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Your co hosts from Berlin Gerard Raid and from London Laurent Segalam. Today on Redefining Energy, we're going to talk about decarbonizing buildings, Laura.
Yes, Jaden. There's a lot of action going on. Probably first award from my.
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Yes, Jada. It's an important topic because the sector of buildings accounts for thirty seven percent of all emission, so it's a third pilar of decarbonization next to a generation and transportation.
Yeah, and it's always been the one that has been regarded as really hard to decarbonize. And my own view is that's changing, and it's changing because of rapid technology change which actually enables us to decarbonize buildings. But that's only my opinion. So we decided let's bring on an expert.
And that expert you met him at the World Economic Forum, and I will explain in the conclusion why you are invited, but never me.
I got to know Vincent Petite, who is senior vice president at Schneider and he's really in charge of their sustainability research institute, and we've we've been talking for a long, long while in and around what's needed, and what he felt was needed was just a publication of data in and around buildings, and no better company to do that than Schneider given the fact that they've got energy management systems and buildings across the world.
Good Look, it's a good moment because there are a lot of regulation coming online. In Europe. We have something called as usual in Europe, it's a mouseful, the Energy Performance of Building Directive EPBD. What do you want to say about that?
Well, I think this is a game changer. The reason I think it's a game changer is because what you've got is a binding target across Europe to reduce carbon emissions by sixteen percent by twenty thirty and up to
twenty two percent by twenty thirty five. So it's a little bit like we had before a row on this redewble energy target, but now it's in buildings and that means you have to invest in energy performance, whether that's solar batteries, artificial intelligence, energy management systems, you name it. That's where we're going.
Okay, so let's bring versus Computy on the show to discuss that regulation and a lot of other things. Vincent, Welcome to the show.
It'll all so Vincent first, it is great to have you on the show.
We're really interested to sort of dig into building efficiency and what we can do there in terms of decarbonization.
And what you seem to see is huge.
Change going on in the building area, where what you're seeing is a current approach, which is governments are incentivizing changes, but there's also a stick. You know, your carbon tax is coming in, etcetera. So it feels as if the next part of the energy transition is all going to be about buildings. Do you agree with that or how do you see the future there in terms of the energy transition and the role of buildings in it.
Yes, buildings. I think the next two pick we've seen tre among those progress will either as decayed or saw in some sectors like boil generation and mobility and the next order of business buildings. My view is that it's not completely started yet. It's started, but it's not completely started to run up yet. However, the route is pretty clear because we see a lot of things emerging. And if you walk by the strait of where you live, you start to see more and more households equipped with
solar panels. You start to see evs on the road, which, by the way, are charging inside the homes and the buildings. You start to see a lot of new solutions to electrify buildings, to remove fussy fuels from buildings. You live in buildings, and you have more and more digital capabilities inside buildings. So all those things are here and they're starting to perlate the building market, and when you start to combine them, you see really buildings transforming in the foreseeable future.
I was very struck by recently being in Japan and if the Japanese approaches, you just knock the building down and restart.
While we in Europe and North America we.
Have a different approach, which is we say, let's keep us and renovations. It seems to be expensive and difficult.
Yeah, you're right. I mean, if we look at the global landscape, we tend to say in the Western world that seventy percent of the buildings will still be here in twenty fifty or something like that. It's actually a Western perspective. I mean, if you look at it at global level, it's not exactly the figures figure is more around thirty to forty percent. Why because in many regions of the world, the building stuck is actually about to considerably increase, So it's going to be buildings of the
future versus buildings of the past that we try to renovate. Now, coming to your point on renovation and the fact that we traditionally consider that renovation is expensive, it's true, but it depends on what renovation we're talking about. If we're talking about rebuilding the walls, rebuilding the roof, rebuilding all the insulation inside the building, that's true that it's expensive. It brings a lot of efficiency, and don't get me wrong,
but it's true it's expensive. Now, what I was saying right before about deploying period deploying electric solutions and on integrating EV's and so on is a very different story. And we could talk about this right because we've been doing a lot of projects around the world and so we have a little bit of experience on that. We were also doing some research, some modeling research, on the topic.
So we see the benefits and the paybags and actually well some issues, but the bottom line is it's not that expensive.
Then that's a very good point to start with.
So you've done obviously a lot of research and modeling, as you said, in this area. Maybe you could just talk a little bit about your findings are. In other words, if I want to go and renovate or upgrade a building in terms of its energy grade, what should I.
