The theme for World Green Building Week 2024 is: Reduce, electrify, adapt. Shift to electricity today for a zero-carbon future.
“Buildings account for 37% of global energy-related emissions. Energy reduction is a key part of a sustainable future and what we can’t decrease, we need to decarbonise. So, how do we build the transition to a zero-carbon future?
“We need to eliminate the use of fossil fuels across the building and construction industry.
“Currently, electricity only accounts for 35% of buildings’ energy use. We need to shift to using electricity for essential functions where possible, such as heating and cooling, as well as other facilities that utilise gas, oil, and other fossil fuels.
“To fully decarbonise, electricity generation needs to shift to low-carbon sources, too. We need to shift to using renewables that provide on-site power from solar or heat pumps or switch to green energy from the power grid.
“These types of upgrades are typically more efficient, reduce energy demand, offer cost savings and create healthier homes and outdoor spaces.”
Three industry leaders from across Tetra Tech High Performance Buildings Group, Nick Thurlow, Global Market Sector Leader for Existing Offices for NDY; Laurence Johnson, Director of Hoare Lea‘s Utility & Energy Infrastructure group; and Zoe Roberts, Senior Energy Consultant with Glumac, met last week to talk about the challenges and barriers our clients are facing when it comes to electrifying their existing assets along with some of the solutions to these issues.
1. Why now?
Our clients say: I’d rather wait for our next major refurbishment or legislation before I electrify.
The business case for electrification varies from building to building. It could be driven by meeting environmental, social and governance (ESG) targets; incoming tenant energy requirements; changes to building rating schemes: plant end of lifecycle or future-proofing against rising gas costs.
But, your reason to electrify doesn’t need to be about the economic benefits. It can be driven by reducing carbon emissions as soon as possible. A plant that uses gas is emitting carbon that’s going to be in the atmosphere for up to 1,000 years.
An electrification project takes time
The reality of a decarbonisation project for a portfolio of buildings is that the planning and long-term nature of these projects requires you starting sooner rather than later.
You may have ESG goals 10 years from now. You need to start thinking about your plan and methodology now so, when that time comes, you’re ready to implement projects.
Plan for your assets before end of life
What do you do if your plant end-of-life isn’t for another 10 years?
One of the worst things we can see happen is an emergency equipment failure with no plan in place. The equipment gets replaced like-for-like with its fossil fuel equivalent and then you’re in the same position for another 15-20 years. Planning for it now means you’re ready when goals come around and you’re ready for unplanned events.
We’re not going to encourage you to rip out your assets and start anew. We’ll encourage you think about how you can use your existing assets for peak heating or cooling days.
Legislation is moving in this direction
Policy and legislation are changing all the time and some asset owners think it’s better to wait for financial incentives, legislation or confirmation of a new government’s direction.
We know the direction in which legislation’s going; energy codes are becoming more efficient. Getting ready now is going to get you more prepared when it does come into effect.
Lettable value can increase
We’ve seen those that have gone first – and proven their targets and ratings – have seen a significant rise in lettable value. That high premium will probably only remain until everybody else has done the same so there’s good economic reason to go first and not be frightened.
Buildings that achieve an outstanding sustainability rating – where you would definitely be all electric – can demand around 10 per cent more in rental values for retail, just under 10 per cent for offices and around 6 per cent for a mixed use development that includes residential.
Risk of obsolescence
You don’t want to be left with a stranded asset when all your peers have decarbonised. This is especially important if you’re looking for a new tenant or coming closer to a break clause.
The sentiment of any major tenant looking to sign a new lease in a commercial building is that electrification is front and centre in the lease requirement.
Refinancing
Asset owners may have to refinance at a time that may not align with renewing leases or refurbishments. Some funding is only available if you meet certain criteria, for example making progress on decarbonisation.
Change in government
In the UK, there’s policy proposed that, for a commercial building to achieve an energy performance certificate (EPC) rating, it needs to improve its rating to C by 2027 and B by 2030. As this is politically driven, and there’s just been a change in government, developers are playing a waiting game to see what future policy dictates.
