Decarbonization of buildings is a complex topic that means many things to many people, depending on your perspective. For any given asset, it could mean a focus on energy efficiency, low carbon electric supply, embodied carbon for new construction, or satisfying recent mandates to “electrify everything” and transition heating systems from natural gas to heat pump technology.
Building owners and operators facing decarbonization challenges will benefit from organizing their efforts into a basic framework to bring order and clarity to this long-term, complex topic. One such framework—from the Better Buildings Challenge—focuses first on energy efficiency before moving to electrification, renewable supply, or offsets.
Source: Better Climate Challenge
Why focus on efficiency? For asset owners, energy efficiency has a strong economic return; typically double digit returns for comprehensive retrofits, and higher for lighting and controls retrofits. LED lighting in particular is a pressing opportunity in California due to a law (AB 2208) that bans the sales of fluorescent bulbs over the next two years. Energy efficiency can also be financed “on-bill” by firms like Gridium so the owner pays nothing out of pocket and improves both the sustainability and net operating income (NOI) of the building.
If energy efficiency is what we want to do for strong returns, for most, electrification of heat is what we will have to do to comply with local and regional mandates that support economy-wide decarbonization. For smaller buildings, air-source heat pumps offer adequate returns and can assist in decarbonization. But for large buildings with hydronic heating systems and central boilers, the technical challenges are substantial— for example, if your building relies on single-pass heating coils that require high water temperatures that are not easily reachable by heat pump technologies. Not to mention the extreme loads in large buildings, where heating capacity is a challenge.
A potential solution to this added complexity is a reference design that uses a combination of chillers, thermal energy storage tanks and heat recovery chillers to make “heat from ice.” The design is encouraging for relatively low operating costs, similar electrical loads, and higher water temperatures. Several projects are in the planning stages in the Bay Area, and we are sure many lessons will be learned. Certainly if this design proves popular, strong training and retention programs will be necessary for building engineers given the deep complexity of these systems compared to a traditional boiler.
The bad news? The economics. Typical capital costs for these designs are $20 per square foot with paybacks in the 100- to 200-year range for retrofit applications! Those kinds of economics are going to challenge even the most well-capitalized owners in a difficult era of vacancy and interest rates. Our industry has successfully navigated multiple technologies for heating from coal to fuel oil to natural gas, but all of these transitions were driven by fundamental energy economics; the case for electrification of large buildings is not.
So if you are a building owner or operator, what steps should you take to prioritize your decarbonization efforts?
First, think about what your building has, how it is heated and how that heat is distributed in the building. Second, be very skeptical of any new spending on natural gas infrastructure. Based on current Bay Area rules, natural gas investments could be stranded as soon as 2031! Third, start thinking about what your pathway is for electrification and communicate this upwards for long term capital and asset planning. Finally, recognize there is a big gap between well-intentioned policy and engineering and building realities. Advocate for rules that make sense for everyone.
Interested in fine-tuning your buildings through energy efficiency? Get in touch with the Gridium team below.
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