RESEARCH REPORT Executive Summary: Energy Efficiency Retrofits for Commercial and Public Buildings HVAC, Lighting, Building Controls, Water Efficiency, Water Heating, Building Envelope, Energy Production, Commissioning, Installation, and ESCOs: Global Market Analysis and Forecasts NOTE: This document is a free excerpt of a larger report. If you are interested in purchasing the full report, please contact Navigant Research at research-sales@navigant.com. Published 1Q 2014 Robert Eckard Associate Analyst Eric Bloom Principal Research Analyst
Section 1 EXECUTIVE SUMMARY 1.1 Overview The world economy is becoming increasingly constrained by energy cost, energy availability, and energy-related environmental regulations. On a global scale, buildings (both residential and commercial) account for 35% to 40% of total final energy consumption. Commercial buildings, for example, consume a considerable amount of energy related to heating, ventilation, and air conditioning (HVAC); lighting; water heating; and various other building functions. Most countries around the world are also becoming more environmentally conscious. With the continued challenge of climate change, more countries are implementing measures that will reduce greenhouse gas (GHG) emissions and reduce energy consumption. Within this context, increasing deployment of energy efficiency retrofits for commercial and public buildings provides an important pathway for increasing energy security, reducing or even decreasing energy demand, reducing GHG emissions, and reducing demand for new energy production and distribution facilities. Energy efficiency commercial building retrofits can also be used by building owners and tenants alike to support greening and green marketing efforts, which are increasingly critical for many industries, particularly those with many consumer-facing brands such as retail and consumer technology. This Navigant Research report provides a comprehensive, global examination of the state of the market for energy efficiency retrofits in commercial and public buildings today, combined with key market factors and drivers that will contribute to market growth through 2023. 1.2 Key Market Trends In the report, Navigant Research provides analyses of the significant factors and drivers that will contribute to market growth for energy efficiency retrofits for commercial and public buildings through 2023. Key market trends considered include:» First motivators for initiating an energy efficiency commercial building retrofit in most cases, especially outside of energy service companies (ESCOs), increasing energy efficiency is not the primary reason that energy efficiency retrofits are initiated.» Payback periods for many energy efficiency retrofit technologies are slowly decreasing but remain a critical factor for most potential installations. Tolerance for longer payback periods varies regionally and by building owner category. 1
» Efficient lighting is a major technology that currently supports growth in the energy efficiency commercial buildings retrofit market. However, due to the fact that light-emitting diode (LED) technology is dropping in price and requires replacement much less frequently than other technologies, many regional retrofit markets for energy efficient lighting are expected to shift from expansion to contraction during the time period considered in this report.» Regulations and incentives supporting energy efficiency and green buildings will remain a critical component of increasing market expansion in certain areas. In particular, scheduled and anticipated regulations in China and Southeast Asia will drive markets there, while potential increases in regulations could also support markets in the Middle East.» Corporate sustainability initiatives continue to play an important role in energy efficiency retrofit market development. Various other important market drivers and barriers are also considered and discussed in the report. 1.3 Global Market Size and Forecast By the close of 2014, the global market size for energy efficiency commercial building retrofits will reach $68.2 billion. Of this total, approximately 81%, or $55.0 billion, will derive from sales of products used in energy efficiency building retrofits. These include efficient HVAC, lighting, building controls, water efficiency products, hot water heating products, building envelope, and other products (primarily onsite power generation). The remaining 19%, or $13.2 billion, will be derived from sales of energy efficiency services. These include building commissioning (recommissioning, retro-commissioning, and continuous commissioning) and costs associated with the installation of the energy efficiency products noted above. Global markets for energy efficiency commercial building retrofits are expected to show persistent growth through 2023. Global markets are led by the Asia Pacific region, which is expected to see its market share grow from 39% in 2014 to 45% in 2023, a compound annual growth rate (CAGR) of 9.0%. Growth in this region will be led by a growing number of retrofits in China and emerging economies, as stricter energy efficiency regulations, incentives, and cultural shifts come into play. North America and Western Europe will show moderate to strong growth, with 2014 to 2023 CAGRs of 5.6% and 5.9%, respectively. Market volumes in Latin America, the Middle East, and Africa are smaller, but these areas are anticipated to generate moderate to strong growth through 2023. Overall, the global market will roughly double, from $68.2 billion in 2014 to $127.5 billion in 2023, a CAGR of 7.2%. 2
