There’s an urgent need to retrofit and electrify as much of our existing commercial buildings as we can. But what’s the business case look like? Sometimes it’s a no brainer – at other times it’s not so simple.
The Fifth Estate’s Festival of Electric Ideas masterclasses on Wednesday this week (2 August) I pm, will take a deep dive into the issues, with the help of some of the most informed minds in the business.
Here are some nuggets of insight from the briefing we held with the presenters ahead of the event.
According to NABERS, almost 80 per cent of the buildings we will be using in 2050 already exist today.
“If your office building is more than 10 years old, it’s highly likely that some modest updates and changes will make an enormous difference to its energy efficiency and pay for themselves very quickly’, the report said.
Out in the market, opinion is divided about which changes to make to get the best return and how to finance those changes. But one thing everyone agrees on is the urgent need to transition from gas to electrification.
Clean Energy Finance Corporation says we need a new way to reposition assets.
CEFC’s head of property Michael Di Russo, says that that while many new builds target 100 per cent electric and the importance of the transition to electricity is recognised, existing buildings have a more challenging pathway.
“We know that technically it can be done, but the traditional approach to repositioning assets needs to change,” Di Russo says.
“We need to take a whole of building and a whole of lifecycle approach in terms of measuring value – without this, initiatives such as electrification will continue to be difficult.”
While sustainability has been an integral part of the business case for building upgrades, the value proposition appeal is becoming much broader.
Electrification is now a key priority
The case for electrification has become a key priority to unlock the benefits of an asset and its relevance in future markets. The technology already exists to future-proof these assets now by electrifying them, enabling us to accelerate the decarbonisation of the sector.
“Australia has the tools, the experts, and the guidance to meet this call. We need industry to take an ambitious, sophisticated approach to electrifying existing buildings.
“It’s not a question of why we’re doing it…‘Why wouldn’t you?’”
“Most of the buildings that we live and work in today will be standing in 2050, so it really is a matter of making sure these assets stay relevant and competitive in a future economy,” Di Russo says.
Why wouldn’t you do it?
Director at Forza Capital Adam Murchie agrees.
He warned that National Construction Code requirements can be an impediment to deep retrofits, but said there are simple changes that can make a difference such as lighting upgrades, sensors, BMS upgrades, and the use of AI in building management.
However, when embodied carbon is taken into account, choosing what to retrofit becomes more complicated.
“What’s better: occupying an existing asset that gets to five stars, or a brand new asset at six [stars]?
“You’ve got to look at the lifecycle costs, the embodied carbon costs. You don’t want to chuck out a brand new, highly efficient gas boiler because it’s gas, and spend a lot of money to get a marginal uplift in energy rating by going electric … you’ve taken a perfectly good piece of equipment and effectively put it into landfill.”.
Replacing like for like can be a problem
Managing director of the Bridgeford Group Nick Tassigiannakis also warns that replacing like for like can end up solving the wrong problem. He says it is important to look at synergies and analyse usage across a portfolio.
“It’s all well and good to say, well, let’s go and electrify one whole building. But the analysis that we’ve done in some of our projects has shown that if you look at a load duration of a building, it doesn’t sit at peak load very often,” he says.
He gives an example of an aquatic centre that for 90 per cent of the time sat under 60 per cent load. The building managers faced spending $2 million to electrify the whole site or half that to avoid the infrastructure upgrades.
“Yes, you might only be at half capacity – 500 kilowatts instead of the megawatt – but it was something like 80 or 90 per cent of emissions reduction,” he says.
Banks’ appetite for financing retrofits is on the rise
Banks’ appetite for financing retrofits will accelerate over the next couple of years, according to the sustainability strategy manager at Suncorp Bank, Heidi Aspinall.
“We have a role to play in educating customers about what the benefits to them are, reducing the energy bill potentially, but also making sure that those assets don’t become stranded and that the demand for those assets is protected over time, particularly as we see that policy shift across the different states to having minimum requirements around energy efficiency,” she says.
“Asset value protection is something the bank is connecting to the emissions profile of those assets, exploring long-term sustainability, both from an environmental and a commercial perspective,” she says, adding that building ratings tools will be a critical step in enabling the flow of financing.
Aspinall will be joined on her presentation by Shane Boyce, national manager – development finance, Suncorp Bank.
CEFC’s Di Russo agrees education is the key.
“Institutional capital is another big driver that has the capacity to change the market and raise sustainability measures with rating tools – industry-led approaches are important in this regard too.
“Ultimately, it’s not going to be about the pricing benefit of implementing sustainability measures, it’s going to be about what’s the premium for not doing it,” he says.
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