Energy Retrofit Systems Market Size, Share & Trends Analysis Report By Product (Envelope, LED Retrofit, HVAC Retrofit, Appliances), By Applications (Residential, Commercial, Institutional), By Type (Quick Wins Retrofit, Deep Retrofit) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2024-2032

Market Overview

The global energy retrofit systems market size was valued at USD 156.02 billion in 2023. It is projected to reach USD 235.59 billion by 2032, growing at a CAGR of 4.91% during the forecast period (2024-2032).

Energy retrofits are used to reduce GHG emissions and overall energy consumption. Consumers are making energy efficiency improvements in residential, commercial, and public buildings, which lowers energy costs and a significant amount of GHG emissions. The building industry has a significant potential for increasing energy efficiency and reducing carbon emissions. The market for energy retrofit systems is anticipated to grow as demand for energy-efficient systems rises. Some key factors driving the market growth include the developing economies' rapid urbanization, industrialization, and construction of new infrastructure; adoption of HVAC appliances; government regulations regarding building codes in developed nations; and green certifications for commercial buildings.

Market Dynamics

Global energy retrofit systems market drivers

Growing need for improvement in energy efficiency

The primary source of fuel for social and economic development is energy. There is a steady demand for energy since more consumers desire these systems, which are essential for all sectors to operate. Regulators and policymakers have been approving measures to increase energy efficiency and support energy retrofit systems to promote the transition toward more sustainable energy systems. As building managers become more conscious of the need to adopt energy-efficient lighting, heating, and cooling solutions, the residential sector is experiencing significant changes in energy operations. Energy efficiency is of utmost importance for users of battery-powered devices and those with limited access to an energy supply. The capacity to gather data on energy-consuming electronic equipment and appliances and remotely control HVAC and other energy-consuming equipment. These factors are anticipated to propel the market for energy retrofit systems over the forecast period.

Growing energy consumption worldwide

Companies can understand the power consumption pattern through various software and technical solutions provided by energy as a service provider. Due to the rapid rise in energy consumption, energy is utilized in many different sectors. The commercial industry is one that utilizes the most energy to operate district heating services. Since many currently used technologies to produce power from renewable sources will result in increased electricity consumption in the commercial sector. Due to an increase in the demand for energy consumption worldwide, the growing installation of energy systems and the widespread accessibility of smart devices have created space for new business models to emerge in the electricity sector. Additionally, consumers' needs for energy in the residential, commercial, and industrial sectors are growing daily.

Global energy retrofit systems market restraint

More extended reimbursement periods and secret fees

Energy retrofit systems' technologies are still expensive due to high research and development costs. Additionally, a company's financial health is highly correlated with its capital spending. The return on investment is also gradual and can take between three and four years. These elements demonstrate to be significant market restraints. Any costs typically excluded from the business's economic models are referred to as hidden costs. The total investment required comprises several hidden charges in addition to the essential cost of energy retrofit systems, such as general overhead expenses, costs specific to a given industry when choosing an energy-efficient option, and the potential loss of utility associated with such options. This raises the price of energy retrofit systems even further and restrains market growth.

Global energy retrofit systems market opportunities

Mandates for regulation and incentive programs

Most developed nations' building codes and standards are increasingly incorporating energy-efficiency measures in response to the Kyoto Protocol and other comparable goals established by international directives or standards. Such laws have been adopted more frequently in developing nations like China, Mexico, India, and Singapore over the past ten years. The implementation of national building codes and standards is driven by these requirements, which also help to harmonize the actions taken. Various financial incentives are also available to promote investments that lower building energy use and CO2 emissions. Financial assistance comes in many different forms, such as grants, soft loans, tax breaks, and exemptions from penalties. Many businesses offer to create a carbon disclosure report in exchange for federal and state tax incentives. The market is forecasted to be driven by these benefits of policy and incentive programs.

Regional Analysis

The global energy retrofit systems market is bifurcated into four regions, namely North America, Europe, Asia-Pacific, and LAMEA.

Europe dominates the global market

Europe is the most significant shareholder in the global energy retrofit systems market and is expected to grow at a CAGR of 4.5% during the forecast period. Europe accounted for over 47.48% of the global market for energy retrofit systems, along with Germany, Spain, Russia, the UK, Italy, and France. In addition, Russia dominated the European energy retrofit systems market in 2021. Factors such as escalating concerns over greenhouse gas (GHG) emissions and strict regulations to reduce carbon footprint are predicted to drive the adoption of energy retrofit systems over the forecast period. The market is expected to be driven by rising population levels and demand for clean and efficient energy. R&D for generating clean and efficient energy has been active in the European region. One of the key factors influencing the region's growth has been funding for energy conservation and energy efficiency projects in the European Union.

Asia-Pacific is expected to grow at a CAGR of 4.7% during the forecast period. China, Japan, and India are the market's three largest competitors. The lower cost of infrastructure and the lower cost of renewable energy encourages the region's rapid adoption of energy modernization systems by end users in the residential and commercial sectors throughout the Asia Pacific. To promote the construction of new environmentally friendly green buildings and the renovation of existing ones throughout the nation, the Chinese government introduced several plans and policies, including a three-star rating system. The country's central government has logically broadened the reach of laws and regulations in the last ten years. These energy building codes outline the requirements to be adhered to when all new residential and non-residential buildings are built in China's cities.

