INDUSTRIAL ENERGY EFFICIENCY MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2023 - 2030)

The industrial energy efficiency market size is expected to reach US$ 41.2 Bn by 2030, from US$ 23.13 Bn in 2023, growing at a CAGR of 8.6% during the forecast period.

Industrial energy efficiency refers to the use of technologies, systems, and practices to reduce the amount of energy required for industrial processes and operations. Adopting energy efficiency measures helps industries optimize energy consumption, reduce costs, and lower greenhouse gas emissions.

The key offerings in this market include efficient equipment such as motors, pumps, compressors, and heating and cooling systems. It also includes automation and control systems like distributed control systems, building management systems, and energy management software. Services such as system optimization, maintenance, and training are also part of industrial energy efficiency solutions.

Industrial Energy Efficiency Market Regional Insights

• North America is the largest market for industrial energy efficiency, accounting for a share of 35.4% in 2023. The growth of the market in North America is driven by the stringent government regulations on energy efficiency, the increasing adoption of smart grid technologies, and the growing demand for energy-efficient products and services from industrial companies.
• Europe is the second-largest market for industrial energy efficiency, accounting for a share of 28.2% in 2023. The growth of the market in Europe is driven by the increasing focus on renewable energy sources, the rising awareness about the benefits of energy efficiency, and the growing demand for energy-efficient products and services from industrial companies.
• Asia Pacific is the fastest-growing market for industrial energy efficiency, accounting for a share of 24.4% in 2023. The growth of the market in Asia Pacific is driven by the rapid industrialization in the region, the increasing demand for energy-efficient products and services from industrial companies, and the supportive government policies.

Figure 1. Global Industrial Energy Efficiency Market Share (%), by Region, 2023

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Industrial Energy Efficiency Market Drivers

• Supportive Government Policies and Regulations: Various governments across the globe are introducing policies, incentives, and regulations to drive industrial energy efficiency. For instance, the European Union has set energy efficiency targets under the Energy Efficiency Directive. The directive mandates energy audits for large companies and aims to cut energy consumption by 32.5% by 2030. Similarly, under the U.S. Energy Policy Act 2005, tax incentives are offered for energy efficiency investments. Such policies encourage industries to adopt energy-efficient equipment, systems, and processes, thereby driving the industrial energy efficiency market. For instance, a 2021 report by the American Council for an Energy-Efficient Economy stated that the federal programs under the Initiative helped commercial and public buildings across U.S. save almost 11 billion kWh of electricity and reduce CO2 emissions by 9 million metric tons during 2020-2021.
• Rising Energy Prices: Energy prices have been volatile and on an upward trajectory over the past decade. According to the U.S. Energy Information Administration (EIA), the industrial electricity prices rose from 7.06 cents/kWh in 2010 to 7.43 cents/kWh in 2020. Similarly, industrial natural gas prices spiked from US$ 5.1 million British thermal units in 2010 to US$ 7.3 million British thermal units in 2014. The rising energy prices strain profit margins for industries. This is compelling industries to employ energy efficiency measures to optimize energy consumption and costs. For instant, according to data published by The Climate Group, the cement industry in India recovered 5.4 million GJ of energy in 2020 by investing in waste heat recovery technologies
• Need to Reduce Carbon Footprint: Industries are targeting net-zero emissions and reducing their carbon footprint through energy efficiency amid increasing environmental concerns. The International Energy Agency estimated that industry accounted for 35% of global final energy consumption and 40% of energy-related CO2 emissions in 2019. By adopting energy-efficient equipment and systems, industries can significantly reduce emissions and align themselves with their sustainability goals. For instance, as per data from the United Nations Environment Programme, global investments into industrial energy efficiency grew by around 12% annually between 2018 and 2020.
• Technology Advancements: Advances in technology are enabling greater energy optimization in industrial operations. Technologies like artificial intelligence, machine learning, IoT sensors, and cloud computing are helping analyze energy usage patterns and improve efficiency. For instance, General Electric’s intelligent PLC software analyzes data to identify operational inefficiency. Siemens offers cloud-based monitoring platforms to track energy performance. Such technological innovations propel the adoption of industrial energy efficiency solutions. According to the International Energy Agency (IEA), the deployment of digital technologies like sensors and IoT across industries could deliver potential energy savings of 10% globally by 2040.

