Energy Retrofit Systems Market Size, Share & COVID-19 Impact Analysis, By Type (Quick Wins Retrofit and Deep Retrofit), By Product (Envelope, HVAC, LED Lighting, and Appliances), and by Application (Residential, Commercial and Institutional), and Regional Forecast, 2021-2028

The global energy retrofit systems market size was valued at  USD 148.23 billion in 2020 and is projected to grow from USD 157.39 billion in 2021 to USD 210.37 billion in 2028, exhibiting a CAGR of 4.2% during the forecast period of 2021-2028. 

The global impact of COVID-19 has been unprecedented and staggering, with witnessing a negative impact on demand across all regions amid the pandemic. Based on our analysis, the global market will exhibit a negative growth rate of -12.8% in 2020 as compared to the average year-on-year growth during 2017-2019. The rise in CAGR is attributable to this market’s demand and growth, returning to pre-pandemic levels once the pandemic is over.

Energy retrofitting of a building represents the upgrading of energy systems to improve system efficiency and reduce energy consumption. The increasing share of energy consumption in residential and commercial buildings has resulted in the use of energy retrofits systems to improve the efficiency of buildings. Retrofitting involves improving or replacing lighting fixtures, ventilation systems, windows and doors, or adding insulation. Additionally, retrofitting also includes measurements of energy efficiency during renovation & repair activities of buildings. Moreover, the energy retrofit systems help in reducing the building’s operational cost, which has improved the market edge of retrofit initiatives.

COVID-19 Crisis Adds a New Layer of Uncertainty For Global Energy Efficiency Efforts

The global health emergency caused by the sudden outbreak of COVID-19 has significantly affected energy efficiency progress landscape. The current economic crisis caused businesses and consumers to postpone investments in more efficient technologies. The crisis has caused changes in the behavior of markets, which added to the uncertainty surrounding energy efficiency advances. For example, depending on how the aviation industry recovers after the pandemic, the historic decline in air transport demand could alter the energy intensity of international travel and freight.

The socio-economic benefits of energy efficiency are now well recognized. Governments are beginning to answer to the challenge of "building better" after the crisis, announcing billions of dollars in stimulus investment to improve energy efficiency, especially in buildings and transportation.

LATEST TRENDS

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Increasing Focus on Energy Efficiency to Spur Market Opportunities

Energy efficiency is one of the market trends for environment-friendly, social, and economic development of any nation. However, reducing energy use is the most viable approach for promoting long-term environmental sustainability and overcoming global energy shortages.

The construction industry is heavily reliant on energy and plays an important role in energy conservation and sustainability. The construction industry accounts for about half of all energy usage. Energy retrofit systems represents an opportunity to upgrade the energy performance of any commercial building's assets for their ongoing life and also helps in improving energy efficiency or decreasing energy demand.

Additionally, energy retrofit systems act as an excellent opportunity to install distributed generation to a building. For context, the government of Netherlands has committed a funding of EUR 150 million to EUR 600 million in grants for rental houses and funds for local government implementation of housing energy efficiency. The energy-saving agreement includes targets the use of 1 million retrofit systems by 2020 and related market development programs to near zero energy levels and long-term energy savings. Thus, increasing focus on energy efficiency spurs the energy retrofit systems trend.

DRIVING FACTORS

Adoption of Energy Retrofit Systems To Achieve Sustainable Building Targets to Drive Market Growth

Energy retrofit system is widely used in construction sector to optimize the energy performance of the structure, which results in lower consumption of land energy and also reduces the dependency on constructing new buildings. This factor is expected to drive this market. Additionally, the adoption of these systems could also help in extending the life of the existing building or historical buildings while ensuring optimum thermal comfort for the occupants which leads to higher productivity. For instance,

• On May 17, 2021, the Biden Administration accelerated efforts to attend to the goal of modernizing and upgrading the nation’s residential and commercial buildings to be affordable, resilient, accessible, energy-efficient, and electrified. The administration promises to build, rehabilitate, and retrofit more than 2 million houses across the U.S.


• On August 13, 2021, the U.S. Department of Energy (DOE) awarded USD 82.6 million in funding toward 44 projects that will lower energy bills. These project help to meet goal of net-zero carbon emissions by 2050 by investing in new energy-efficient building technologies and construction practices. New Jersey Institute of Technology will design, prototype, install, test, and evaluate a high-performance residential wall retrofit that can achieve estimated heating and cooling energy savings of 30% or more.

