Unsurprisingly, then, the energy-efficiency retrofit market is expected to grow by 8% year over year between 2024 and 2050, increasing from a $500 billion to a $3.9 trillion market, according to an analysis by McKinsey*. This analysis includes heating, ventilation, and cooling systems, external envelopes (roofing, insulation, windows, doors, and cladding), lighting, and appliances. More substantial retrofits address structural and civil elements but aren’t included in this analysis.

That said, energy-efficiency retrofitting may use virgin raw materials (resources extracted directly from nature without processing) and often presents a waste challenge because existing materials, which may still have a functional lifespan, are removed.

This is where circularity – optimizing resources and minimizing waste during production and consumption – can help by creating a closed-loop system.

What materials are required by the growing energy-efficiency retrofit market?

To achieve net zero, renovation rates must increase to approximately 3% to retrofit 20% of existing assests by 2030. This means that from 2023 to 2050, tens of billions of tonnes of materials will be required for energy-efficiency retrofits. These materials include plastic, mineral wool, glass, aluminium, flat steel and concrete, for example, according to the McKinsey analysis.

Recent examples, such as the Entopia Building in Cambridge, UK, show the benefits of circular retrofit principles and the reuse of material on-site. Over 5,000 items were diverted from landfills during its construction, and approximately 3.8 tonnes of steel sections were reused, saving 2,000 kilograms of carbon dioxide equivalent. Overall, 84% of carbon was saved per square metre compared with a standard office fitout.

How can the energy-efficiency retrofit industry create a circular value chain?

The anticipated savings of energy-efficiency retrofitting cannot be realized unless the industry creates a circular value chain. There are seven key parts of the retrofit value chain that can capture value from the move to circularity:

Today, materials and parts manufacturers generate revenue by selling materials to upgraders and renovators, with the cost of goods driven by virgin raw material costs and substantial energy consumption. With the move to a circular ecosystem, four initial actions could help materials and parts manufacturers capture some of the value of the growing energy-efficiency retrofit market:

1. Increase product transparency

This includes providing lifecycle information such as Environmental Product Declarations and material passports. Manufacturers could also develop “green parts” with high levels of recycled material or create a dedicated “reuse” parts line to increase revenues.

Depending on the material, there could be an increased willingness to pay for green materials and parts with full lifecycle information that allows for end-to-end traceability. A recent McKinsey survey, which has not been published, shows that nearly 80% of decision-makers are willing to pay premiums for green glass, for example.

2. Create value-add retrofit services for existing customers

Incumbent manufacturers can provide retro-first services such as repairing and remedying existing materials to extend their useful life. For example, a cladding material manufacturer could replace a product that does not meet new standards or needs repair with an alternative that uses recirculated material.