Alternative Energy Opportunities for Commercial Real Estate

Commercial real estate (CRE) and industrial facilities have immense energy needs and account for roughly 40 percent of energy use in the U.S., putting a great strain on the nation’s power grids. Developing more efficient, sustainable structures can help ensure a steady supply of affordable power and significantly lower operating costs for businesses. It’s also good for the environment and your corporate image. Here are the top alternative energy trends in CRE, as well as reasons why alternative energy is a smart choice for commercial property owners.

TOP ALTERNATIVE ENERGY TRENDS IN CRE

RENEWABLE ENERGY

In 2021, the renewable energy industry remained remarkably resilient. Decreasing costs, advances in technology and increased battery storage have made renewables one of the most competitive energy sources in the market. The most common forms of renewable energies are solar, wind and geothermal.

Solar: Solar photovoltaic (PV) systems are the most commonly reported and cost-competitive form of on-site renewable energy in CRE globally. Photovoltaic (PV) panels installed onto rooftops, garages and sun-exposed ground surfaces, or building-integrated photovoltaics (BIPVs) that are built into the façade of a structure itself, have a 25 to 30 year lifespan and have considerably decreased in cost over the past decade, making them viable long-term energy solutions for CRE.

Ongoing research and innovation are constantly advancing solar technology, allowing CRE developers to incorporate diverse solar options, such as floating solar farms (or “floatovoltaics”) that are built on reservoirs, dams and other water bodies. Floating solar farms can generate huge amounts of electricity without taking up valuable land or real estate and power production is more efficient than land-based solar farms, due to the cooling effect of the water. Another innovation includes solar skins, which allow CRE developers to customize solar panels to fit the aesthetic needs of their clients.

Wind: Wind power, harnessed by generating electricity via horizontal or vertical axes wind turbines, is much more common at the utility scale rather than the commercial scale. However, the number of corporations, businesses, farms and others relying on wind power to fuel their energy needs is growing – especially during times of natural disaster. 

Hurricanes and typhoons often take down power lines, while flooding concerns can shut down nuclear power plants. Extreme cold can also freeze coal reserves and natural gas pipelines, leaving those who depend on their energy in the dark. The U.S. government has been investing in wind energy research since 1976, and a recent analysis of that research concluded that the net benefits of wind energy equal $31.4 billion and an 18 to 1 benefit-to-cost ratio. With climate change expected to fuel more extreme weather patterns, durable wind turbines could provide a way to convert the power of these storms into sustainable solutions for powering businesses and communities.

Geothermal: For commercial buildings with insufficient space to incorporate solar panels or wind turbines, harnessing geothermal energy is a great option. This type of energy is created when ground-source heat pumps use ambient ground temperature to heat or cool water. Depending on the design of the system, on-site geothermal systems can supply up to 100 percent of a building’s heating and cooling loads.

A geothermal-adjacent option is a green roof, a vegetative layer grown on a rooftop that provides shade, removes heat from the air and reduces temperatures of the roof surface. Using green roofs in cities with limited vegetation can moderate the daytime heat island effect often found in concentrated urban areas. Green roof temperatures can be 30 to 40°F lower than those of conventional roofs and can reduce city-wide ambient temperatures by up to 5°F. 

GREEN HYDROGEN ENERGY

Hydrogen is the most abundant material in the universe and produces close to zero greenhouse gas emissions when combusted, two qualities that make it a very exciting potential source of energy. The challenge has always been that converting it into a form of fuel that can be used involves the consumption of fossil fuels and the creation of carbon emissions. Hydrogen also produces high amounts of the harmful air pollutant nitrogen oxide when combusted. Green hydrogen, however, is created using electrolysis and water, and generates electricity from renewable sources like wind or solar power — effectively making the production process carbon-free.

Proposals to burn hydrogen have surged in the U.S. in recent years, including some industrial and CRE projects. A major renewable energy developer based in Illinois just announced an upcoming green hydrogen project that is expected to have capacity to store up to 400 kg of hydrogen on-site and provide hydrogen to a local 584-megawatt energy center.

AI & THE INTERNET OF ENERGY

The World Economic Forum predicts that Artificial Intelligence (AI) will play a big role in the world’s transition to clean energy. Gains in efficiency will be created by the development of predictive maintenance technology, accurate forecasting of supply and demand, and a shift to decentralized models of power generation and distribution in which power is generated by smaller, localized power grids like solar farms. Coordinating the integration of these networks requires complex AI algorithms.

The Internet of Energy (IoE) is a smart energy infrastructure system that incorporates the principles of the Internet of Things (IoT) to connect every point within the power grid: generation, load, distribution, storage and smart meters. It uses sensors and scanners to process information both close to the energy source, as well as via remote data centers, in order to carry out specific functions. This technology is currently being used for things like biometric monitoring, logistical tracking and controlling systems in smart buildings. Future applications could make it possible for utility companies to conduct real-time, data-driven diagnoses and predictive maintenance, improving efficiency and customer service.

WHY ALTERNATIVE ENERGY SOURCES?

Alternative energy sources are not only an environmentally responsible investment for CRE, but a smart business strategy for corporate image and a portfolio’s bottom line:

ENVIRONMENTAL REASONS:

  • Reduce energy consumption.
  • Lower greenhouse gas emissions and improve indoor air quality.
  • Reduce water consumption and construction waste.
  • Protect natural resources.

SOCIAL REASONS:

  • Promotes a safer environment for tenant wellness: proper ventilation and moisture control, optimal acoustic performance, maximum natural lighting, minimal use of materials with volatile organic compounds.
  • Creates a sense of community by increasing affordability in low-income multifamily residential buildings and strengthening grid resilience during peak energy consumption hours.

BUSINESS STRATEGY:

  • Tax credit incentives.
  • Return on investment (ROI): For new green buildings and green renos/retrofits in the U.S., respondents projected a 3 to 13.5 percent average reduction in operating costs in the next 12 months and a reported 17.9 percent average reduction in the next five years.
  • Align with local regulations and green building certifications.
  • Customer and stakeholder demand; customers want to support eco-friendly businesses.

Ongoing research and innovations in alternative energy are constantly creating new possibilities in CRE, and Old Republic Title is a significant industry player when it comes to insuring title for renewable energy projects. From utility scale wind and solar farms, natural gas power plants, battery storage facilities, and other energy project portfolios, we have the experience and expertise to support complex transaction structures for alternative and sustainable energy projects. For more information, visit oldrepublictitle.com/commercial.