Government Regulations and Frameworks To Implement Energy Improvement Projects To Propel Growth

Retrofitting systems are typically used in commercial, residential buildings to save around 10-40% of the energy use. Due to this, the use of energy retrofits systems is complemented with various government regulations, financial models, and policy frameworks to cover more buildings with energy retrofit systems to improve the energy performance of the buildings.

For example, the Mayor’s Energy of Londoner's program has designed a retrofit accelerator for homes and buildings to pace up the cutting carbon emissions and achieving zero carbon by 2030. Moreover, the European Regional Development Fund bagged the program, which also helps tackle the climate emergency and reduce energy bills through insulation and low carbon heat and power solutions.

Other notable example includes the implementation of strict legislation by the Netherlands government to make it mandatory for office buildings to meet the buildings' performance level C by 2023 and performance level A by 2030. Almost 15,000 buildings/houses are currently needed to complete the 2023 requirements. EU Emissions Trading provides funds or revenue to leverage private investments in building renovation, which is anticipated to improve the market landscape for energy retrofit systems.

RESTRAINING FACTORS

Lack of Information and Insufficient Infrastructure to Hinder Market Growth

As per the European Union (EU), the residential sector accounts for almost 27.2% of energy consumption and 24% of CO2 emission. The European Union has established energy policy and long-term investment strategies to renovate the residential stack by 2050 completely. However, achieving efficient energy levels is not a straightforward task in the residential sector. The existing gap in energy efficiency is caused due to the irrational behavioral habits of residential consumers. Various studies have investigated that the gap of energy efficiency between investment opportunities and actual implementation hinders the energy retrofit systems market growth. Also, behavioral explanations, model & measurements error, and lack of information about the benefits and various possibilities of the efficient use of energy hinder the market growth. Additionally, other factors such as change in structures also create challenges for the energy retrofit market. The use of energy retrofits systems might harm heritage and archaeological assets, which the usage of unproven methods can cause, technologies or instruments.

SEGMENTATION

By Type Analysis

Deep Retrofit Segment to Grow at High Pace

Based on type, the market is bifurcated into quick wins and deep retrofits.

The deep retrofit segment accounted for the significant share of the market in 2020. Deep retrofits are considered those whose marginal capital cost is more significant than USD 10,000 with an exception to replace the HVAC system. Additionally, the deep retrofits result in an overhaul of 50% to 60% of energy-saving and address energy loads such as air conditioning, hot water supply, lighting, and appliances.

Quick wins type of energy retrofit systems refers to the measures whose marginal capital cost is lower than USD 10,000 compared to the deep retrofits. The quick wins are simple, require very little investment, and offer a rapid gain due to its absurdly large potential. In addition to this, other importance of this retrofit type lies in the fact that they are easy to implement, and the proclamation of good practice happens organically with few human resources.

By Product Analysis

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Envelope Segment Accounted for Largest Market Share

Based on product, the market is categorized into the envelope, HVAC retrofit, LED lighting, and appliances.

An envelope retrofit system allows users to add insulation, air barrier in the buildings, which helps in improving thermal comfort and reducing drafts. These factors create opportunities for the occupants to reduce energy consumption, carbon footprint and lower electricity bills by reducing the amount of heat loss.

HVAC retrofits refer to the retrofitting of an HVAC system, which involves installing new tailored parts to an existing system and allowing it to function optimally, resulting in a cost-effective alternative to the unit's replacement.

LED lighting retrofit types are typically the conversion of an existing to a LED fixture. LED lighting fixtures are being widely accepted in commercial & industrial businesses due to lower maintenance cost, improved lighting quality, and increased safety.

Appliances type of retrofits generally refers to the retrofitting of old appliances to improve the compatibility of the appliances and achieve a simple, cheaper supply of power.

By Application Analysis

Residential Segment Accounted for Largest Market Share

Based on application, the market is categorized into residential, commercial, and institutional.

In the residential end-user sector, energy retrofit systems are installed in existing homes, such as mobile homes, 2+ unit buildings, and single-family homes, to increase the energy efficiency of these buildings. Government organizations are explicitly focusing on retrofitting the residential buildings to improve their efficiency and convert them into affordable buildings.  

The commercial end-user is another major sector contributing to a large share of energy consumption. As per the MDPI Energies article, commercial buildings consume approximately 30% of total energy consumption, which provides significant opportunities for energy retrofits systems to reduce energy use, energy costs, and GHG emissions.

In the institutional sector, energy retrofits systems are used in buildings like education, healthcare, public order & safety, worship buildings. In the institutional sector, applications such as water heating, space cooling & heating, lighting, auxiliary heating consume a large amount of energy, resulting in opportunities for these systems.

