What Is Holding Back the Energy Transition? 10 Challenges Facing Building Owners
The biggest barriers holding back the energy transition in commercial buildings include limited capital, high financing costs, fragmented decision-making, split landlord-tenant incentives, lack of project ownership, technology misconceptions, poor data visibility, and reactive building management practices. Industry experts speaking at New York Climate Week 2026 identified these ten challenges as the primary factors slowing building decarbonization and energy efficiency adoption.
We’re at a critical moment of the energy transition. Energy demand is at an all-time high, yet our energy supply is fraught with problems, from outdated delivery infrastructure to continued fossil fuel dependence. Buildings, both commercial and residential, make up a significant portion of that demand and contribute roughly 30% of carbon emissions. Optimizing energy consumption across the built environment is a critical step for nationwide sustainability that can help not only the environment, but the economy as well.
At New York Climate Week 2026, Budderfly’s VP Business Development and Strategy Christian Edwards joined a panel on the future of high-performing buildings, moderated by Michal I. Freedhoff of Holland & Knight.
The panel brought together experts with different backgrounds and perspectives to discuss what barriers are holding back the transition of buildings to clean energy and what critical steps we can take to move it forward. Below are some of the most interesting insights we heard from these climate leaders.
What are the top barriers holding back the energy transition?
The top barriers holding back the energy transition are capital constraints, fragmentation and management limitations, and well as performance risk and data optimization. These themes dominate the specific impediments to sustainability progress mentioned by energy and climate experts, and they are the main reasons goals aren’t being met faster.
1. People aren’t implementing the “lowest hanging fruit.”
A lot of the most basic work hasn’t been done. For example, in the small and mid-sized commercial buildings that Budderfly works in, 30 to 40% still haven't switched to LED lighting. "You would think that's completely saturated, literally the lowest hanging fruit, and it's just not," Edwards said. These changes are small and low-risk, and if more facilities made the change, the cumulative effect would be substantial.
2. There are too many decisionmakers.
Fragmented decision-making also holds back progress. Financiers, owners, tenants, and insurers all have their own interests and priorities. That means how they approach implementing efficiency may look different and move in different directions. More coordination and alignment are critical to move forward substantially.
3. Landlords lack incentives to upgrade their buildings.
There is a disconnect between landlords and tenants and who benefits from energy efficiency. When the savings go to the tenant, owners have little motivation to spend capital on upgrading their facilities. As more people understand the importance of not just energy savings, but energy resilience in the fact of increasing risk, that disconnect could change. “I think the gap is closing because energy performance and energy security,” said Josephine Tucker, Americas Head of Energy Advisory and Sustainability at JLL. “There's now a valuation implication for real estate.”
4. Capital is already designated for other business priorities.
Capital constraints are a significant barrier. Businesses have a lot of operational expenses, and capital often gets allocated to other, pressing needs. “If your money is needed for expenses that help you keep the lights on, you're not so worried about actually changing out the lights to save money on your electricity bill,” said Edwards.
5. High interest rates make financing upgrades impossible.
High interest rates present a significant problem. “Real estate is over leveraged right now. Buildings are underwater. There's not money to refinance principal, much less make capital investments,” said Sadie McKeown, Head of Innovation at The Community Preservation Corporation. “Over the last 40 years, as rates came down, tons and tons of capital came out of buildings, and if we had called carbon a pollutant 35 years ago … we would have addressed carbon the way we address asbestos or lead paint or radon.” Nowadays, there's not enough money now in a building’s life cycle to really make these transitions or these capital investments.
6. Project management and outcomes for energy and sustainability initiatives lack clear ownership.
In much of the commercial market, especially, Edwards noted, there's no facilities director or sustainability team to handle procurement, contractors, or permitting. Even when a project gets done, the performance risk is unclear. "You can put numbers on a spreadsheet," he said. "Who is actually in charge of hitting those numbers?"
7. Leadership fails to understand the value of avoided risk.
Much of the value of building modernization projects, including on energy infrastructure, comes from the fact that they prevent serious problems, yet avoided risk doesn't appear as clearly on a balance sheet. "Those are the ones that actually generate the most value, but it's not as easy to show,” noted Carlos Vargas, Chief Sustainability Officer at GRUPO HYCSA.
8. Awareness, perception, and availability of knowledgeable professionals for high-efficiency technologies can be challenging.
“Many people think of switching to electric heat pumps as political, said McKeown. “It isn't. It's good building practice." There’s also a general lack of knowledge about newer more efficient models. This can make people hesitant to install them, as they have misconceptions around the cost or payoff. But it can even get in the way of benefits when innovative equipment actually does get installed. “You could put in a great system, but if your super who's been managing a boiler for the last 20 years doesn't know how to change out the filters in a heat pump, you're not going to maximize the efficiency of the system.”
9. Data is not collected or leveraged to its potential.
Buildings are a source of data and information with the potential to make a big difference, but right now that data is extremely fragmented or inaccessible. “In order to get to the data flows that enable these projections and optimized operations,” said Edwards, “There is some level of equipment changeup that has to happen.” The transition to smart thermostats and more IoT devices could help collect vital performance data to optimize energy consumption.
10. Leaders look at building infrastructure as a line item, not a strategic asset.
When equipment fails, the default is to replace it with the same thing. An HVAC unit is a 15-year decision, Edwards noted, and the standard across the country remains a like-for-like, lower-efficiency unit. McKeown said this type of straight swap means "you're not thinking about where am I losing energy? You're just replacing a system."
Treating a replacement as a chance to improve the building’s performance overall is one of the simplest shifts an owner can make. It's also one of the hardest when the capital, the expertise, and the risk all sit with someone who has other priorities.
How Building Owners Can Overcome These Challenges
Capital constraint is one of the most straightforward barriers business owners can solve when creating a long-term strategy for building performance. Energy efficiency is the place to start. Talk to your utility and local government about the programs available and know that you don't have to pay for it yourself. Partners exist who can take the financing and implementation off the table.
Budderfly’s model is one solution to this problem. Our model is a direct answer to the three most common barriers: capital, execution, and performance risk.
Budderfly funds, installs, owns, and operates the equipment, so the customer doesn't put up capital, manage contractors, or carry the risk that the savings don't show up. With 9,000 sites connected, the data across the portfolio also makes the return on each project easier to predict.
As Edwards said, “We put up the capital, manage and execute the projects, and then take the performances out of the equation in order to deploy these technologies and truly save the energy that is there for the taking.”