In our view, this uncertainty is, in itself, a reason to move forward. Don’t be in the panic. Think ahead.
Gather your data
You want to have data from across all seasons. A first step may be to plan for implementing your project after a full year of gathering data. Straightaway, this pushes out any strategic upgrade.
Also, you don’t want to be replacing plant in the middle of winter. You need to understand what your overall strategy is and the knock-on impacts of implementation.
Lock in prices, skills and capacity before they’re out of reach
It’s probable that, as the need and drivers increase, the number of buildings going through transitions and decarbonising will too. As demand goes up so will prices.
If it becomes a bit of a crisis situation – similar to what we saw in COVID – there could be a shortage of staff, skills, capabilities and grid capacity.
2. We need to talk about the cost of electrification.
Our clients say: There isn’t a big enough financial incentive for us to electrify.
Access to capital for electrification projects is really difficult. Building owners haven’t worked out a way to fully rentalise the costs of works. So, while the electrification process is seen to add value to a building, it may not equate to the full value of the cost of doing the electrification.
These capital works aren’t highly visible to a tenant so it may not be seen as attractive spend of capital.
Avoid stranded assets
Tenants are demanding much higher performing buildings. Electrification is a natural part of that alongside a larger package of improvements.
What you don’t want is an ESG-driven tenant moving into a building that’s got gas fired equipment and no electrification strategy. They want to see a plan for transition.
Understand the differential cost
You’re going to have to replace equipment eventually so how can you show the differential cost of electrifying, or the incremental added cost after you’ve considered planned maintenance work? If you can do this, rather than showing it as an entirely standalone system, that’s going to help your business case.
Establish strategic partnerships
In California, we see a lot of incentive opportunities – either from the state or from utilities – and they don’t always stick around for a long time. So, if you want to capitalise on some of these incentive opportunities, you’ve got to have projects ready to take advantage of funds before they vanish.
Take control of your energy
Fossil fuels are cheap and, as we electrify, there’s a risk they’ll get cheaper. This suggests it’s going to be harder to pull away.
While you can’t own your own gas field, you can own electricity. This is common in homes with photovoltaics on the roof. The same applies to a commercial building.
Photovoltaics can be on a building’s own roof or on land in a different location. Wind turbines are also a good option in the UK. Of course, you can also own storage which opens up all sorts of new benefits.
This approach allows you to take control of your energy source. In return, you get more stable energy prices.
3. Where should I start?
Our clients say: I’m not clear on what the pathway to electrification looks like.
Find the low-cost wins
It’s important to have a good picture of your portfolio as there will be some easy low-cost wins that offer high returns in terms of carbon and energy saving. For the bigger challenges – like a leaky building – you can plan and create budgets to improve efficiency before switching over. It’s important to have good visibility of your entire portfolio and the challenges in each building.
There’s a perception that you need to rip out your gas boilers right away and put in heat pumps. While we might be working towards that, start with your low-hanging fruit. These initiatives help you plan for electrification.
- How can you reduce overall building loads and use less energy overall? (Current heating systems are, typically, oversized for a building’s actual load.)
- How can you implement energy efficiency measures that have quick paybacks?
Reduce your electrical load
When you electrify, you’re obviously adding electrical load to a building. You want to think about how you can reduce loads to install smaller equipment. You don’t need to jump in and tackle your largest systems; you want to begin by using less energy and your existing systems in a smarter way.
Understand your plant lifecycle
Knowing where your buildings are in their major plant life cycle is key. How old are the systems that you’re looking to electrify?
Then you can start diving deeper into what is an electrified building look like.
- What are the plant sizes that you need to install?
- What’s the load profile of the building?
- Can you reduce the capacity of the heating hot water plant?
- What are your technology options?
- What are your timeframes to implement
We work out what’s going to fit and the implications downstream, for example infrastructure impacts, structural and acoustic considerations, town planning and future maintenance.
Essentially, we paint a picture that captures all the elements of electrification so you have a detailed understanding of what’s required to go through the journey.
Get clear on your goals
Asset owners can come at electrification as something they have to do because regulation’s coming rather than as an opportunity to think about actual portfolio goals. What’s the story you want to tell?
