Editor’s note: FM Perspectives are industry op-eds. The views expressed are the authors’ and do not necessarily reflect those of Facilities Management Advisor.
Buildings represent more than 40% of U.S. carbon emissions, and natural-gas-fired HVAC, water heating, cooking, and other systems represent the largest fraction. With a growing profile of electric products entering the market, the Building Decarbonization industry is coming. However, the new-products aspect of decarbonization is only the beginning of the story. To make decarbonization strategies actually work, we have to rethink systems to offset the resulting cost and electrical demand, and embrace a new approach to planning and design.
Decarbonized buildings represent a frontier in building development, opening new doors to think about how buildings can function, and an opportunity to rethink how they’re designed moving forward. We’ve been through other big “rethink” moments like this, and there are some things we should keep in mind as we enter this new phase.
There’ve been major turning points in recent history that represent leaps in commercial building design—the introduction of air-conditioned spaces in 1931 led to HVAC loads; innovations such as reinforced concrete, automatic elevators, and others enabled high-rise buildings to massively increase square footage and energy consumption of the buildings sector; and the science of energy efficiency spearheaded by Arthur Rosenfeld helped California keep its per-capita energy consumption flat for almost 50 years. Each required design to evolve, and for industries to reintegrate in response to demand.
Turning points like these redefined buildings for the better, and the design process followed suit. Decarbonization stands to refine building design and operations in revolutionary ways. Below, we offer two major changes we believe will become standard practice over the next decade.
Change No. 1: Design for Decarbonization
We have an opportunity to innovate across all these aspects—flexible, smart, carbon-free building infrastructure. Rapidly expanding frontiers in technology innovation are making buildings more flexible, more intelligent, and deeply sustainable. The market for decarbonization will be driven by fresh approaches to building renovation and improvements, as well as to efficient energy use in operations.
This will include managing energy use across systems within buildings, and employing solar and energy storage systems to eliminate the use of inefficient backup generators for emergency and code required standby power systems. Taking advantage of another major influence on building energy—electric vehicles—will make a huge impact on reducing global carbon emissions while providing energy for peak demand as well as emergency backup power. The deeper we go, the greater the opportunities.
Change No. 2: Proactive Integrated Fiscal Planning
There is a real risk that market incentives and reactive upgrades will produce unintended disadvantages to the owner. Short-term project horizons, unsophisticated energy analysis, and reactive maintenance programs prevent building owners from achieving strategic improvements and enhancing asset values long term. Realizing the full value of decarbonization requires big-picture, rational financial thinking and long-term planning. Unfortunately, most owners are reactive instead of proactive: They fail before they begin by constantly responding to system breakdowns instead of systematically identifying the opportunities that redesigned building systems will bring.
What the owner needs is a capital/investment roadmap for the short to medium term, which extracts the maximum possible savings at the highest possible yield over an owner’s capital return threshold. The resulting lower utility expenses, lower maintenance/repair expenses, and greatly increased building comfort (and satisfied tenants) maximizes return on investment and building value over time. A final, key outcome is that ownership can differentiate lower-CAM, higher-performing buildings compared to peer competitors who continue to utilize the reactive approach to equipment repair/replacement.
There are huge challenges to address. Over the summer of 2023, we looked at the building stocks of a dozen public and private building portfolios and found several key factors that make or break their chances to reach their goals. Owners may track maintenance activity, but need a clear, detailed inventory of building systems (HVAC, water heating, storage, etc.) that would enable them to see the potential impacts of portfolio-wise decarbonization investments, let alone set priorities and timelines. Similarly, their decision to replace or upgrade systems should be based on maximum ROI on asset replacement in addition to achievable carbon savings and other long-term benefits.
Decarbonization projects, on a product-replacement basis, are likely to continue and increase. However, as we outline above, the industry will not respond in a cohesive way until integrated planning and design can demonstrate opportunities for significant ROI and innovation. The underlying value of decarbonization is not merely removal of natural-gas-consuming systems, but in achieving higher levels of energy efficiency, integration, and financial sustainability across buildings.
Doug Davenport is the founder of Prospect Silicon Valley (ProspectSV); David Kaneda is the founder of IDeAs Consulting; and Alex Kaffka is CEO and senior principal at Verdera Partners.