Focusing on energy efficiency, particularly in commercial properties is a burgeoning challenge for real estate owners and developers in the United States. This is further exacerbated by the fact that our commercial buildings use 40% of the energy, 75% of electricity while contributing one-third of greenhouse gas emissions. The Biden-Harris Administration’s Climate Plan paves the path to overcome this challenge with a four-pronged approach to optimize commercial buildings and to cut the country’s building stock-related carbon footprint into half by 2035.
President Biden has dedicated an accelerated investment of $2 trillion to the development of jobs, infrastructure, and resources that facilitate more sustainable and energy-efficient commercial buildings. With a target to retrofit for 4 million commercial buildings, weatherize 2 million low-income homes, and build 1.5 million new affordable homes, building owners and developers can expect the following resources and policy trends over the next four years.
1. Updated equipment standards
The new administration is looking to roll-back lighting and appliance energy efficiency standards through an Executive Order. In addition to the existing programs, fifty other new standards for commercial and household products will be upgraded to save energy and water. Under these standards, retrofit projects as well as new construction will be able to lower the utility bills and operational costs further by using high-efficiency lighting, electrical appliances (e.g. refrigerators and washers and dryers), and energy-efficient heating and cooling or HVAC systems manufactured in the U.S.
This aggressive approach to development and enforcement of appliance efficiency standards will have an overall emission reduction potential equivalent to 5.2 billion metric tons CO2.
2. Stringent building energy performance standards
Federal government could soon require commercial buildings nationwide to measure and report their energy usage and emissions. This means that commercial property owners along with other tenant stakeholders will need to adopt new energy-efficient standards. This shall lead to an increased focus on low-carbon and energy-efficient upgrades and new commercial constructions.
To drive this effort at a local level, US Department of Energy (US DOE) will also assist state and city governments develop and enforce stricter building codes and energy efficiency standards, and providing access to funding mechanisms that allow them to adopt standards and all-electrical standards. This will have a significant impact on old properties with outdated and energy intensive building systems, driving adoption of low-carbon commercial construction using healthy or sustainable green materials and all-electrical codes for compliance.
3. Incentives and low-cost financing
To meet the decarbonization goals, the proposed ‘Clean energy and Sustainability bill’ will provide $100B federal investment and leverage $500B private sector lending. With Biden’s plan in motion, states, cities, local governments and tribes should have to access direct cash rebates and low-cost financing solutions to incentivize deep-retrofits, development of net-zero commercial projects, and bridge the green premium. This induced investment will also result in improved indoor environmental quality, an increased asset value, and a higher market rent.
Apart from green incentives, CRE stakeholders and developers will also be able to leverage financing programs offering alternative specialized financing, and below-market interest financing. Resources such as EnerYields can connect property owners and developers to cost-effective capital to upgrade existing commercial projects. This way, buildings can reduce their energy use and meet new energy performance benchmarks.
4. Specialized technology and workforce
To bolster plans for addressing energy-efficient commercial development and accelerate R&D into net-zero emission technologies, the administration is committed to launch Advanced Research Projects Agency on Climate (ARPA-C) and fund Advanced Research Projects Agency-Energy (ARPA-E). These research organizations will tap into the scientific and educational community for development of materials, systems, processes and appliances to make net-zero buildings possible at net-zero cost.
Biden’s plans and investments will also lead to the development of skilled workforce, that can assist property owners to achieve the required energy and emission targets, and contribute to a clean energy economy in the future.
5. Focus on specific building types
Investing in disadvantaged communities is one of the fundamental features of the Biden-Harris climate change agenda. 40% of the proposed funds are earmarked for communities disproportionately affected by environmental pollution or climate-change impacts, making energy efficiency and net-zero emissions more equitable.
Small and medium commercial buildings will be able to benefit from green banks, which reserve larger portion of the funds for smaller energy efficiency and clean energy projects with low- and moderate-income borrowers.
Biden’s plan also puts greater emphasis on commercial buildings used as learning facilities, detailing goals pertaining to modernization and upgrade. Funds will be deployed to support both student health and sustainable commercial construction. Improving indoor air quality and building climate-resilient and green infrastructure.
If the plan is followed through and progress is fast-tracked with accelerated enforcement of new standards, US could be looking at cutting emissions by 16 billion tons until 2050, and positively impacting the building performance and occupant health in spaces where we live, work, and learn.