Baby Steps: CRE’s Energy Efficient Future

I recently read an article from NPR where experts imagined what the world would look like in 2050 if we were able to reduce the globe’s net greenhouse gas emissions down to zero percent by that time. These imagined scenarios for reducing emissions range from new methods of farming to mass adoption of urbanization to a shift in how heating and cooling systems are powered. Commercial real estate overlaps with many of the ideas in the NPR article.

And there’s a solid reason for this – per the U.S. Energy Information Administration, 18% of total U.S. energy consumption was consumed by commercial buildings in 2017. According to the same report, only 3% of energy consumed by commercial buildings was from renewable sources. So whether commercial buildings can become more energy efficient or obtain their energy from renewable sources, there’s definitely room for improvement in the industry.

Not surprisingly, one of the largest line items on property owner’s P&L statements is the utility expense. Some commercial property owners have taken steps to reduce their carbon footprint and recurring utility expense by installing solar panels, energy efficient windows, or new heating/cooling systems. However, to achieve the goal of reducing the globe’s net greenhouse gas emissions to zero percent by 2050, we need the vast majority of commercial property owners to become more energy efficient with a focus on renewable energy sources.

While technologies such as see-through solar cells (i.e. solar windows) have concerns around durability and efficiency (today), technology has been improving the energy efficiency in rooftop HVAC units, water heaters, and heat pumps. However, replacing these systems are a large capital expenditure. For a building owner to replace their older systems with new, energy efficient systems, the cost-savings analysis needs to clearly show an appropriate return on investment. Or the older equipment needs to fail and be replaced. Waiting around for equipment to fail and hoping costs come down is not a great plan.

Recently, entrepreneurs have created software to monitor building equipment with sensors to help property owners better understand where energy is being used  (a couple startups in this space include Enertiv and Aquicore). While these technologies will not directly help a property owner reduce utility use, they will help owners understand where they are using energy, where an owner can optimize performance of their equipment, and they can help owners use data to assist in large capital expenditure decisions. If an owner can use these technologies to identify an overworked piece of equipment or optimize a heating/cooling schedule, they can address these issues and begin to reduce utility usage.

These monitoring technologies are not earth shattering, but installing these technologies are some baby steps that property owners can take to reduce energy use in commercial buildings, thus reducing their production of greenhouse gases. The early adopters of these technologies have seen a reduction in energy use, which can also lead to a reduction in their operating expenses (go check out the case studies for Aquicore and Enertiv). If commercial property owners see a clear path to an expense reduction by installing energy efficient equipment or other green solutions, they will do so (before the equipment fails). Due to scale, a small percentage reduction in a large building can have a pretty big impact on the environment, and these small reductions start to add up over time. Perhaps these are the incremental steps that lead to the exponential increases of Moore’s Law.

As someone who hopes to be on this planet in 2050 (and hopefully many more years!), I wish we could go full steam ahead with all the ideas from the NPR article right now, but some of these ideas are prohibitively expensive to implement (today) and, as the article states, the hardest part is navigating the social disruption some of these ideas have. However, building owners can start to take some baby steps to understand and manage their energy use to make more informed decisions on future energy efficient capital expenditures. Entrepreneurs are going to continue to tackle ways to reduce greenhouse gas emissions and the technologies to do so are going to become better and cheaper over time. I am very excited to be working in the venture community where I can see technologies in the early stages, knowing that these problems are going to be solved. If you are a startup with a better or cheaper way for properties to reduce their carbon footprint, we would love to hear from you!

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