insulation and glazing retrofit, and roofing retrofit, are primarily used to reduce operational costs through distributed generation of electricity. The COVID-19 established a lockdown, forcing major industries throughout the world to suspend output. As a result, investment in overall energy efficiency systems fell by 9% in 2020. People across major economies reduced visits to workplaces by more than 60% as of April 2020, resulting in a fall in commercial building power use. According to the IEA, average household power consumption in the United States climbed by 30% in April 2020, followed by a fall in commercial building electricity usage. The COVID-19 epidemic reduced worldwide construction sector investment by 3.1% in the first half of 2020. Furthermore, regional markets had contractions of 4.4% in Germany, 7% in Canada, 2.2% in India, and 7.7% in Malaysia compared to 2019, owing to the closure of production facilities. The majority of energy components are manufactured. The production of most components in the energy and power sectors is slowing significantly. Travel restrictions, quarantine procedures, and lockdowns on a local and worldwide scale have created delays in the supply of previously made parts to distributors and end users. Companies are experiencing constraints as a result of constrained supply production in COVID-19-affected nations.

Global Energy Retrofit Market: Regional Insights

Based on geography, the global energy retrofit market is segmented into North America, Europe, Asia Pacific, Latin America, and Middle East & Africa.  At present, the Europe is expected to hold leading position in the global energy retrofit market over the forecast period. North America, headed by the United States, Mexico, and Canada, will account for the worldwide energy retrofit systems market in upcoming years. Due to increased worries about greenhouse gas emissions and stringent restrictions, Canada is likely to expand at a quicker rate. Germany is one of the world's early adopters of clean energy solutions, with large-scale HVAC system installations and technical obsolescence in the non-residential sector. The country's rules and regulations help the energy retrofit systems business model by catering to various industries. The European area is also investing in research and development for renewable energy generation, with EU funds available for energy conservation and efficiency initiatives.

Figure 1. Global Energy Retrofit Market Market size, By Region

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Global Energy Retrofit Market Drivers:

Need for the improvement in energy efficiency

Energy is the primary source of fuel for social and economic progress. All industries require the systems to work, and they confront a constant demand for energy as consumer demand for such systems grows. Regulators and politicians have approved steps to increase energy efficiency and encourage energy retrofit systems in order to facilitate the transition to more sustainable energy systems. Significant improvements in energy operations are being observed in the residential sector as building managers become more conscious of the need to implement energy-efficient (lighting, heating, and cooling) solutions. Electricity efficiency is critical for customers of battery-powered gadgets and people with restricted access to electricity. Favorable government incentives in the United States are likely to drive the residential market. The capacity to regulate HVAC and other energy-consuming equipment remotely, as well as acquire information on energy-consuming technological gadgets and appliances. During the forecast period, these factors are expected to boost the energy retrofit system market.

Rising demand for energy consumption

Energy as a service providers provide a variety of software and technological solutions to help businesses analyse their power use patterns. Because energy consumption is increasing at a rapid rate, energy is utilised in a variety of sectors; one notable section that uses a larger capacity of energy to operate district heating services is the commercial sector. Because many present methods utilised to produce power utilising renewable energy would raise business sector electricity demand. Due to a growth in global demand for energy consumption, the expanding installation of energy systems, along with the broad availability of smart devices, has created space for new business models to emerge in the power industry. Consumers' energy-related requirements in the residential, commercial, and industrial areas are growing by the day. The advent of smart home gadgets for residential users has enabled constant monitoring of energy consumption. During the forecast period, these factors are expected to boost the energy retrofit system market. For instance, according to International Energy Agency, around USD 2.8 trillion will be invested in energy in 2023. More than USD 1.7 trillion is going to clean energy, including renewable power, nuclear, grids, storage, low-emission fuels, efficiency improvements and end-use renewables and electrification.

Global Energy Retrofit Market Trends:

Regulatory mandates and incentive programs

Energy-efficiency measures are increasingly being included in building codes and standards around the world in response to the Kyoto Protocol and other comparable objectives established by international directives or standards. Such restrictions have been progressively imposed in growing economies such as China, Mexico, India, and Singapore during the last decade. These criteria promote the application of national building rules and regulations and help to harmonies measures made. Furthermore, different financial incentives exist to stimulate projects that minimize building energy usage and CO2 emissions. Tax breaks, subsidies, low-interest loans, and penalty exemptions are all examples of financial assistance. Many businesses volunteer to provide a carbon disclosure report in exchange for federal/state tax breaks. Such policy and incentive program benefits are projected to stimulate the market. Because of the cheap cost of renewable energy and low-cost infrastructure, quick manufacture of energy retrofit systems has promoted widespread adoption among residential and commercial end users. China's government programs and regulations for current and new structures, such as the Three-Star Rating System, promote environmentally friendly green buildings. The regulations provide a requirement that must be met during the construction of all new residential and non-residential structures in China.