Industrial Energy Efficiency Market Opportunities

• Integration with Renewable Energy Sources: There are significant opportunities for integrating energy efficiency initiatives with renewable energy adoption in industries. Renewable sources like solar, wind, and geothermal can be leveraged along with upgrades to equipment, automation and control systems to minimize carbon footprint and energy costs. For example, onsite installation of solar panels coupled with intelligent energy management systems can optimize self-consumption of renewable energy. For instance, a 2021 report from the International Renewable Energy Agency (IRENA) estimates global renewable capacity could grow by over 50% between 2020 and 2025.
• Retrofitting Existing Infrastructure: A major opportunity lies in retrofitting existing industrial infrastructure with energy-efficient technologies as completely replacing equipment involves huge investments. Retrofitting with products like energy-efficient motors, variable speed drives, lighting systems, insulation, and heat recovery systems can improve efficiency at lower costs. According to the IEA, efficiency retrofits could cost-effectively reduce global industrial energy use by 10%.
• Focus on SMEs: While large energy-intensive industries are early adopters, small and medium enterprises (SMEs) also offer opportunities. SMEs account for a major share of industrial energy consumption in countries like India and China. Governments are introducing financial incentives and subsidies to encourage SMEs to employ energy efficiency solutions tailored to their needs. Industry leaders are also partnering with SMEs to provide knowledge and resources to optimize their energy usage.
• Emerging Economies: Industrialization and infrastructure development in emerging economies offer strong potential for energy efficiency uptake. Countries like China, India, Indonesia, Brazil, and South Africa, with rapidly growing manufacturing and heavy industries, provide lucrative opportunities. Government initiatives like India’s Perform, Achieve and Trade Scheme, which allows industries to trade energy credits, further boosts energy efficiency investments in these markets.

For instance, according to the International Energy Agency, these industries in Brazil. saw an average saving of 12% in their energy usage from 2018 to 2021. Other nations  like India and South Africa have launched similar programs to spur efficient industrialization as well.

Industrial Energy Efficiency Market Trends

• Internet of Things (IoT) and Big Data: The Industrial Internet of Things (IIoT) is driving large-scale adoption of connected sensors, meters, equipment, and other devices that generate data on energy usage and performance. Big data analytics enables deriving actionable insights from the massive amount of data collected. This facilitates identifying inefficiencies and achieving automation in real-time to optimize energy utilization For instance, as per the 2021 report by the U.S. Department of Energy, the Industrial Assessment Centers nationwide observed average savings of 13% in electricity consumption at client food, paper, and chemical plants by implementing energy management recommendations derived from data analytics of production systems.
• Cloud-Based Software: Cloud-based software solutions are emerging as an important tool to manage energy efficiency across multiple facilities of an industry. They provide a centralized platform to obtain transparent energy usage data, track savings, identify optimization opportunities, and control equipment remotely.  For instance, based on information from the 20202 Department of Energy about 500 manufacturing facilities in the United States that moved to GE Digital's Predix cloud platform. Through automatic enhancements and remote performance monitoring, it reported 12% average energy savings.
• Artificial Intelligence: Artificial intelligence and machine learning have become indispensable for unlocking complex insights from energy data that humans cannot discern. AI algorithms help in predictive maintenance of equipment, dynamic optimization of systems, modeling energy consumption patterns, and simulation for decision making to enhance energy efficiency. Mordor Intelligence estimates the AI in energy market could grow at a CAGR of 22.82% from 2022 to 2027.

For instance, according to a 2020 study by the Alliance to Save Energy, AI-powered process optimization helped an American cement manufacturer reduce its annual energy costs by 15% amounting to savings of over US$ 3 million

• Blockchain Technology: Blockchain is an emerging technology being explored for facilitating transparent and tamper-proof monitoring of industrial energy consumption while protecting sensitive data. It enables reliable tracking of energy savings and trading of Energy Efficiency Certificates. Blockchain also allows peer-to-peer energy trading of renewable energy between industries.