Do To walk around the street? What do you see? You see more and more homes with PVY, more and more homes with hitt bombs, more and more home with TV's and so so the interesting question is if you combine all those changes together, what are the economics. Let me talk about the research and the modeling we've done, because it's interestingly enough, there's not been a lot of
research from the topic. Most of the result is actually focused on the old way of doing things, and in fact, what are the finding So long story short, when you look at your annual bills, how much energy you pay, what's the savings you make once you've clubbed all those transformations together. Well, the savings you get range between twenty and eighty percent across different types of buildings and across
different regions. In the research we do, we look at commercial buildings and residential buildings, and we look at that across different regions in US, in Europe, in China. Mostly this is what we've been looking at so far. There are obviously a lot of differences across regions and building types because the buildings are not the same, so the capacities are not the same, the regions are not the same, the weather is different on the tariffs are different on,
the local tonations are different. The cost of the technology is also different. But overall you save up to eighty percent of your bill. In the lower range you will find a very large, tall buildings, like large office buildings that you see in city centers. And in the higher range, toward the eighty person, you will find your single family household or big retail street mall and that kind of
thing that's for the bill. Now, if you look at the payback, because obviously all this as a cost, it's interesting already when we start discussing about payback to differentiate about new construction and renovation, because you still have new constructions happening even in Western economies. Even if it's a small portion, but like I was saying before, you've got
a lot in new economies going on. When you look at new constructions, the additional cost on the total cost of construction is between two and eight percent, So that's the bottom line, and actually the capex is going down, so it's probably going to go further down going forward. And when you look at renovations, the payback vary quite greatly today between five years for some applications like for instance, hotel,
strip malls, schools, and so. Commercial buildings are actually much better paybacks, and you have paybacks that are much higher. For residential they can go up to twenty years or above. In certain conditions. It varies, but in general the paybacks remain quite acceptable. And we see as well happening and you know that much better than I do, JR. Is that actually the capex for all those technologies is going
down at rapid pace. On top of that, the value chain is not yet completely structured to tackle those projects, and the hassle factor, as we say, is still pretty important. So you can expect those paybacks to improve dramatically.
Can you give me one or two example of major renovation you've done and I guess I'm changing the light bulbs. That's probably an easy one, but it's all about the h FI heating system probably where there is the most energy demand.
There's this project we did in Finland a couple of years ago, so Biso and not necessarily the sunniest place in the world in a city in nam Lipula, Java. What it is is a net zero city center, so it's a city center, so it's retail offices all together, and they built it net zero and the payback was five years. And with this the actual source fifty percent of their energy demand from what they've got on their howtop. So that's one example. I could give you another one.
It's also about the speed of chain. Those projects can go very fast. So there's this project so this time in US that we've done in the Montgomery County of Marylands. You've got the city which has all these bus fleets, so they've got like eighty public buses. They wanted to decarbonize and to electrify their buses, which they did in
less than a year. We were actually able to have them electrify their bus fleet and then to create a full micro gride on their bus depot, which means that probably all their charging is done with solar panels that are on the canopies of the bus depot. And that was a project that was done in a very short timeframe, right, and then maybe a last one also because those are relatively smaller applications, but that this is actually quite scalable
to build larger applications. We're currently working with the gfkare Port. They're rebuilding their terminal one. The terminal one's going to you full of microgrids, even megawats micro grids, but eight megawetts of panels. They've got five megawets of storage. And the target, which has been model simulated, validated one is a reduction of emissions of about forty percent. And obviously there will be fully resilient. There was a reason why
they did that was not a medical organization. Was also resiliency in case you have a storm, they want the terminal to still be operting and so on, and so with this there sure this happens.
So I really understand this, and when I'm listening to what you're talking about is really putting generation behind the meatia And I understand you might say heat pumps is not because it's a place is obliged.
But could you explain the energy efficiency benefits?
After all, you know, I can understand from a like I'm a sharp I put soll on my roof, I reduce my carbon emissions. But when I think of it efficiency for me, it's lorentzop. Maybe earlier on it's LEDs. You put LEDs in reduce consumption. So does the technology talk about reduce consumption or the reducing emissions there as a power?
