Energy Technology Perspectives 2020

A path for the decarbonisation of the buildings sector

14 December 2020 Page 1 Opening remarks

Timur Gül

Head, Energy Technology Policy Division, International Energy Agency (IEA) The IEA buildings technology work across four main deliverables

Energy Technology Tracking clean energy Special Report on Clean Technology guide progress Perspectives Innovation

Tracking Clean Energy Progress

Assessing critical energy technologies for global clean energy transitions

The IEA is unfolding a series of resources setting an ambitious pathway to reach the Paris Agreement and other Sustainable Development goals. Opening remarks

Roland Hunziker

Director, Sustainable Buildings and Cities, World Business Council for Sustainable Development (WBCSD) Energy Technology Perspectives 2020 presentation

Thibaut ABERGEL Chiara DELMASTRO

Co-leads, Buildings Energy Technology, Energy Technology Policy Division, International Energy Agency (IEA) Commitment to net-zero emissions is globalising

Share of energy-related CO2 emissions covered by national and supra-national public net-zero emissions targets as of 01st SeptemberDecember 20202020 Carbon or climate 100% 10 neutrality target

80% 8 No target 2 60% 6

Under discussion GtCO 40% 4 In policy document 20% 2 Proposed legislation 0% 0

In law

Total emissions (right axis)

Countries responsible for around 60% of global energy-related CO2 emissions have formulated net-zero emissions ambitions in laws, legislation, policy documents or official discussions.

Source: IEA (2020),| Credit Energyphoto ( BhadlaTechnology solar park): Perspectives. Climate Investment AllFunds, rights 2018 reserved. The heavy direct and indirect buildings carbon footprint

Global share of buildings and construction final energy and emissions, 2019

Final energy CO2 emissions

Non-residential Residential (direct) 8% Transport 6% Transport 23% 28% Residential (indirect) 11% Other Residential 7% Other 22% 35% Non-residential (direct) 38% 5% 3%

Other industry Non-residential (indirect) 32% 8% Other industry 32% Buildings construction industry Buildings construction industry 5% 10%

The buildings sector is responsible for 35% of global final energy consumption and 38% of global CO2 emissions, when both operational and construction phases are accounted for.

Source: IEA (2020),| Credit Basedphoto (onBhadla Energy solar park): Technology Climate Investment Perspectives. Funds, 2018 All rights reserved. Around half of today’s buildings stock is likely still in use in 2050

Building stock by year of construction and share of stock that remains in 2050

80 80% 2010-2019

2000-2009 60 60%

1990-1999 2 1980-1989

40 40% 1970-1979 million m million

1960-1969 Share of 2019 stock 2019 of Share 20 20% 1945-1959

<1945

0 0% Remaining in 2050 North European China India Other Other (right axis) America Union advanced emerging

…but floor area is expected to increase more than twofold in the period to 2070, which is equivalent to adding a city the size of Paris to the world every week.

• Deployment of early adoption technologies Heat pumps, district energy, LEDs, rooftop PV, solar thermal and other technologies can not only deliver on emissions reductions but also on job creation and energy expenditure savings in the COVID19 recovery context.

• Buildings integration in the energy system Buildings need to support the transition of the power and industry sectors. In 2019, electricity use in buildings accounted for nearly 19% of global CO2 emissions, and material use for construction and renovation accounted for another 10%

• Clean energy innovation Despite a number of technologies being available on markets today, R&D needs to further enhance technology performance, deliver on new services (e.g. demand response) and foster the development of new technologies (e.g. advanced cooling).

Clean energy technology deployment

CO2 emissions from the use phase of buildings in the Sustainable Development Scenario, 2019-2070 By subsector By region

12 12

2 2

10 10

GtCO GtCO 8 8

6 6

4 4

2 2

0 0 2019 2030 2040 2050 2060 2070 2019 2030 2040 2050 2060 2070 Non-residential (indirect) Non-residential (direct) Rest of World India China European Union United States Residential (indirect) Residential (direct)

The phase-out of fossil fuel, the deployment of high-efficiency electric equipment and the decarbonisation of the heat and power sectors together drive buildings-sector CO2 emissions to net-zero by 2070.

Source: IEA (2020),| Credit Energyphoto ( BhadlaTechnology solar park): Perspectives. Climate Investment AllFunds, rights 2018 reserved. Electrification and energy efficiency are key

Buildings energy use and intensity in the Sustainable Development Scenario, 2019-2070

160 160 EJ

120 120 2 kWh/m 80 80

40 40

0 0 2019 2030 2040 2050 2060 2070

Coal Oil Natural gas Electricity Heat Hydrogen Bioenergy (traditional) Other renewables Intensity (right axis)

The share of electricity in final energy use grows to nearly 70% at net zero emissions, while the average buildings intensity is more than halved.