Electrification might be one goal but what are there other things you want to achieve through these projects? As these plans and projects are often long term, there’s an opportunity to redirect your overall strategy. An example could be building resilience.
In our goal setting with some of our university clients, they say, “We want to be the best in higher education when it comes to sustainability”. We see this as an opportunity to start planning for healthier, more resilient buildings that are electrified and have high sustainability ratings. As well as helping them achieve their goals, this opens up new marketing opportunities to attract new students, clients and tenants.
Thinking about these projects from more than just an engineering perspective provides expansive opportunities.
Know that maintenance is pretty straightforward
You might be thinking, “I understand my gas fired equipment- it’s reliable, simple and operational. These newfangled heat pumps are not something that we can trust”. We have to remind ourselves, that heat pump’s been around since the 1800s.
Of course technology continues to improve; that will happen with anything. But, so long as you have a consultant who can tell you about the benefits of each type, for example air source or water source, it’s more straightforward that you think.
We’re also seeing uncertainty around a possible increase in operational or maintenance costs. If we’re talking about heat pump technology that’s been around as long as it has, mechanical contractors are familiar with what’s required to maintain them. Newer technologies are, generally, easier to maintain and less onerous than the gas-fired equipment.
Feasibility can take time
We’ve seen quite a few feasibility studies that, once you start scratching away at the detail, are not actually feasible. That could be because certain aspects haven’t been considered at the appropriate time, for example structural requirements. This means feasibility needs to start again.
We’re looking at a university precinct electrification exercise at the moment where the original feasibility had plant located in a location which wasn’t suitable because of the structural analysis.
It’s important to understand what those major considerations are because they can have a high cost impact and completely change the direction of your electrification strategy.
What am I going to get out of a feasibility study?
At the end of a feasibility study, you’ll have a suite of projects with timelines. This doesn’t replace the design phase; you’re still going to spend time and coordination efforts implementing projects. But, understanding which to prioritise is hugely impactful on the sequence and extracting an overall picture.
4. Can the grid cope with electrification?
Our clients say: I’m concerned about capacity with growing market sectors, like mission critical and data centres, sucking more from the grid.
Obviously, if you shift a building that’s on gas over to electricity, you’re placing additional demands on the electricity grid and you’ll need to ask for more capacity from your energy supplier.
First come, first served
The UK grid is capable of delivering 63 gigawatts at its peak. But, people are making applications for heat pumps. data centres, electric vehicle (EV) charging and general growth. There’s currently 120 gigawatts’ worth of applications waiting to connect to our grid – a really big challenge.
On the other side, the UK’s made good strides towards decarbonising the grid. We’ve got access to a lot of wind, some solar and a lot of battery storage in planning. The applications waiting to connect is 520 gigawatts – nearly 10 times the size of the grid.
We’re going to have to be smart in the way that we fix these 2 things together – excess generation and demand. If you’re a building owner lucky enough to get a connection with increased capacity, without a particular cost or a time constraint, great. That’s a reason to go early and lock in that capacity, certainly in the UK. It’s, generally, first come first served.
So, if you’ve electrified your building, put in your EV charging and are paying for your capacity, you’re there first which is a prudent thing to do. But if you’re not in early, you might have to be smart and think about your own energy generation and storage. There’s good economic cases for it; you can shift all of your heating load to the nighttime when your building’s not occupied or you can shift it to cooling loads to other times when solar is available with storage.
Demand-responsive buildings
Designing for load and demand management is going to become more standard as we decarbonise. This is where you have the opportunity to get your connection cheaper and quicker if you can shift your usage to when there’s greater grid capacity.
In Australia, solar is a dominant player. If you can think, “Can I move cooling away from the absolute peak when I’ve still got reasonable solar? Can I store excess on the weekend when we haven’t got so much cooling need?”
Storage can be battery, ground source, thermal mass and water. Many options are low cost.
5. Does energy efficiency still matter when the grid, or electricity provider, is mostly green?
Our clients say: Our grid is dominated by renewables so efficiency isn’t so much of an issue.