Chart 1.1 Energy Efficiency Retrofit Revenue, World Markets: 2014-2023 $140,000 $120,000 $100,000 ($ Millions) $80,000 $60,000 $40,000 $20,000 $- 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 (Source: Navigant Research) 3
Section 8 TABLE OF CONTENTS Section 1... 1 Executive Summary... 1 1.1 Overview... 1 1.2 Key Market Trends... 1 1.3 Global Market Size and Forecast... 2 Section 2... 4 Market Issues... 4 2.1 Demand Drivers... 4 2.1.1 Initial Motivators for Energy Efficiency Retrofits... 5 2.1.2 Energy Cost Reduction... 6 2.1.3 Regulatory and Policy Measures and Incentives... 7 2.1.4 Green and Low Energy Consumption Buildings... 7 2.1.4.1 Green Branding... 8 2.1.4.2 GHG and Carbon Footprint Reductions... 8 2.1.5 Energy Independence and Security... 8 2.1.6 Benefits to Building Owners... 9 2.1.6.1 Occupancy and Rental Prices... 9 2.1.6.2 Real Estate Market Value... 9 2.1.7 Benefits to Tenants... 10 2.2 Market Dynamics... 10 2.2.1 United States... 10 2.2.2 Europe... 13 2.2.2.1 United Kingdom... 16 76
2.2.2.2 Germany... 17 2.2.3 Asia Pacific... 17 2.2.3.1 China... 17 2.2.3.2 Japan... 19 2.2.3.3 Australia... 20 2.2.3.4 Other Factors... 20 2.2.4 Latin America... 21 2.2.5 Middle East... 22 2.2.6 Africa... 23 Section 3... 24 Technology Issues... 24 3.1 Definition of Energy Efficiency... 24 3.2 Energy Efficiency Products... 24 3.2.1 Heating, Ventilation, and Air Conditioning... 24 3.2.1.1 Furnaces and Boilers for Space Heating... 24 3.2.1.2 Unitary Systems... 25 3.2.1.3 Air-to-Air Heat Pumps... 26 3.2.1.4 Radiant Heating and Cooling Systems... 26 3.2.1.5 Ground-Source Heat Pumps... 27 3.2.1.6 Ductless/Split System Air Conditioners... 27 3.2.1.7 Central Chiller Systems... 28 3.2.1.8 Ventilation and Indoor Air Quality... 29 3.2.2 Lighting... 29 3.2.2.1 Low Ambient/Task Lighting... 30 3.2.2.2 Daylighting... 30 77
3.2.2.3 Intelligent Lighting Controls... 30 3.2.3 Building Control Systems... 30 3.2.4 Water Management... 31 3.2.4.1 Low-Flow, Low-Flush, and Zero-Flush Fixtures, Toilets, and Urinals... 31 3.2.4.2 Greywater Systems... 32 3.2.5 Hot Water Production... 32 3.2.5.1 Tankless Hot Water Heaters... 32 3.2.5.2 Heat Pump Water Heaters... 33 3.2.5.3 Solar Hot Water... 33 3.2.6 Building Envelope... 34 3.2.6.1 Insulation... 34 3.2.6.2 High-R Windows... 35 3.2.6.3 Smart Glass... 35 3.2.7 Other Technologies... 36 3.3 Energy Efficiency Services... 36 3.3.1 Commissioning... 37 3.3.2 Installation... 37 3.4 ESCOs... 38 Section 4... 39 Key Industry Players... 39 4.1 Major Market Players... 39 4.1.1 AECOM Energy... 39 4.1.2 Ameresco, Inc.... 40 4.1.3 Carrier Corp. (United Technologies Corp.)... 41 4.1.4 Chevron Energy Solutions... 43 78
4.1.5 Cofely (GDF Suez)... 44 4.1.6 Daikin Industries... 45 4.1.7 E.ON Energy Services... 47 4.1.8 Eaton Corp.... 48 4.1.9 Johnson Controls... 49 4.1.10 Lennox International... 51 4.1.11 Philips Lighting... 52 4.1.12 Schneider Electric... 54 4.1.13 Siemens Building Technologies... 55 4.1.14 Trane... 56 4.1.15 Wahaso... 58 4.1.16 WattStopper (Legrand)... 58 4.2 Real Estate Professionals and Architectural Services... 59 4.2.1 CBRE Group, Inc.... 59 4.2.2 Goody Clancy... 60 4.2.3 Jones Lang LaSalle... 60 4.2.4 Malachite LLC... 60 Section 5... 61 Market Forecasts... 61 5.1 Study Methods and Assumptions... 61 5.2 Global Market Summary... 62 5.2.1 North America... 63 5.2.2 Western Europe... 64 5.2.3 Eastern Europe... 65 5.2.4 Asia Pacific... 66 79
5.2.5 Latin America... 67 5.2.6 Middle East... 68 5.2.7 Africa... 69 5.3 Conclusions and Recommendations... 70 Section 6... 71 Company Directory... 71 Section 7... 73 Acronym and Abbreviation List... 73 Section 8... 76 Table of Contents... 76 Section 9... 81 Table of Charts and Figures... 81 Section 10... 83 Scope of Study... 83 Sources and Methodology... 84 Notes... 84 80
