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Buildings consume more than a third of the EU's energy. Here’s how to decarbonize them

Buildings of the future must be at the heart of the green transition in Europe.

Barbara Frei
Executive Vice-President and Chief Executive Officer, Industrial Automation, Schneider Electric
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SDG 11: Sustainable Cities and Communities

This article is part of: The Davos Agenda
  • Buildings of the future must be at the heart of the green transition in Europe, with digital at the core.
  • New indicators are needed to drive investments, and action must happen at European level more vigorously with a push for renovation milestones to achieve economies of scale.

The building sector is the critical segment to tackle if the European Union wants to achieve its COP21 commitment. It is Europe’s single largest energy consumer, accounting for approximately 40% of EU energy consumption (36% of CO2 emissions).

Around 25% of the current building stock could be considered “future-proof”, leaving 75% of buildings that still need to be renovated.

On average, the annual deep-energy efficiency renovation rate barely reaches 0.2% for both residential and non-residential buildings in the EU. Based on the current renovation rate, we estimate it would take approximately four centuries to renovate the building sector in Europe to be in line with the COP21 trajectory.

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Digitalization is the ‘game changer’ to accelerate energy decarbonization of buildings. People spend around 80% of their lives inside buildings – office buildings, schools, hospitals, and homes. Buildings represent large capital expenses for businesses. For example, building management systems empowered by digital technologies such as Internet of Things (IoT) and Artificial Intelligence (AI) will radically change how we manage the building stock’s energy consumption.

Digital technologies improve efficiency through the entire lifecycle of a building (design, construction and operation). More digital in the building value chain is critical to enhance competitiveness and innovation. It also offers full transparency for the consumer, which important in raising awareness and drawing support from society for the transformation of the building stock.

Image: Architecture 2030

With up to 98% of its construction chain composed of SMEs and micro-enterprises – characterized by decreasing innovation, low rates of technological adoption and patchy efficiency – the digitalization of SMEs in the construction sector is strategic for the EU.

The European Union’s role is to ensure market convergence and the recent European Commission Strategy on the Renovation Wave initiative is a welcome development, intending to double Europe’s renovation rate in the next ten years and contribute to making the continent carbon neutral by 2050.

The building industry’s highly localized nature is certainly a challenge. Yet, the most powerful way to scale up a renovation industry that does not currently exist, is to give access to a consumer market of about 500 million people. We need to act at European level more vigorously by pushing for renovation milestones in order to achieve economies of scale.

This will attract financial investors and accelerate the deployment of solutions by industries, SMEs and local artisans in parallel.

At the core of the future framework to accelerate the renovation of buildings, we need a set of macro-indicators guiding future decisions when deciding about future investment, with a focus on digital.

The aim is to assess whether the right set of technologies and incentives are deployed across European countries. Considering the important amount of money being allocated to building refurbishment in the next few years, it is vital to ensure maximum transparency in terms of returns on investment and performance achievement for key technologies especially for the digital ones, which have been overlooked when it comes to their positive impact on building decarbonization.

Buildings of the future must be at the heart of the green transition in Europe, with digital at the core. Promoting the digitalization of the building sector will accelerate post-COVID-19 recovery through more efficiency and will build a European software ecosystem while generating industrial champions for decarbonization. That requires stimulus for the development of a set of indicators that would drive investment towards the right set of technologies.

This blog is part of the lighthouse projects in the European Green Deal Action Group.

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