Beyond “ESG”: Bottom Line Impacts of Sustainability in Real Estate
If any more proof was needed that energy sustainability and real estate are inseparable conversations, our colleague, Alexandre Tilmant, was invited as a panelist to Blueprint 2021, “real estate’s premier event for tech startups, VCs, and industry players” (no relation to Blueprint Power, just great minds thinking alike!). Participating in a panel entitled “Sustainability as a Value Driver for Real Estate,” Alex and his co-panelists made plain the economic decision making that has driven meaningful investment from the real estate sector in energy sustainability.
Sustainability is by no means a novel concept or concern in the real estate sector. What excites us, and many others in this industry, is the transition of investment in energy sustainability from a “do good” conversation to a “make money and do good” conversation. Though both have been relevant factors for years, it has never been a better time for real estate owners to generate bottom-line ROI by paying attention to sustainable energy solutions for their properties.
Though sustainability proposals have been kicking around for years, market conditions have caught up to allow for economic ROI today. Energy efficiency and demand charge management are two readily available avenues for electric bill cost savings. Moreover, as DERs travel down the cost curve, the implementation of these assets presents a viable method for real estate owners to augment their load management efforts. Make no mistake, however - revenue opportunities abound as well through government incentives for carbon reduction, demand response programs, and new avenues for energy market participation. As we wrote over the Summer, FERC Orders 841/2222, for example, unlock the potential for DERs to be compensated for participation in wholesale markets.
Coupled in the ROI calculation is a recognition that falling behind could open real estate owners up to regulatory risks. Local Law 97, an NYC mandate that will penalize buildings that exceed a prescribed range of carbon emissions, is an example of a potential downside for owners if not adequately addressed in the near future.
Beyond the direct ROI generated from the assets themselves, a shift in capital markets and tenant sentiment weighs on real estate decision-makers minds and investment calculations. Data suggests that “green” buildings command higher rents, boost property values, and allow access to favorable financing instruments/terms (both project and corporate).
At Blueprint, we’re working alongside real estate partners towards a future where driving the bottom line from DERs is a mainstream concept. Significant breakthroughs in behind-the-meter storage and connectivity between DERs and the market are happening as we type, enabling a transformation of the built environment into a flexible power network. Ultimately, a win-win: good for the energy transition and sustainability, and good for the financial profiles of our partners.
We’re grateful that our partners, real estate colleagues, and Blueprint 2021 recognize the value potential of sustainability and are working with us towards this future.
