Editor’s note: This is the first article in a series aimed at helping facility managers prepare for the opportunities presented by the energy revolution. 

The clean-energy future is interactive and grid-interactive buildings offer indisputable benefits to their owners, tenants, the utilities and the community. Because buildings tend to be passive electricity users, it is important to understand what this opportunity means.

Accountable for 40 percent of global greenhouse emissions and for three fourths of the total U.S. electricity consumption and even more at peak, buildings play a key role in the economy and in climate change action. The real estate industry has embraced this and amassed a proportional response to energy efficiency, embodied carbon and net-zero challenges. Still, buildings have remained a largely passive consumer of energy: they use the electricity they need whenever they need it, disconnected from the rhythms of renewable energy and blind to the stress inflexible loads create for the grid.

This passive approach impedes the transition to the clean-energy future and misses significant opportunities to engage customers and to align operations with organizational commitments to climate action. Moreover, it leaves money on the table: grid-interactive buildings offer both savings and new revenue streams.

“Grid-Interactive buildings represent the next technological challenge for the corporate real estate (CRE) industry. Making a building energy efficient is a key element in addressing the threats posed by climate change, but in itself does not manage the demand/response flow of energy. The need for grid-interactivity has risen out of the exponential growth in distributed renewable energy generation. emerging energy storage technologies, peer-to-peer energy trading, and vehicle-to-grid energy transfer.  This will become a critical knowledge and skillset requirement for the facility manager. It is vital to begin the introductory education and skill development efforts today, so the FM Profession is prepared for tomorrow’s opportunities.”

Dean Stanberry, CFM (U.S.)

IFMA 2nd Vice-Chair – Global Board of Directors

 

What are grid-interactive efficient buildings?

According to the U.S. Department of Energy, grid-interactive efficient buildings (GEBs) are energy-efficient buildings with smart technologies characterized by the active use of distributed energy resources (DERs) to optimize energy use for grid services, occupant needs and preferences, and cost-reductions in a continuous and integrated way.

What is a DER?

Distributed Energy Resources (DERs) are small-scale (1-10,000 kW) power generation or storage technologies that can provide an alternative to or an enhancement of the traditional electric power system. These can be located on an electric utility’s distribution system, a subsystem of the utility’s distribution system or behind a customer meter. Examples:

  • rooftop solar PV units

  • natural gas turbines

  • microturbines

  • wind turbines

  • biomass generators

  • fuel cells

  • tri-generation units

  • battery storage

  • electric vehicles (EV) and EV chargers

  • demand response applications.

Why are we here?

Energy has shifted from a “perishable” commodity to a tradable one. At first, mankind knew energy as stationary: sun, water and wind. Humans are the original dispatchable energy (that is, energy that is reliable and can send wherever it is needed), followed by domesticated animals. If one wanted to dig a mine, he used a human with a shovel and a bucket. If one wanted to move something from A to B, she used a horse or two. To this day, “horsepower” is a recognized unit of energy. However, dispatchable energy was limited to muscle power until the 1860s, which is when steam and coal became the preferred mode of dispatchable energy. The transition was not smooth.

If that was the first energy revolution, the second came when renewable energy – the sun, water and wind energies that had always been perishable – became dispatchable. This ability to deliver a renewably generated electron from its source to its destination has given rise to DERs.

If all of this occurred decades ago, why does it finally matter? Because once perishable, renewable energy has now become a tradable commodity just like coal, oil, gas, or gold.

Is a battery required for a GEB?

Any building – with or without capacity to generate renewable energy and with or without a battery to store it – can participate in the energy markets. That is because precincts can be part of a solution: buildings can trade excess renewables between themselves (peer-to-peer trading via a power purchase agreement) or store this excess to use or dispatch it to the grid should it need it.

Even without a solar panel or a battery, a building can purchase verified renewable energy while saving money and reducing pressure on the grid. And a battery makes it a true collaborator for clean energy.

“This will improve resiliency of the grid and integrate grid congestion issues with market support. The opportunity to do things in a much smarter way, and save plenty of money while doing so, is hard to resist. And perhaps it’s reassuring that far from just creating problems for the grid, renewables could help in making it more cost effective.”

Jemma Green, PhD. Co-founder and Chair of Powerledger

Building the New Flexibility. Forbes.com, February 2, 2021.

Moreover, imagine procuring excess solar from customers in exchange for the furniture, clothing, services, or even beer made within the facility within the portfolio. In a cashless transaction, Carlton & United Breweries (Australia) is doing just that in pursuing its goal of carbon-neutral beer. A self-funding marketing initiative activating such a solar exchange has already garnered them AUS$3M worth of free media.

