Reducing energy consumption is paramount to effective operation and management of commercial properties today. Owners of commercial buildings can, for example, install high efficiency LED lights that are up to 50% more efficient than fluorescent lighting. Since lighting accounts for around 35 percent of a property’s total energy costs, a retrofit can result in significant savings and reduce the carbon footprint dramatically.
That’s a great option for any commercial property. But how can a group of properties or an entire metropolitan commercial market collectively reduce electricity usage and in turn help the environment? The answer may be development and implementation of a national smart grid, a long-term energy initiative that has wide-ranging implications for commercial properties.
Putting The Smart Grid In Perspective
So, just what is a smart grid? There are various definitions. The U.S. Department of Energy’s www.smartgrid.gov website defines it as “a developing network of new technologies, equipment, and controls working together … and the wires that connect them.” This proposed national model, says the DOE, will provide the electricity needed to power commercial properties more efficiently and do much more. A true smart grid is computer-based and driven by remote control automation; plus, it would make better use of wind, solar and other types of renewable energy.
Other sources, however, maintain the smart grid exists only as a concept at this time in the U.S. and is many years and many billions of dollars away from completion. The national power grid actually is comprised of the existing electrical wire infrastructure operated by power companies rather than a vast, interdependent network and the technology required to make the grid, well, “smart.”
In concept, a true smart grid would give major users of electricity – including all classes of commercial property — real-time data on energy usage through electronic “smart meters” and the knowledge to implement ways to reduce energy costs, and in turn, cut operational costs. Buildings also could participate in demand response programs that offer compensation to cut back on electricity usage during peak usage times.
Federal Government Support for Smart Grid Creation
In the past decade or so, plans for building a smart grid began shaping up. One tangible step came in December of 2007, when the federal government approved legislation supporting the DOE’s leadership in developing and coordinating the much-needed modernization efforts to the nation’s electrical power system. Building the smart grid, of course, is expensive and requires a significant public-private partnership.
Last summer, the DOE reported that $7.8 billion has been raised through the Smart Grid Investment Grant program, an initiative that combines private sector resources and government dollars through the Recovery Act to identify and provide funding for smart grid research and development. Today projects that employ smart grid technologies within existing power grids have been launched in many markets in nearly all of the 50 U.S. states. But building a truly encompassing national smart grid may face some local roadblocks.
“The national power network is actually several local or regional grids that are attached to each other and maintained by the energy providers,” said Russell Riggs, Senior Regulatory and Policy Representative for the National Association of REALTORS®. “These power companies do share power, but there’s suspicion among some providers about the smart grid. Some don’t want the federal government taking over power distribution because it would give the government too much power to regulate the industry.”
Value to Commercial Real Estate
Beyond the expected energy savings, the movement toward smart grid technologies holds other potential benefits for commercial real estate. A 2012 study from Jones Lang LaSalle, called the “Connected City,” showed that major U.S. markets with public investment and use of smart grid technologies had better employment statistics, higher annual GDP growth rates and office occupancy rates 2.5 percent higher than less advanced metro areas.
The JLL report also points out that smart grid technology can only prove beneficial if data is shared and analyzed across a property portfolio, a challenge because commercial buildings in dense urban areas have different owners and managers. A solution may be in the works in Chicago, where the Building Owners and Managers Association in February announced plans for a pilot smart grid program that would incorporate up to 40 downtown member office buildings.
Riggs offers another perspective on the value of a smart grid to the industry, and the nation. “The market is taking care of a lot of the energy efficiency needs at the commercial property level as more tenants demand that their rent money gets used efficiently,” he said. “But the industry should encourage a grid modernization because if we can’t compete with other countries that are moving forward with a smart grid, we’ll be behind the curve.”