Top 10 Growth Opportunities

State of the Industry – What‘s next?

Sustainability, digital transformation and the energy transition have accelerated significantly in the past 18 months. The global Energy and Environment (E&E) industry is going through an unprecedented transformation and this change is bringing exciting new growth opportunities.

But the transition to a net zero future for carbon emissions means many companies also face struggles with pricing pressures, commoditization and industry disruption.

The competitive landscape for the future of the E&E industry will be different; driven by innovation, market transformation, and disruptive business models. The advent of greener, smarter and more connected products and services will transform our cities, communities, workplaces and homes into a digital and sustainable domain. This will enhance efficiency, environmental performance, reliability, productivity, flexibility, safety and company profitability.

In the wake of COVID-19, there is also an opportunity for the E&E sector to be at the heart of a ‘green recovery’. Every company has the chance to grow and pivot in the E&E space in 2022, by embracing ten transformational trends and opportunity areas:

Climate Neutral Cities
Circular Economy & Scope 3 Emissions
Sustainability as a Service
Cognitive Buildings & Digital Twin
Services 2.0
Energy Efficiency & Automation
Hydrogen Economy
Carbon Capture, Utilization & Storage (CCUS)
Electrification & Growth in Renewables
Critical Power & Data Centre Investment

By adopting these critical levers, companies will be positioned to weather upcoming uncertainties, create differentiation and sustain top-line growth.

Climate Neutral Cities offer a decentralized pathway to decarbonization

Cities account for close to 75% of carbon emissions and will have a key role in the path to decarbonization. In the absence of a political consensus among nations to take action on decarbonization – cities have the opportunity take the lead. Cities are deploying decarbonization roadmaps on the 3 key pillars of energy transition, energy efficiency, and circular economy focused on both the demand and supply side of energy, transportation, homes & buildings, water and waste management services. Cities are becoming innovation hubs for the design, development, piloting and roll-out of climate-smart solutions and platforms.

What’s Driving Growth?

Investors looking to capitalize on the ESG-aligned decarbonization opportunity in cities.
Global Covenant of Mayors for Climate and Energy together with C40 Cities initiative to recruit 1,000 cities to deliver on climate action.
European Union’s Green Deal, 100 Climate Neutral and Smart Cities 2030 and supporting financial support mechanisms.

Key Growth Opportunities

Electrification of public transport powered by renewable energy.
Building, Information Modelling (BIM) and Digital Twins for buildings, assets and infrastructure of building and utilities.
Prefab, 3D printing and robotics to reduce carbon intensive materials such as steel and cement.
Buildings as Material Banks for recycling and resourcing of materials from buildings.
Smart infrastructure/grids and asset monitoring.
Smart metering of energy, water and waste management services.
Greener building materials with lesser embodied carbon.
Net positive buildings.

Recommendations & Best Practices

Cities comprise a diverse range and mix of stakeholders. To be successful in reaching the climate neutral goal – cities will need to ensure the policies are both effective, equitable and localized.
Partnerships with private sector will be crucial for the much needed investment.

Circular economy of resources is witnessing digital transformation with a shift of focus on Scope 3 emissions of upstream and downstream parts of value chains

The global resource management sector is transitioning toward greater digital technology adoption using disruptive and smart solutions. These include internet of bins and fleet management, ERP, cloud computing, customer interface, waste tracking systems, and AI robotic sorting. Digital technologies are a game-changer for resource-related operations and logistics in collection, sorting, and recycling, resulting in high automation, support, and enhanced service quality.

What’s Driving Growth?

Increasing demand for real-time data analysis and customer-centric operations for greater transparency and monitoring.
Emphasis on greater operational efficiency, higher material recovery rate, long-term cost-effectiveness, and safety along progressing urbanization, industrialization, climate change, and growing waste volumes.

Key Growth Opportunities

ERP solutions comprising of Value Chain Mapping, Monitoring and Certification.
Fleet Management & Reverse Logistics.
Product/material passports/assessments.
Smart Material Recovery Facilities.
Sustainability Cloud Services.
Track & Tracing Platform Services.

