Energy Outlook 2025: Energy Solutions

With increased regulatory, environmental, and stakeholder pressures regarding the way in which we use energy across all sectors, it’s more important than ever to implement appropriate energy solutions. Whether it be the way in which we operate buildings to reduce energy demand, or the contractual models adopted to deliver carbon reduction projects, energy solutions are not just about remaining compliant; this fast-evolving space is also home to new innovations, technologies, and opportunities. 

Here we explore some of the key areas where energy solutions are developing, and the challenges and opportunities that this presents.

Building automation: harnessing the power of AI 

Globally, the operation of buildings accounts for approximately 30% of end-user energy consumption, over half of end-user electricity demand, and approximately 26% of energy-related emissions. With rapid growth of global floor areas predicted, even greater consideration for the effective management of energy within the built environment is required. 

Building automation (the use of digital tools to monitor and control building-wide systems such as heating, ventilation, air conditioning, lighting, and water) is a critical tool for increasing buildings’ energy efficiency. Centralised building automation and control systems (BACS) are already helping buildings use less energy and reduce CO2 emissions, without compromising on safety or comfort. 

The implementation of AI-enabled systems, both in new buildings and as retrofitted systems, is growing and becoming more sophisticated. BACS are harnessing the power of AI and machine learning algorithms to analyse building usage patterns and automatically adjust energy consumption to increase energy efficiency. AI platforms can be ‘connected’ directly to buildings to collect, and dynamically learn from, occupancy and environmental data over time. This data is used to construct contextual models of entire smart building environments known as digital twins, which combine technologies and analytics to form a dynamic model of how people and processes interact with the building. AI-empowered tools can suggest, or even directly implement, adjustments to BACS based on the digital twin and the data used to construct it. 

AI is also being deployed to ensure buildings operate with minimal environmental impact, by integrating data from water recycling systems, waste management and on-site renewable energy sources into AI building automation systems. 

Energy and Utilities as a Service (EaaS) – reducing the capex burden 

Meeting net zero related targets for businesses may not be achievable under their existing capital expenditure policies alone. Businesses can be burdened by the capital-intensive requirements of implementing the solutions designed to help achieve these targets. In light of these challenges, EaaS is an increasingly attractive option to achieving targets, whilst maintaining budget stability and cost competitiveness. 

Under a typical EaaS arrangement, an energy service provider (ESP) pays for all project costs; with the building owner having no upfront expenditure, typically treating the transaction as an off-balance sheet financing solution. The services provided by the ESP can vary, as can the technical solution: from the installation of LED lighting to provide an energy savings service within a residential block of flats, to the build and operation of a Co2 recovery plant to provide an availability service on an industrial site. As the EaaS model generally operates on a pay-for-performance model, the ESP bears the performance risks of what is installed or constructed, and the ESP is incentivised to achieve operational efficiencies. The ESP may also provide upgrades to new technology to secure more savings for the building owner. 

Whilst the EaaS model is not necessarily a new one, it continues to be deployed in more ambitious and innovative ways. Frameworks through which multiple EaaS solutions can be purchased are being established. And ESPs are offering a more comprehensive package of energy-related services (including consultancy services to identify the most appropriate technical solutions for a building, access to financing, asset installation and energy management services all-in-one). By maximising existing procurement supply chains EaaS projects can be mobilised at scale and more efficiently.

A growing number of ESPs are offering EaaS projects, across different sectors and with different funding sources. The diversification of protagonists active in the market means there is no one-size-fits-all for an EaaS project. Tailoring procurement strategy, delivery model and contractual terms for a project to the requirements and incentives of the customer, whilst maintaining bankability for the ESP is a critical dynamic than can risk resulting in protracted negotiations.

District Utilities — a lower carbon solution? 

District heating, a system for distributing heat generated in a centralised location, remains an expanding market, particularly in Europe where there has been an increase in policy support. But despite large potential for the integration of lower carbon and renewable heat sources, as well as recycled heat, fossil fuels continue to dominate heat supplies globally (accounting for c. 90% of total heat production in 2023), and decarbonisation efforts have not yet counterbalanced associated emissions. 

Innovation and policy support, however, in the sector is helping. For example, last year Denmark adopted regulation to exempt geothermal heat projects from price regulation, and Finland's first geothermal heating plant commenced operations. In England, regulation is expected in 2025 to implement zoning policy for heat networks: identifying and designating where heat networks provide the lowest-cost, low carbon heating option. 

Whilst Northern and Western Europe is contributing to expanding the district heating market, similar principles are being applied in South-East Asia, where there is a fast-growing cooling market. In Thailand, the first district cooling system project was announced in 2023 and is soon to be completed at the Government Complex Centre in Bangkok. This project aims to achieve 20% energy savings and reduce carbon emissions by up to 3,000 tons annually. Singapore’s Marina Bay district cooling network, the largest underground cooling system in the world, is set to expand to a further 32 buildings by 2027. It is estimated that this project alone helps Marina Bay avoid up to 20,000 tonnes of carbon emissions annually. China and Singapore’s joint Tianjin eco-city project includes a district cooling system which signals these systems being integrated into cities in the PRC in future. The efficiencies of this system of urban environment cooling will continue to be key to city planning in warmer climates during 2025 and beyond.

Government intervention 

As countries race to meet net-zero targets, Government spending and regulation remains a critical tool. In Europe, the EU’s Energy Performance of Buildings Directive, which came into force in May 2024, has set a target to decarbonise the EU’s building stock by 2050 through interventions including minimum efficiency standards and mandatory renovations. In Sweden, the budget for 2025 includes SKK 320 million to support efficiency technology and reduced electricity and gas use in households. The UK’s Future Homes and Buildings Standard, set to be mandatory from 2025, further aims to ensure new homes produce 75-80% less carbon emissions by focusing on mandatory improved energy efficiency and easy integration of low-carbon heating systems (in particular heat pumps and heat networks). 

Whilst the election of Donald Trump is creating uncertainty as to energy policy in the US, the Department of Energy has set new efficiency standards for household appliances which will take effect in 2029, new energy-saving rules for federal buildings, and granted USD169 million for nine projects to accelerate electric heat pump manufacturing at 15 sites across the United States. 

Meanwhile, in APAC, China’s ambitious target to reduce the amount of energy used per unit of economic growth by 2.5% in 2024 will likely continue into 2025 as the PRC races to meet its wider climate and net-zero goals. In Singapore, the Energy Efficiency Fund continues to provide up to 70% financial support to adopt pre-approved energy efficient equipment.