Section 9 TABLE OF CHARTS AND FIGURES Chart 1.1 Energy Efficiency Retrofit Revenue, World Markets: 2014-2023... 3 Chart 2.1 Primary Initial Motivation for Initiating Energy Efficiency Building Retrofit: 2013... 5 Chart 2.2 Typical Payback Periods for Energy Efficiency Retrofits by Building Sector, World Markets... 6 Chart 2.3 Commercial Buildings Share of Energy Consumption, United States: 2012... 11 Chart 2.4 Energy Consumption of Commercial Buildings, Historic and Projected, United States: 1980-2035... 12 Chart 2.5 Commercial Buildings Share of Energy Consumption, EU27: 2012... 14 Chart 2.6 Commercial Buildings Total Energy Consumption, Europe: 2000-2012... 15 Chart 2.7 Historic and Projected Future Energy Consumption of Office Buildings by Segment, China: 2005-2020... 18 Chart 5.1 Energy Efficiency Retrofit Revenue by Region, World Markets: 2014-2023... 62 Chart 5.2 Energy Efficiency Retrofit Revenue by Product and Service Type, North America: 2014-2023... 63 Chart 5.3 Energy Efficiency Retrofit Revenue by Product and Service Type, Western Europe: 2014-2023... 64 Chart 5.4 Energy Efficiency Retrofit Revenue by Product and Service Type, Eastern Europe: 2014-2023... 65 Chart 5.5 Energy Efficiency Retrofit Revenue by Product and Service Type, Asia Pacific: 2014-2023... 66 Chart 5.6 Energy Efficiency Retrofit Revenue by Product and Service Type, Latin America: 2014-2023... 67 Chart 5.7 Energy Efficiency Retrofit Revenue by Product and Service Type, Middle East: 2014-2023... 68 Chart 5.8 Energy Efficiency Retrofit Revenue by Product and Service Type, Africa: 2014-2023... 69 81
Table 2.1 Energy Efficiency Commercial Building Retrofit Market Participants... 4 Table 4.1 AECOM Energy SWOT Analysis... 40 Table 4.2 Ameresco SWOT Analysis... 41 Table 4.3 Carrier SWOT Analysis... 43 Table 4.4 Chevron Energy Solutions SWOT Analysis... 44 Table 4.5 Cofely (GDF Suez) SWOT Analysis... 45 Table 4.6 Daikin SWOT Analysis... 47 Table 4.7 E.ON Energy Services SWOT Analysis... 48 Table 4.8 Eaton Corp. SWOT Analysis... 49 Table 4.9 Johnson Controls SWOT Analysis... 51 Table 4.10 Lennox SWOT Analysis... 52 Table 4.11 Philips Lighting SWOT Analysis... 53 Table 4.12 Schneider Electric SWOT Analysis... 54 Table 4.13 Siemens Building Technologies SWOT Analysis... 56 Table 4.7 Trane SWOT Analysis... 57 Table 4.14 Wahaso SWOT Analysis... 58 Table 4.15 WattStopper (Legrand) SWOT Analysis... 59 82
Section 10 SCOPE OF STUDY This Navigant Research report covers energy efficiency commercial building retrofit markets at a global scale, with regional breakdowns (North America, Western Europe, Eastern Europe, Asia Pacific, Latin America, the Middle East, and Africa) and select additional national-level breakdowns for key markets. The report also segments by building retrofit categories, based on Navigant Research s Global Building Stock Database. Building retrofit categories included in the database and in this report are: office, retail, education, healthcare, hotels & restaurants, institutional/assembly, warehouse, and transport. In addition, the report addresses markets by major efficiency technology segments, including HVAC, lighting, building controls, water efficiency, water heating, building envelope, other (primarily power generation technologies), and services, including commissioning and installation. ESCOs are considered as an alternative channel for energy efficiency sales, and, thus, they are not added to other market values. They instead function as a partial reorganization of market valuations identified under other product and services categories. The report is intended to provide a complete, comprehensive review of energy efficiency commercial building retrofit markets. In addition to market valuations and projections for 2014-2023, the report also identifies key trends relevant to the industry and provides relevant technology, market, and regulatory background to support a better understanding of market dynamics and valuations. 83
SOURCES AND METHODOLOGY Navigant Research s industry analysts utilize a variety of research sources in preparing Research Reports. The key component of Navigant Research s analysis is primary research gained from phone and in-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but not limited to technology companies, utilities and other service providers, industry associations, government agencies, and the investment community. Additional analysis includes secondary research conducted by Navigant Research s analysts and its staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report. These primary and secondary research sources, combined with the analyst s industry expertise, are synthesized into the qualitative and quantitative analysis presented in Navigant Research s reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, both within the body of a report and in direct conversations with clients. Navigant Research is a market research group whose goal is to present an objective, unbiased view of market opportunities within its coverage areas. Navigant Research is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets. NOTES CAGR refers to compound average annual growth rate, using the formula: CAGR = (End Year Value Start Year Value) (1/steps) 1. CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well. Figures are based on the best estimates available at the time of calculation. Annual revenues, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2014 U.S. dollars unless otherwise noted. Percentages may not add up to 100 due to rounding. 84
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