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Trends in Energy Use During COVID-19 Indicate Opportunity for Value Creation

Trends in Energy Use During COVID-19 Indicate Opportunity for Value Creation

Trends in Energy Use During COVID-19 Indicate Opportunity for Value Creation 1080 720 Christopher Fiorello

Oct 2, 2020

By Ben Mendelson, CCO, Hatch Data

Since the onset of COVID-19, we’ve been continuously reviewing our dataset of CRE building operations—the largest in the country—for insights to help our customers proactively adjust and respond effectively. We have found that, on average, after dropping 24% during the height of the COVID-19 lockdown in May, U.S. commercial building electricity consumption is back within 10% of pre-COVID levels, when adjusted for temperature effects. Meanwhile, a Wall Street Journal article published in mid-September revealed that office building occupancy is hovering closer to 50% of pre-COVID levels. How can such an enormous discrepancy exist, and what does it tell us about the opportunity to drive efficient building operations amidst COVID-19?

Hatch Data - COVID Building Elec Consumption Chart

Why Isn’t Building Energy Use Tracking Linearly With Reduced Occupancy?

Despite the fact that occupancy levels were reduced by more than half in early April, office buildings don’t simply shut down. As explained in GreenTech Media, during the lockdown, building systems continued to run to prevent degradation, protect occupant health, minimize risk of failure, and ensure that lease obligations are met when tenants return to work.

As COVID-19 progressed, building operators have had to deal with heightened health and safety issues, some of which required increased energy consumption to meet: in July we highlighted third-party guidance on how to adjust building operations to ensure tenant and operator safety during return. That meant increased hours of operations to support frequent cleaning, extended HVAC runtime, and property improvements. Regional policy differences led to a lagging effect as operators did their best to guess how soon tenants might return.

US Commercial Building Energy Consumption By Region

Still, it’s worth asking whether shaving 25% from pre-COVID baseline was all the electricity an under-occupied building could have safely reduced. Especially because, in that same period, we found that best-in-class buildings—by taking proactive measures—reduced energy consumption by upwards of 40% or more from pre-COVID baselines. To us, that discrepancy underscores the sizable opportunity to increase operational efficiency and seize the moment to make lasting changes.

How These Findings Should Shape Portfolio Managers’ Conversations with Their Building Teams

Since March, portfolio managers have had to struggle through flagging revenue, stalled project development, and worried investors. Now, as 2021 budgets are being defined, OpEx uncertainty is top of mind. With utilities accounting for around 30% of OpEx, how well next year’s can be predicted amidst unpredictable occupancy rates has far-reaching consequences for portfolio health.

To properly manage this uncertainty, portfolio managers should take advantage of the new opportunities COVID-19 presents to safely reduce energy use, which requires a three step process: measure, identify, act.

It begins with building managers measuring their buildings’ performance as compared to a pre-COVID baseline. If a pre-COVID benchmark cannot be well-established because a building manager is still relying on utility bills to understand the energy cost impact caused by changes to operations, now is the time to implement a more granular building operations platform. The ability to benchmark and track operational performance is critically important as we wade into the uncharted waters of operating commercial buildings under COVID-19.

From there, portfolio managers must be able to identify why their buildings’ energy consumption dropped, and whether it’s picked back up faster than necessary, given occupancy rates. While we’ve already laid out many of the explanations for higher-than-expected building energy consumption during COVID-19, the discrepancy between best-in-class building energy consumption and the rest highlights the possibility that building teams already struggling to stay aligned and break down information silos have only become less effective as COVID-19 has forcibly increased decentralization. If, as is the case today, buildings are consuming 90% of the electricity they were when occupancy was twice as high, is that last 10% really just down to plug load, maintaining temperature ranges, and running elevator banks more frequently, or is it pointing at additional opportunities?

Leading organizations are acting on these findings, truly stress testing operational changes that may have been deemed too risky during full occupancy. This can only be accomplished by using a software platform for continuous monitoring and real-time feedback on operational performance, system health, and energy consumption. To learn how Hatch Data’s platform has helped leading organizations unearth opportunities to reduce unnecessary expenses amidst COVID-19, please reach out on LinkedIn or at hatchdata.com.