Sep 12, 2022
Decarbonizing the urban built environment: Ten trends to consider
by Nadia Soultanova — Head of Urban Network at Urban Impact Ventures
When thinking of curbing carbon emissions and countering climate change most of us tend to visualize sprawling solar and wind farms. Decarbonization efforts at the site of production continue, but parallel efforts are now concentrated at the place of consumption. This most often means in cities, and more specifically in buildings, where a large portion of human activity is concentrated.
The built environment was slow to become the center of global decarbonization efforts. The initial focus was on the electrification of buildings and curbing consumption via smart energy-saving devices, energy monitoring and management, insulation, and other sustainable design features.
The drop in prices of solar panels and other energy-generating technologies over the last decade, combined with tools for grid decentralization turned the attention to on-site generation. The role of the built environment changed from that of a passive energy consumer to one of an energy producer with a two-way connection to the grid.
The trend towards energy-independent buildings is set to continue with increased attention to the carbon footprint of the building materials.
Why are buildings crucial in the fight against climate change
The built environment accounted for 36% of global energy demand and 37 % of energy-related CO2 emissions in 2020, mainly a result of heating and cooling. (2021 Global Status Report for Buildings and Construction)
As urban population growth is set to continue in the coming decades, reports predict that the total global building stock will grow from 165.8 billion m2 in 2019 to 184.7 billion m2 in 2028, although exact data is hard to collect. The highest rates of growth are to occur in developing regions - Asia-Pacific, Latin America, the Middle East, and Africa. (Data by Guidehouse Insights, formerly Navigant Research)
In Europe and North America, the rate at which new buildings are added relative to existing construction is much lower, at around 1 to 2% per year. (Ren 21). The majority of the built environment that will serve us in the next 30 to 50 years was already in existence even before the introduction of energy-related building codes. This means that for much of the developed world decarbonization of the built environment means mostly retrofitting.
Our view
As an impact investor with a focus on sustainable urban transformation and decarbonization we see a big potential in the field of building decarbonization — both in terms of impact and in terms of financial returns.
There is a clear consensus that in order to meet global climate goals we need to decarbonize the world’s building stock by 2050. Having in mind that the useful life of a building might be over 50 years, every building that is currently being built and every building that will be built from now on should be carbon neutral. Today, however, less than 1 percent of existing buildings are considered net zero.
The good news is that the renewable potential of cities is still untapped. For example, an analysis of the solar potential in Berlin found that using the city’s available rooftop space could power up to 25% of city-wide electricity needs. (Renewables in Cities, Ren 21) According to the World Green Council construction of new green buildings presents a 24 trillion investment opportunity by 2030, yet to be realized. The current peak in energy prices and concerns around global energy insecurity have created an unprecedented demand for energy efficiency and energy-generating technologies in buildings.
Trends to consider
Here are a few trends we take into consideration when evaluating solutions in the space of building decarbonization:
- Expected economic gains in the face of the current high energy prices will be the leading driver for the decarbonization of buildings in the near future. Local policy and building code and ESG compliance for commercial tenants will come in second.
- The technologies needed for zero carbon buildings already exist but further innovation can come from individualized bundling of different technologies at a building level or for particular geographies.
- Scalability and modularity of decarbonization technologies, optimizing building surfaces for solar installations, and inclusion of battery technologies become relevant in the context of rising energy prices.
- From energy efficiency to energy independence. Energy efficiency defined as the reduction in primary energy consumption in buildings via energy-saving technologies offers large carbon and economic savings but cannot by itself lead to carbon neutrality. Linking renewable energy production and energy efficiency is the way forward and is now required in some local building codes.
- The fragmented ownership of buildings is the major hurdle to scaling decarbonization efforts in cities. Working with real estate market participants who aggregate bigger asset portfolios is an interesting business model allowing for simpler decision-making and permitting process.
- Building neutrality becomes more achievable when the definition is expanded beyond the individual building to allow consideration across a portfolio of real estate assets or the so-called energy-independent districts or communities. This approach overcomes potential limits on energy production or efficiency in an individual building, compensating them with the use of off-site clean energy.
- Retrofitting is key in the developed world, especially in Europe — Even if all the buildings being currently built in Europe were100% CO2 neutral that would still account for less than 50% of the building stock decades from now. Decarbonization efforts need to be primarily focused on changing the existing building stock.
- Fast-moving disruptors with track records in digital tech might dominate the city utility in as little as a decade. The continuing trend of cutting dependence on the grid or going off the grid entirely, the technologies allowing buildings to sell back energy to the grid, and the ongoing digitalization will create possibilities for new players to emerge in the market and challenge the city’s legacy distribution companies.
- The embodied carbon is the new frontier — If climate neutrality is to be met by 2050, the construction industry will have to significantly reduce emissions from the production and transport of building materials. These include emissions released during the production, transport, installation, and later demolition, and decomposition of buildings and construction materials. Emissions from embodied carbon account for as much as 11% of global emissions according to the World Green Building Council (WorldGBC). Embodied carbon remains one of the most challenging aspects of climate change mitigation and an area where deep-tech innovations will be needed.
- Aesthetics matter — to preserve the uniqueness and visual appeal of our cities energy generating features need to be sensibly incorporated into historical buildings or turned into architectural features.
Urban Impact Ventures is a transformative investor on a mission to improve urban quality of life in Europe. We provide capital blended with deep expertise in business strategy and innovation, impact entrepreneurship, and sustainable urban development. We are looking for Europe-based entrepreneurs committed to sustainable solutions aligned with our core investment themes: decarbonization and circularity.
Find out more at www.uiventures.com or contact us at info@uiventures.com
Sources:
- United Nations Environment Programme (2021). 2021 Global Status Report for Buildings and Construction: Towards a Zero‑emission, Efficient and Resilient Buildings and Construction Sector. Nairobi
- https://guidehouseinsights.com/news-and-views/the-total-global-building-stock-is-estimated-to-grow-from-1658-billion-m2-in-2019-to-1847-billion-m2
- REN 21 (2021). Renewables in Cities, 2021 Global Status Report.
