Guest writer Gina Elliott, from US-based Buildings IOT, discusses the importance of commercial building owners embracing sustainability in order to drive not only economic incentives, but environmental ones too.
Commercial building owners have always sought to reduce operating expenses, but the quest to accomplish this via reduced energy usage and higher energy efficiency is now critical to that reduction. The U.S. Department of Energy estimates that the country’s commercial buildings account for 18% of primary energy use, leading to yearly expenditures worth $190 billion (£165M). In fact, 18% of non-residential real estate energy consumption in the U.S. is greater than the energy consumption of the entire country of Canada.
Beyond the economic impact, commercial energy consumption has a costly environmental impact. Burning fossil fuels to provide energy for buildings emitted 718 million metric tons of carbon dioxide in 2020, approximately 16% of all U.S. CO2 emissions that year.
More than a mechanism to save money, buildings have the opportunity to become more sustainable and environmentally friendly.
Why Buildings Decide to Embrace Sustainability
As organisations face increased pressure to implement environmental, social, and governance (ESG) programs to reach net zero by targeted dates – especially publicly traded companies – they need to look even further at their physical structures to accelerate achieving these goals to meet federal, state, and local mandates. Government bodies at all levels prioritise sustainability and hold organisations accountable to fulfil these goals and limit emissions. Consistent data and reporting will become crucial to measuring goals.
For example, in March of this year, the United States Securities and Exchange Commission proposed rules that aim to enhance and standardize climate-related disclosures for investors by requiring publicly-traded companies to disclose their greenhouse gas emissions and other climate-related risks to their shareholders starting as early as 2023.
Publicly-traded real estate investment trusts (REITs) have already begun providing sustainability disclosures and reports to keep up with today’s growing environmental concerns. Prologis, the largest owner of warehouses in the world, has focused on sustainability – and reporting on it – for quite some time. Even non-publicly traded real estate companies will need to embrace these methods. When doing business with a publicly-traded real estate investors, non-public entities will need to report their greenhouse gas (GHG) emissions to the public REIT as part of that public REIT’s required Scope 3 emissions reporting. If the non-public business partner cannot provide that data, then the public REIT may reconsider doing business with the company that cannot comply.
Investors have taken notice as well. According to BNP Paribas Wealth Management, Socially Responsible Investing (SRI), ESG, Low Carbon and Clean Energy indices have outperformed non-sustainable benchmarks over the last five years. Since 2016, general SRI/ESG indices and more specifically low carbon/clean energy indices have all outperformed European and global benchmark indices.
Other government organisations specifically focused on energy, such as the U.S. Environmental Protection Agency and Energy Star, provide building owners with resources that help boost awareness and incorporate strategies. State-level government resources also exist, such as the New York State Energy Research & Development Authority (NYSERDA) in New York, which encourages energy efficiency and the use of renewable energy sources for public, private, and residential properties.
Adding to the government mandates, utility companies have also stepped in to assist building owners with energy conservation to prevent grid overload. For example, Pacific Gas and Electric (PG&E) offers energy efficiency solutions that tackle LED lighting, HVAC controls, appliance optimisation and efficiency that reduce operating costs for owners while attracting and retaining tenants. Another example is the Database of State Incentives for Renewables and Efficiency (DSIRE), run by North Carolina State University and Energy Sage, which helps businesses across the U.S. identify tax credits and exemptions, loan programs, and rebates when deciding to acquire renewable energy assets.
While government agencies and utilities prioritise sustainability, tenants and occupants are also largely driving the need for more sustainable spaces. Employees, consumers, and investors are reconsidering working with companies that do not align with their values and are increasingly expecting the commercial buildings in which they work, shop, eat, or go to school to meet their expectations for sustainability. To meet these needs, corporations, especially those in the technology, finance, and insurance sectors, are interested in meeting net-zero goals and often use this in their messaging and mission statements.
Whether driven by government enforcement or the needs of tenants and occupants, there are several forces shaping the future of building management and operation. Commercial building owners will need to adapt and evolve their strategies to succeed, and fortunately, the building industry has solutions in place to help stakeholders along the way.