It's both in fact, but probably I insisted a bit on the generation behind the meter as you put it, because I think it's a game changer. But in what we do, it's a combination of things. It's about local generation, but it's also about the hitt pont as you mentioned, which,
by the ways, bringing efficiency. And it's also about the digital infrastructure because anyhow, once you've put that in place, you know those two components, you need some level of control locally in order to be able to manage that. And those controls they do not only manage the generation, they also manage the demand and the uses in a whom the benefits are what they are. The are typically
between eight to ten percent of energy efficiency. But if you go in a commercial building, if you go in an office building, is the savings are actually much larger. They are own ound twenty to thirty percent of energy demand. And this is fairly simple because what you do people leave a meeting, hold, you shut down the light, you shut down the AC not everyone is coming at the office. Nowadays we have some chromofice and so on not to shut down parts of the buildings. That way you make
actually very significant energy efficiency saving. And by the way, it's a different form of savings than you were mentioning in the introduction Real insulation work and traditional renovation. Traditional renovation is really about its passive efficiency if you want so, it's really about braining down the baseline. What we're talking
about here is more active energy efficiency. So it's complementary, but it's making sure that you optimize the uses of the given building, getting to the law the minimum of the baseline. And it's also about preventing rebond effects right, which we have upseller with traditional efficiency measures as well. Well.
Vincent, listening to you, I believe that we have all the necessary tools, whether it's heat pumps, hevise, solar batteries, digital your name made, so can you expand a bit on solar place.
Yes, thanks Lauren for the question, And I think that ties up well with the previous questions from there or deficiency, because there are other efficiencies beyond what you can actually get inside the building. There are efficiencies that are more at a system level, and PV is a good example because we are in a race of supply and demand, So how much fast can we ramp up the supply, how much fast can we decarbanize the demand or electrifize
the demands. So we've got all this thing going on, but the potent shoal of distributed generation, so host of PV is much larger than we think in some research we've done. But it's not only US. We've seen some research in the US saying that forty percent of current electricity demand could be provided by distributed generations. Imagine that. In some studies we've done, we're thinking that we at global level it's about twenty twenty five percent of electricity
demand that could be provided by distributed generation. So this is a big accelerator of the transition. And coming back to efficiency is also efficiency of use, lend use and more very the role of distributed generation in the realm of the electrification of building. You know, there are a lot of discussions and people claiming that we're gonna need
to electrifize those buildings if we want to take organize them. Okay, fair enough, but when we do that, we're going to have a massive impact on the power raid because obviously the demand for electricity is going to rise very significantly. When in fact, when you start to put PIV on your rooftop to a large extent, you mitigate that issue. And we've done some simulation about this and it's clear that in some areas you will face problems and there may be local areas where you need to upgrade the
distribution in crastal jobs. But one thing that came up in our work and that was actually quite a surprise to us, is typically for commercial buildings, what we found out is that for commercial buildings, if you've got the right amount of PV, you actually mitigate the impact of the electrification from the standpoint of the power raid. And that's another big, big efficiency gainst for the system.
As all, I can now introduce one of my favorite concepts jars and all of it the Jevons paradox.
You like that job, don't you we do the rebound effect.
Yeah, exactly. So the Gevens paradox means the more energy efficiency you put in a system, the.
More energy is being consumed.
And I empathize with your thesis that discribution grid is going to be okay because we're going to do a lot of local generation. But when the suns are shining, if you not have enough batteries, it's probably going to work eighty percent of the time or eighty percent of the time. But the problem are always the last ten percent.
And I don't think we have a problem on average, but that system needs to work twenty four seven, three sixty five, And of course the problem is it's the total heat wave or the blizzard, and maybe it's going to happen thirty days a year. That's how big the system needs to be designed, plus a little margin. So are we just running on a treadmill?
Appear on your point on a rebound effect, which is a very good point because I look a bit at the history of past energy transitions. You've always had a rebound and at least a nature of things. That's very very true. Two points maybe on that when we discuss on energy efficiency The point on using digital technologies, which are modern technologies to manage the energy used, is really a way to prevent rebound effects in energy among inside buildings.
So that's one point I think we should keep in mind. And this is very different from traditional uncontrolled efficiency solutions which do not prevent you from a remom. But that's a very specific point. I fit. Your question about rebund is larger than that, and you're right, if you deploy more generation capacity, well you may have more energy uses. But this is also a synonym of abundance law. We feel we live in a period of scarcity, but nothing
prevents us from living in a period of abundance. If we develop enots energy and clean energy obviously supply the topic of rebond it's a complicated one. I think there are technologies that can help you to prevent it on
specific aspects. After the larger question, which is the one you're raising, is the one of building a society of abundance of energy, and to do that we need to deploy a lot of energy capacities, and beyond the meter or behind the meter, we've got a huge reservoir that we can tap into a new question of residence, which is also a very good one. You're absolutely right, law, and if it's not going to be a one hundred
person residience. Now, in some of the examples they give you, like the JFK Terminal one airport, why did they build it. They did not build it only because they wanted to reduce emissions. They built it because they wanted to increase the resilience of the airport of the terminal in case of large weather incident. And you know that in these regions it happens that there are quite a few over winter.
