By: Will Yarnall
Increasingly, startups that we come across in the PropTech ecosystem are really solving energy problems. This kind of market crossover is not a new phenomenon, but the rise we're seeing is noteworthy. And if you look at the surge in energy consumption, the trend is no surprise. As utility companies scramble to boost capacity, owners of real estate face pressure to lower consumption, and founders see opportunities for innovation.
Unfortunately for PropTech & Energy Tech startups, there’s a knowledge gap among a large swath of their customer base - owners and operators of commercial real estate (CRE). The CRE industry is still learning about the consumption problem, just as startups are hoping to capitalize on the pressing need to reduce consumption.
CRE folks are likely more familiar with the drivers that are increasing energy demand than the solutions to reduce it. Drivers like the rise of on-site EV chargers and the boom in data center construction, have been well-documented in CRE publications, but the urgency surrounding their energy impact is a more recent development. This creates a challenge for both PropTech startups offering solutions and CRE professionals who may not yet be fully aware of the issue. So what does that mean for the parties involved?
- Founders: Be aware of this potential barrier to revenue growth, and invest time/resources in customer education.
- CRE Professionals: If you want to have an edge (or avoid falling behind), get educated on the problem and the solutions.
What should the CRE professional know?
I won't claim to be an expert, but I can provide a solid foundation for the uninitiated CRE owner. To be clear, this is just scratching the surface. I'll have more to come on this topic as its been occupying a lot of my headspace.
Cause for Concern: The Grid Capacity Crunch
The CRE industry faces a double threat from rising energy consumption: potential power grid strain leading to outages, and the escalating cost of electricity supply. As the demand for electricity surges, driven by forces like the proliferation of electric vehicles (EVs), and data centers, the existing infrastructure may struggle to keep up. This could lead to power outages, voltage fluctuations, and higher electricity costs. When these events occur it can negatively impact property operations, and tenant satisfaction. In cases of prolonged outages, these events lead to business interruption, inventory losses, and more. Outages and runaway costs may not affect every market, but if you experienced the 2021 Texas power crisis, you know its worth planning for this kind of risk.
Regulatory Pressure
Regulatory pressure adds another layer to the energy challenge. Even if grid capacity issues aren't a pressing concern, stricter regulations are likely on the horizon in many markets.
A prime example is NYC's Local Law 97, which is accelerating changes in building practices and maintenance to improve energy efficiency. This has spurred the development of solutions that help owners achieve compliance and avoid fines (Cadence OneFive and our very own Dextall for example). By getting educated on energy efficiency solutions now, CRE professionals can stay ahead of the curve and prepared for these regulatory changes.
CRE's Energy Solutions
Real estate owners and managers can play a crucial role in alleviating the strain on the power grid by adopting proactive measures. There are a wide range of solutions available, but I'll focus on three buckets:
- Energy Efficiency Improvements: Investing in projects and upgrades like energy-efficient appliances, lighting, and HVAC systems can significantly reduce the overall energy consumption of a property. And this doesn’t all need to be paid out-of-pocket. There are incentive programs abound that will pay for these upgrades. Incentifind is our go-to resource to find and secure these rebates & incentives.
- Energy Management Systems: Software and devices that monitor and optimize lighting and HVAC usage show promise, and are easy enough to adopt and implement. More holistic management solutions like David Energy could prove even more impactful for reducing costs, and consumption at scale.
- Renewable Energy Generation & Storage: Solar panels, and other renewables have not been adopted en masse in CRE, due in large part to the the ROI calculus. However, as these systems get more efficient and new tech emerges, I expect there will be a better case for adding/retrofitting renewables at existing properties. With the launch of companies like BASE Power, we’re keeping our eye on the battery storage space, which could bring huge, untapped value to CRE.
By bridging the knowledge gap and fostering collaboration, PropTech and CRE can work together to achieve significant energy savings. This not only benefits the environment and building operations, but are crucial steps for CRE to navigate the energy challenges of tomorrow.