Industrial Energy Efficiency Market Restraints

• High Upfront Costs: The high upfront costs for installing new energy-efficient equipment and systems deter many industries, especially SMEs, from adoption. Payback periods tend to be longer compared to other investments. However, governments are trying to address this through financial incentives. Companies also increasingly adopt lifecycle cost analysis to account for long-term cost savings from efficiency investments. For instance, as per the U.S. Department of Energy's 2021 report, many industrial facilities may take 3-5 years or more to recover costs of new high efficiency equipment through energy savings

Counter balance: Energy Savings Performance Contracts (ESPCs) allow industries to finance energy upgrades through future energy savings. The contractor covers the upfront costs and is paid back from the energy savings over time, reducing the immediate financial burden on the industry. Partner with an energy solutions provider or technology company to provide equipment  on a low-cost or lease basis and spread payments over time.

• Lack of Expertise: There is a shortage of skilled expertise to optimize complex integrated systems for energy efficiency in industries. It requires knowledge in disciplines like power engineering, control systems, data analytics, IoT, and information technology to be leveraged cohesively. Industries find it challenging to assemble teams with such diverse expertise. But they are trying to address this through partnerships and hiring specialists.

Counter balance: Advise upskilling current workforce through training programs focused on energy management and sustainability. Recommend the recruitment of energy managers or consultants with specific expertise in industrial energy efficiency to help plan and implement energy-saving measures

• Legacy Infrastructure: Existing old and disjointed infrastructure makes it difficult to retrofit and integrate new technologies for energy optimization in industries. Replacing legacy equipment involves substantial downtime and affects production. Lack of interoperability and cybersecurity risks of Industrial Control Systems also hamper integration. However, industries are modernizing infrastructure in phases to facilitate energy efficiency. For instance, installing LED lighting or a new waste heat recovery unit within a factory setting requires shutting down assembly lines and production during the changeover period.

Counter balance: Explore any available government grants, loans, or incentive programs designed to support the modernization of industrial infrastructure.

Analyst view

The industrial energy efficiency market is poised to grow at a steady pace over the next decade due to stringent regulations on carbon emissions globally. Major drivers for this market include the need for reducing energy costs and achieving sustainability targets among industrial operators. North America and Europe currently dominate the industrial energy efficiency space owing to early adoption of energy management best practices in these regions.

However, emerging economies in Asia Pacific are expected to provide bright opportunities in the coming years as countries like China, India and Vietnam push for greater adoption of energy efficient technologies and processes in core industries. Retrofitting existing infrastructure and systems will drive significant demand particularly in China and India. Some of the key solutions seeing increased uptake include LED lighting, HVAC and refrigeration optimization, electric motor systems and renewable energy integration.

While concerns around payback periods continue to act as a restraint, rising energy prices and focus on operational efficiency are compelling industrial plant managers to invest more in energy audits and performance contracting programs. Government led incentive programs and formation of dedicated ESCOs are also aiding the growth momentum. Overall policy support for energy management at the national level across regions will be a major factor shaping future investments.

Recent Developments

New product launches

• In September 2022, Schneider Electric launched EcoStruxure Power Automation System, a suite of connected software and systems for digital transformation of power distribution infrastructure. It helps improve safety, reliability, efficiency, and sustainability. Schneider Electric is a France-based multinational company specializing in digital automation and energy management. It operates in more than 100 countries and offers integrated energy management and automation solutions. The company addresses various sectors, including homes, buildings, data centers, infrastructure, and industries, by combining energy technologies, real-time automation, software, and services.
• In November 2021, Eaton announced the launch of new medium voltage switchgear technology, Xiria Ring Main Unit (RMU), to make electric power distribution safer and more reliable. It is an SF6-free RMU aimed at sustainability. Eaton is a diversified power management company and a global technology leader in electrical systems for power quality, distribution, and control. The company also specializes in hydraulics components, aerospace solutions, and vehicle products. With a presence in over 175 countries and a workforce of more than 92,000 employees, Eaton is a significant player in the global power management and technology industry.
• In May 2022, Siemens opened a new showcase facility for efficient electrification and automation technologies that can be customized for the mining industry. This provides an immersive demonstration of Siemens technologies tailored for mine optimization. Siemens is a German multinational technology conglomerate focused on various sectors, including industry, infrastructure, transport, and healthcare. The company's operations encompass automation, digitalization, energy, and health technology. Siemens is the largest industrial manufacturing company in Europe and holds the position of global market leader in industrial automation and industrial software. The company is also committed to sustainability, with a focus on driving substantial progress in sustainability through its products and technologies. Additionally, Siemens Healthineers, a subsidiary of Siemens, is dedicated to pioneering breakthroughs in healthcare, with a focus on innovative medtech and sustainability in the field of radiology

