Buildings are energy intensive – in the energy crisis, better efficiency is crucial

As the global energy crisis intensifies, the public and private sectors face mounting challenges in securing reliable and affordable energy to keep real estate and infrastructure running as normal in the coming months.

Given that buildings account for around 40% of global energy use, a perfect storm of conditions including the war in Ukraine, a surge in demand for energy after curtailed production during the pandemic, and inflationary prices is taking its toll.

And the outlook remains uncertain – despite shorter-term support measures such as the UK government fixing gas and electricity prices for businesses for six months from October 1. The EU plans to cut gas imports from Russia by two-thirds within a year and member states have agreed to reduce gas usage by 15% in the next seven months. A potential price cap on Russian gas is another measure on the table. In the U.S., prices have recently fallen back from record highs but remain significantly higher than a year ago.

With the heavy energy use seasons fast approaching in the northern hemisphere, real estate owners and managers are assessing the implications of potential brownouts, lack of available gas supplies, and steep price increases for both electrical and thermal energy.

While it’s an undoubtedly difficult time, even moderate tactical operational, structural and strategic steps can help companies to better position real estate to weather the current storm - with the added benefit of accelerating their transition to net zero status. Here’s how:

Reduce operational energy use

This is the obvious starting point but it’s area where many companies can still make significant savings. One key goal is to conserve energy by reducing use in unoccupied or underoccupied parts of the building. Consider, for example, an office that supports a hybrid workforce. The company may choose to limit in-office hours to three days a week, Tuesday through Thursday, conserving energy from Friday through Monday.

For buildings that need to remain open round-the-clock, concentrating density in specific spaces can reduce operational energy use. Using advanced software tools, occupants can schedule office visits in advance, allowing the company to coordinate space allocation to maximize occupancy on a single floor of the building. This approach can reduce energy use by 10 – 20% - and can be enacted immediately. Longer-term, smart sensors that detect office occupancy can make a critical difference to energy efficiency by optimizing lighting and heating, ventilation and air conditioning systems (HVAC).

Identify building improvement and enhancements

Mid-range strategies involve structural changes that can mitigate energy consumption. Investments in modernized HVAC and lighting systems can significantly improve energy efficiency in addition to other building modifications for energy efficiency like improved insulation. These enhancements also bring buildings closer to net zero design.

In older buildings, draught proofing and better insulation can cut wasted heating costs while switching to LED lights and maximizing the use of natural light in office design can improve energy efficiency while creating a more pleasant work environment.

Negotiate a PPA

Corporate demand for power purchase agreements (PPAs) for renewable energy continues to grow amid a focus on looming sustainability targets. Even though the installed costs for solar have dropped significantly during the last decade, prices are inflated right now; Q2 2022 analysis from LevelTen Energy found purchase prices in Europe were up almost 47% year-on-year and almost 30% higher in North America. However, negotiations lock in the rate for the term of the contract, typically 15 – 20 years, providing some pricing stability and visibility into long-term energy costs.

Given the surge in demand and limited supply, PPAs can be difficult to secure. Companies should engage a qualified third party to help identify potential sources, review contract terms and conditions, and ensure optimal value.

Pursue energy self-sufficiency

Installing onsite renewable energy sources is a growing area as companies look to become more self-sufficient while minimizing their carbon footprint. Depending on a building’s size and location, onsite photovoltaic panels can be one option. While this may not completely eliminate dependence on third party sources, it can reduce total grid purchases, ensure more stable costs for energy supplies, decrease the overall average cost per kilowatt, and potentially turn excess energy into additional income by selling it back to the grid.

Take a step toward the future

Not every sustainability and property enhancement strategy aligns well with reduced energy use. As the energy crisis gathers pace, tradeoffs will be inevitable in the short-term. Yet buildings and tenants must also maintain a longer-term focus; actions taken now to reduce reliance on fossil fuels will support their net zero ambitions and help to future-proof their business in the coming decades.

Navigating these complexities is not evident. For more information on what’s right for your business, contact our experts to help cut your energy use and optimize your sustainability strategy.

Contributors:
Christian Whitaker, Global Head of Sustainable Operations, JLL
Gregg Taylor, EMEA Head of Sustainable Operations, JLL