The energy transition requires colossal investments: according to the International Energy Agency (IEA), nearly 5,000 billion dollars per year would be needed globally by 2030 to achieve carbon neutrality.
In France, the Annual Panorama of Climate Finance (I4CE Institute) estimates that energy renovation investments of €50 billion per year are needed to meet the 2030 ambition of a 55% reduction in greenhouse gases (vs. 1990). Already, many regulations are being implemented to achieve these goals; both for individuals and for companies. The latter is the subject of our article.
Specifically, companies in France are subject to the Tertiary Decree, which aims to reduce the energy consumption of buildings in the tertiary sector by 40% by 2030 (vs. a post-2010 reference year).
Energy renovation of buildings is one of the most effective ways to achieve this obligation. These projects are complex and require significant funding. However, they can also quickly become value creating if they are correctly defined.
Predictive tools are the cornerstone of a profitable compliance trajectory
Indeed, these operations (for example, thermal insulation) generate savings on energy costs. In theory, this should be attractive to property owners and managers. But, in practice, many of them are still hesitant because of the uncertainties about this return on investment; uncertainties generated on the one hand, by costs and implementation timelines and, on the other, by the variation in energy prices over time.
These uncertainties can be reduced thanks to simulation tools, which make it possible to envisage different scenarios of renovation programmes, with estimates of the renovation costs and the corresponding potential savings for each of them. These tools include the Sitowie and Optee platforms, which use predictive models.
Sitowie simulates different renovation trajectories, based on a proprietary model of how materials and components evolve over time. Optee, on the other hand, uses AI to simulate different renovation projects, their energy savings and associated returns on investment. Both of these solutions use:
- the technical characteristics of the buildings (size, materials, equipment) and a model of the different types of work and their impacts;
- an assessment of energy savings, based on historical energy consumption data and the energy performance of the planned work.
Project financing combines public aid and bank loans
Once an energy renovation plan has been drawn up and validated by the company, the question of how to fund the work arises.
Today, there are several types of public aid for energy renovation in France. The main scheme concerns the CEEs (Certificats d’Economie d’Energie or Energy Saving Certificates) which are paid by energy suppliers to meet their obligations regarding energy consumption reduction. These certificates are ultimately paid to companies (and also to individuals) who undertake energy-saving work. Over the last twenty years, CEEs have become one of the main levers for controlling energy demand in France, with about 5 billion euros per year.
In addition to these aids, two other mechanisms must be taken into account: (a) energy performance contracts (CPE, Contrat de Performance Energétique), and (b) green loans distributed by banks.
CPEs are agreements in which a specialist service provider guarantees energy savings over a set period of time. These savings, measured via real-time monitoring tools, are then used to reimburse, partially or totally, the cost of the renovation work. However, CPEs are complex and costly contracts (audit and follow-up fees) that require extensive negotiations between the parties. That is why they are mainly for large-scale projects.
For the majority of energy renovation work, green bank loans are a simpler and more flexible financing solution. Often offered with advantageous conditions (reduced interest rates or extended repayment periods), these loans do not require a contractual commitment on the energy savings achieved. Green loans are an ideal option for medium-sized or small-sized renovation projects.
Green loans and CPEs can be combined in certain large-scale projects, to finance ambitious renovations.
Banks have a major opportunity to seize
Thus, many tools, both in terms of the definition of the renovation plan and financing, are already available to facilitate energy renovation projects. However, according to the I4CE Institute, less than 50% of the necessary investments required are actually made today. Energy renovation is therefore an important opportunity for the financial sector, whose potential remains fully to be seized. Beyond new revenues, it allows banks to meet their increasing obligations to “green” their balance sheets (in particular with CSRD or Green Asset Ratio reportings).
To strengthen existing green loan offerings, banks should position themselves as preferred partners for renovation projects, providing end-to-end customer support. This can be accomplished through various levers:
- The development of an ecosystem around specialised start-ups, in particular on scenario simulation tools
- Extensive training of sales representatives so that they can support their clients in optimising their various financing options, including public aid
- Define and commercialise products that meet specific needs, such as owners of large rent-control real estate
Banks, by proactively helping companies’ energy renovations, could play a central role in the green economy, for the benefit of the planet.
Sopra Steria Group has a long-standing commitment to supporting major real estate companies through its subsidiary, Sopra Real Estate Software (SRES). By working with a specialized ecosystem of partners, we help our clients meet the requirements of the Tertiary Decree and environmental regulations while optimizing their projects for an efficient and sustainable energy transition. By enabling a clearer definition and understanding of their energy renovation needs, we also facilitate the structuring and execution of financing applications.