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Decarbonization of Buildings: The Role of Real Estate in the Energy Transition

Medium Friday, June 11th 2021
Source: Pixabay

Achieving all climate goals requires substantial participation of the building sector. However, transitioning this market to being carbon neutral is by no means an easy or straightforward objective. How then will the building sector reach net zero? What are the biggest challenges that stand in the way? And what are the greatest opportunities?

There are no two better people to help answer these questions than Stephanie Greene, Senior Principal and Program Lead for Carbon-Free Buildings at Rocky Mountain Institute and Sara Neff, recently named Head of ESG at Lendlease Americas and Member of the Board of Advisors for Dynamo Energy Hub.

Stephanie kicked off the event by explaining the critical role the building sector plays in the energy transition along with the industries’ long-term goals.

“It’s actually a pretty ambitious level of speed that we need to decarbonize the building sector. We need to hit 100% zero emissions by 2050. The thing that always gives me the urgency to show up to work every day, is that we also have to reach a 50% emissions reduction in less than 10 years.” — Stephanie Greene, Senior Principal and Program Lead for Carbon-Free Buildings at Rocky Mountain Institute

Stephanie noted that despite all the hurdles towards meeting net zero — ranging from eliminating both indirect and direct emissions from buildings, along with productivity and labor supply challenges — the industry is aware of how to make buildings zero carbon and has the technology to do so. The real challenge then becomes how to make these projects easier, scalable, and affordable.

In order to reach zero carbon buildings, RMI is concentrated on four key levers: electrification, decarbonized electricity, energy efficiency, and embodied carbon.

Credit: Rocky Mountain Institute

Stephanie ended her presentation by noting how participation of both the industry and policymakers is crucial to meeting the energy transition goals:

“We at RMI believe that a mix of both policy change and market implementation are needed for the buildings sector to meet our energy transition. Catalyzing the retrofit market and transforming the construction industry market are the types of approaches that are going to be required.” — Stephanie Greene, Senior Principal and Program Lead for Carbon-Free Buildings at Rocky Mountain Institute

Credit: Rocky Mountain Institute

After presenting an overview, Stephanie led a lively discussion with Sara Neff. Given Sara’s success of leading Kilroy’s transition to achieving carbon neutral operations at the end of 2020 she provided nothing but thoughtful commentary and insightful advice to the conversation.

Sara began by discussing what she believes to be the biggest challenges and opportunities of addressing the climate threat in the building space. She noted while shifting the building sector towards carbon neutrality is a relatively new concept, she’s seeing more and more companies make commitments and efforts towards reaching this goal. But while the top 10% of the market has transformed, the rest of the sector is underserved.

Continuing this point, Stephanie then asked: “what do you think we need to do to address this underserved segment of the building community?”

Sara responded by stating how there’s great opportunity within this area; simpler solutions such as retrofitting buildings, appliance rebates, building code policy, and utility participation are all areas for improving energy efficiency.

Turning towards Sara’s previous work, Stephanie inquired about what Kilroy’s biggest challenges were and how they were addressed when working towards carbon neutral operations.

Sara highlighted how procuring offsite was a key component to Kilroy reaching carbon neutrality by the end of last year; believing everything can be done onsite may just simply not be possible in some cases and there is not a one size fits all solution to help the building sector reach net zero.

“There’s this view that somehow it’s possible for every single building to get to net zero onsite, it’s not. We have to start thinking at scale and start needing to think outside the box. We need to start thinking about adding more renewables to the grid while we get rid of the natural gas.” — Sara Neff, recently named Head of ESG at Lendlease Americas

The conversation then shifted to the Q&A section of the event, where both Stephanie and Sara answered questions posed by event attendees. When asked about how to deal with a split incentive problem of weighing up front capital cost versus long term energy efficiency for tenants, Sara advised:

“There’s a lot of really great opportunities to procure 100% renewable at no cost premium for tenants; I think a lot of folks just assumed it’s going to be more expensive. Yes, I’ve seen it more expensive, but I’ve also seen it less. There’s a lot of opportunity out there as long as someone is willing to spend the time doing it.” — Sara Neff, recently named Head of ESG at Lendlease Americas

And as for real estate owners, Sara noted how simple actions such as light retrofitting and ventilation updates are great ways to decarbonize portfolios.

Given all the proposed solutions for energy efficiency and carbon neutrality, the inevitable question of how to address the capital challenge for transforming the building sector arose. Sara commented how the entire finance sector, like the building industry, is also in a transformative period.

“The thing to remember is that real estate was not set up with energy efficiency in mind; capital budgets were not designed with energy efficiency in mind.” Sara goes on to note that ultimately, “It requires a different way of thinking about money,” such as setting up standalone sustainability budgets specifically meant for smaller, non-emergency energy efficiency projects.

Stephanie chimed into the conversation to note how the trend of energy efficiency has shifted over the last several years to discussion around lowering the cost curve of newer technologies, like heat pumps, and implementing technologies around electrification and embodied carbon. Sara agreed, but reiterated the importance of the building sector not pushing energy efficiency to the wayside.

It is clear that the building sector is transforming at an unprecedented rate; even though there is a lot of work that needs to get done, through thinking at scale and outside the box, there are a plethora of opportunities to successfully and cost-effectively convert the building sector market to net zero. Dynamo Energy Hub is proud to bring together energy leaders like Sara and Stephanie for such a meaningful conversation, which provided thoughtful insights and invaluable advice; it’s these exact kinds of discussions that are needed to cultivate energy innovation.


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