EU scaleups: GNE Finance’s journey

As investments in startups and scaleups continue to increase in Europe as part of efforts by the bloc to invest in emerging and innovative solutions capable of delivering the energy transition, we explore challenges being faced by these small companies.

Although a new annual record in venture capital towards cleantech innovation is anticipated in 2021, following more than €7 billion ($8.2 billion) in the first half of 2021, according to Cleantech for Europe, we analyse why EU startups and scaleups continue to seek financial aid and growth opportunities elsewhere especially in Asia and North America and what needs to be done to address this.

We explore technologies and business cases from EU startups and scaleups that have received EU funding and how they can help the bloc to achieve the Green Deal and Fit for 55 climate mitigation goals.

We spoke with Spain-based Global New Energy Finance (GNE Finance) about how their business is helping reduce the impact of buildings’ energy and water usage in climate devastation. Today, buildings account for over 40% of global emissions.

GNE Finance’s Eduard Puig and Mara Oprea describe their journey from being a startup to a scaleup they are today:

Describe briefly the concept on which your business is based.

GNE Finance is a high-impact investment company that designs and operates integrated home renovation services to help homeowners improve their homes and thus reduce their energy-related emissions. In collaboration with cities, GNE offers these services to help home and building owners overcome common barriers to renovation.

Do you believe your business model is contributing to the Green Deal as presented recently by the EU Commission and if so, how?

The Renovation Wave, an initiative released by the EU commission as a part of the Green Deal, envisages the renovation of 220 million buildings by 2050, or 150,000 buildings a week. Since the public sector cannot achieve renovation of this scale alone, GNE helps by supporting cities and municipalities in setting up and managing one-stop-shops for home renovation.

Through the use of public-private partnerships, we are able to gather local expertise and resources to ease the homeowner’s renovation journey via end-to-end support throughout the process. The one-stop-shops that GNE establishes are put in place to accompany citizens through their entire customer journey. In the case of homeowners, support is offered for issues surrounding a lack of financing options, technical knowledge, trust in contractors, and complexity of the works, while in the case of multi-family buildings, competencies of the OSS include project management, regulatory advice, and cost control.

How difficult or easy is it to reach international levels for a scale-up or a small company? What are the causes for it?

GNE was able to reach an international level during its second year of operation due to its participation in European H2020 Projects, which bare the requirement of project implementation and action in at least 3 countries. Such opportunities granted us exposure to national stakeholders and lead to our involvement in several projects focused on a number of European countries including Spain, the Netherlands, France, and Italy. GNE has even been able to work on increasing residential energy efficiency past the EU’s borders in Chile, in partnership with the World Bank.

What role do you think scale-ups can play in the energy transition?

Moving forward, we will rely increasingly more on businesses to make the energy transition happen. Many scale-ups focus on bringing innovative business ideas and solutions to the energy market and could be the key to cleaning up our cities. In fact, many sectors and governments rely on scale-ups for a steady stream of ideas to cut emissions, and so they are often nurtured by industry-specific actors with a plethora of support programmes to foster and accelerate the innovation that is so desperately needed worldwide. It’s important to encourage these companies to enter the energy market and disrupt it with new and better products or ideas. Without this innovation, the energy transition that we are hoping to achieve will not be possible.  It is also essential that these young, innovative companies address their customer’s needs. In our case, we provide energy-efficient renovations for homeowners that aren’t interested in renovation solely for energy efficiency, but rather for comfort, health, well-being and even for status.

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Buildings are the largest emitters yet have the greatest potential to address climate change. Why is the industry still lagging in climate mitigation compared to other sectors such as transportation and energy generation? What needs to be done?

In the residential sector, the market offer for sustainable energy upgrades is fragmented, as it is composed of a myriad of small companies or initiatives which are mostly uncoordinated. The renovation market, therefore, does not have enough actors generating strong enough influences to standardise services tailored towards home renovation. This means renovations carried out by home and building owners may not be the most beneficial in terms of reducing energy use. However, multiple pilots have been developed in the last 10 years which serve as concrete examples that renovating Europe’s building stock is possible if the appropriate methodologies are applied and correct actors become involved. Ultimately, the home-owner holds the power to renovate and is the target market which all of our efforts should be aimed towards. Without increasing their engagement and desire to sustainably renovate the buildings that directly affect their lives, progress will be minimal and all of our efforts will be in vain.

