Authored by Emma Wink and Alana Valero
As part of this year’s Solutions Day at COP27, efforts to accelerate the development of green buildings are a central topic. The concept refers to a systems-approach to environmental responsibility and resource-efficiency; minimising life-cycle emissions, pollution, and waste. The construction and operation of buildings are responsible for approximately 38 percent of global carbon emissions, and if we are to limit global warming below the 2°C threshold, all buildings must be net-zero by 2050. Meeting this challenge requires collaboration across sectors, and for innovative business models to advance decarbonisation efforts.
National and regional approaches to green buildings must consider the decarbonisation and efficiency of existing and future structures, as the context across continents differs greatly: Whilst 80 percent of the buildings in Europe are expected to still be there in 2050, across Africa, 80 percent are yet to be built.
Thus Europe’s main challenge is to reduce the emissions of existing assets. Across Africa, high rates of urban growth are set to increase energy access and cooling needs, driving up energy demand and consumption. This makes the expansion of clean energy crucial to climate change mitigation and decarbonising the building sector. Additionally, innovative and efficient design will be key to reducing the emissions of future buildings, as once construction of a building begins, most decisions affecting life-cycle emissions are already locked in. For example, poorly designed or low-quality buildings may provide insufficient thermal comfort and, therefore, require more energy to cool or heat. Tackling the reduction of operational building emissions, such as from cooling and heating systems, requires the integration of renewable energy and efficient equipment. An innovative business model that can make efficient and renewable energy systems more widely affordable and accessible is servitisation. The model has the potential to accelerate green building development in Africa by providing incentives for the design and adoption of climate-driven solutions.
In this model, customers engage with solutions on a pay-per-use or outcome basis rather than purchasing physical assets. This allows customers to implement more efficient technologies without upfront costs or performance risks and can free up capital for other investment priorities that might compete with renewable energy or energy efficiency solutions. The model has tremendous scaling potential in the building sector where it is already being applied to cooling, heating, lighting, energy, and even materials such as steel. A central component of the servitisation model is digitalisation, where remote monitoring and smart data algorithms can enhance the overall life-cycle performance of technologies and drive energy savings. This article explores two high-impact areas for servitisation solutions to contribute towards green building development in Africa. These are clean energy supply and cooling systems.
Energy-as-a-service
Buildings require energy for heating, cooling or electricity. Whilst energy efficiency gains (for example through the use of more efficient appliances) can deliver more than 40 percent of emissions abatement needed by 2040, a net-zero building sector requires clean energy. Strategies for green buildings must harness the potential integration of clean energy within (or on top of) buildings. Investment in renewable energy infrastructure on rooftops for example, can address low levels of electrification and energy access, and tackle grid connectivity and reliability issues. By applying the as-a-service approach to rooftop solar and microgrids, there is an opportunity for Africa to leapfrog traditional centralised infrastructure development to tackle increasing energy demand.
Microgrids, energy generation systems which can be connected to the grid or operated as an ‘island’, are a form of decentralised supply that can tackle energy access, and provide power for critical services. Energy-as-a-service microgrids are growing in popularity in the Asia Pacific, using mobile phone technology to enable a pay-as-you-go payment model, where fees also cover operation and maintenance. In Europe, the potential for widespread integration of rooftop solar PV and building-integrated PV systems (BIPV) is gaining attention. As part of REPowerEU adopted in May 2022, the EU outlined a solar energy strategy proposing a European Solar Rooftop Initiative to accelerate and streamline the adoption of rooftop solar solutions. On the other hand, a recent study focusing on the low level of market penetration by rooftop solar in South Africa found a lack of political pressure on South African banks to provide desirable PV financing and reluctance by banks to finance such projects.
Energy Efficiency: The cleanest and cheapest energy is the energy we do not use
An important consideration for green building development in Africa is the growth in demand for cooling, a critical system for adaptation to heat stress and developing resilience. Space cooling using fans or air-conditioning is the fastest-growing use of energy in buildings responsible for 10 percent of global electricity consumption. Reducing cooling-related energy demand and phasing out harmful refrigerants is therefore critical to decarbonisation and climate change mitigation efforts.
The potential of the servitisation model for cooling has been discussed for example by the Economist Intelligence Unit and World Economic Forum. In 2019, BASE launched the Cooling-as-a-Service (CaaS) initiative, and the model was selected as one of the most innovative, actionable, and scalable climate solutions by the Global Innovation Lab for Climate Finance. Under a servitisation model, providers retain ownership of technology and are therefore encouraged to design for circularity, efficiency, and material recovery to optimise the life-cycle of assets.
The servitisation model could also be useful for technologies such as solar water heaters. Solar water heating systems provide hot water without the need for electricity (and can also be placed on rooftops) and are being introduced across Botswana, Lesotho, Mozambique, Namibia, South Africa and Zimbabwe to reduce electricity demand. Such systems reduce overall energy demand and can be more efficient than a rooftop PV system providing electricity to heat water.
Challenges in adopting a Servitisation model
Improving the energy efficiency of cooling systems and shifting to cleaner refrigerants present an opportunity to reduce energy use and GHG emissions in buildings while delivering cost savings, improved air quality, comfort and increased productivity. Businesses around the world are demonstrating the value of as-a-service solutions and publications are highlighting the importance of the model. Examples include the real estate complex Elpro Park in India or the Clover dairy factory in South Africa. In both cases, the CaaS model improved energy efficiency by more than 30 percent.
Nevertheless, changing a business model or bringing business model innovations to market requires stakeholders to also change the way they interact with each other. Businesses need new pricing mechanisms, as they switch from selling products to services. The financing needs and risks of businesses must also be understood by financiers: barriers remain to financing and deploying solutions at scale, requiring capacity building and financial mechanisms to de-risk investment. Initiatives like the global Servitisation for the Energy Transition Alliance (SET Alliance) are raising awareness of the model across sectors and providing support to businesses making the transition to servitisation. The SET Alliance also engages with stakeholders to understand how lending for solutions can become mainstream. One particular financing issue is the consideration of assets as collateral, which might be tackled by secondary markets for these technologies.
Call to action
Buildings are a crucial sector to mitigate climate risk, and an opportunity to improve the health and safety of end-users. General measures and policies to support low-carbon and net-zero buildings must be strengthened, including national building energy codes, appliance efficiency standards, and supporting the uptake of efficient technologies. However, the high up-front costs of implementing renewable energy and energy-efficient technologies remains a significant barrier. Therefore, developing financing strategies and services-oriented business models that remove up-front costs are a potential way to accelerate the building sector’s pathway to net zero.
We suggest the wider deployment of servitisation solutions can accelerate energy efficiency and renewable energy uptake in the buildings sector in Africa and call on entities in the field such as the World Green Building Council’s Africa Regional Network to promote servitisation and develop capacity-building activities. There are Green Building Councils currently operating in Ghana, Kenya, Mauritius, Namibia, Rwanda, South Africa, Tanzania and Zambia. We hope delegations attending this year’s Solutions day at COP27 are inspired to create meaningful change within the building sector.
