Article
Tackling Energy Costs
December 21, 2022
In the past few months, western nations have had to confront the challenge of energy shortages caused by the war in Ukraine. A dramatic reduction of gas supplies reaching Europe from Russia has driven up fuel prices to the point where many businesses will face unprecedented and potentially unaffordable bills over the coming winter. Governments are now asking themselves how they can protect their own economies and move towards national energy security. Responses vary from one country to another. New coal plants are being started in Germany and the nuclear infrastructure in France is being put under pressure to produce more.
All this comes on top of the global challenge of addressing climate change. Businesses around the world were already asking themselves; how can we be more sustainable? Reducing energy consumption has become even more critical than before; for the future of the planet, to safeguard the welfare of citizens and to maintain thriving economies. So, for those of us working in the real estate sector, what choices do we have?
Quick wins are available. For investors and owners that would mean energy saving strategies which show a positive return on investment in four years or quicker. Some are stand alone interventions, others need to be seen as part of a wider ranging refurbishment or building improvement project. Introducing energy saving devices like LED lighting, sensor-controlled taps and dual flush toilets are simple steps which will have an immediate impact on energy use. Smaller IT racks (to reduce cooling demand), more frequent air filter maintenance and making sure BMS systems are optimising energy use, all offer relatively quick returns. From our own experience, it’s possible to save as much as 50% of cooling energy by replacing overdesigned IT racks.
Where improvements are more expensive, the payback period will be longer, but the impact on energy use can be much greater. Improving the thermal performance of building fabric is clearly a key area in tackling energy efficiency, but recovering the cost of enhancing roof insulation, for example, may take between six to ten years. One of our clients recently spent an additional €90,000 on upgrading ceiling and wall insulation whilst refurbishing their building. This is expected to reduce energy consumption between 8-12% each year. By upgrading the roof insulation – which is the next step – they can expect this saving to increase to 12-18%. The return on this investment would be between 9 and 11 years.
Arguably, if energy costs continue to rise, this period will be shorter. For example, on a recent project in France, we saw the projected payback period for installing LED panels reduce from six years to two.
Introducing more efficient heating, ventilating and air conditioning equipment, coupled with intelligent controls, will be a significant investment but can pay for itself inside ten years. Perhaps a less obvious but nonetheless effective strategy is preventive maintenance. Ensuring that buildings and their systems are running efficiently will help keep energy costs down. We helped a client recently to switch their old fan coil units for new high energy efficiency models. This cut electricity consumption by up to 50%.
Meanwhile, Summers are getting warmer and water shortages are likely to be more frequent. These climate trends amongst others will drive resource costs up, so they need to be reflected in how we design, adapt and use our buildings every day. A more intelligent building can provide the data that owners and tenants need to understand key operational factors and manage energy use more effectively. CBRE’s own Asset IQ tool is designed to do just this.
Deciding what to do and when relies on understanding the building and being clear about your own objectives - both short and longer term. Focused technical studies are the foundation of a properly considered strategy. Programme and cost will, of course, be key considerations. Less complex projects that don’t need regulatory or third-party approval may exert an obvious priority. LED panels, for example, are very quick to install and do not need any approval from local authorities.
To develop the best plans, building owners will always need clear evidence of both the costs and the benefits of any capital investment. Sometimes that’s difficult when external factors are changing so rapidly as they are now.
If you’d like to continue the conversation, please get in touch.
All this comes on top of the global challenge of addressing climate change. Businesses around the world were already asking themselves; how can we be more sustainable? Reducing energy consumption has become even more critical than before; for the future of the planet, to safeguard the welfare of citizens and to maintain thriving economies. So, for those of us working in the real estate sector, what choices do we have?
Quick wins are available. For investors and owners that would mean energy saving strategies which show a positive return on investment in four years or quicker. Some are stand alone interventions, others need to be seen as part of a wider ranging refurbishment or building improvement project. Introducing energy saving devices like LED lighting, sensor-controlled taps and dual flush toilets are simple steps which will have an immediate impact on energy use. Smaller IT racks (to reduce cooling demand), more frequent air filter maintenance and making sure BMS systems are optimising energy use, all offer relatively quick returns. From our own experience, it’s possible to save as much as 50% of cooling energy by replacing overdesigned IT racks.
Where improvements are more expensive, the payback period will be longer, but the impact on energy use can be much greater. Improving the thermal performance of building fabric is clearly a key area in tackling energy efficiency, but recovering the cost of enhancing roof insulation, for example, may take between six to ten years. One of our clients recently spent an additional €90,000 on upgrading ceiling and wall insulation whilst refurbishing their building. This is expected to reduce energy consumption between 8-12% each year. By upgrading the roof insulation – which is the next step – they can expect this saving to increase to 12-18%. The return on this investment would be between 9 and 11 years.
Arguably, if energy costs continue to rise, this period will be shorter. For example, on a recent project in France, we saw the projected payback period for installing LED panels reduce from six years to two.
Introducing more efficient heating, ventilating and air conditioning equipment, coupled with intelligent controls, will be a significant investment but can pay for itself inside ten years. Perhaps a less obvious but nonetheless effective strategy is preventive maintenance. Ensuring that buildings and their systems are running efficiently will help keep energy costs down. We helped a client recently to switch their old fan coil units for new high energy efficiency models. This cut electricity consumption by up to 50%.
Meanwhile, Summers are getting warmer and water shortages are likely to be more frequent. These climate trends amongst others will drive resource costs up, so they need to be reflected in how we design, adapt and use our buildings every day. A more intelligent building can provide the data that owners and tenants need to understand key operational factors and manage energy use more effectively. CBRE’s own Asset IQ tool is designed to do just this.
Deciding what to do and when relies on understanding the building and being clear about your own objectives - both short and longer term. Focused technical studies are the foundation of a properly considered strategy. Programme and cost will, of course, be key considerations. Less complex projects that don’t need regulatory or third-party approval may exert an obvious priority. LED panels, for example, are very quick to install and do not need any approval from local authorities.
To develop the best plans, building owners will always need clear evidence of both the costs and the benefits of any capital investment. Sometimes that’s difficult when external factors are changing so rapidly as they are now.
If you’d like to continue the conversation, please get in touch.