The way they see this kind of technology and particularly generations behind the meter, is a way to increase their residience because by the way they have that, they have some local generation capacity may not work one hundred of the time, but if they don't, they rely on the power grade and there are incidents on power grids as well, especially when there are harsh weathers. So actually you could say, for shots, I'm going to solve one hundred percent of
the issue. No one is saying that, but it's actually improving the residience of the total system.
Vincent, can I ask you a little bit of a cheeky question, what we've got in Europe is we've got a new energy performance directive in the buildings area, and what this means is that governments across Europe have to go and look at their building stock and decide how best to decarbonize them. My question to you is, you're the minister in charge of buildings in France. What's your policy is going to be to actually ensure that we improve efficiencies in buildings over the next decade?
Thank you, Ah, that's a cheeky question.
Or I can answer. I can answer second million bureaucrats.
Let me frame my own self this way. So there are two things. The first one in French, right, So it's a good question about the Minister of Francis. I also live in Boston in the US, and I walk by the streets on the weekends with my daughters and my girls, and I look at the new homes being built, and I'm getting nervous because what I see is that
they're installing a lot of gas boilers. So I have a first recommendation, which is, when you build a new home, and you build a new building, how come that we continue to build them with technologies from the twentieth century that we know that we don't want anymore by twenty fifty, So are we serious or are we're not serious? So my first thing would be what do we do about
new construction. My subbumn thing is more looking at it from the standpoint of company corporation which is involved in the field, and it's a case of Snider Rectrick that it's a case of many others. Sometimes I'm inside meetings where people discuss about why is it not happening faster, what's blocking? Why is it that companies are not getting into this failed and so there's a lot of discussions and reflection training with government or on what to be
done in terms of incentive, carrot and sticks. Like you said earlier, the are what the private sector. It is a business case. They need customers. When you start to have customers, you have the private sector that get in and that invests. And the reality is in many regions of the world we still don't have that market or it's still not structure. And so this is probably where I would could focused rather than you're putting a lot of money on the table, but other focus on how
do we cread the condition of the market. There are also a lot of discussions around skills. Okay, do we have the skills available, where the technology is available, with the manufacturing capacity available. All of this can be solved by the private sector. This is what the private sector is doing. They're scaling stuff. That's what the private sector is known for. But in order to scale, you first
need to start. In order to start, we need to have a business case insight, and so maybe a recommendation I would make in order to create that market is maybe also to show the way, what do we do about public buildings as an example, Maybe we could start with public buildings and that would be a market.
Incent That probably leads to a good end question, which is about the market. How do we createe and scale up the mark?
It's a fundamental question. So I think we have to create that demand. So regulation, by the way you were mentioning the IPIBID, I did not extend on that. But that's going definitely into this way, right, So it's helpful. Is it going to be enough? Well, time will tell. But like I was saying, in new constructions, public buildings, there's a lot of things that could be done in
order to launch that market and make the case. It's a little bit like what happened in the mobility sectors and when it starts to romp up that after its scales. We are just at this moment and we need to be attentive to that. Now. When the market is here and starting to grow, then it's the time to scale up. And here the private sector will have to play a key role. It's about structuring the value chain, training the channel, recruiting people. It's going to take a lot of people.
We did a study with Boston University the Institute of Global Sustainability last year about the specific set of solutions. We found out that it would require two million jobs across the US and Europe in the coming years. That's
what it's going to take. So there are a lot of positive sides to this kind of transition as well, by the way, but it's going to take a lot of effort from the private sector to grow his competency, creates the channel structure, revalue channel, and as we do that, as the private sector manages to do that, costs are going to go down. You can better it because all of the administrative burden will probably disappear.
And what you're saying is there's a great opportunity and growth opportunity in front of us.
Yeah, it's actually the future. I don't think it's an opportunity. I think it's inevitable. I think it's inevitable. Question is the time it will take to get there and how early we want to be in there, you know, in different regions, and we could draw a parallel with mobility and electric bakers on that way.
Very interesting, keep very much, vincent.
Really, that was excellent you guys, very much. It's a pleasure, pleasure, super.
Super so job. I guess you had a great moment with that discussion.
You have to tell me why.
I'm laughing, because I don't know. I never know what's compable with you.
You really want to have my opinion?
Yes, okay.
