The trend toward building electrification in commercial properties with a view toward decarbonization is increasingly at the forefront of the effort to mitigate climate change. While the planning process to electrify new construction projects can usually be more accommodating than that for existing buildings, owners and operators of existing assets also have tools available that allow them to compete in today’s market.
The trend toward electrification is being accelerated by upcoming Securities and Exchange Commission reporting requirements for large publicly traded companies as well as by the ongoing greening of the grid. The green power market, a subset of the larger electricity market in the U.S., is a complex system that delivers power as it is produced. As advances in technology are made, especially in the development of large-capacity electricity storage systems, renewables will contribute more and more to the greening of the grid.
To put this in perspective, in just one state, Illinois, over two-thirds of the grid’s capacity is sourced from fuels that do not generate atmospheric carbon (Figure 1). Solidifying a decarbonization plan – what we call an “asset drawdown strategy” – that carefully considers both capital and operating costs represents a game-changing opportunity for existing properties to compete with new projects and differentiate themselves in the marketplace to avoid becoming stranded even as competitors innovate.
As the carbon footprint of the electrical grid drops, developing an asset drawdown strategy becomes more critical when planning an asset’s future. While 100% electrification may not be feasible, a significant climate impact can be achieved with hybrid electrification that balances capital expenditure (CapEx) and operating expenses (OpEx) while providing flexibility for the future. This should be the primary motivation for any building asset’s drawdown strategy.
Electrification of existing assets in heating-dominant climates can be particularly problematic. There exists a substantial inventory of buildings that are imminently due for major infrastructure upgrades; many of these, particularly those designed before the mid-20th century, were not designed with electrification in mind.
Many owners and operators of these facilities understand it is critical to take action to limit climate impact, not only due to competition but also from a sense of responsibility to their communities and stakeholders. Updating central systems that have expected service lives of 20 or more years will have a significant aggregate impact. Infrastructure retrofits must therefore include a feasibility analysis of deploying passive energy management strategies plus equipment replacement.
While it may be impossible to change a building’s orientation and infeasible to perform major envelope modifications, addressing energy drains related to envelope tightness, stack effect management, lighting and controls, operational setbacks, and retro-commissioning of existing MEP systems can significantly reduce the energy demand of a building.
Once you optimize existing efficiency via passive design, engineering, and construction approaches, you can turn to strategies that use more costly technologies and retrofits, such as heat pumps, dedicated outdoor air systems (DOAS) with heat recovery, and on-site renewable energy. These strategies can be more efficiently deployed as part of the infrastructure upgrades in conjunction with existing capital improvement plans.
CONSIDER USING A ‘BRIDGE SOLUTION’ FOR DECARBONIZATION
One suggested approach is to use a “bridge solution” whereby heat pumps are selected and operated for a significant majority of operating hours while gas-fired or electric resistance heating is activated during peak heating periods.
This approach can be applied to both new and existing assets. In both cases, energy savings are realized by the efficient heat pump operation for most hours of operation while the heat pump plant, which is significantly more costly and space intensive compared to gas-fired technology, is optimized (Figure 2).
Figure 2. Air-to-water heat pump vs boiler footprint. Courtesy ESD
Heat pumps move heat rather than generate heat. They can provide up to four units of energy output for every one unit of energy input, whereas even the most efficient natural gas-fired equipment tops out at 99% efficiency.
However, the average U.S. electricity rate is about three times the cost per unit energy as natural gas, so while heat pump systems are typically more energy efficient, they are not always less costly to operate.
Moreover, the efficiency of air-source heat pumps decreases as the outside air temperature drops. In cold climates like Chicago, operating hours below freezing constitute less than 25% of the approximately 6,000 annual heating hours and often occur during unoccupied hours when operational setbacks are in place.
Rather than devoting capital and operational expenditures for a fully electric project, building owners and operators should consider a bridge solution that optimizes high-efficiency (and high-cost) electric heating systems, notably heat pumps and heat recovery chillers, for the 75% of operating hours when temperatures are above freezing, combined with gas-fired or electric boilers to target the balance. This approach significantly reduces operational carbon and enables future retrofits when heat pump technology presumably will be more cost and space efficient.
An effective asset drawdown strategy for an existing building can be phased and implemented over time so that capital expenditures can be deployed incrementally and aligned as new leases are executed. Even where there is a central heating plant that serves multiple tenants, part of the plant can be upgraded with the associated cost, energy, and carbon reduction allocated to specific tenants.
This allows an incremental shift toward electrification in line with tenant demand. However, it also requires a deep understanding of the hybrid plant’s configuration and operation so that a green lease can be successfully implemented, keeping in mind the operational costs on both new and current tenants.
Electrification of existing buildings also comes with unique concerns, most notably the retrofit of existing heating plants, which are often designed for elevated hot water temperatures that heat pump systems struggle to achieve.
A recent corporate headquarters relocation project in Chicago addressed that problem by deploying cascading heat pumps with heat recovery machines to meet the fluid temperature requirements of the existing perimeter fin-tube radiators.
DECARBONIZATION INCENTIVES IN THE INFLATION REDUCTION ACT
The Inflation Reduction Act of 2022 contains significant incentives to use renewable energy and efficient systems such as heat pumps and geothermal systems, which further defray the initial capital impact of this strategy.
A current electrification project for a financial services client in New York includes retrofitting their existing heating/cooling plant to add 1,000 tons of geothermal capacity to meet corporate sustainability goals and reduce on-site fossil fuel consumption. Normally an expensive endeavor, the geothermal system is on track as it targets up to a 40% Federal Investment Tax Credit under the IRA.
The goal is to displace fossil fuel heat while also avoiding the use of electric resistance heat, which is far less efficient than heat pumps at the target operating hours and will result in operating costs that may be significantly higher than that for competing commercial properties.
While building electrification can be a powerful tool in the fight against climate change, a full understanding of the costs, incentives, logistics, and planning requirements must be achieved before proceeding. Although 100% electrification should be the goal, it is not always feasible, and positive climate benefits can still be achieved in a cost-feasible manner.
Development of a bespoke asset drawdown strategy for sites that includes strategically deploying bridge solutions can prevent the property from becoming stranded while realizing significant operational carbon reductions, increasing its value and marketability, and setting it up for long-term viability.
ABOUT THE AUTHORS
Andrew Lehrer, PE, LEED AP, is Practice Leader for High Performance Buildings at ESD, a leading global engineering firm specializing in mechanical, electrical, plumbing, fire protection, life safety, structural, and technology engineering.
Lehrer focuses on life sciences, major real estate asset repositioning/adaptive reuse, corporate headquarters, and high-rise markets. He is a licensed Professional Engineer in Illinois and California, an Executive Board Member of ACE Mentor Chicago, and a long-time member of ASHRAE.
In 2019, he was named to Building Design+Construction's "40 Under 40" honor roll, recognizing the 40 "rising superstars" of the AEC industry.
Tyler Jensen, PE, LEEP AP, is Studio Leader for High Performance Buildings at ESD. He has broad experience as a mechanical engineer and project manager across a variety of markets, with a focus on new construction, tall buildings, infrastructure, large commercial interiors, and repositioning projects. He is a member of ASHRAE and the Council on Tall Buildings and Urban Habitat and has published numerous articles within the industry.