3 Steps Toward Decarbonizing Existing Buildings

Decarbonization is a term used frequently by public policy professionals and others focused on sustainability, energy use, climate change and similar disciplines. But what does this term actually mean? And how does decarbonization affect owners of existing buildings?

Simply put: decarbonization of existing buildings means severing ties with fossil fuels completely, and changing systems to operate on electricity that is generated by renewable energy.

Unfortunately, the process required to decarbonize a building is rarely presented cohesively. The myriad entities involved along the way — such as public utilities, renewable energy providers, solar panel installers, energy consultants and tax credit specialists — each tend to convey information about their own scope of services, providing little guidance about how to work across disciplines.

To help connect these disparate points, LoopNet spoke with professionals that were able to provide context around the notion of decarbonization by dividing the process into three general steps. While the details of each phase are complex and not fully addressed in this piece, understanding these three key areas can help building owners develop a plan for each asset.

Jesse Warren is the associate director of sustainability at the University of Virginia. He serves as the energy engineer responsible for UVA’s electric demand response and sustainable building programs. Among other things, he focuses on renewable power generation on the UVA campus as well as renewable energy procurement from outside sources.

He suggested that to begin the task of decarbonization, building owners should focus on three main areas:

• Insulate the building and make it energy efficient.
• Convert all building systems to operate on electricity.
• Use renewable energy.

Warren recommends starting with insulation because this improvement has the fastest return on investment among the three tasks. He said using as little energy as possible will keep costs down, making the building less costly to operate for both landlords and tenants. “The cheapest way and the best return on investment is to reduce the energy you already use,” Warren said.

However, Chris Pyke, senior vice president for product at the U.S. Green Building Council focusing on building performance software, notes that the order in which these upgrades are carried out is up to each building owner and should ultimately align with renovation cycles and capital spending. “It is not going to be the case for most people, most of the time, that they are going into a perfectly good building and ripping out perfectly good systems,” Pyke said.

“What we are talking about is when you have moments of decision — fit-outs, retrofits, replacement cycles — that is when you should think about doing these things,” Pyke said. Realistically, it could take many years to make all of the necessary upgrades, as owners work within the constraints of their capital improvement budgets, he added.

Pyke went on to explain that the hierarchy of these tasks has evolved since the 1970s, largely due to the increased availability of renewable energy. He said the change that is emerging calls for a focus on electrification first. “Traditionally we said, reduce demand, improve efficiency, provide clean supply. We did that because clean supply [i.e., a reliable supply of renewable energy] was incredibly precious, and it was very expensive,” Pyke said.

But today, low-cost clean energy is more readily available than it was years ago and the need to act has become more urgent, Pyke said. As buildings are retrofit, components like water heaters and HVAC systems can operate on electricity from renewable energy sources rather than gas lines or other combustible power sources.

Warren said he focuses on where he can save the most money and that each phase of decarbonization — insulation, electrification and use of renewable energy — has a different return on investment. Energy efficiency and insulation will have a return on investment that is usually faster than the other two phases. “Those are your most expensive units of energy, the ones you're actually paying for. So, if you can reduce that first, that's where your greatest savings lie,” Warren said.

This phase typically involves energy audits to evaluate energy patterns and understand where the most energy is being consumed in a property, along with an analysis of a building’s energy bills. Other areas of focus include upgrading the building envelope and shell by identifying and addressing areas that are losing or gaining heat and weatherizing windows and doors.

Inside the building, upgrades include installing programmable thermostats and lighting systems that adjust automatically. But the most significant energy drain in a building is the HVAC system, so ensuring that it operates as efficiently as possible is a critical aspect of the process.

The importance of changing building systems so they operate exclusively on electricity is not immediately evident to many property owners.

The concept is that if all building systems can be powered by electricity, and that electricity comes from renewable sources, the building can sever its dependence on gas lines or other combustible fuels.