Recommendations & Best Practices

Development of innovative business models and cloud-based enterprise solutions for resource management service providers that cover end-to-end services mapping of value chains are crucial to meet future market demands.

Data-driven service model to achieve sustainability outcomes gaining traction across industry verticals

Sustainability as a service is emerging as a strong business model to drive behavioural change and provide purpose-driven outcomes for customers. The key to a more sustainable future economy is resilience achieved through much greater levels of digitalization. Remote monitoring, operations, automation, data analytics, and artificial intelligence will equip business operations with the actionable insights to enhance resilience as well as achieve key sustainability outcomes of decarbonization, water/resource conservation and health wellness and well-being. Sustainability as a service model is able to leverage and/or deploy the data infrastructure and provide the sustainability outcome based services for customers.

What’s Driving Growth?

Investors and customers are accelerating the sustainability and ESG agenda of industries and utilities.
Steep increase in the deployment of sensors and supporting digital infrastructure in manufacturing, building and utilities for tracking, monitoring and analysis of assets and supply chain services.

Key Growth Opportunities

Net Zero as a Service for Manufacturing and Buildings
Decarbonization Roadmap Tracking and Monitoring
Sustainability Cloud Services
Supply Chain Sustainability
Indoor Air Quality as a Service
Smart Asset Management Services for Utilities
Sustainable Procurement Services
Sustainability monitoring and reporting services
Sustainability performance based contracting
IT Asset for Refurbishment/Re-certification and Reuse

Recommendations & Best Practices

Sustainability as a service provides a unique data-driven approach for the mapping of energy/resource intensity in operations, assets and/or value chains to identify and manage key sustainability outcomes of decarbonization and resource conservation.

Digital twin in the built environment will play a critical role in operations and maintenance of connected and healthy workplaces

Digital twin, combined with a smart building platform, is to become the 4th-generation solution for the Homes & Buildings industry in the operations and maintenance phase of building lifecycle management. Virtual simulation of building performance optimization scenarios will be tested and implemented in commercial buildings.

Immediate Opportunities in 2022

Digital twin providers must target critical infrastructure segments in the short term to mitigate the financial damage done by COVID-19. In the long term, companies should target smart city infrastructure projects in high-growth regions to capitalize huge opportunities in these segments.
Digital twin software equipped with Artificial Intelligence (AI)/ Machine Learning (ML) and analytics will gain competitive advantage. Building owners that are committed to sustainability understand the value of AI/ML.

What’s Driving Growth?

Collaboration and Operating Cost Reduction – Technology companies will team up with digital twin and smart building participants to create a virtual twin of connected and healthy workplaces, monitoring indoor air quality, optimizing space utilization, and increasing energy efficiency.
Evolution of Urban Infrastructure – The digital twin will increasingly be used for advancing urban infrastructure through smart city planning and construction. For instance, Microsoft and Bentley Systems collaborated to explore opportunities for digital twins in urban planning and citizen engagement.

Recommendations & Best Practices

Incorporate AI and Machine Learning (ML) in digital twin platform
Align digital twin solutions to promote sustainability and net-zero buildings
Develop flexible business model and incentivization

Augmented services to reduce human intervention in maintenance and improve operational costs

The pandemic will continue to drive the facility management (FM) and energy management service markets to move beyond total cost of ownership (TCO) and building efficiency. Next-generation service and maintenance solutions will witness convergence with digital technology in enhancing total business productivity, user experience, and achieve sustainability goals.

Immediate Opportunities in 2022

The pandemic has shifted the focus of building owners, property managers, building services companies toward healthy building standards and certifications. There is a growing opportunity to offer these services as a part of a new business model in the form of healthy buildings-as-a-service and integrated service contracts.
Higher demand is forecast for SaaS and energy-as-a-service agreements post-COVID-19 than one-time installation cost models or licensing models. Building technology companies with in-house ESCOs are likely to benefit from comprehensive service agreements.