Source: IEA (2020),| Credit Energyphoto ( BhadlaTechnology solar park): Perspectives. Climate Investment AllFunds, rights 2018 reserved. Technology shifts are necessary to decarbonise heat

Heating equipment sales share and share of NZEB in buildings stock by region in the Sustainable Development Scenario

100% Renewable equipment

80% District heat

Other electric and hybrid equipment 60%

Electric heat pumps 40% Hydrogen boilers and fuel cells

20% Oil boilers

Natural gas boilers and heat pumps 0% 2019 SDS SDS 2019 SDS SDS 2019 SDS SDS 2019 SDS SDS 2019 SDS SDS 2040 2070 2040 2070 2040 2070 2040 2070 2040 2070 Coal boilers United States European Union China India World Share of NZEB

Decarbonizing heat in buildings requires increased coordination of measures to improve the building envelope and to deploy clean and efficient heating technologies.

Source: IEA (2020),| Credit Energyphoto ( BhadlaTechnology solar park): Perspectives. Climate Investment AllFunds, rights 2018 reserved. Decarbonisation strategies are highly geographically-dependent

Local thermal needs are at the heart of building decarbonisation strategies. A third of global population needs both heating and cooling and an additional 5 billion people will gain access to cooling by 2070.

Cumulative capacity and capital cost learning curve for vapour compression applications in the SDS

200 100 TW Capacity for heating 160 80 demand

Capacity for cooling demand 120 60

Capacity for heating Cost Index (2019=100) Index Cost and cooling 80 40

Heat pump cost - without spillover 40 20

Heat pump cost - SDS

0 0 2019 2030 2040 2050 2060 2070

Synergies between heating and cooling results in around 15% lower cost for heating equipment

Integration with power systems

Global electricity use and generation in the Sustainable Development Scenario, 2019-70

Electricity generation Electricity use

80 60

50 60 Variable renewables

40 Other

thousand TWh thousand thousand TWh thousand

Hydro and bioenergy Transport 40 30

Nuclear Industry 20 Buildings 20 Fossil fuels 10

0 0 2019 2040 2070 2019 2040 2070

Variable renewables dominate the electricity generation mix in 2070 as emissions reach net-zero. Buildings hold both the potential and responsibility to provide flexibility services.

Average numberGlobal of air electricity-conditioners use perand household generation by in country the Sustainable relative to incomeDevelopment per capita Scenario, and heat 2019-index-70 cooling degree-days, 2020-2070

The number of installed air conditioners could quadruple by 2070, but more efficient air-conditioners and building envelopes could halve electricity demand for cooling relative to baseline trends.

Source: IEA (2020), IEA (2020), Is cooling the future of heating?, https://www.iea.org/commentaries/is-cooling-the-future-of-heating. All rights reserved. Thermal demand is set to be driving the peak load in key regions

Cooling load profile in China, 2030 (Cooling demand of the Sustainable Development Scenario)

400 Need for Direct use of renewables GW storage & 300 flexibility Commercial cooling

200 Residential cooling

100

0 0 8 760 Hours of the year Low variable High variable renewable renewable generation generation

Growing cooling demand may lead to additional power capacity needs of more than 150 GW in China by 2030. Cooling storage systems and other flexibility measures need to address such variability in demand.

Vehicle-to-grid potential relative to total generation capacity, 2030 (EV deployment of the Sustainable Development Scenario)

1400

Vehicle charging for

1050 V2G GW

GW 1050 GW Variable renewables

700 Variable renewables

Generation capacity needs 350 V2G potential Other generation capacity needs 0 China India United States European China India United States European Union Union Other generation capacity needs Peak capacity (average of the 10% of hours of Off-peak capacity (average of the 90% of hours of lowest highest electricity demand) electricity demand)

Vehicle-to-grid services could unlock up to 600 GW of flexible capacity in 2030 (distributed across EV markets). 600 GW represents nearly half of current hydropower capacity.

Integration with material manufacturing value chains

Decomposition of CO2 emissions from steel and cement manufacturing for buildings construction, 2000-2020 Cement Steel

1 600 1 000

/ 2

1 200 750 MtCO

800 500

400 250

0 0 2000 Buildings Industry 2019 2020* 2000 Buildings Industry 2019 2020* factors factors factors factors

Emissions Construction (floor space) Building frames Height Other Material CO₂ intensity Embodied emissions in the cement and steel used in buildings have increased sharply since 2000, with increased construction outweighing the effect of a fall in the carbon intensity of both materials.