There’s always benefit to a building owner in reducing emissions.
Don’t just think about yourself
You need to ask: is it green for everyone? In Scotland, there’s a lot of wind so it’s low carbon. In London, it can be much higher because there isn’t access to so much wind.
So, if you’re in Scotland, should you be following the same rules as you might in London and gut the building, incurring a huge amount of embodied carbon, just because you’ve got a low-carbon grid?
You need to make a balanced decision based on the embodied and operational carbon, cost and infrastructure requirements.
Add up the numbers
Just because your energy is clean doesn’t mean it’s free. Using less is always going to be good from the bottom line perspective. It’s not done at the moment because legislation doesn’t demand it.
6. Who’s done it well?
Our clients say: I’m not seeing any of our peers or competitors electrifying.
Electrification is just one piece of the puzzle
Electrification shouldn’t happen on its own. It should be one dimension of a bigger strategy.
At Hoare Lea, we worked on a residential building in London that was part of a large mixed-use development. A study showed that after a deep refurbishment, it increased its rentable value by 10 per cent due to decarbonisation and 20 per cent overall when all refurbishment measures were considered. A second building in Maidenhead showed a 20 per cent improvement in value after a major refurbishment.
Establish partnerships with utility providers
A successful partnership we’ve been seeing lately in our California projects is when a portfolio owner brings a utility provider on board. A lot of utility providers have their own goals and, when they’re active participants in the electrification discussion, we see better outcomes for business.
An electricity provider in Sacramento is pushing forward electrification feasibility studies where they bring on a partner like Glumac. They want to show building owners – “Look, it’s feasible for you to electrify your building and this is how much it’s going to cost.” It reduces the barrier of that first step.
We’re at the beginning of the journey
In Australia, I’d say there’s a handful of existing occupied buildings that have gone through the whole electrification process. However, there’s a lot of activity in terms of looking at electrification at a high level to then moving through into a more detailed analysis.
In the next few years, there will be a lot of live examples that we’ll be able to draw on for lessons learned.
It’s easier with good data
Businesses that are having the most success with their feasibility studies are the ones that have good data. However, access to good metering data and actual building performance can be a challenge.
If you have the data to show your real building heating load is only 60 % of what it was designed for, you know you can look at a system that’s sized for a peak which is 60 % of what it was originally designed for. This would mean you don’t have to replace so much piping which brings down capital cost.
We have a university project that’s looking at electrifying a handful of buildings on campus and their electrical panels are sized for 5 times what their actual peak electrical load is. Having the data to be able to make better decisions can go far in the actual feasibility of electrifying a building.
Gathering good data – over time – enables a quality feasibility study. Many engineers work with data analysts to extract knowledge and understanding from the operations of a building.
What portion of buildings don’t have the data available?
It’s likely that a large portion of B-grade stock is data deficient and these buildings are at a high risk of obsolescence. This quality gap between new buildings and older buildings is going to become greater. This puts more emphasis on those building owners to do something to keeping attracting tenants.
There are modern buildings which don’t have access to this information either and to extract the information you need adds time.
An older building will always have a utility meter though and it’s surprising what you can extract from that. Almost all meters are logged half hourly and you can see trends and make predictions based on that.
What’s the one thing you want asset owners to do today?
Nick, Australia
While electrification may seem like an insurmountable challenge, at the end of the day we’re talking about plant replacement which every building owner is familiar with. The best way to eliminate the uncertainty associated with this task is just to get started. You can start small, system by system.
Laurence, UK
Don’t underestimate the rapid change that could happen and don’t be left behind. There are very few large corporate companies now that haven’t got clear ESG targets and know their decarbonisation pathways for most of their portfolios. Those that don’t are at great risk of having stranded assets.
Zoe, USA
Just get started. Electrification is challenging but clearing some of the small hurdles and then finding out what your real hurdles are is only going to happen once you begin. Maybe some of the things you thought were going to be challenges won’t be and there are other things lurking in the weeds that you need to start thinking about.
You’re not going to be adopting technologies that are in their infancy. You’re going to have all the benefits of picking up lessons learned from the people in it right now.