What’s Driving Growth?

Performance-based Operations – FM is converging with energy management, performance contracting, and sustainability management, thereby driving up the overall addressable buildings services and maintenance market universe.
IoT-based Services – Increasing use of IoT devices and sensory networks in buildings will create demand for smart and digital-based maintenance services.

Remote cloud-enabled automation capabilities will address operational gaps in managing energy efficiency while ensuring the completion of sustainability goals

Managing and using energy resources as efficiently as possible is a key pillar of decarbonization. The Homes & Building sector is a core growth opportunity area, with over 40% of global carbon emissions coming from buildings.
The COVID-19 pandemic has encouraged investments and financing mechanisms for sustainable buildings through many recovery plans for the building sector. These plans describe the higher energy efficiency growth needed to achieve net reductions in final energy use.

Immediate Opportunities in 2022

Connectivity-as-a-Service will be a crucial business model for intelligent building management and automation. The model will include technology that integrates easily with building data and provides an immediate, tangible ROI.

What’s Driving Growth?

Sustainable Energy Management – It involves reducing energy costs in commercial and industrial buildings to minimize energy waste and operating costs and improve owners' net operating income.
Digitalization – A new wave of competition from start-ups and digital businesses challenges the traditional competitive landscape. With intensifying competition, there is scope for business expansion to address long-term business needs.

Recommendations & Best Practices

Integrate systems for a centralized building management portfolio to create operational consistency across sites regardless of region. Create predictive monitoring and maintenance plans for critical assets to limit disruption due to failure and optimize asset upgrade / replacement strategies.

Hydrogen is a key part of the solution toolbox in achieving global decarbonization

Policy makers are focused on creating the necessary framework for the hydrogen economy to flourish, investor appetite to back hydrogen initiatives is high, and industrial conglomerates and busy developing production, transportation and storage solutions for commercialization. End user industries are busy partnering with key stakeholders on proof of concept trial projects for these new solution offerings. A key priority is to ensure that future hydrogen comes from either low carbon or abated fuel sources.

What’s Driving Growth?

The need to take action to reduce the role of fossil fuels in the global economy.
The need to build up the necessary infrastructure to enable the hydrogen economy to become a reality.
Keenness of governments to invest in hydrogen as a way of to boost growth through post-COVID recovery plans.

Key Numbers

99% of the 70 million tonnes of hydrogen currently produced is hydrogen from fossil fuels (grey). Going forward, new capacity added must be from a low carbon energy source – such as renewable energy (green) or nuclear power (purple) – or from an abated energy source such as gas with CCS (blue).
Frost & Sullivan’s base case forecast is for 200 million tonnes of hydrogen to be produced by 2050 – 75% of which will be green.

Key Growth Opportunities

Power-to-hydrogen.
Hydrogen storage for securing electricity supply.
Decarbonisation of hard-to-reach industrial processes – fertilizer production, chemicals, iron & steel.
Massive build-out of electrolyser capacity.
Green ammonia as an energy source for maritime and aviation
Accelerating the adoption of fuel cells for power generation.

CCUS has long been touted as a solution for the power sector, but it has been given new impetus by the deployment potential in industrial applications

The volume of projects across the power, oil & gas and industrial sectors is forecast to significantly increase over the next decade in order to meet decarbonization goals. As the volume of projects increases, the cost per project is expected to fall, creating a virtuous growth cycle whereby the economics of projects are continuously improving. A key future development for the industry will be the utilization of captured carbon, which will provide an additional revenue stream and improve project economics further.

What’s Driving Growth?

The need for power, oil & gas and industry sectors to meet decarbonization targets.
Investor ESG pressure to take action on emissions.
Higher carbon prices improves the economic viability of CCUS.

