Deep retrofits have the potential to unlock $1 trillion in energy savings, but innovative material companies need to link up with energy service companies (ESCOs) to participate, says Lux Research.
Leading ESCOs such as Schneider Electric are best positioned to lead the market for energy efficiency retrofits, which is worth over $5 billion in the US alone, according to a new report from Lux Research, Partnering to Unlock the Trillion Dollar Opportunity in Energy Efficiency Retrofits. Lux says these retrofits can have short, compelling payback periods for building owners.
While so-called “deep retrofits” can lead to big savings, they are disruptive to many building systems, so they require sophisticated ESCOs to act as chief integrating partners. As a result, ESCOs are a vital entry point for technology developers aiming to address this market. So far, equipment companies are well-networked with ESCOs, but materials companies are not, but the report’s author says to expect this to change in the next three to five years.
Lux Research analysts examined partnerships of the dominant ESCOs in the US, European Union and India in order to find winning strategies in each market and identify the entry points for other players in the value chain. Among their findings:
- The US market is dominated by multinationals. Clients focused on commercial retrofits should target the mature US market in which innovative global ESCOs exert a much broader partnership reach than their peers.
- Technology partnerships dominate in the EU. Two large multinational ESCOs, Siemens Building Technologies and Schneider Electric, are busy forming hardware partnerships, enabling them to not just retrofit individual pieces of equipment or components, but deliver building systems integration.
- Industrial retrofits should eye India. Vendors focused on industrial retrofits should target the emerging Indian market, which is driven by IT and telecom retrofit opportunities. Global players like Honeywell have a strong presence in India, but local ESCOs like Intemo Systems are gaining momentum.