We are on the Clock
The IPCC's report on climate change spells out to have a shot at limiting global warming to 1.5° Celsius, we must cut carbon emissions by 50% by 2030, and neutralize them by 2050.
Even if we hit the goal of reducing global warming to 1.5° Celsus, the results are still extremely dangerous, especially for small islands and some of the least developed countries. The truth is there is no “safe amount” of warming, but the scientific consensus is if we reach 2°, we will unleash additional triggers such as the thawing of permafrost, which will greatly increase emissions and increase the pace of warming. Meeting those goals of net-zero by 2050 is not just important to governments; they are important to anyone living on this planet. In part, this helps to explain the emphasis by businesses and governments alike to start working towards net-zero now. With each year that passes, reaching it becomes more difficult.
In the built environment, the path to Carbon Net-Zero includes transitioning to non-fossil fuel-based energy sources. To get there, we need to understand some of the challenges around clean energy.
For multi-family real estate owners in particular, typically 70% of the energy is consumed by the tenants with no operational control by the landlord. This makes for some unique challenges and is why there is such an emphasis on tenant engagement. Without winning the cooperation of the residents to reduce energy consumption, getting to net-zero will be very challenging.
But one area that holds promise is addressing the source of energy, that is, the way the energy we use is produced. While we can’t control the amount of energy a resident uses within their unit to a great degree, we may be able to provide them with energy sourced from cleaner generation sources.
In deregulated electrical states, this is a bit easier as the supply of electricity can be negotiated. This does require asking more than just price, but by expanding your criteria for energy purchases, the identification of cleaner energy options can be incorporated into your strategy.
Let’s give a little background here…
The most common method for calculating our Carbon Footprint is to rely on the Emissions and Generation Resource Integrated Database (eGRID). This EPA-supported database provides a comprehensive source of the environmental characteristics of almost all electrical power generated in the United States (Source). While a great resource, the data is based on the aggregated generation sources associated with a geographic market. In other words, this is what you get through the normal acquisition without making any effort to increase the amount of clean energy purchased for a given location.
Even in deregulated markets, traditional energy procurement will often use a generation mix very similar to the eGRID characteristics, making it rare for evaluating the carbon impact much deeper than what eGrid reports for the “generation mix” in a given area.
Taking a different approach to energy procurement requires the energy broker to provide details to the “generation mix” of the alternative sources, in addition to price alone. In some cases, 100% wind or solar may be available through this process. The end purchaser will have to evaluate the cost-benefit analysis of including these factors in the purchasing decision. Still, it is a deeper conversation than “what is the price per kWh.” Even if the price is more than a traditional generation mix purchase, the price difference may provide a better financial return than retrofits or other strategies, especially when the cost of capital and the access to capital is included in the evaluation.
This can be a difficult concept for the energy industry to grasp… let me give it a shot in a different context, but still an energy context…
Many of us are somewhat conditioned to look for the lowest price per gallon for fuel. In the past, energy procurement was similar; we simply tried to find the gas station with the lowest price. We didn’t really consider the source of energy; the decision was simply based on price.
The new way of looking at energy looks at both price and generation mix for electricity. This means asking the question, what is the generation mix, instead of only the price. Every state requires electricity suppliers to meet specific state guidelines for the mix of energy they supply to be able to supply energy in a given state. This refers to how that electricity is made, and typically, it requires a certain percentage of renewables to be in that “mix.” To document the “mix,” the supplier has to file paperwork with the state documenting the source of the energy they are selling. While the supplier may resist providing a copy of that document, if they sell electric, they have the document - ASK FOR IT (or at least the mix).
For the energy manager, or whoever is purchasing the energy, you can now compare - this mix costs X compared to this mix that costs Y. In some cases, there may even be 100% renewable energy available. I have found often the price difference is negligible, but even if it is slightly more, keep in mind the cost of on-site initiatives such as installing on-site solar or capital equipment upgrades. The slight premium may more than offset on-site measures.
As noted, these strategies are exclusive to deregulated states. However, another opportunity may exist when it comes to solar. Previously, solar with direct tenant metered electricity was sometimes challenging. However, the technology that is Virtual Net Metering (VNM) is starting to change that. While it is not available in every state, VNM provides an ability to address the split incentive dilemma faced by landlords - that when they invest in tenant-controlled areas, there is little or no return.
The states currently offering VNM:
California
Connecticut
Delaware (solar only)
Massachusetts
Minnesota (Xcel Energy only, solar only)
Maine
Maryland
New Hampshire
New York (solar only)
Pennsylvania
Rhode Island
Vermont
Washington D.C.
Wisconsin (NSP only, solar only)
This list is growing rapidly, and several emerging markets are developing. However, it is important to verify that this strategy will work in your market. As it is an emerging strategy, even in states wherein theory VNM is approved, execution can be challenging.
Virtual Net Metering is a bill crediting system which really provides an avenue for community solar. This means the tenant in multi-family can benefit from the landlord’s investment in solar energy for the property. They can typically purchase electricity from the community solar array at a reduced cost than purchasing off the grid directly.
For the landlord, since they are able to bill the tenants for the electricity, but the generation cost is lower than what they are charging the tenant, they can recover some of the capital costs of the solar that benefits the tenants. This also can provide a significant revenue stream for the property, potentially impacting valuation.
The tenants still use energy from the grid, but the cost is supplemented by the solar the landlord returns to the grid.
For a quick tutorial on virtual net metering, take a look at this video:
The result for the landlord is both improved ROI as well as reduced carbon footprint.
These strategies are part of the larger overall portfolio strategy towards net-zero carbon. Once we set goals and establish our baseline data, we can track towards net-zero by improving efficiency. Tracking consumption against that baseline or benchmarking provides the plan of where efficiency projects make sense, and specific audits can identify the specific strategies necessary to achieve efficiency. As highlighted in this post, our next step is analyzing where our energy comes from, moving away from Scope 1 emissions (Natural Gas or other fossil fuels burnt on-site) and towards electrical energy. That energy needs to be evaluated in terms of both generation mix and what renewable energy sources (and potentially storage) are viable. Finally, procurement of certified RECs provides the remainder of the path towards net-zero.
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!
Chris Laughman is the ThirtyNine Blog author, a blog dedicated to reducing the built environment's impact. When not blogging, Chris is helping the real estate industry reduce 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 that have real impacts and track performance to ensure the trendline stays laser-focused on the goal. To get there, we must build relationships within our organizations and outside of our organizations building the critical mass needed to 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.