Key Numbers

$36 billion to be invested annually in CCUS by 2030, with 70% of that investment for storage and 30% for utilisation.
Investment levels split relatively evenly between the three major global regions – North America to account for $12.3 billion, APAC $10.6 billion and Europe $10 billion.
Hydrogen production and bioenergy will be the two most important end user segments for revenues, accounting for 50% of the total.

Key Growth Opportunities

Massive infrastructure build-outs for the capture, transportation and storage of carbon.
New revenue streams for extraction companies as they repurpose depleted fields for storage.
CCUS-as-a-service offerings for industrial customers.
Development of modular CCUS offerings & clusters/hubs to drive project efficiencies and reduce costs through cost burden sharing.

Significant progress has been made, but unabated fossil fuels still accounted for 61% of global power generation in 2021

The industrial sector is much further behind, where 90% of the energy used is either directly from fossil fuels or fossil-based energy. Despite the recent growth in EV sales, transportation is still heavily dependent on fossil fuels. Significant progress must be made on all of these over the next decade if emissions reduction targets are to be achieved.

What’s Driving Growth?

Increasingly stringent decarbonisation targets in most global geographies.
Corporate sustainability agendas – the need to take action to mitigate corporate climate risk.
Continued declines in project and technology costs that make unsubsidised renewables competitive with fossil fuels.
Technology innovation that is making electrification solutions for industry a more viable option.

Key Numbers

An average of $400 billion will be invested annually in renewable energy sources over the next decade.
Over 600 coal-fired power plants to close in the next decade, 25% of the global total.
Low-carbon electricity to account for 55% of total electricity supply by 2030 and 71% by 2040.

Key Growth Opportunities

Potential for equipment supply, project management and implementation of a high volume of renewable energy projects across nearly all key country markets.
Desire for advanced servicing solutions to further reduce OPEX costs and drive renewable ROI.
High sales volumes for industrial solutions to replace existing fossil ones – 70% of global furnaces are due to be replaced in the next decade. A combination of electric furnaces, heat pumps, induction heating etc. to be deployed.

The global data centre market continues to maintain its growth streak through the COVID-19 pandemic and will maintain its high growth trajectory in 2022

Data creation has increased significantly due to increased penetration of internet-enabled devices and industrial sensors such as IOT devices, leading to high demand for data transfer and data storage systems. This has led to massive investments in data centres across the globe.
Cloud investments are mainly driven by North American technology firms that are investing heavily in hyper-scale facilities across the world. The data centre industry is also witnessing a massive wave of investment activity from Special Purpose Acquisition Companies (SPACs) and Marquee Investors; this is expected to take M&A activities to the next level in 2022.
The industry will witness an increasing need for hyper-scale capacity from the enterprises, primarily from public cloud services provider segments; most of the development is expected to happen in Asia and North America. The Asia-Pacific region is expected to become a hub for data centre construction as companies in China, South Korea, Japan, and Taiwan take advantage of the data creation boom.

What’s Driving Growth?

Key factors that will drive the market during this period are increasing demand from hyper-scale data centres, high levels of investment from the colocation segment, significant increase in data creation and consumption, high volumes of data traffic fuelled by emerging technologies such as 5G, Edge, IoT, along with AI/ML developments, ever increasing enterprise outsourcing, increasing adoption of hybrid-cloud and of course, high degree of data centre activity in emerging economies.

Recommendations & Best Practices

Colocation providers need to add more value around hybrid cloud and deliver new types of value centres on the hybrid cloud and multi cloud ecosystem.

Explore Innovations in Energy & Power to optimize efficiency, costs and power consumption – Leverage Artificial Intelligence (AI) to monitor, analyse and manage key metrics.

Frost & Sullivan has spent the last 60 years learning how to navigate disruption and transformation to create growth opportunities that allow businesses to thrive. We’ve come to believe that the growth of companies cannot be separated from the stakeholders around us and that when properly managed, company growth not only impacts the bottom line but addresses many global challenges that face society as a whole, including economic inequality, climate change, and social inclusion. We intend to spend the next 60 years enabling growth opportunities that don’t just make good business sense – they become a moral imperative.

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