Predictive Maintenance: A Key Driver for Sustainable Buildings
Saving energy by ensuring equipment is only running when needed can be an efficient way to realise cost savings and reduce waste, whether it’s energy, carbon, time, or money. Accomplished largely by analytics software, such as fault detection and diagnostics, it delivers two benefits: it provides real-time, prioritised alerts of equipment that is underperforming and provides root cause of issues related to energy, operations, comfort, and health.
As such, these predictive maintenance strategies represent a seismic shift in the day-to-day operation of those running a building. The longer-term benefits mean a more efficient and sustainable property utilizing predictive technology to optimize everyday operations.
When introducing equipment analytics, building owners and operators must incorporate its utilisation into their existing maintenance routine. Indeed, a phased approach to implementing predictive maintenance for energy efficiency and optimisation will yield lasting results. Reducing energy consumption is a relatively straightforward time-to-value calculation, as it represents a goal most building owners wish to pursue immediately and analytics provide quick results.
The ROI for predictive maintenance is easily calculated based on the existing maintenance strategies, particularly the cost of break/fix, contractor cost, the productivity of staff and the impact of downtime. Assuming an average of $1.63 per square foot of annual maintenance cost and a conservative 8% savings, a predictive maintenance strategy would save a 150,000-square-foot building almost $26,000 per year. In addition, the improvement in productivity would be substantial.
DIY: The Growing Trend of Renewable Energy Generation and Storage on Site
On-site renewable power generation and storage is another way for building stakeholders to implement more sustainable practices.
For example, commercial property owners have been implementing on-site microgrids and DERs to deliver greater efficiency, cost control, and sustainability. And as an added benefit, using renewable energy resources like solar and energy storage builds resiliency for when the utility grid goes down.
This microgrid trend has been gaining momentum for several years and will continue to grow, thanks to the push for renewable integration. These “smart energy upgrades represent a way to add value to premium properties serving customers that demand top-of-the-line service in a world tilting toward a digital economy,” notes RealComm. However, owning and operating a microgrid requires a talented and dedicated team of people that not every organisation can have available to them.
Energy-as-a-Service (EaaS) providers, enabled by a smart building integration platform like IOT Jetstream, will continue to bring cleaner energy into the grid when utilities are otherwise not incentivized to bring it online, as evidenced by the successful implementation by large-scale property owners like Macerich.
Energy Management Success Story: Macerich
Macerich is one of the country’s largest property owners, operators, and developers in retail and mixed-use real estate. When the company, the third-largest shopping centre investor in the U.S., wanted to unify energy management systems across 17 sites, the REIT sought the help of Buildings IOT to integrate them without disrupting operations.
Macerich’s previous energy management systems didn’t provide any insight into whether the systems were performing at peak efficiency. Macerich viewed using fault detection and diagnostics (FDD) as an opportunity to enhance and modify operating parameters to reach the company’s energy goals.
Buildings IOT married Macerich’s two competing goals of an engaging mobile-forward user front-end and robust FDD back-end, leading them to the platform currently in use today. Since its initial implementation in 2019, the platform has been a key driver of Macerich’s 9% reduction in emissions—significant to the REIT’s goal of carbon neutrality by 2030.
There is Still Work to Do
While saving money and reducing energy consumption are welcomed goals for any building owner or property manager, it is much more complex in reality. Improving sustainability is a growing concern, driven by external forces such as government mandates and internal factors such as tenant and occupant needs, but it can be challenging to implement. Predictive maintenance can help cut costs by reducing energy consumption and improving operations, but to meet ESG objectives, there are other measures to consider. As the corporate real estate industry is still finding normalcy throughout 2022, sustainability is becoming a leading factor in the marketability of owned assets.
About the Author
Gina Elliott is Chief Services Officer with Buildings IOT where she oversees the customer onboarding, digital services, and customer success. Gina has held positions with Schneider Electric, EasyIO, and Switch Automation. She has been recognized in the industry as Person of the Year nominee (2017), 100 People You Should Know, Women of the Year and 2018 nominee for The Power 100: The Most Powerful Women in the Channel and 2019 winner of ControlTrend’s Small Business Executive of the Year.
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