Building the Future — 3 steps to enable smart & sustainable buildings

Buildings are placed at the intersection of the energy transition and people’s daily life. It is this delicate junction that makes their decarbonisation a public-good challenge. Yet, while the need to decarbonise the sector is undeniable, lack of public awareness, societal resistance, high upfront costs and limited financial incentives too often serve to undermine this imperative.

Today the housing sector is responsible for a third of Europe’s greenhouse gas emissions (GHG), mostly due to their high reliance on fossil fuels for heating and cooling. Ending such addiction would unleash many benefits starting from better air quality, higher energy efficiency, lower energy demand and ultimately energy savings and cheaper electricity bills.

To tackle this challenge, the European Commission tabled a reform of the EU’s Energy Performance of Buildings Directive (EPBD), now in interinstitutional negotiations known as trialogues, which mandates renovations for the 15% worst-performing structures to reduce their energy consumption.

Will it be enough to overcome the current societal and financial bottlenecks?  

At Power Summit 2023, a panel of experts discussed how to unleash the untapped potential of smart and sustainable buildings.

Step 1: Acknowledge

“More than 90% of the technology available today can make most of the new and existing buildings fit for net zero, but people don’t know that these technologies exist.” – says Philipe Delorme, Executive Vice President of Europe Operations at Schneider Electric.

Lack of public awareness is often the number one bottleneck for the scaling of digital and electric solutions such as heat pumps, rooftop solar panels, and smart meters. These technologies are many times more energy efficient than their fuel-based alternatives and can be deployed rapidly with quick returns on the upfront investment.

Raising awareness is the first solution to tackle societal resistance in a sector that is, by design, difficult to change given its closeness to people’s daily lives. A positive example of how citizens can be engaged and properly informed about the opportunities of smart and sustainable buildings comes from the Netherlands.

The Dutch Success

The Dutch Government recently passed a law to spur more sustainable home-heating systems, under which, starting from 2026, only hybrid heat pumps will be allowed to be installed.

“We did not see societal backslash around that, because it was part of a long process.” – explains Femke de Jong, Project Manager Buildings Programme at ECF.

“It started with a climate agreement at the national level, municipalities were then empowered to develop local transition plans by 2022, involving citizens and communicating about the options and financial products available to them to make that switch.”

Different actors, including grid operators, installers, the heating industry, and NGOs, sat together and developed an action plan. In the end, when the Government presented its plan, it came with a lot of financial instruments, such as 0% interest loans for low-income households, subsidies for investment, and financial products for renovation.

Step 2: Automate

Beyond acknowledging the existence of low-carbon alternatives, real awareness is gained once a customer can reliably measure their energy consumption. This is why the EPBD as well as the reform of the electricity market design (EMD) are asking to increase metering and sub-metering across Europe.

This type of granular measurement, however, can only be done with automated appliances such as heat pumps connected to smart thermostats or smart meters. The latter can measure a home’s or business’ consumption of electricity, gas, or water and communicate it back to the utility company via a wireless connection.

The utility can therefore improve billing accuracy and transparency by accessing real-time data on resource usage, rather than relying on manual readings. Customers, on the other hand, can learn how they can save energy and money by checking their energy use and adapting their demand to price signals.  

Scaling these smart solutions would allow European cities to move from passive buildings, where insulation is often the only recourse to reduce energy use, to active sustainable buildings.

Step 3: Act Smarter

Buildings will see the highest absolute increase in electricity demand in the future – shows our Decarbonisation Speedways study. Final electricity demand will reach almost 3,800 TWh by 2030, 60% of which will come from buildings. The good news is that active sustainable buildings can become assets for our energy system by helping the distribution grid manage higher and more complex loads via demand-side response.

Smart buildings can interact with the grid and sell back energy at times of demand shortage. In case of a local congestion event, for instance, grid operators in need of a certain amount of capacity can rely on flexibility assets such as buildings to turn on or off their energy consumption.

“Shutting public buildings at night, for example, would halve electricity demand from buildings” - assures Delorme.

Will active sustainable buildings need lots of regulation?

“Not necessarily. What we need is an open market in all member states, as the technology is already there. We need more implementation rather than regulation.”– answers Paul Micallef, Global Digital Grid Leader at EY.

This means having a smart meter, access to dynamic tariffs and business models around it while ensuring consumer protection is upheld.

Yet, as the capital to retrofit buildings is often a barriers, more financial instruments and commercial propositions are required to attract customers and generate higher demand for renovation.

To this end, the EU should put in place a modern and forward-looking framework where financial resources are brought together to create an investment case supported by technical advice, upskilled and retrained workforce.  

“We (the EU) need to have complete and comprehensive renovations plans and systematic planning for each building. – says Stefan Moser, Head of unit at the European Commission’s DG ENER – “We also need to make sure liquidity is provided and a reasonable financial schedule is agreed upon to bring enough private money to finance these renovations.”

Whether the EU will be able to create such a framework remains to be seen in the final negotiation of the EPBD.