EDF Earth Day Perspective: Powering Past the Barriers

By Ellen Bell

Ellen Bell, Environmental Defense Fund.

It has been about a month since I returned from speaking at the 2016 Building Energy Summit, and yet I remain fired up about the energy management opportunities that exist for commercial real estate. The conference reinforced what I see every day—energy management is not only an opportunity, but an undisputed part of commercial real estate’s core business.

Commercial buildings are the single largest energy-consuming sector in the U.S. and energy is often a property’s single largest operating expense, representing nearly 30 percent of the typical office building’s costs. So, it’s not surprising that energy management ranks high on the radar of building owners and managers.

Programs like LEED, the Department of Energy’s (DOE) Better Buildings Initiative and other voluntary programs, combined with municipal and state benchmarking regulations, have brought energy efficiency and resulting savings to a new level. Meanwhile, an unprecedented array of advanced energy management tools is available, ranging from basic benchmarking through Energy Star Portfolio Manager to sophisticated dashboards, commissioning software and other smart building technologies that allow a team to determine how usage can be reduced.

But commercial real estate can and must go further, and the only way that’s going to happen is through greater focus on the improved tenant experience and lower operating costs provided by strong energy management. The notion that measures beyond low-hanging fruit and incentive-sweetened utility upgrades are too expensive and difficult is outdated. Clear, concise business cases and real-world success stories can show the way. Innovative commercial real estate firms are already working to solve industry-wide obstacles and piloting advanced energy management programs.

Working with real estate portfolios in my role in EDF Climate Corps, I have heard all the barriers. But I have also seen what happens when companies grasp opportunities the opportunities that await just beyond those hurdles.

Below are three barriers to comprehensive energy management and examples of how leaders in commercial real estate are overcoming them.

Shorenstein, which owns this building at the Champion Station in North San Jose, Calif., instituted a portfolio-wide energy management program.

Barrier #1: Fear of upending tenant satisfaction

Tenant satisfaction is the number-one priority of property owners and managers. It is crucial for operations to be as seamless as possible in order to reduce vacancies and keep occupants happy. Toward this goal, building teams often strive to make operations nearly invisible and the maxim “out of sight, out of mind” frequently wins the day. Many building managers view advanced energy management measures as potentially disruptive and detrimental to tenant satisfaction.

Solution: Engage tenants and educate them about the property management team’s efforts to reduce the building’s baseline energy use, as well as simple opportunities to reduce energy in their own spaces. Tenants are becoming increasingly savvy and demanding energy-efficient spaces that can help fulfill a variety of goals, from good corporate citizenship to improving the balance sheet. Engaging tenants in sustainability measures enables property teams to a vital way for properties to empower their clients while keeping an eye on their own bottom line. This can not only give tenants the feeling of inclusion, it can enhance the office experience.

Buildings that have embraced tenant engagement have reaped valuable rewards. Shorenstein Realty instituted a portfolio-wide tenant engagement strategy for advanced energy management that improves building-business performance. This “continuous improvement” approach to tenant outreach emphasizes operational performance and enhances the office experience for building occupants.

Barrier #2: Uncertainty about data analysis

Eighty percent of properties in the commercial real estate sector lack the technology or the systems to be considered “energy-intelligent.” As a result, as much as 30 percent of the energy use in the sector is wasted. A recent survey of building owners and managers highlights the confusion about the information available and its application for running a property efficiently. Forty-four percent of respondents believed they had energy management software in place, but 70 percent of the time it was generalized building management software, which lacks the granular oversight needed to generate true change. It is not a lack of options, but of understanding and education, that is holding up progress.

Solution: Choose a software solution that allows building managers to effectively use their energy data, then educate and empower staff to address the opportunities suggested by the data. Zeller Realty Group partnered with a Chicago-based sustainability consultant that provided access to a rich stream of utility and energy data from 18 properties in the Midwest. This data was housed in an online energy dashboard that generated insights into operational efficiencies for more than seven million square feet of office space. Zeller hired a consultant that identified hundreds of thousands of hours of energy-saving opportunities and helped engineers better understand and manage their facilities.

Barrier #3: Confusion surrounding technology options

Many building management teams would love to invest in advanced energy management, but are unsure of its value. As a result, building managers often pursue piecemeal strategies to advance energy management because persuading decision-makers to make the investment demands so much time and effort. This strategy may mean less savings and more work in the long run as simple solutions can quickly become obsolete and low-hanging fruit is easily exhausted.

Solution: Focus on the savings opportunities left on the table by inadequate understanding of advanced technology, and tap into the expertise of nonprofit, utility and vendor partners to create customized solutions. Energy storage solutions add value by increasing property value, lowering energy costs and providing visibility into building operations, all obvious benefits.

Irvine Co. in California is setting the example in this category with a plan to install Tesla Powerpack battery systems in up to 15 of its commercial properties. The program will create a fleet of hybrid-electric buildings that will amount to a virtual power plant of 10 megawatts of reserve capacity (enough to power 10,000 homes). The first battery was put in place in December 2015 and the company eventually intends to use energy storage system-wide to reduce peak-energy consumption, cut costs and provide back-up power during outages.

The path forward

Commercial real estate is the second-fastest growing segment among major energy-consuming sectors of the economy. It is time to turn the conversation from the barriers that too often prevent energy management from becoming part of everyday operations—and concentrate on the opportunities that advance it. Doing so will help building owners and managers position their assets as the most attractive and competitive options in the market.

Industry leaders like Zeller, Vornado and Shorenstein have taken steps to move the needle forward. Will your company be next?

Ellen Bell is the Midwest clean energy program manager for the Environmental Defense Fund.