Developing the right service to plug into the Green Deal for construction

In our perspective ‘Circular economy in the Building Industry’, we underlined the untapped climate potential of the construction ecosystem. Despite the numerous scientific articles, governmental ambitions and sector pledges, the most recent figures are still showing limited to no measurable progress, in stark contrast with the realized decarbonization in other sectors such as industrial processes and energy generation. Impatience is growing and the EU institutions will intensify the efforts under the Green Deal flag. Below is an overview of the most important EU policies and initiatives that underpin the Deal. In this perspective, we will demystify a few of them and discover their innovation potential for different construction stakeholders.

Source: Construction Products Europe

Emission trading to ignite the renovation wave

The Emission Trade System is the most impactful green project of the EU, accounting for almost 43% of the realized GHG reduction over the past 16 years. The ETS sets a cap on the total emitted GHGs per sector in scope, which are the most energy-intensive industries, including building materials production. By decreasing the cap gradually, companies are progressively more incentivized to decrease their footprint as the cost of buying the same volume of emission rights rises. This is how True Pricing is materialized (see ‘6 leverages for the circular paradox’). Depending on GHG abatement cost and company strategy, each player decides whether to invest in energy efficiency or additional emission rights.

Building material producers have been in the scope of ETS since the start, leading to ongoing production process decarbonization and to the adoption of new technologies (see for instance CCU/CCS). The challenge for construction is to expand the efforts to what happens downstream of building material production. One of the ongoing reflections in the EU Commission is to roll out a similar trading system to the building owners, to accelerate the renovation wave (retrofitting insulation, heating systems, doors and windows etc…) and decarbonize ‘assets in use’. For residence owners, this will further emphasize the importance of prioritizing the right renovation in terms of expected CO₂ reduction per euro invested. The potential rollout of this trading system will highly depend on how social impact can be managed (‘Leave no one behind’), as there is a risk of over-soliciting investment pockets that are already depleted by the current economic crisis.

Nonetheless, one way or another, a serious renovation wave is imminent and this opens up promising business model innovations such as Knauf Energy Solutions.

Illustration of the Knauf Energy Solutions impact on an asset owner over time, from making the initial retrofit choices (‘Maximize ROI’) over verification after the intervention and towards further ROI increase
Source: www.knaufenergy.com

With this solution, Knauf – a market leader in drywall gypsum boards and insulation materials – expands into energy efficiency services for asset owners with a technology breakthrough – the so-called ‘negaWatt hour meter’. Based on intelligent assets and data science, Knauf guarantees the realization of predicted energy cuts per invested euro.
This example demonstrates how traditional building material producers can valorize knowledge and technology to shift from conventional seller-buyer transactions towards genuine service models with higher expected customer lifetime value. Note that Knauf operates the field services and interventions, hence intensifying the direct connection with the owners.