At first I found the conversation uninspiring. That's why I crack stupid jokes, you know about French bureaucrats. Then I really listened to the interview and I had an epiphany. Yeah,
I understood something. So let me share my thoughts with you all that the commonization of buildings are great solutions, but looking for an economic model, and the problem with these engineers, in my opinion, is that they build nice products, but you know, the guys say, you need twenty years to amortize this, so in fact they need ether enormous sticks or enormous carrots to go to market.
Agreed, Absolutely great.
Yeah, And sometimes I go to conferences and I see those type of engineers with those technology, and I ask the simple question, what is the most powerful sentence in business when you are selling a new tech? What is that sentence?
Jihad, I have no idea.
Tell me that sentence is you'll see your money back in three years. But the problem is with those decarbonization of buildings, you don't see your money back in three years. So it requires a very very strong external push. Now, of course, when putting in wades, price goes through the roof and bank everybody is installing a roof top solar. But there are a lot of those cases where technology is great, but nobody wants to pay for it unless
you've got those supercards or the superstixel. Of course, we talked about the energy directive, and I'm sure there are a lot of states in the US, mostly democrat I guess, have this type of strategy. But let's talk about the carrots, and I have a good example of the carrots. Is a program which was launching Italy called the superb Bonus one hundred and ten, So ern tell.
Us a little bit about that pall us.
That program was launed in to twenty one and it was a tax credit scheme aimed at making homes more energy efficient. So the Superbonus one hundred and ten entitled the home owners to a tax credit up to one hundred and ten percent of the cost of upgrading their property. That's a great idea, that's the best scrut. But guess what after three years, dared to scrap it because do you know how much it costs? That program cost one
hundred and ten billion euro. Okay, there were a lot of upgrades to be done, but guess what the cost of building went through the roof because everybody cheated on the pogut and there were frods and everything. So you have a great program, but it's a super car out and guess what the Superbonus hundred and ten cost one hundred and ten billion. That demonstrate that it is not simple to put together an incentive which gives society a reasonable amount of value for the money which is invested.
Let's go back fifteen years ago and I was listening to a fossil fuel relic and I was talking about renewables and how we were going to put in feed in tariffs and we're going to put tax credits in place, and that. The other thing what I would have got back was all the economics of it. This don't make sense. Oh, it's really difficult. And and and actually what you saw was the exact tops you saw that actually freedom tariffs very expensive, kicked off, the Markush call went down, and
you suddenly put yourself in a different situation. And I want to say that start with that, because if I just take what the numbers for example that Schneider gave, what there is is there's a lot of very interesting that's called under five year payback without any form of incentive scheme in place. And you take the case of just taking the shopping center and putting sola on the roof.
There's loads and loads of these. Now, the interesting thing about it is these technologies are getting cheaper and cheaper and cheaper. So for me, that economic side of it is much about the playback periods are coming down basically right across the world because of you know, massive technology improvement.
So that's the first point. The second thing I would say is there's no doubt we need a carrot.
And you just gave a very good example of the Italian situation where they didn't give you just a carrot, They basically gave you a goal.
Line and the rest is history didn't work out. But if I.
Do look at the United States, all their renewables have been based on tax credits and whatever, and you have to put the proper systems in place to incentivize that. And I do believe countries will do that the next few years. In Europe, we will make mistakes like the Italians. But I give you the really simple or if I really wanted to decarbonize buildings, I do one thing, and that is I make electricity everywhere as low costs as possible.
That means get rid of the taxes. Make a statement to all of Europe and say, guys, from now on, there's no vat, there's no government taxes on it. Electricity is going to be your cheapest way to actually have energy in the buildings. Now why do I say that, Because the opposite approach is what we've been trying for the last ten years, which is we make fossil fuels more expensive and nobody likes that.
So that for me is the carrot that you would need to do this.
And I believe these cars will come wrong, but I will furnish about the stick because there's a stick which is very interesting. The stick is the amount of regulations that have come in across Europe in the last few years is just so big that we don't realize the impact.
But I'll tell you who does. It's property owners. So if I look at the German numbers actually this morning, is that last year there is a difference between a Grade A building and a gray building of twenty five percent in evaluation.
And it's getting bigger and bigger and bigger.
Because the point about it is, did the property owner goes, oh God, if somebody buys that building, they're going to have to revamp it, or.
I is the property older have to revamp?
But so I think that also, although you might say is a stick, it's also a carrot as well, because you have to decide what to do with those buildings that are there. So that's why I think there's a pivotal moment.
John, what is a great looking to you? We thank a Mundi for supporting the show. We thank Zombouti for coming and how it took to you. Next week, Thank you, guys.
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