Actually getting to net-zero
“You Don’t Have To Be Great To Start, But You Have To Start To Be Great.” – Zig Ziglar
A quick google search reveals an increasing number of corporate and government commitments to reach net-zero emissions by 2050. While setting the goal is relatively easy, understanding the path to achieve that goal may be more complicated. The encouraging and necessary reductions that LED lighting retrofits provide can be a bit of a misleading narrative if you believe the remainder of your reductions will be as easily implemented.
This is not to say that LED lighting retrofits are not good, they are certainly an essential step towards net zero, but they will not get you to the finish line alone. Reaching net-zero is an ambitious goal that requires an organizational-wide approach. From operations to procurement, it requires genuinely developing a strategy that embeds sustainability into the corporate DNA.
Any experience in sports will teach you; before you can develop a game plan, you must understand your own abilities. In the world of ESG, this means understanding your current state. Do you have the data to determine where you currently stand?
Bill Data - collecting consumption, normalizing, weatherizing - identifying your cost drivers, developing per-unit costs, identifying fees, identifying the effects of peak rates, time of use, or capacity charges, etc. of electric, gas, water, sewer, and waste.
Property Inventory - HVAC types and configuration (unitized vs. centralized), lighting, water heating type and configuration, waste collection equipment. What is the age, life expectancy, efficiency rating, etc.?
Energy Supply Mix - what properties are in deregulated markets, are you leveraging supply contracts, what are the terms, what are the expiration dates of current agreements, what opportunities exist to drive the impact of supply generation?
Benchmarking - comparing your properties against a robust data set that provides an ability to determine how the property’s consumption performs. The dataset must be large enough to include the different types of building configurations, consider different climates, and contemporary enough to be relevant.
Site Energy Trend Analysis - understanding how the property consumes energy and water from the perspective of baseload, heating load, and cooling load.
On-site audits - all properties should have an initial audit conducted during due diligence. Once operating when the data indicates an opportunity, an on-site audit can provide specific energy efficiency opportunities.
Green House Gas Emissions Calculation - This baseline provides an all-encompassing look into the total Scope 1 and 2 emissions produced as a result of the organizations at a minimum. As the organization matures, Scope 3 emissions increasingly should become part of this mix, notably supply chain emissions.
Regulatory Compliance - Where does your portfolio stand regarding compliance with benchmarking, waste, and other performance ordinances? Are you tracking the emergence of new regulations, and have you developed a strategy to address them. Particular emphasis on performance ordinances and retrocommision or physical audit requirements should be called out and tracked to mitigate non-compliance risks.
Governance Review - What is in place currently in place and documented? What internal structure is in place to ensure organizational-wide impact? Where does ESG sit in the organization, the further removed from the C-suite, the more likely it is not considered important.
Internal Engagement Review - What measures are in place that embeds ESG into the organization. Where is this reflected? Is there a required training element for new hires? Is ESG discussed in the annual review process?
Customer Engagement Review - What measures are in place to engage residents or tenants in the ESG program? Are health and wellbeing measures included and communicated?
Stakeholder Survey - Who else is impacted by the organization, and does ESG concern that stakeholder? If so, what is being done to address it?
Materiality Assessment - What is the impact of ESG on business success in terms of importance to stakeholders?
Resiliency Assessment - Has the organization identified the potential risks to its portfolio in the case of carbon transition, physical or natural disasters, social risks, or biological risks? Is there an assessment to identify the vulnerability? Is there a scale to compare assets? What has been done or could be done to mitigate the risk identified? Do any of the risks present opportunities?
Communication - What is the organization doing now to tell the story of ESG?
Admittedly, this is an extensive list; keep in mind that this is not actually doing anything yet; it only determines your starting point. Before an overall strategy can be developed to get the organization to its ESG goals, you must understand where we are now.
The next step is, however, to develop that strategy. Collaboration is critical as a business case is developed that reflects the goals of the organization. The strategy must identify where the opportunities for improvement exist and provide a plan that will secure executive support. Specific goals and milestones will guide you towards a roadmap to arrive at the desired outcome.
In the case of net-zero, the goal is around the impact of the organization on the climate. There are two distinctive “net-zero’s,” however, understanding the difference between the two is important when setting a net-zero goal.
Net-zero energy refers to the building producing as much energy as it consumes on an annual basis.
Net-zero emissions refers to the building producing no net greenhouse gasses.
The crucial difference between net-zero energy and net-zero emissions is that no net greenhouse gases are produced under the latter. Thus, there is no contribution to climate change. Under the most common definition, a building could operate using “net-zero energy” yet release emissions through the burning of fossil fuels on-site, for example. Under any definition, “Carbon neutral” or “net zero emissions” is a more demanding standard to achieve than “net-zero energy.” For this article's purposes, when I refer to net-zero, I am referring to net-zero emissions as defined by the U.S. Department of Energy.
The first step is always efficiency. Efficiency is the most cost-effective strategy as it eliminates the need for energy or water. You are simply identifying waste and eliminating waste. The key to that sentence is identifying. When speaking with someone who claims to have a net-zero goal, ask them if they know what their current consumption is, followed by if they know how that consumption compares against similar buildings in similar climates. If they are not tracking consumption and comparing it against a robust data set, there really is no need for further questions; they aren’t pursuing net-zero because they don’t even know what their use is.
