CREJ

Page 14 — Property Management Quarterly — July 2021 www.crej.com Sustainability C ombating climate change requires efforts on many fronts, one of which involves a significant improvement in building energy efficiency. Included in the Biden administra- tion’s American Jobs Plan is a goal to decarbonize 2 million build- ings over the next four years. To meet this challenge as well as the commercial real estate industry’s increasing commitment to envi- ronmental, social and governance initiatives, it will be necessary to replace the fossil fuels currently used to provide space and water heating in buildings with renewable sources of electricity generation. This can only happen if we plan for, build and support an all-electric building infrastructure – referred to as beneficial electrification (or strategic electrification). The approach requires the replacement of systems that use fossil fuels (e.g., natural gas, propane, heating oil) with systems using electricity only. Beneficial electrification provides a path to buildings and systems that draw energy from renewable energy production sources, thereby elimi- nating or minimizing fossil fuel use, which in turn significantly lowers overall carbon emissions. While innovative all-electric design strategies can be applied to both existing building retrofits and new construction projects, these design choices typically appear to be more costly than traditional equipment. Therefore, one of the main challenges to decarbonization and electrification is the need to present a building owner or property manager with a credible “business case” for what may appear to be the more costly solu- tion. Until recently this “business case” would come in the form of a time- and cost- intensive energy audit, which would estimate the life- time energy cost savings and finan- cial impacts of alternative solutions. Such an audit would either make the case (or not) for investment in high-efficiency equipment. Given the upfront cost for such detailed energy audit and uncertainty about the return-on-investment outcome, most existing building owners, when faced with an end-of-life HVAC equipment decision, opt for the lowest-cost code-compliant option. n Emerging technology. Bringing electrification to scale and “pushing the needle” will require tools that confidently expedite the decision- making process. Fortunately, inex- pensive technology solutions have emerged to help project developers and HVAC contractors analyze, in real time, the economic impacts associated with high-efficiency HVAC equipment choices. These tools do not require a timely and costly energy audit and yet provide estimated energy savings, carbon dioxide emissions reduction and key financial metrics for multiple equip- ment upgrade alternatives. One such tool that the Colorado Commercial Prop- erty Assessed Clean Energy program has successfully deployed is the Energy Performance Improvement Calculator. EPIC enables property managers and building owners the ability to compare the benefits of an investment in high-efficiency equipment such as an all-electric variable refrigerant flow system vs. less efficient traditional systems, e.g., natural gas-fired space heating equipment. In addition, building owners and property managers can quickly compare the impact to net operat- ing income and projected annual cash flows of self-funding vs. financing options. In short, technol- ogy solutions have emerged to help overcome the conundrum building owners often face – investing in a time- and cost-intensive upfront energy audit that may result in unattractive project economics and therefore no path forward to recov- er the upfront audit cost. n Innovative financing. Another major challenge facing building electrification and decarbonization efforts is the capital cost of such projects. This is where tools like Colorado’s C-PACE program have proven an attractive solution for owners and managers of a wide range of building types. C-PACE enables owners of eligible commercial and industrial buildings to finance up to 100% of energy effi- ciency, renewable energy and water conservation eligible improvements on existing buildings. Financing is provided by private capital provid- ers at competitive rates, with repay- ment terms up to 25 years. The pro- gram also can finance 15%-20% of the costs associated with new con- struction projects that are designed to meet or exceed the 2015 Interna- tional Energy Conservation Code. While owners or developers often are reluctant to pay the cost premi- um associated with high-efficiency or all-electric equipment options, the choice becomes clearer when they can take advantage of C-PACE financing that provides low-cost capital, long-term (up to 25-year), nonrecourse financing that cov- ers 100% of the costs of an existing building upgrade. This rapidly growing, innova- tive program, which is leading the state’s commercial building elec- trification and decarbonization initiatives, has provided over $145 million in financing for retrofit and new construction projects in Colorado. As more building owners, managers and developers become educated on the benefits of C-PACE, they come to understand that this C-PACE funds energy improvement projects Brian McCarter CEO, Sustainable Real Estate Solutions (SRS) Tracy Phillips Director of Colorado C-PACE, Sustainable Real Estate Solutions (SRS) Please see McCarter, Page 31