REGIONAL INSIGHTS

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The market has been analyzed across North America, Europe, Asia Pacific, Latin America, and Middle East & Africa.

Europe is the major region in the global market. In terms of value, the region held a share of 38.2% in 2020. In 2020, The European Commission’s launched the Renovation Wave Strategy, which aims to cut emissions, improve quality of life and reduce energy poverty by accelerating home renovations across the EU to improve the energy performance of buildings. Moreover, since inefficient buildings increase vulnerability to cold spells and heat waves, the renovation wave strategy will improve the health and well-being of citizens. The strategy targets to double energy renovation rates in the next 10 years, leading to more tremendous energy and resource efficiency. The Commission estimates that 35 million buildings could be renovated by 2030.

North American market is projected to grow exponentially during the forecast period, as the U.S. Department of Energy (DOE) announced the Commercial Buildings Integration program and funding from the Solution to Improve the Energy Efficiency of Small and Medium Buildings. The completed project demonstrated an annual energy savings of 103 166 MMBtu, 190 298 GHG emissions reduced over the lifetime of the upgrades, and USD 4008 average utility savings per building annually.

In Asia Pacific, India, South Korea, and China promote energy-efficient products. For example, in 2015, the government of India  launched the UJALA program to provide LED bulbs to domestic consumers. It targeted to replace 770 million incandescent bulbs with LED bulbs by March 2019. As of July 2021, approximately 360 million incandescent bulbs were replaced, leading to 47 million kilowatt-hours (kWh) of energy savings per year and 30 Mt CO2 emissions savings per year. The program allowed low-income households to purchase LEDs at an initial cost of USD 0.154 per unit and pay off the balance through easy installments from their electricity bills. The program has not only helped promote the use of efficient lighting technology at affordable rates to domestic consumers but has also helped the country’s distribution companies manage peak demand for energy due to reduced energy consumption from lighting end-users.

KEY INDUSTRY PLAYERS

Orion Energy Systems, Inc. to Focus on Expanding Its Product Line and Utilizing its Channels to Market New Products

Currently, Orion Energy Systems, Inc., Ameresco, Inc., Daikin Industries Ltd., AECOM, Johnson Controls, and Siemens are the key players in the market, accounting for a dominant share in 2020. Supportive government initiatives for the growing energy efficiency targets and an increasing number of mergers and acquisitions have led to intense competition in the market.

Orion Energy Systems, Inc. is a provider of LED lighting systems and turnkey project implementation. The company’s services product portfolio consists of installation and commissioning of fixtures, controls, Internet of things (IoT) solutions, ongoing system maintenance, and program management. On October 20, 2020, Orion Energy Systems, Inc. secured new contract extensions of approximately USD 41 million for the retrofit of 295 additional locations, representing the next phase of a turnkey LED lighting and controls retrofit project for an existing large national retail customer. The retailer also awarded Orion projects as the lighting and controls partner for specific new construction projects.

LIST OF KEY COMPANIES PROFILED:

• Daikin Industries Ltd. (Japan)


• Ameresco (U.S.)


• Eaton (Ireland)


• AECOM (U.S.)


• Johnson Controls (Ireland)


• General Electric (U.S.)


• Schneider Electric (France)


• Orion Energy Systems, Inc. (U.S.)


• Siemens (Germany)


• Trane Technologies Inc. (Ireland)


• Signify N.V. (Netherlands)


• Engie SA (France)

KEY INDUSTRY DEVELOPMENTS

• October 2021 – Ameresco, Inc. announced its partnership with Wells County, Indiana, on a comprehensive jail facility renovation and modernization project. Ameresco will repair the jail's existing HVAC systems, update the lighting with LED retrofits both inside and out, revamp the parking lot, enhance the controls system, and remodel and construct a new building expansion.


• December 2020 – Orion Energy Systems, Inc. has secured a new contract extension totaling approximately USD 40 million for the turnkey LED lighting and controls retrofit of 290 additional locations for an existing large national retail customer. The turnkey retrofit projects include installing LED lighting fixtures and state-of-the-art IoT control integration.

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The energy retrofit systems market research report presents a comprehensive assessment of the industry by offering valuable insights, facts, industry-related information, and historical data. Several methodologies and approaches have been adopted to make meaningful assumptions and views to formulate the market research report. Furthermore, the report covers a detailed analysis and information as per market segments, including type, product, applications, and regions, helping our readers to get a comprehensive overview of the market.

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