Your analysis of the energy use of the portfolio should provide you clues where to look. Where are we using energy efficiently, and where are we casually wasting it. From there, we are peeling back the layers, identifying specific options, determining the cost and impact of each measure, and developing specific actions that reduce the site’s energy use intensity (EUI).
Once we have determined the portfolio is efficiently using the energy consumed on-site, the second step towards net-zero deciding how to reduce the greenhouse gasses associated with the energy consumed on-site. Several paths can be taken at this point, but we again begin with where we are. What is the origin of the energy being delivered to our individual properties? Is there anything we can do to control that supply? If our properties are in deregulated energy markets, the answer may be yes.
In the procurement process, we need to be checking in with who is making the purchasing decision in deregulated markets and what their criteria are for executing a supply contract. If their decision starts and ends with price, you are most likely missing opportunities. State regulators set up disclosure requirements for electrical suppliers in all states to disclose the generation source of their energy. Electricity is made differently in each state, and that difference may provide opportunities for educated buyers in deregulated states. (This New York Times article offers a detailed look at how each state differs in how electricity is produced.)
Different electrical suppliers will use different sources for their electrical supply and report these sources in disclosures they file with the state. These records can be requested from the suppliers and the differences in supplier mix evaluated when making a purchasing decision. Often for little to no cost difference, with simply asking a few questions, the property’s electrical supply can provide reduced greenhouse gas emissions.
Another strategy commonly employed at this stage is on-site energy generation. This is most likely deploying solar panels. Often we see solar panel installers rushing to this step, but the strategy needs to be well thought out. Especially in multifamily, there are configuration challenges that can complicate what can be included and what cannot. This is also a prime area that understanding your risks and opportunities can provide considerably different ROI and cash flow implications, particularly in jurisdictions that offer the option of virtual net-metering. Simply covering the common areas and returning the electrical generation to the house meters may prove to be short-sited, and you may be missing a substantial property cash flow opportunity.
With a strategy in hand, we move towards implementation. The key to this stage is understanding what is most important. Is it the timeline, project costs, potential for disruptions? If your strategy included the development of an internal Green Team representing multiple departments, this is where that step can really provide returns. The inclusion of all departments in the strategy creation can help flag potential issues and deliver a smoother rollout.
Last week I wrote about the importance of collaboration, and any project manager will tell you that communication is vital once you are at the implementation stage. That ability to establish a meaningful dialogue with all parties involved will provide feedback and the ability to shift strategy if needed. All stakeholders uniformly understand the status and stage of the implementation, and if issues develop, a better response can be created. Surprise is not a term we want to hear at this stage; transparency and coordination are kings.
You might think this is where we are done, but if you pronounce the strategy completed at this stage, you would be missing some of the most critical steps. The first of which is measurement and reporting. This is a crucial component as it verifies the effectiveness of the measure. Measurement and reporting provides the case studies to build confidence for future measures, reassures investors of the wisdom of their trust, and reinforces to senior management that their decisions are yielding positive returns. This is the step that provides your ability to sell it again because you just proved you could do it. It builds confidence across the organization and further embeds sustainability into the DNA of the organization.
The final phase is performance optimization, once again focusing on data and tracking properties, management, and vendors. Who is pushing towards our goal, and who is pulling us further from our goal? In the age of performance-based ordinances that potentially pose significant fines for non-compliance, we have to ensure that we are moving together towards compliance. Each property has to be helping move the portfolio towards the goal, those do not need to be identified and the reason addressed.
Technology can be introduced to optimize the performance further, deepening the understanding of the asset's performance and identifying trends. This shift effectively replaces reactive management with proactive management. Downtime can be reduced, and the life of the asset can be extended. Equipment that is maintained is more likely to experience its full life expectancy than neglected equipment.
You can see this is a cycle. Once we optimized performance, we reset where the current state is, adjust the strategy to the new state of the portfolio and work through identifying opportunities, minimizing risks, and implementing solutions.
You can help reduce the impact of the built environment by sharing this blog with your peers. Together we can impact the 39% of greenhouse gasses attributed to the built environment. It starts with awareness, and we succeed with teamwork.
Stay well!
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Chris Laughman is the ThirtyNine Blog author, a blog dedicated to reducing the impact of the built environment. When not blogging, Chris is helping the real estate industry minimize energy and water impact as the Vice President of Sustainability for Conservice, the Utility Experts. Whether Multifamily, Single Family, Student Housing, Commercial, or Military, we simplify utility billing and expense management by doing it for you. Our insight into your utility consumption provides an opportunity to identify risks. Leveraging innovation and experience, we ignite solutions with tangible impacts and track performance to ensure the trendline stays laser-focused on the goal. At Conservice, we have developed a true bill-to-boardroom solution to help truly make a difference. We have before us a tremendous opportunity. Standing shoulder to shoulder, we will get this done. Contact me at claughman@conservice.com for more information.
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