This is likely not news to anyone in the industry, but commercial buildings have immense energy needs. This is putting a great strain on the nation’s power grids. According to the U.S. Department of Energy, the annual electricity use for commercial building space is an incredible 14 kWh per square foot, which is the rough equivalent of microwaving almost 300 frozen burritos.
Given the amount of electricity and natural gas consumed by commercial buildings, developing more efficient structures can help ensure a steady supply of affordable power and significantly lower operating costs for businesses, as well as help protect the environment. Most property owners are aware that the addition of solar panels to a building means less carbon is released into the environment, but the overall consensus has been that this is either too expensive or too much of a hassle to implement. However, renewable energy on commercial properties has grown to look like a more attractive option, as these investments reduce operating costs, promote sustainability and boost returns on investment.
How Do Big Buildings Contribute to Greenhouse Gas Emissions?
In 2018, the residential and commercial real estate sectors accounted for nearly 40% of total U.S. energy consumption, using large quantities of energy for heating, cooling, lighting, and other needs. The impact of buildings on energy consumption and greenhouse gas emissions is undeniable. To combat this, the Department of Energy has established national efficiency standards for appliances, lighting products, and equipment, regulating over 55 products manufactured for sale in the U.S.
Unfortunately, many of the efficiency guidelines are not mandatory and don’t account for the building itself. It is up to these building owners to adopt the standards. Looking to make commercial properties greener is more than a passing trend—it’s a significant pattern that owners, developers, and even investors have a responsibility to acknowledge. Many property developers like Prologis, General Growth Properties, and Hartz Mountain have already begun to switch to eco-conscious buildings, allowing them to reap the economic benefits while having a heavy hand in saving our environment.
Despite the independent efforts by some companies, this type of lax regulatory policy reinforces the need for climate initiatives to be better integrated, as well as increases the need for public awareness around the resources and programs available. Finding responsible and efficient ways to “greenify” buildings must be at the top of our list of efforts to cut carbon pollution.
We’ve seen the consequences of wasteful perspectives, like increasing incidents of severe weather and shrinking water supplies, and commercial property developers have a responsibility to become a part of the solution, not perpetuate the problem. According to the U.S. Environmental Protection Agency, carbon emissions in the form of carbon dioxide make up more than 80 percent of the greenhouse gases emitted in the United States. Thankfully, there are ways for commercial real estate developers to implement simple, cost-effective solutions to cut back on these carbon emissions.
When Choosing Renewable Options, Where Can You Start?
Implementing energy-saving techniques and taking advantage of cleaner sources in a commercial building is easier today than ever before. Green buildings have seen an increase in demand in recent years, creating clear incentives for companies to develop new green building technologies.
Property owners can get a lot of bang for their buck by making small renovations, like using low-flow faucet aerators, replacing outdated features, and retrofitting the property to meet modern standards. Larger projects may consist of installing green garden roofs, dual plumbing systems, or switching to recycled insulation. It all depends on budget limitations and how much they are willing to spend.
Renovations aside, what will make the greatest difference in the long run is switching to renewable energy. Power production is the main source of greenhouse gas emissions, and renewable energy reduces harmful smog, toxic air and water buildups, and the long-lasting negative impacts caused by coal mining and gas extraction.
Solar power installations have especially been on the rise, as it is more affordable and accessible in the United States than ever before. The U.S. solar industry has the largest pipeline of utility-scale solar projects in history, and by 2024, more than 15 GW of PV capacity will be installed annually.
Solar power can be converted to usable energy using photovoltaics or solar thermal collectors, and with the decreasing cost of installing solar panels, more people in more places can take advantage of solar energy. Solar power installations perform best when the site is located in an open area free from obstruction and shade caused by trees or adjacent buildings. This could be on the roof of a commercial building or an adjacent field or other large open space, such as a covered parking structure.
Onsite solar installations (known as “behind the meter” by us energy wonks) are not the only way to employ solar energy. Community solar programs, for example, are great alternatives for switching to solar power if behind the meter solar installations are not constructed. The state-specific government incentive program allows electric customers to subscribe to receive solar energy credits from a shared solar farm located within their utility area, providing businesses equal access to the wide-ranging benefits of solar energy generation, regardless of the physical attributes or ownership of a property.
As commercial real estate owners and developers assess their options to participate in the green revolution, community solar programs are an attractive option that helps create a positive impact on their local community.
What’s in it For Commercial Real Estate Owners?
Switching to solar should be thought of as an investment, not an expense. The investment pays for itself, not only by generating a positive social impact aimed at reducing the world’s reliance on fossil fuels but in terms of the money on energy costs a business will save over the years.
Commercial real estate owners who develop behind the meter solar installations will reap several financial benefits. There is the federal Investment Tax Credit (which currently stands at 30% but will fall to 26% for projects breaking ground in 2020 and continue to decline), accelerated depreciation (MKRS) and Solar Renewable Energy Credits (SRECs) which can be sold on the financial markets if the developer does not wish to lay claim to the renewable energy tag. Over the useful life of the solar asset, which can be about 35 years, monthly power costs will be decreased.
If the real estate owner opts for community solar, there is no up-front investment, and savings in the realm of 10-30% are typically guaranteed due to program subsidies in various markets. Commercial customers can negotiate a longer-term (25 years) Power Purchase Agreement in some situations, whereas smaller commercial clients typically sign up the same way as a residential customer on a shorter-term (about 5-years) or even a month-to-month basis for maximum flexibility.
The world is changing when it comes to both the physical and cultural climate. Tenants are looking for ways to reduce their energy use now just like landlords and managers have always done historically. Going green and aligning with sustainability boosts corporate image, proving that owners and developers can be innovative and utilize green technology to achieve the overarching objective of carbon neutral. The commercial real estate industry is at the forefront of a green revolution and if my experience has taught me anything, revolutions like this are not smart to ignore.