Buildings Are Managing Energy So Well They’re Finding Arbitrage Opportunities

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Buildings consume a lot of the world’s energy and are one of the main contributors of greenhouse gas emissions. But unlike other carbon intensive industries like transportation or manufacturing, a lot of the energy consumed is wasted. Lighting, heating, and cooling rooms with no one in it is incredibly wasteful, but for decades was a necessary evil of making buildings comfortable for occupants. But now technology is being unleashed on these wasteful practices. Smart software and even AI is being used to help buildings become smarter about how they operate. Now buildings can automatically adjust settings and turn off equipment in parts of a building that are not being used.

Buildings can also be smart about how they consume electricity, drawing power when most of the energy on the grid is renewable and use it when coal and gas powered plants are fired up to meet demand. Buildings are going even further than smart consumption. Thanks to the improvements in battery technology and the ability to sell power back to the grid during peak demand periods, buildings are using their BMS software and battery systems to partake in energy tariff arbitrage.

So important is energy storage and management for new buildings that some of them are even being designed to function as giant batteries. The architecture and engineering firm Skidmore, Owings & Merrill made some waves earlier this year when they released a design for a skyscraper that would use large concrete blocks as a way to store energy by lifting them when renewable energy was available and dropping them to run a generator when that clean power is needed.

The electrification of buildings is an ongoing process. Electricity accounted for 35 percent of building energy use in 2022, up from 30 percent in 2010, reflecting a gradual shift toward electrification. One of the main technologies helping move buildings off of fossil fuels and onto (hopefully green) electricity is heat pumps. Adoption of heat pumps is up 11 percent in 2023. This is just shy of the 15 percent that models say we need to hit our net zero carbon targets. Heat pumps are now proving themselves efficient even in the coldest climates, which was not the case for the early heat pump technology

Not all of the adoption of heat pumps has been market-driven. Cities like Boston, Denver, and, most notably, New York City have created regulations that can fine building owners for failing to meet energy efficiency standards. The regulations haven’t come without pushback. Legal challenges have been made to the ability of cities to supersede state regulations. New York City’s Local Law 97 has been pushed back to appellate court after a panel of judges recently ruled that there was not sufficient evidence to prove that the city’s regulations would be able to preempt the state’s existing climate legislation.

Denver has also just been sued by a number of trade groups saying that “Congress intended EPCA (Energy Policy and Conservation Act) to preempt patchwork state or local laws that are unworkable, that undercut a coordinated national energy policy, that overlook the public’s need for reliable and resilient energy, and that deny consumer choice.”

Right now, building owners around the country are waiting to see who will win the upcoming election, as each candidate has a very different stance on energy policy. Depending on who wins, we might see regulations either ratcheted up or stripped down. Either way, the prospect of lower energy bills, lower emissions, and more resilient grids is pushing the real estate industry to invest heavily in energy savings, and it doesn’t look like it will slow down, no matter who is in the White House.

Now, let’s dig in!

Attract & Retain Tenants with Effortless EV Charging

EV charging is now a necessity. Join our webinar to learn how to future-proof your property, access funding, lower infrastructure costs and keep operations simple.

Insider Insights

Sustainable and secure
Connected buildings are the future of energy management but that connectivity also creates opportunities for bad actors. To combat these risks, the Department of Energy has released guidelines for property cyber security protocols for grid-interactive buildings.

Whose bill is it anyways?
A report from the Sustainable Markets Initiative has identified that one of the main barriers to entry for sustainability in buildings is the misalignment of incentives since landlords and developers often pay for the upgrades but tenants reap the majority of the energy savings.

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Propmodo Focus is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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