In December 2015, history was made in Paris when 195 countries agreed to work together to substantially reduce global warming to a maximum of 2C and to phase out fossil fuels by the end of the 21st century. More than ever, governments around the world are determined to find cost-effective ways to transition to clean energy – and no sector, or economic actor, is immune to public scrutiny.
“In order to meet the commitments in the Paris Climate Agreement to keep global average temperature increase to below 2C, the world needs to transition to a low carbon economy based on low carbon power sources,” says Rik Recourt, associate, real estate, at GRESB. “With buildings and building construction responsible for 36 percent of global energy consumption and nearly 40 percent of total direct and indirect CO2 emissions, the real estate sector has a critical role to play.”
Rethinking energy use
Sarah Ratcliffe, chief executive at Better Buildings Partnership, adds: “If we are to have a chance of meeting the scientific imperative to keep global warming within 1.5 degrees by 2050, it will be absolutely essential to transition from fossil fuel-based economies to decarbonized forms of energy production.
“For this to happen, major systemic changes in energy policy, infrastructure and technology are required,” Ratcliffe says. “For the property sector, this has three important strands: firstly, reducing the demand for energy by improving the design and energy efficiency of buildings; secondly, moving towards more localized energy production; and thirdly, decarbonizing heat and investing in low or zero forms of energy production, both on and off site.”
Real estate investors are increasingly partnering with smart building technology providers in order to improve the efficiency of their assets and to support energy transition. Another area of focus is renewable energy. The cost of onsite solar PV has reduced dramatically in recent years, for example, and is frequently installed at suitable properties.
In California, solar panels have even been mandated on new homes and apartment buildings built from next year, as the state pursues its target of increasing renewable sources to 50 percent of electricity consumption by 2030 and reducing emissions to 80 percent below 1990 levels by 2050.
Indeed, distributed energy systems are an important component of real estate’s energy transition journey, encompassing not only renewable energy generation technology, but storage and monitoring solutions as well.
“The real estate industry has a real responsibility to rise to these challenges, as it will likely be one of the biggest financial and societal risks we face,” says Guy Grainger, chief executive at real estate advisory firm JLL. “Energy use needs to become smarter. Business practices need to become more sustainable. Waste and water are also critical. In the future, the value of a property will be linked more directly to its operational efficiency in use.”