Do electric vehicles factor into GEBs?

Absolutely. Charging an electric vehicle during peak demand exacerbates grid stress but the opposite is also true: using the energy stored in EV fleets during peak solves multiple problems. That is because electric vehicles are effectively “batteries on wheels,” an asset FMs will be increasingly able to monetize. Imagine parking at an airport for a holiday and authorizing a vehicle battery to be charged and discharged to moderate the airport’s overall demand in exchange for paying to park

Why does it matter to FMs?

Production of renewable energy is only going up, with real estate assets contributing to that substantially. Real estate owners, FMs and tenants will increasingly engage with the energy markets in pursuit of their corporate commitments and to save and make money. However, it will be a bit chaotic for a while: which party should own the generation asset? Who manages it within the asset daily? Who gets to decide when excess energy can be on-sold or when a deficit is topped-up in real-time? Who handles the arrangement with the utility for helping the grid with balancing its load by providing what are known as flexibility services, when stored power is dispatched to the grid in the rare but lucrative event of power shortage? While uncertainty may spell risk, it also illuminates a phenomenal opportunity for those willing to embrace it.

It is anticipated that the majority of today’s FMs will retire within 10 years. Not only does it compel the profession to recruit new talent, but it offers an opportunity to redefine FM’s value to the real estate industry, leveraging the incoming tech-savvy generation to command a more influential and strategic seat at the property sector table.

How can a real estate asset participate in energy markets?

Real estate assets can engage with the clean-energy market in any combination of the following ways (in order of increasing direct impact on climate change):

Load shifting

  • Facilitate trading within a connected community (peer-to-peer trading)

Arbitrage & ancillary grid services

 

  • Activate residential or EV batteries to dispatch stored renewable energy to the grid when it needs it and not when it doesn’t

  • Participate in frequency control ancillary services (FCAS)

Energy Demand

  • Procure (verified) “green” energy

  • Procure Renewable Energy Certificates (RECs)

  • Procure from your customers or community

Energy Generation

  • Finance investment through pre-commitment

  • Activate every surface: roofs, parking lots, land awaiting development

  • Performance-contract, own, rent out, lease, lease-to-buy your DER

Energy Storage

  • Batteries linked to on-site generation

  • Batteries linked to off-site generation

  • EV batteries

Is technology a barrier?

Absolutely not. Not only is there ready hardware, software, and systems integration expertise today but there are compelling use cases around the world.

Awareness is the biggest obstacle to greater uptake of GEBs: even if better options exist, integrating them into current systems faces the inertia of how things have been done to date. The other major obstacle is regulation.

What regulatory constraints exist?

While a valuable tactic in its time, net-metering is an obstacle to this future. Furthermore, consumers cannot trade energy directly with each other in most places in the world; an obstacle that can often be overcome by having their energy retailer on board. Such obstacles are expected to soon recede.

In Europe, EU directive 2018/2001 set a deadline of June 1, 2021 for all its member countries to enact regulation that allows buildings to share energy (“peer-to-peer trading”), and many are doing just that. In the U.S., GEBs are about to get a boost as FERC Order No. 2222 comes into effect because it will allow almost any DER to sell directly to the grid. In addition to the mushrooming commitments to climate action by states, municipalities, and corporations, this will help the U.S. Department of Energy to deliver on its commitment to triple the energy efficiency and demand flexibility of the building sector by 2030 relative to 2020 levels. Today, Australia offers some of the most favorable conditions for GEBs, generating a disproportionate number of world’s best practice examples and it is only going to get better: a regulatory change has recently compelled utilities to procure grid services from DERs.

In conclusion…

The real estate industry and FM profession remain largely passive in the way they consume electricity. Not only does this miss significant opportunities to advance corporate goals but it leaves money on the table: grid-interactive buildings offer both savings and new revenue streams.

It is time to understand and leverage the energy revolution heading towards us. There is good news: recent regulatory changes and technology breakthroughs now allow all real estate assets throughout some of the world – including the U.S. and the E.U. – to become grid-interactive. There is also even better news: what is vital for clean-energy markets is also good for business because it unlocks new revenue streams for real estate.

“Facility Management has the opportunity to take back its purpose of providing effective and professional support services for the organizations it serves by integrating energy trading and improving the quality of the grid -- and, through grid-interactive buildings, making money at it.”

Maria Atkinson AM, global sustainability leader

FM has shown leadership time and time again, even when it meant redefining its contribution. The current energy revolution warrants attention because FM is now well positioned to transform its CapEx and OpEx business cases while slashing the costs of doing the right thing.