Fast-tracking innovation in the construction value chain: Maarten De Groote, Buildings Performance Institute Europe

Reading time: 3 minutes
6 June 2016

Maarten De Groote, Head of Research at the Buildings Performance Institute Europe (BPIE), makes the case for industrializing deep energy retrofits, a value-add of around €200 billion (US$227 billion) a year which could create up to 2 million construction sector jobs. This is part of The Climate Group's project Home2025.

Innovation and ‘mega trends’ in the construction value chain offer big economic and decarbonization opportunities for Europe.

But despite disruptive technologies, new business models and growing sustainability concerns pressuring the chain to adapt to a changing economy, the construction industry is not known to be very fast in introducing innovation.

Construction companies prefer evolutionary change – and are predictable when choosing their tools, techniques and suppliers.

One reason for this is that technology is not yet dependable enough to encourage a rapid mind shift. Although techniques and machines are getting smarter as time passes, they aren’t sufficiently adapted to the construction environment to foster mass-market adoption.

While there is a wide range of innovation opportunities within the construction value chain, let’s focus on one aspect in order to identify the interventions needed to accelerate the competitiveness and decarbonization benefits such innovation can bring.

And that area is off-site industrialization of prefabricated building elements for the renovation market. It represents an enormous opportunity in the construction value chain, creating new sources of revenue as well as new prospects of growth.

LOW CARBON RENOVATION

Stakeholders finding new ways to grow their businesses in this area are material manufacturing companies and medium or large contractors, offering highly innovative and affordable approaches to mass-market uptake of deep energy renovation.

But a further transition of the industrialized renovation process is required to achieve the long-term transformation targets needed for the existing building stock to become carbon neutral – both in renovation rate and depth.

The key innovation elements to apply successful prefab construction methods for the renovation market are:

  • Aggregation of renovation projects to benefit from economies of scale.
  • New cooperative business models leading to new value chain ecosystems.
  • Customization of the prefab elements per project, with the help of innovative technologies such as robotics, Building Information Modelling, 3D-scans and simulations.

The industrialization of the construction process will lead to lower costs for holistic energy renovations. And these lower costs, combined with other supportive measures, should lead to a higher renovation rate and depth.

Expert opinions suggest that a deep energy renovation equates to a reduction in energy consumption for heating, cooling, ventilation and hot water in a range between 60 to 90%. Today, the renovation rate in the EU is at 1%. If it were to increase to 3%, energy demand in the current building stock could be reduced by 80% before 2050 compared to 2005 levels.

The potential revenues for the total construction sector are estimated to amount to around €1200-1400 billion (US$1363-1590 billion) per year.

INDUSTRY INNOVATION

The construction value chain, characterized by a high number of micro-enterprises – mostly operating at the local level – is cautious on the industrial approach, especially on what it would actually mean for the job market.

On one hand, it’s true that industrialization means that some processes will be taken over by robots. But on the other hand, indoor prefabrication of building elements will make construction work more resilient against weather disruptions and less physically demanding. This change can also improve  gender equality and allow older employees to remain active longer.

It will also lead to a “cleaner” and more innovative image of the construction industry, which in turn will attract the next generation of young and more technology-savvy workers. Plus, a tripling of renovation rates will translate in the creation of many more job opportunities.

Since the construction sector is not perceived as an easy high-profit market, there is little incentive for outside actors to enter the market. However, shifts within the value chain itself will occur.

The numerous micro-enterprises active as on-site workforce will have to reposition themselves to capture value within this market segment.

For example, manufacturers of prefabricated new buildings could make the shift toward production of renovation modules and foresee a more ‘B2C’ approach, instead of the conventional ‘B2B’ business model.

Similarly, this might lead to actors from the building services, such as architects and structural engineers, providing services through more integrated, ‘one-stop-shop’ business models and less as independent actors.

BPIE identified enabling measures to unlock the transition:

  • Policy regulation and support measures based on performance (e.g. energy savings per square meter) rather than quantity of renovated buildings.
  • Legislation on urban planning and architecture should allow more flexibility (e.g. spatial planning outside the perimeter, orientation of the building, look and feel of renovated buildings).
  • Support by (local) governments or other organizations in aggregating and mediating with building owners and users.
  • The introduction and further implementation of Building Information Modelling (BIM) and other standardized protocols.
  • An attractive innovation system and support from banking institutions for enterprises that want to make these types of investments in the innovation of their products or services.
  • Ambitious energy efficiency renovations approached as a combination of cost, comfort and health.

PROGRESS IN EUROPE

Europe already has the necessary base to make this shift happen, but converting this know-how (mostly at the research and development level) and workforce will be a challenge.

Firms in the sector will need to adapt to new business models. Policymaking also has a clear role to play in creating good framework conditions, while actors in the segment will have to converge toward a unified approach.

But there are different possible approaches within the integration of building elements in the prefabricated renovation systems.

Current best practice in the Netherlands (Energiesprong) and Switzerland is the prefabrication of complete modules. Companies shifted from producing separate roof and façade modules to holistic building solutions, integrating windows and special techniques such as ventilation and renewable energy systems, in the new building façade.

Other examples are demonstrated in the EASEE project, where companies develop prefabricated façade insulating panels, optimized in terms of size and geometries as well as in application, structural behavior, insulating materials and aesthetic options.

For a deeper look into the topic of innovation in the construction value chain, read BPIE’s study, Driving Transformational Change in the Construction Value Chain.

Back to Home2025. For information please contact us at home2025@theclimategroup.org

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