This phase of the process requires replacing items such as oil and gas-based furnaces, boilers and other products with all-electric heating, cooling and hot water systems, as well as making the electrical upgrades that most buildings will need for many energy-efficiency improvements to work.

Pyke noted that there are both economic and environmental reasons to invest in electrifying a building before it is fully insulated. He said that once a building is electrified, the gas lines that feed it can be capped. This means that if neighborhoods or communities go all-electric, the gas infrastructure supplying them can disappear altogether. The result is that the costs of maintaining them, and the carbon they emit, are eliminated.

Adding more momentum to the decarbonization effort, Pyke said that as buildings go all-electric it positions them to leverage emerging technologies “like heat pumps and water heaters that are profoundly more efficient and significantly more reliable than they were 10 or 20 years ago.”

Warren agrees that building systems must be electrified and that “it’s largely heating systems which are a challenge.” He explained that using electric resistance heat is not nearly as efficient as using a heat pump. It warrants noting that this seemingly mal-named device doesn’t merely heat structures, but cools them as well.

Warren explained that when you install a heat pump — instead of electric resistance heat — “you can move four or five times the amount of heat for the same amount of input energy.” By installing systems like these, that require significantly less power, and running them with renewable energy, “that's how we're going to get to the efficiencies that we need to decarbonize.”

In addition to addressing electrification, property owners must procure renewable energy. There are myriad options for obtaining renewable energy, but for ease of understanding, this article explores generating power onsite through the installation of solar arrays and procuring power from a third-party provider through a Power Purchase Agreement.

“When I'm considering how to procure renewable energy, I'm thinking again about where my most expensive energy is. If I can put it on the roof of my building and reduce the [amount] of energy that I'm buying,” those are the most expensive kilowatt hours in a portfolio, Warren said. He added that “when we think about strategies toward decarbonization, actually reducing your own bill has to be first and foremost.”

According to the U.S. Department of Energy solar photovoltaic (PV) panels have declined in cost by 70% since 2014, and “markets for solar energy are maturing rapidly around the country since solar electricity is now economically competitive with conventional energy sources in most states.”

With costs coming down and accessibility increasing, solar panel arrays, either on roofs or mounted to the ground, can be financially feasible for many buildings across the United States. Warren noted that a well-suited site for solar PVs has several key elements. They include large expanses of flat, or southern facing roofs or site areas for ground mount installations; minimal shading from mature trees or mechanical structures; a roof that is new or has at least 25 years of life left; a roof structure that can support three pounds per square foot to accommodate the PV array; and electrical infrastructure and regulatory support to enable net-metering, so owners can get credit for electricity they contribute to the grid.

Pyke agreed that there is a logic to saying the best renewables are those that are generated onsite, but to him the cheapest and most sustainable renewable energy comes from the execution of Power Purchase Agreements, or PPAs.

A PPA is a contract between a building owner and a utility or renewable energy developer to purchase power generated by renewable energy technologies. Agreements are executed for several years at established and agreed to rates. These contracts ensure reliable cash flow for renewable energy providers, so they know they have the revenue necessary to operate and expand the infrastructure required to support renewable energy generation and distribution.

Pyke conceded that if a property owner can afford to install renewable infrastructure on site, such as wind or solar for example, and they have the space and the right orientation, then placing them on site can be viable. “But I’m less concerned with where you get them, than that you get them,” he said.

Pyke said that onsite energy generation, with the right financing, makes sense for many owners. But if an owner is converting a high-rise in Manhattan and they don't have space on their roof or an adjacent area, a PPA makes more sense. “The premise is still the same. The best thing you can do is reduce the emissions from your purchase of electricity.”

According to Pyke, PPAs are “radically more available,” than they were years ago. There are many more providers and a broad range of agreements. Groups such as the Clean Energy Buyers Association can help owners secure a broad range of energy procurement contracts from an array of both public and private sector providers.

Renewable energy is available to various degrees across all 50 states and Pyke said many advisors can counsel building owners about the offerings of their local utilities and what they can buy in the open market.