Acquisition and partnerships

• In January 2022, Danfoss acquired Roxar, a leading provider of software systems for reservoir management and production optimization, from Emerson. This strengthened its position in the oil and gas industry. Danfoss is a Danish multinational company that provides innovative technologies and solutions for fluid control equipment, pump, seal, valve manufacturing, climate & energy. The company offers a wide range of products that meet the growing need for infrastructure, food supply, energy efficiency, and climate-friendly solutions. Emerson is a global technology, software, and engineering company that drives innovation to make the world healthier, safer, smarter, and more sustainable. The company is committed to accelerating its automation capabilities and driving higher-value industrial technology
• In June 2021, Enel X partnered with the Italy-based energy services company Renovit to jointly offer integrated energy efficiency solutions for industries using Enel X’s technologies. Enel X is a global business line of the Enel Group that operates in the field of energy supply, energy management services, and public and private electric mobility. The company offers a portfolio of products and value-added services to incentivize more sustainable energy consumption and promote the circular economy Enel X provides innovative and technological solutions for homes, companies, and smart cities, with a focus on energy sustainability, renewable energy, and decarbonization
• In April 2022, Honeywell partnered with Shell to provide predictive maintenance and asset monitoring solutions to help extend equipment life and improve performance at Shell's Bukom manufacturing site. Honeywell International Inc. is an American multinational conglomerate with a diverse range of business operations. The company primarily operates in four areas: aerospace, building technologies, performance materials and technologies (PMT), and safety and productivity solutions (SPS). Honeywell is a Fortune 500 company and is headquartered in Charlotte, North Carolina. In the aerospace sector, Honeywell provides products and services for commercial, defense, and space aircraft, while in building technologies, it offers solutions for various industries, including ground transportation, oil, gas, and mining. The company also focuses on smart home, home comfort, safety, and energy efficiency solutions through its Honeywell Home business line. Shell is a British-Dutch multinational oil and gas company with headquarters in London, UK, and The Hague, Netherlands. The company operates in various sectors, including oil and gas      exploration, production, refining, and marketing. Shell is committed to driving sustainability and innovation across its various business segments .The company has a significant presence in the United States, where it explores and produces energy products, including fuels, oil, natural gas, lubricants, LPG, and chemicals

Figure 2. Global Industrial Energy Efficiency Market Share (%), by Systems, 2023

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Top Companies in Industrial Energy Efficiency Market

• Siemens
• General Electric
• ABB
• Johnson Controls
• Schneider Electric
• Honeywell
• Eaton Corporation
• Rockwell Automation
• Emerson Electric
• Mitsubishi Electric
• Yokogawa Electric
• Veolia Environment
• SGS
• Enel X
• Wärtsilä
• Danfoss
• Hitachi
• Legrand
• Ingersoll Rand
• Schneider Electric

Definition: The Industrial Energy Efficiency market refers to the technologies, equipment, systems, software, and services implemented across various industry verticals to optimize energy utilization. It aims to reduce energy consumption in industrial processes and infrastructure by using energy-efficient equipment, installing automation and control systems, changing processes, and adopting software to analyze and control energy flows. The adoption of energy efficiency measures brings energy and cost savings, improved productivity, reduced emissions, and long-term environmental and economic sustainability for industries.

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