There are many factors that impact the Building Automation and Control Systems (BACS) industry over the course of time, but let’s consider some of the most relevant trends at present.
Many companies are introducing ESG policies, and investors are increasingly applying these non-financial factors as part of their analysis to identify risks and growth opportunities. This is leading companies to focus on sustainability, regulations and managing energy costs. At the same time, they are challenged with workforce related issues, including how to satisfy and retain key staff, arrange for hybrid working, implement measures for staff health & wellbeing, and adapt to skills shortages.
Furthermore, there is an urgent need for renovation & refurbishment of older building stock across the western world.
BACS manufacturers are tackling some of these challenges through the digitalisation of their product portfolio, leading to smarter buildings which exploit SW, Internet, Cloud, and increasingly AI, to drive solutions that are more versatile, and generate more data to better manage their buildings.
Regulations play an important role in the BACS industry. In Europe, a revised Energy Performance of Buildings Directive (EPBD) was agreed in May 2024, requiring, by December 2024, BACS in all tertiary buildings whose HVAC output is greater than 290 kW, dropping to a 220 kW threshold by 31 December 2029, and by May 2026, monitoring of indoor environmental quality.
It also requires Energy Performance Certificates (EPCs) in non-residential buildings to comply with at least energy performance class F by 2027, and class E by 2030 (the UK currently requires class E). The recast EPBD also harmonizes these energy performance classes across the EU on a scale of A to G. Overall, the EPBD aims to substantially reduce emissions and energy use of EU buildings by 2030 and make it climate-neutral by 2050. It aims to increase the rate of renovations of energy-inefficient buildings, improve energy performance information and it introduces a zero-emission (ZEB) standard for new buildings - for non-residential from 2030, and from 2027 already for public buildings.
Worthy of note is that the EPBD, which was just a European BACS standard (EN 15232), is now replaced by an ISO standard (EN ISO 52120-1), so its validity now extends worldwide.
The Net Zero Industry Act was also adopted in the EU in June 2024, with the aim of speeding up net zero industrial transformation by expanding the EU’s manufacturing and installation of clean technologies.
In the USA, the aim of the August 2022 Inflation Reduction Act (IRA) has been to lower US carbon emissions by around 40% by 2030, providing $369bn in federal funding in the form of grants, loans, tax provisions, and other incentives to accelerate clean and energy-efficient energy, vehicles, manufacturing, and buildings. It meant that over 300,000 federal buildings would have to reach net-zero emissions by 2045, including a 50% reduction in building emissions overall by 2032.
As of February 2024, more than 271,000 clean energy jobs have been created, with projections to support some 1.5 million jobs over the coming decade according to outside estimates, and as of August 2024, 32 States and the District of Columbia had & DC had released state climate action plans, and 16 had released a Priority Action Plan. In January 2024, New York city passed LAW 97, a carbon tax requiring around 50,000 buildings whose floor area is greater than 25,000 ft2, to cut 40% of emissions by 2030, rising to 80% by 2040.
In March 2024, the U.S. Securities and Exchange Commission (SEC) adopted a long-awaited rule, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which requires registrants, including foreign private issuers, to disclose extensive climate-related information in their registration statements and periodic reports, including material climate risks, greenhouse-gas emissions, emissions reduction targets & transition plans. It applies directly to publicly traded real-estate companies and real-estate investment trusts that are registered with the SEC, and indirectly to the vast majority of large real-estate owners. Clearly, this has implications for both tenants and investors.
However, the growth plan of the new US Administration is characterised by lower taxes, less regulation and fewer government interventions. Several executive orders have already been signed related to energy, climate, and infrastructure, one of which has temporarily halted funds from the Infrastructure Investment and Jobs Act (IIJA), also and the IRA, both of which are beneficial for non-residential projects. Uncertainties surrounding such investment policy may now lead to project delays and make it more difficult to predict the next 4 years. Nevertheless, individual US states are adopting encouraging legislation, with 26 having adopted a 100% clean electricity commitment, several adopting policies supporting transitioning away from gas fuelled home appliances in new build, and carbon-pricing programs currently active in 13 US states. Some states are also part of the Regional Greenhouse Gas Initiative (RGGI) which is the first mandatory cap-and-trade program in the US to limit CO2 emissions from the power sector. So, there are numerous reasons for optimism in the US cleantech business to be sustained.
Now, the sweeping trade tariffs imposed by the US have unsettled stock markets and upended the world economic outlook such that world construction and BACS markets are bound to suffer. The next weeks and months are set to be uncertain and challenging times, but BSRIA will continue to track and analyse market dynamics in order to help clients position themselves to navigate the way ahead.