In North America, the United States dominated the market for energy retrofit solutions. Another significant market in North America, Canada, is anticipated to expand more quickly than the United States. Over the forecast period, it is expected that factors such as rising concerns about greenhouse gas (GHG) emissions and regulations to reduce carbon footprint will fuel the growth of energy retrofit systems. Policymakers are concentrating on creating effective energy generation products, which is expected to increase the country's adoption of energy retrofit systems. Additionally, government initiatives to expand the new technology market and offer extensive retrofits in existing structures would fuel market expansion.

LAMEA contributes comparatively less to market expansion when compared to the other areas of the world. Due to government initiatives in the region to reduce carbon footprint and heat emissions from buildings, the market for energy retrofit systems in Central and South America is predicted to grow significantly in the coming years. Energy consumption has increased due to the Middle East's and Africa's rapid population growth and industrialization. Authorities have made several statements in recent years emphasizing a gradual improvement in energy efficiency in the area.

Segmental Analysis

The global energy retrofit systems market is segmented by product and application.

Based on product, the global market is bifurcated into the envelope, LED retrofit, HVAC retrofit, and appliances.

The envelope segment is the highest contributor to the market and is expected to grow at a CAGR of 4.5% during the forecast period. A building's envelope can be made more energy efficient by installing exterior window films, exterior window shades and light shelves, wall and roof insulation, a vestibule, a cool roof, and new windows. Over the primary structure, the building envelope provides cover and serves as a defense barrier. Additionally, it aids in maintaining good air quality, controlling noise and outside odors, and keeping the building warm or cool. Retrofitting a building's envelope gives walls insulation and an air barrier, improving thermal comfort and minimizing draughts. As a result, there is less heat loss, which lowers energy use and the carbon footprint for owners and tenants. Demonstrating a commitment to environmental sustainability will also positively influence the public's perception.

The expansion of the HVAC retrofit market is anticipated to be driven by government support for increasing the modernization of HVAC in residential applications over the forecast period. To assist Canadian homeowners in replacing their outdated HVAC systems with cutting-edge technology, the Canadian government announced an investment worth USD 2.6 billion under the Canada Greener Homes Grants program. The new technology will reduce pollution and increase the energy efficiency of residential buildings. Homeowners in the nation will be eligible for grants under this program worth up to 5,000 USD to pay for improvements to energy-efficient homes. Modern HVAC systems require additional expensive duct work to retrofit and customize. This additional work requires skilled labor, which could impede the segment's growth over the forecast period.

Based on applications, the global market is bifurcated into residential and non-residential.

The non-residential segment owns the highest market share and is expected to grow at a CAGR of 4.2% during the forecast period. In the global market for energy retrofit systems, the non-residential application segment held a larger share (71.33%), which is anticipated to maintain over the forecast period. The widespread installation of HVAC systems and the technological oblivion of conventional systems used in non-residential buildings are two factors that have contributed to the market segment's expansion. Due to their heavy reliance on HVAC and lighting systems, regions that experience severe winter conditions will benefit from retrofitting power systems. Investments in the global market for energy efficiency transformation are primarily driven by efforts to lower energy costs and regulatory measures to reduce carbon emissions. Many industrial and commercial organizations have been forced to implement advanced energy-efficient modernization systems due to the rise in energy system costs and the strict implementation of various emission regulations.

The residential sector of the market for energy retrofit systems is anticipated to expand significantly over the forecast period. Existing buildings have been modified, with many customers choosing retrofits due to rising residential property costs and creating laws to protect historic buildings. Technology advancements aid homeowners manage their energy costs and promote renewable energy sources, reducing carbon footprints globally. In residential applications, LED lighting and envelopes are the most frequently retrofitted products due to the falling cost of LED bulbs and the public's growing understanding of the advantages offered by green structures.

Recent Developments

• In June 2024, the World Bank has launched the "Scaling Up Energy Efficiency in Europe and Central Asia Program" (E3 Program), a 10-year initiative aimed at enhancing energy efficiency across the region. The program is projected to save over 63 TWh of energy and reduce CO2 emissions by 18.7 million metric tons. It will provide USD 1.46 billion in World Bank funding and raise an additional USD 2.4 billion, including USD 1.5 billion in private capital. Initial investments will focus on energy efficiency in public facilities, residential buildings, industrial modernization, and district heating upgrades.
• In July 2024, In support of the Biden-Harris Administration’s Investing in America agenda, the U.S. Department of Energy (DOE) announced USD 33 Million for nine projects across seven states to advance concentrating solar-thermal(CST) systems technologies for solar fuel production and long-duration energy storage. CST technologies use mirrors to reflect and concentrate sunlight onto a receiver, helping to produce carbon-free clean fuels, heat, and storage for a wide variety of applications.
• October 2022- The Greater Toronto Airports Authority (GTAA) selected AECOM, Alectra Energy Solutions (Alectra), and Enwave Energy Corporation to provide an original and comprehensive solution to support the GTAA's decarbonization goals.
• October 2022- Air Liquide, Chevron Corporation, LyondellBasell, and Uniper SE will work together on a study that will assess and possibly advance the construction of a hydrogen and ammonia production facility along the U.S. Gulf Coast.
• September 2022- AECOM, the world's most reputable infrastructure consulting company, and Ferrovial Vertiports announced a division of the largest global infrastructure operator Ferrovial, that a due-diligence framework had been put in place to find the best locations for a network of planned vertiports connecting key Florida locations.