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The Increase In Carbon Emissions – and Costs – Facing Commercial Building Owners

The Increase In Carbon Emissions – and Costs – Facing Commercial Building Owners

The Increase In Carbon Emissions – and Costs – Facing Commercial Building Owners 2560 1708 Christopher Fiorello

Building Electricity Usage Data Since COVID Suggests Reoccupancy
Will Add More Than 30 Million Tons Of Carbon Emissions
and Billions of Dollars in New Costs

August 9, 2021

In efforts to maintain new standards of air flow and filtration, commercial buildings are using more energy than they were before COVID. While low occupancy rates are currently masking those costs, when occupancy returns closer to 62%, buildings may be using just as much energy as they were pre-COVID (at occupancy rates of 94%). When occupancy returns to pre-COVID levels, buildings may be using 10% more energy than they were before the pandemic – not only generating more than $5 billion in new costs, but also emitting nearly 31 million metric tons of additional carbon nationally each year. While air flow and filtration standards may remain higher indefinitely, building owners can avoid associated carbon emissions by proactively adapting operations.

carbon with image scaled

Since the onset of COVID-19 in the United States in February 2020, Hatch Data has been reporting on electricity consumption at commercial office buildings. Just one month after stay-at-home orders came into effect, we published data showing that buildings had reduced energy use by 22% on average and detailing regional differences. Then in Q4 2020, we revealed that best-in-class buildings had shed 40% of their electricity, 60% more than the average across buildings nationwide.

Now, with almost a year and half of the crisis behind us, Hatch Data has drilled down into individual real estate markets to examine how COVID has changed building operations – both in terms of cost and carbon footprint. Anyone living in an urban area knows offices aren’t as busy as they once were, but are they actually using less energy than before COVID? And if COVID has changed office energy use, how much is it impacting building owners’ bottom line and their carbon reduction goals?

To provide a clearer picture of the relationship between energy and occupancy, we analyzed public access control data from Kastle alongside our aggregate electricity consumption data from across the country. The result is a potentially concerning picture of what’s in store for building owners – and their ESG goals most often set years prior to the pandemic – as offices fill back up.

A Year In Review: Energy Use Out of Step with Occupancy

Early in the pandemic, energy use sank as occupancy levels plummeted. Shelter-in-place orders kept the vast majority of office workers at home, leaving building managers to “set back” their buildings’ lighting, heating and cooling almost as though they were completely unoccupied. The effect was significant: Hatch Data reported a drop in energy use of 22% on average, at roughly one half the rate of occupancy. That ratio should come as no surprise; energy use wouldn’t be expected to match occupancy. As we explained in a previous report, even at low occupancy rates, buildings must always use at least some electricity.

At the height of shelter-in-place in early April, the nation’s offices were using 76% of the electricity they’d been using before COVID and were just 15% occupied. During this period, buildings with solid track records of operational efficiency were able to shed 60% more energy than the average building.

Around May 2020, energy use began rising again, as did occupancy. But the occupancy rise was just a blip as essential workers returned from lockdown. Energy use, on the other hand, continued to steadily tick up for several months after, even as occupancy flatlined. As of July 2021, energy consumption had risen to 88% of pre-COVID levels on a national basis.

occupancy and electricity use COVID aug 2021

Coinciding with the rise in office energy use, ASHRAE released a concise set of guidelines for buildings intending to stay open during the pandemic. They included four recommendations which quickly made the rounds with building engineers and began popping up in tenant questions to property managers:

  • Improve central air filtration to MERV-13 or the highest compatible and seal edges of the filter to limit bypass.
  • Keep systems running longer hours, if possible 24/7, to enhance the two actions above.
  • Consider portable room air cleaners with HEPA filters.
  • Consider UVGI (ultraviolet germicidal irradiation), protecting occupants from radiation, particularly in high-risk spaces.

Any of these recommendations, but the first two in particular, are energy intensive operations. In our dataset, there is strong evidence that the energy use rise in May is attributable to buildings implementing some or all of ASHRAE’s guidance. Moreover, our data reveals that the increase in energy usage hasn’t reversed as the country moved past shelter-in-place and as ASHRAE itself eased some of its recommendations to reflect new data. Today, with COVID-19 more likely to become endemic than eradicated, building owners face the probability that tenants will expect the air and filtration improvements they made to be permanent.

This has serious implications for building carbon bottom lines and emissions – to the tune of billions of dollars and an additional tens of millions of metric tons nationally – as occupancy levels return to normal levels.

The Coming Billion Dollar Question

As occupancy rebounds, electricity use in buildings are projected to eclipse pre-COVID levels. If the current trend holds, buildings will be using as much electricity as they were prior to COVID when occupancy levels are at just 62%, which seems increasingly likely as early as Q4.

If buildings return all the way to pre-COVID occupancy levels, they may end up using 110% of pre-COVID energy levels. While energy costs are highly variable, using a standard (“blended”) method to estimating rates per kWh reveals that the excess energy could cost US building owners $5.2bn nationally each year.

office energy use vs occupancy covid table

In an increasingly competitive, cost-conscious environment, this is more than most building owners can withstand. Whether they absorb the costs or seek to pass them on to tenants who have more choices than they’ve had in a decade, it has the potential to push already struggling firms deeper underwater.

Thankfully, owners have clear options to proactively manage this increase in energy consumption while maintaining air flow and ventilation up to tenant expectations. Our analysis suggests the following steps for building owners and their operating teams:

  • Use this period of lower than normal occupancy as an opportunity to fine tune building systems, establish new baseline performance metrics, and root out anomalous operations.
  • Review the latest industry guidance from ASHRAE and others to ensure operations have been adjusted appropriately following revisions over the past six months that de-emphasize extended HVAC runtime in favor of local filtration and distancing.
  • Adopt a consistent portfolio-wide approach to monitoring building performance that empowers operators to run buildings optimally and provides energy and sustainability teams with the data they need to demonstrate progress to investors and the market.
  • Engage tenants to understand the type of assurance and experience their employees will require to re-enter the space following updated CDC guidelines for fully-vaccinated people.

Taking steps like those above will help distinguish the firms who rise to the top of the new normal from everyone else. The static nature of pre-COVID operations can no longer be taken for granted; action now could change the relationship between occupancy and electricity consumption before massive costs are incurred.

For more information or assistance in understanding how you can optimize for both indoor air quality and energy across your portfolio, contact us today.