Energy

Investing in energy: A view from the construction and real-estate sectors

April 23, 2013

Europe

April 23, 2013

Europe
Our Editors

The Economist Intelligence Unit

_____________________

Key Findings

  • The financial crisis, which has caused downward pressure on real estate valuations across much of the EU, has highlighted the need for renovation of existing building stock. This will be needed to maintain and even increase the value of portfolios; deep retrofi ts will be crucial to achieving lasting value.
  • EU companies are relatively active in retrofitting buildings compared with their counterparts in other regions, but efforts need to double to meet EU energy efficiency goals by 2020. Our 2012 survey revealed that 43% of EU respondents in the building sector focus on retrofits—more than in the US (37%) and in China (23%), for example. The majority (57%), however, still focus on new builds, with energy efficient retrofits still accounting for only a meager 1% of existing stock.
  • The EU has taken some positive steps to improve regulation, but ambiguity regarding definitions of what constitutes a "deep retrofit" and a "nearly zero-energy building" affects implementation at national levels. Indeed, 29% of the EU survey respondents identified regulatory uncertainty as a barrier to pursuing energy efficiency investments. Furthermore, implementation of energy efficiency-related directives varies by country, which limits the ability of property owners to achieve economies of scale across the region.
  • Regulatory uncertainty should not be an excuse as waiting on the sidelines in anticipation of better laws exposes companies to the risk of asset depreciation. Large property owners are starting to audit their portfolios to identify where they can achieve the most cost-effective energy efficiency measures. The deeper the retrofit, the lower the asset depreciation risk.
  • Attracting large institutional investors in retrofit finance will require energy efficiency project aggregators. Aggregators can be public or private and can appear either as a result of regulation or client demand. To be effective, however, they require clear energy performance objectives, standardized contract structures that allocate responsibility for performance, and data collection and transparency about results.

Economist Impact is a part of the Economist Group.
Occasionally, we would like to keep you informed about our newly-released content, events, our best subscription offers, and other new product offerings from The Economist Group.

The Economist Group is a global organisation and operates a strict privacy policy around the world. Please see our privacy policy here.

Enjoy in-depth insights and expert analysis - subscribe to our Perspectives newsletter, delivered every week