Source: IEA (2020),| Credit Energyphoto ( BhadlaTechnology solar park): Perspectives. Climate Investment AllFunds, rights 2018 reserved. Construction activity fell in the wake of the pandemic

Projected year-to-year growth of residential construction activity in 2020 relative to 2019

10% Growth rate Growth 0%

-10%

-20% Canada United Japan United France Germany Italy EU Other EU China India States Kingdom Nordics

Material demand is strongly affected by the Covid-19 pandemic; residential construction activity could decline by up to around 15% in 2020 relative to 2019, depending on the country.

Source: IEA (2020),| Credit Energyphoto ( BhadlaTechnology solar park): Perspectives. Climate Investment AllFunds, rights 2018 reserved. Embodied carbon is harder to abate than use phase emissions

CO2 emissions in the buildings and construction value chain in the Sustainable Development Scenario

14 70% Buildings use phase

/ 2 12 60% Coal

GtCO Oil 10 50% Natural gas 8 40% Electricity and heat

6 30% Buildings construction

Construction energy use 4 20% Material manufacturing 2 10% Cement and steel manufacturing 0 0% Share of cement and steel 2010 2019 2030 2040 2050 2060 2070 manufacturing Despite reductions in material use and material manufacturing emissions, the share of cement- and steel-related emissions in total buildings emissions jumps from less than a fifth today to 40% by the 2060s.

Source: IEA (2020),| Credit Energyphoto ( BhadlaTechnology solar park): Perspectives. Climate Investment AllFunds, rights 2018 reserved. Sustainable action needs to be stimulated along value chains

World cement- and steel-related CO2 emissions in the buildings construction sector by scenario and driver

Cement Steel

1.5 1.5

/ 2

1.2 1.2

GtCO STEPS

0.9 0.9

0.6 0.6 STEPS

0.3 0.3

SDS SDS 0.0 0.0 2019 2030 2040 2050 2060 2070 2019 2030 2040 2050 2060 2070

Material manufacturing Lifetime extension Material efficiency Precasting, prefabrication, reuse, recycling, material properties Structural optimisation Material efficiency measures contribute to around a third of the total reduction in emissions by 2070 in the Sustainable Development Scenario relative to the Stated Policies Scenario.

Source: IEA (2020),| Credit Energyphoto ( BhadlaTechnology solar park): Perspectives. Climate Investment AllFunds, rights 2018 reserved. 3. Innovation

Cumulative global buildings sector emissions reduction by maturity category in the Sustainable Development Scenario relative to the Stated Policies Scenario, 2020-2070

35 2

30 GtCO 25

0 Heating Cooling Other end-uses

Mature Early adoption Demonstration Large prototype

Three quarters of necessary emissions reductions could be achieved through the use of mature and early adoption technologies, but further innovation is also required to achieve the full decarbonisation of heating and cooling.

The ETP Clean Energy Technology Guide contains information for over 400 individual technology designs and components across the whole energy system that contribute to achieving net-zero emissions.

Heat pumping technology deployment by market segment in the Sustainable Development Scenario in 2030

TW of thermal output thermal ofTW 6

0 All (SDS) Integrated (heating, Advanced vapour Non-vapour Cold-climate Hot and humid In renovated cooling, storage) compression compression [Early adoption] climate buildings [Large prototype] [Demonstration] [Early adoption] [Early adoption] [Early adoption]

Heating only Heating and cooling Cooling only Innovative

The deployment of heat pumping technologies is closely linked to innovation as they need to be scalable and suitable to many buildings, climate and operating conditions.

• Packaged multi-service solutions To exploit synergies between technologies and deliver cost reduction and performance improvements.

• Integration among different end-uses To exploit the and maximize the synergies of different services.

• Solutions tailored to local conditions To guarantee high perfomances in all climates and buildings stock conditions

Global energy sector CO2 emissions in 2050 by sector

10 /yr 2 Other transformation

8 GtCO Power 6 Industry 4 Transport 2 Buildings 0 Agriculture - 2 Total - 4 SDS Faster Innovation Case

In the Faster Innovation Case, in buildings, accelerated innovation in space cooling technologies, which also benefits the heating sector, contribute up to 60% of total annual emissions reductions in buildings.

• Tackle emissions from existing buildings.

• Strengthen markets for clean technologies at early stage of adoption.

• Develop and upgrade infrastructure that enables technology deployment.

• Boost support for research, development and demonstration.

• Expand international technology collaboration along material and energy value chains. Questions & Answers

Luca De Giovanetti Cécile Faraud Tianzhen Hong Henk Kranenberg

Manager, Manager, Deputy Head, Senior Manager, Science-based Clean Construction Building Technologies Environmental targets, Programme, Department, Research, WBCSD C40 LBNL Daikin & Eurovent Board