Net-Zero..... Can we?
Not only a solution to climate change and air pollution, but also a cheaper, more resilient energy system, a more productive economy, and a better quality of life - Mathew Hampshire-Waugh
While perusing the list of sessions for this year’s Greenbuild Conference, you can’t help but notice the frequency of the terms “decarbonization” and “net zero” in the titles on the agenda. While we can get to energy efficiency by reducing wasted electrons, getting to “net zero” is another level, one that we can get to. Still, it will require a more holistic approach to the energy in our portfolios.
This is not to say energy efficiency should not be part of the strategy; indeed, it is a critical component, it is just not the only component. When a property owner or investor pushes for a commitment to achieving zero carbon emissions, we have to understand that we are not only talking about how we consume energy but also how we obtain the energy that we consume, as well as how that energy is generated.
This requires a deep understanding of our energy use and its supply. Once again, the importance of data and accountability for the electrons being used is a foundational requirement. It is no wonder that when regulators want to encourage carbon reduction, their first step is often requiring building owners to report their energy use. In doing so, they are signaling to those owners the importance of knowing what their energy use is.
Typical second steps will focus on the efficiency of the energy being used. This is where most sustainability programs focus, at least initially. This is benchmarking, identifying wasted energy and water, and doing something about it. This step tends to provide operational expense reductions that are easy to understand - since you buy less energy or water, your expenses go down.
To get to net zero, we will have to go deeper than just efficiency, and we must focus on our energy generation and evaluate opportunities to procure renewable energy. I am distinguishing procurement from on-site generation as if you can procure renewable energy in your existing buildings, it can be a much simpler, quicker, and scalable strategy. It gets you closer to your net zero goals while giving you time to plan for the potential for on-site renewable energy generation. Similar to efficiency, the procurement strategy can reduce expenses - assuming your actively bidding your energy supply and timing the purchases with the market.
I put on-site renewable next, as this will be a more building-dependent process. While a portfolio-level evaluation can help us prioritize and line up projects where incentives and resident utility recovery laws provide the best ROI, we still have to look at property-specific attributes:
What is the building type - and what does the building footprint look like?
How much space is available for Solar Photovoltaic (PV) Panels? Do you have green space, open parking spaces, and adjoining property that could potentially be leveraged?
Are there shading issues?
What direction does the roof slope towards, what shape is it, and are there peaks or other obstacles (i.e., other mechanical equipment, vents, etc.)?
If mounting on a roof - what is the condition of the roof?
What is the weight the roof can handle?
Where will the water go?
How will we connect to the grid?
If we are recovering from residents - what arrangements need to be made, both physical (connections) and legal (lease)?
What inverter is being used, and can you connect to it remotely? (You will need to account for the energy being generated - more on that below)
What are the warranties (Installation, Inverter, & Panels)
Are their insurance implications?
Plan for a regular preventative maintenance program.
Another on-site renewable planning item is how the system will be owned. Just because you have decided to add solar to your portfolio does not necessarily mean the community has to own the solar. Solar leasing, or Power Purchase Agreements (PPA), can help offset the upfront cost of equipment and installation.
Who does a PPA work?
Unlike panels that you install and own when a PPA is leveraged, a third party owns the equipment. The cost for that equipment and its installation, in addition to the third-party fees, are paid over time. It should be noted with a solar lease, the rebates or incentives associated with installing the system will belong to the third party who owns the system. In addition to avoiding upfront costs, a second advantage of the PPA is the third-party owner typically covers the maintenance of their equipment as part of the agreement. There is some question regarding the RECs in this arrangement that would need to be addressed.
There is an opportunity for creativity in the structure of the third-party agreement; for example, the third party may be a separate entity wholly owned by the parent organization that also owns the asset—in a sense, leasing from yourself.
Another interesting angle is for the third party to approach the solar installation similar to cellular antennas. Instead of a true PPA being applied, the solar panel owner might consider leasing the roof space from the community. In return, the solar panel owner is provided the exclusive right to sell the energy back to the residents and common areas for the property. This is more akin to community solar in some ways, as the recovery is being made through the resale of the utilities by the solar panel owner. In this case, the solar owner becomes another “tenant.”
What if you don’t have the roof space or capacity for solar on-site?
In some states, community solar may be another option to get renewable energy. Unline the solar arrangements outlined to this point; community solar typically is not located on-site. Instead, there is a large, central solar power plant (or solar farm) whose electricity is shared by more than one property.
Like on-site solar, community solar has nuances that need to be navigated. The first of which is - that it is not available in every state, and only certain states have provided the virtual net metering legislation necessary for shared renewables.
If community solar is allowed in your state, the next question is - is there capacity for participation? These programs go fast; it is not unusual for the entire allotment of electricity to be sold before the solar farm even flips on the switch - waiting lists are common.
If there is an ability to participate, you are typically either given access to the electricity from a certain number of panels in the array or purchase a specific amount of electricity, usually at a discount to the normal utility rate.
Community solar programs typically have two formats for participants:
Subscription: In this program, the community “subscribes” to the community solar program and pays a lower electricity price on their monthly bill. Often this is through a utility provider, and you opt-in or opt-out of the program provided there is availability for participation.
Ownership: In this program, the community “owns” whether a percentage of the community solar project itself or a specific number of panels within the project. The credit provided is based on the generation of your portion of the solar farm.
Just as there are additional business strategies for on-site solar, businesses have taken creative approaches to community solar. Some of these businesses will take the billing component and interact with the residents directly, providing them the option of opting in and opting out of the program. The benefit to the resident, in addition to sourcing clean energy, is it is typically provided at a discount to the grid rate.
As you can see, there are many options for incorporating a renewable energy strategy; it is essential to ensure that the renewable energy being generated is tracked and accounted for in the calculation of the communities energy consumption. For example, generating power on-site and consuming that power on-site without accounting for that consumption would falsely give the property the illusion that they are consuming less power than they are. This tends to happen when properties fail to capture the energy generation from the inverters and set up solar meters for the property. If you are relying on your utility bill alone, you are not accounting for all of your consumption.
Similarly, if you purchase cleaner energy through procurement, you need to track the energy purchased and the generation mix from that purchase. When calculating your greenhouse gas inventory, the purchased supply needs to be accounted for instead of merely using the eGrid factor in emissions calculation. The same is true for community solar; the amount of renewable electricity generated on behalf of the site must be captured and included in the greenhouse gas inventory calculation.
Finally, if the goal is net zero, you may not be quite there through efficiency and addressing generation alone, and you may still need to purchase offsets or RECs to make up the difference. I have written previously on the challenges around offsets and RECs in this article: “Carbon Offsets, oh the tangled web they weave.” It is a viable strategy, but it needs to be done right.
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Stay well!
Chris Laughman is the ThirtyNine Blog author, a blog dedicated to reducing the built environment’s impact. When not blogging, Chris is helping residents, clients, and investors reduce their energy, carbon, waste, and water impact as the Senior Director of Energy and Sustainability for Greystar. Our team’s insight into the utility consumption of our managed and owned portfolios provides insight into opportunities to identify and mitigate risk. We leverage innovation and experience to ignite solutions with real impacts while tracking performance, ensuring the trendline stays laser-focused on the goal. All of us in real estate have a tremendous opportunity to make a difference in the built environment. Standing shoulder to shoulder, we will get this done. I can be contacted at: chris.laughman@greystar.com for questions, concerns, or collaboration.
The opinions expressed in this blog are my own.
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