Commercial buildings today represent about 16% of energy use (30% of electricity) and a key source of GHG emissions across the US. As policymakers set unprecedented goals for energy efficiency, decarbonization and renewable energy, the commercial market will be critical to this evolution. While new construction is a small proportion of the overall building stock, it represents an excellent opportunity to lock in energy savings and emissions reductions —and lead as early adopters of new technologies and solutions that can have broader applications for the overall building stock.
A new study funded by the California investor-owned utilities and led by TRC explains what it will take to drive commercial new construction market transformation with an eye towards broader market impact. The study tracks commercial market progress towards California’s 2030 zero net energy (ZNE) goals, but findings can be applied to commercial solutions for other advanced energy objectives as well like carbon reduction, grid harmonization, resiliency and renewable energy.
Identifying the opportunity
Transforming the commercial market requires a change in the way developers, engineers and architects think about and design buildings. Interviews with these stakeholders revealed that they value the return on investment and marketability of buildings that are designed for deep energy savings (or ZNE). They also reap the benefits of occupant comfort and corporate responsibility for their impact on the environment. Further, stakeholders voiced that their real-world experiences with ZNE and other advanced energy buildings have been positive, as shown in the figure below.
Incorporating advanced solutions was identified in the study as technically feasible for most commercial sectors of new construction. The few ZNE retrofits show that existing buildings can also achieve deep energy savings, but this typically requires far-reaching action, sometimes at the gut rehab level. Despite the feasibility, market adoption of advanced energy commercial buildings is still very low. Stakeholders report building ~11% of their properties ‘above-code,’ but a mere <1% to a ZNE or ultra-efficient standard.
Catalyzing commercial solutions
The commercial market will transition when industry, policy, and institutions align efforts. By working together to improve and even re-think the levers of influence on the market, we can empower stakeholders like developers and others to make different choices with their investments.
Based on the study findings and TRC’s experience, we recommend the following strategies to activate this transition:
1. Align goals and efforts. Energy goals and policies can vary in their purpose and implementation pathways. California, for example, adopted ZNE goals in 2008, but also recently doubled energy efficiency goals, adopted new decarbonization targets, and is increasingly focused on resiliency, grid management, renewables, storage and water efficiency.
Understanding overlap, addressing discrepancies and better aligning goals will produce better results sooner. And once goals are aligned, support frameworks like incentives, technical support, codes and standards, certification programs and others should follow. Utilities, regulators and industry organizations can embrace a new level of partnership to coordinate market offerings.
2. Monetize non-energy benefits. The study demonstrates that non-energy benefits are highly valuable to the market (e.g., indoor air quality, occupant comfort) as well as the utility (e.g., resiliency, grid harmonization). Yet these benefits are not fully considered in cost-effectiveness tests for programs and building codes and standards. To pave the way for more advanced solutions, non-energy benefits would need to be better understood and supported at the regulatory level.
3. Design programs for the future. Programs are still a primary pathway for large-scale market adoption of advanced commercial solutions. As such, key design elements can help achieve state and local goals—be it energy efficiency, decarbonization, or a combination of objectives. Early influence in the building design (or retrofit) lifecycle and a focus on whole building / systems solutions has been shown to garner the biggest impacts. This also makes the new construction market a prime target for advanced solutions.
Programs should also provide multiple options for participation—including easy entry points and roadmaps for deeper engagement over time. Every customer holds potential, but the program needs to meet them where they are today. Further, technical solutions will evolve, and the most effective programs anticipate these opportunities and create flexible on-ramps for emerging technology inclusion.
4. Enhance codes and standards. Similar to programs, advanced state codes and standards are a major market force, improving regularly to support advanced energy goals. And increasingly, local reach codes and ordinances are also shaping the commercial market. The study highlights effective local solutions that include enforcement of minimum expectations plus advanced voluntary options with incentives.
State or local building performance standards that regulate actual (rather than modeled) energy consumption of buildings is another effective strategy, implemented at any level.
5. Evolve financial solutions. Not surprisingly, the study indicates that insufficient budget is a top concern among market stakeholders—who also voiced a need for greater financial incentives. For some, understanding the value proposition of advanced solutions and prioritizing energy goals early in the process may be enough. But providing incentives for advanced solutions in addition to offerings like tax credits, on-bill financing and revolving green loans will be important to help overcome early costs.
For utility program structures, pay for performance incentives and post-occupancy support to meet goals can be foundational tools to ensure savings.
6. Expand education and training. Market stakeholders also described inexperienced design and construction teams as a major barrier to advanced solutions. 88% of study interviewees indicated some type of education, training and tech assistance would be critical to market transformation—in fact, just as important as financial assistance.
Some regions are considering training programs for the first time and this is an important step. For regions already providing training, and perhaps achieving only limited participation, they might explore opportunities for a curriculum update or even making training mandatory.
7. Explore behavioral strategies. Like other markets, commercial stakeholders respond to social and behavioral science factors. Building developers and practitioners can be influenced by existing market leaders and channels (e.g., trade organizations), and all market levels (including commercial occupants) can be affected through enabling technology, competitions and recognition.
As an industry, we can look forward to greater commercial impact when we come together to implement creative solutions. TRC eagerly joins our clients, partners and peers in committing to this challenge.
Abhijeet Pande, Marian Goebes, Julieann Summerford, and Andrea Thompson contributed to this article.
Photo credit: Volume 2: PG&E Zero Net Energy Case Study Buildings