As we are all aware, the government’s Net Zero 2050 initiative is underway. We are all in a climate emergency, and organisations of all shapes and sizes are being poised to take action.
Real Estate alone, contributes to almost 40% of energy and process-related emissions. Therefore, tackling climate change should be of primary concern for every property owner and occupier.
Reports suggest the industry still has miles to go on the road to zero. For instance, The Global Status Report for Buildings and Construction stated that energy demand in buildings increased by 1% between 2017 and 2018, whilst sector emissions increased by 2% worldwide.
There are positive steps being taken by stakeholders in the UK CRE sector.
A new focus on building energy performance is happening due to the launch of the NABERS UK rating scheme which measures the operational performance of the building. This is a significant change for the UK, which is more used to using Energy Performance Certificates (EPCs) as a target and measure of building energy performance. However, EPCs are based upon predicted or designed performance, rather than the measured. This will see a long overdue shift of focus towards energy monitoring and management, away from our current “design for compliance” culture to one of “design for performance”.
Climate-induced financial risk
For the larger investors within real estate, the impact of climate change has become more based around the resilience of the location of assets, as a result of the physical risk of environmental incidents, in addition to the buildings themselves.
When we look at the change in building performance in relationship to a typical net zero plan, we can see the huge positive impact in terms of cost and risk reduction. At today's prices, carbon reduction can be bought at virtually no cost by switching to ‘green electricity’ via REGO backed supply contracts. Even offsetting all remaining emissions can look like a simple, low cost option with cost ranging 0.5%-4% of utility spend for a typical office building but the demand for such solutions is predicted to increase dramatically in the mid to later stages of the decade as Net Zero commitments start having to be realised.
In addition, to compound the situation yet further the true situation regarding the low cost REGO contracts will become too big to hide. Currently all suppliers have to do is buy surplus REGOs from suppliers who have already used this power to supply their customers. It’s not much more than an accounting trick and hides the reality that some customers aren’t getting what they think they’re paying for. It’s a loophole, and an incredibly cheap one at that (the current price for a REGO is ~£0.35/MWh) and a market correction will leave a big hole in Net Zero budgets for those CRE stakeholders who haven’t maximised energy performance and locked in long term transparent REGO’s or PPA’s
To find out how Optimised Energy can support you in Commercial Real Estate, please click here.
Alternatively, information about our Net Zero support offering, can be found here.