A major issue within the EE industry also lies with the complexity of renovating multi-family buildings. These renovations can only occur if there is a consensus among the general assembly of homeowners to renovate. When it comes to building owners, decisions for retrofits are made rationally and based on pay-back, business cases and opportunity costs. The collaboration of these two actors often results in split incentives where barriers to implementation occur due to the interests of the tenants, who are responsible for paying energy bills, are not the same as those of the landlords or building owners making the capital investment decisions. In order to overcome this barrier, building owners must be shown that upgrading the value of their assets will enable them to apply higher rents post-retrofit. Essentially, what needs to be done is to couple homeowner’s initial will to improve their home with policy that incentivizes home and building owners to take the decision to retrofit their homes and assets.

What challenges did you face both as a startup and scale-up and how did your introduction to the EU helped you address the challenges?

Our difficulty lied within being recognized by the market as a knowledgeable stakeholder capable of serving the needs of our clients. Being awarded the lead of several H2020 projects on the topic of innovative financial instruments to boost residential energy efficiency has prompted GNE’s position in the market. Nowadays, we are being consulted regularly by the European Commission along with other high-level organizations working on policy and advocacy such as EEFIG, BPIE, and World Green Building Council Europe.

Which smart buildings sector requires most attention to speed up the energy transition and why?

According to the International Energy Agency, EE improvements in buildings can contribute to a reduction of around half of the energy-related greenhouse gas emissions that are required over the next 2 decades. By connecting the public sector with experts in integrated services focused on the homeowner, we are enabling partnerships that combine the agility and market knowledge of the private sector with the trusted image and robust service provision of public authorities to further the energy transition. It is important to note that although increased use of green technologies for energy generation is vital for decarbonizing the building sector, efforts should simultaneously be placed in reducing the demand for energy, and hence increasing the energy efficiency, at the residential level. In order to do this, integrated home renovation programs put in place using public-private partnerships are key to engaging the citizen, and ultimately the most important actor, in home renovation. In doing so, we can help to mature the energy efficiency market and work toward making renovation and the energy transition accessible for all.

What trends are likely to shape the smart buildings market through 2025? Are we going to see new technologies, what existing technologies will likely see widespread adoption? Are existing technologies within the sector adequate to drive the energy transition?

The NextGenerationEU Funds are expected to shape the market as they will trigger a great deal of demand for renovation from homeowners. GNE is agnostic regarding future technologies that will advance the energy transition, as our focus remains on the citizen. This is the key stakeholder responsible for making the complex decision to renovate, and so our work revolves around this actor and their needs rather than on one technology dedicated to energy efficiency. In our belief, the technologies that may see widespread adoption are those that make the lives of homeowners easier, more comfortable and that make them feel that they are contributing towards abating climate change.

Find out more about GNE Finance.

Eduard Puig – Chief Operations Officer and Co-Founder

Trained as an industrial engineer in Barcelona, Spain, Eduard holds an MBA from ESADE in Barcelona and has executive training in Innovation Management from Escuela de Organización Industrial in Madrid, Spain. Prior to launching GNE Finance, Eduard founded Climate-Aligned Partners, a consulting firm located in Amsterdam to provide advisory services on Strategy and Financing to SMEs. Eduard worked for 6 years as a Corporate Development Manager at Enertika, an ESCO headquartered in Spain.

Mara Oprea – Project Leader

Mara holds a Bachelor’s degree in Environmental Studies and Biology from York University, as well as Master’s degrees in Sustainable Development from Utrecht University and Sustainable Business Management from Karl-Franzens-Universität Graz. Mara has worked in the solar and events industries to facilitate the international energy transition. At GNE Finance, Mara supports the development of EU projects which are centered on sustainable home renovations and heads corporate and project communication efforts.