Global Energy Retrofit Market Restraints:

Longer payback period and hidden costs

Technologies employed in energy retrofit systems are still costly due to high R&D expenditures. Furthermore, capital investment is strongly tied to a company's financial health. Furthermore, the return on investment is slow and may take three to four years. These characteristics prove to be significant market limitations. Hidden expenses are any costs that are not normally included in the company's economic models. Aside from the core cost of energy retrofit systems, several hidden costs, such as general overhead costs, industry-specific costs associated with the selection of an energy-efficient option, and potential utility loss associated with energy-efficient choices, add up to the total investment required. This raises the cost of energy retrofit solutions even further. The system's basic overhead expenses include the cost of hiring specialists and the cost of energy audits. The cost of recognizing opportunities, extensive analysis and design, and expenses associated with interruptions and annoyance are all industry-specific costs. The final category, possible utility loss, encompasses issues with safety, working conditions, service quality, and extra maintenance. These charges add up to the entire expenditure, making energy retrofit solutions even more costly. These are some of the biggest roadblocks for many organizations, restricting the market's growth possibilities.

Stringent challenges in the industry

The change of utility infrastructure enhances the capabilities of the power transmission system, which contributes to the industry's growth. According to the Energy Economic and Financial Analysis, India requires an investment of around USD 60-70 billion over the next five years to upgrade its grid infrastructure in order to achieve considerable capacity development in the renewable energy industry. The utilities intend to invest in new and replacement infrastructure. Such infrastructure improvements are made in response to rising power consumption, planned electricity production projects, particularly alternate renewable energy sources, which are putting a burden on utilities. As a result, hefty investments and longer payback times pose a significant challenge to the industry. The general overhead cost includes the expense of hiring specialists as well as the cost of energy audits. The cost of discovering opportunities, extensive analysis and design, and the cost of interruptions and annoyance are all industry-specific expenses. The final category, possible utility loss, encompasses issues with safety, working conditions, service quality, and extra maintenance. These expenses add up to the entire investment, making the model even more costly. These problems tend to be important roadblocks for many organisations, resulting in high maintenance costs and lengthy payback periods. As a result, the aforementioned difficulties are projected to represent a challenge and limit overall market growth throughout the forecast period.

Figure 2. Global Energy Retrofit Market Market size, By Product

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Global Energy Retrofit Market Opportunities:

Rapid urbanization and industrialization

Rapid urbanization and industrialization are the opportunities for the global energy retrofit systems market forward. This aspect is assisting in the overall rise of consumer expenditure. Customers have begun to purchase energy retrofit solutions for their homes. This has assisted them in lowering the amount of their power cost. Furthermore, rising consumer awareness of energy retrofit systems is propelling the global energy retrofit systems market forward.

Global Energy Retrofit Market Segmentation:

The global energy retrofit market report is segmented into product, end use, and region. Based on product, the market is segmented into envelope, HVAC and appliance. Out of which, envelope is expected to dominate the global market over the forecast period. The synthetic segment was cover overall 79.6 % market share during the review period. Adding outside window coatings, exterior window shade and light shelves, wall and roof insulation, vestibule, installing cool roof and replacing windows are all examples of energy retrofitting of a building's envelope. The building envelope provides protection and shelter to the core structure. It also assists in keeping the building warm or cool, controlling noise and odours from outside, and maintaining acceptable air quality. Building envelope retrofitting adds insulation and an air barrier to walls, improving thermal comfort and reducing draughts. As a result, the quantity of heat loss is minimised, which helps occupants and owners by lowering energy consumption and carbon impact. This will also influence public perception positively by demonstrating a commitment to environmental sustainability. Hence, it is expected that the envelop will contribute heavily in global energy retrofit market in the forecasting period.

Global Energy Retrofit Market: Key Developments

• On 22 June 2023 Automated Logic Announces which is the, provider of innovative building-management solutions Agreement to Acquire Standard Plumbing Heating Controls which is an independent Automated Logic Dealer located in Spokane, Washington. This agreement will help Automated Logic to expand their business.
• In 2021, Siemens AG launched a new energy management system, which allows building owners and managers to monitor and control energy consumption in real-time.
• In June 2021, Ameresco announced that it partnered with Defense Logistics Agency Energy and Cannon Air Force Base for USD 19 million Energy Savings Performance Contract (ESPC). The project designed by Ameresco will provide tangible facility improvements and enable recurring reductions in utility costs. On utilizing the DOE Energy Savings Performance Contract, the project will help enhance Cannon Air Force Base’s mission capabilities and address its sustainability and energy goals.
• In May 2021, Johnson Controls announced that it selected an environmentally sustainable R-454B as the future refrigerant for HVAC equipment and air cooled scroll chillers. This decision will support and will maximizes environmental benefits in order to avoid the transition for the unitary segment.

Global Energy Retrofit Market: Key Companies Insights

The global energy retrofit market is highly competitive. This is attributed to continuous launch of new technologies due to ongoing R &D and efforts by value chain participants. Moreover, key players are adopting various business growth strategies in order to expand their presence on regional as well as global basis. Some of the key players in the global energy retrofit market are Carrier, Haier Group, Emerson Electric Co., LG Electronics., Lennox International, Rheem Manufacturing Company, Trane Technologies plc, Vishay Intertechnology, Inc., Acuity Brands Lighting, Inc., Ideal Industries, Inc., Lumigrow, Hubbell, Constellation Newenergy, Inc., Energy Systems Group, Cmta, Inc., The Brewer-Garrett Company, Digi-Key Electronics, Renesas Electronics Corporation., Ameresco.

*Definition: The process aimed at enhancing an existing building's energy systems and infrastructure to reduce energy usage is referred to as energy retrofit. It usually entails implementing energy-saving technology like as insulation, efficient lighting, HVAC modifications, and renewable energy systems. The purpose is to reduce the building's environmental effect, reduce energy costs, and improve occupant comfort.