PropTech: A Real Estate (R)Evolution

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Back the 1980’s I was co-founder of a software company, which specialised in creating systems for the (then) new generation of PC’s. Myself and my colleagues had learned our programming skills whilst studying for PhDs using massive mainframe computer systems with clunky user interfaces and torturously slow software development cycles. We seized upon the new generation of “Micro Computers” that had emerged in the 1980s and new software tools that let us develop systems far quicker.

We started to develop software for the commercial real estate market, creating a system that allowed agents to match client requirements against a database of available property. We created a centralised service to compile the database of property and distributed it by electronic bulletin board. Fairly rapidly, we had all of the major agents using our system with over 100 clients.

This was before the internet. In short, we had used technology to disrupt an industry, revolutionised the distribution of information, automated manual processes and consolidated effort. I guess these days we would have beards and drink flat whites in some trendy loft studio near Old Street.

30 years ago PropTech was confined to the primal needs of the commercial real estate world, namely managing the process of finding tenants or a suitable property, managing the process of rent and services charge, and valuing the property. And that was about it.

These processes remain core to the PropTech offerings that are currently on the market and over the years they have been augmented by new technologies, but we have not necessarily seen disruptive change. The advent of the Internet in the 90s bought about huge changes in the way that property could be marketed, but, did this really shake the residential and commercial agency markets? New technological developments are bringing new products to the market but will we see further ‘disruption’?

Let’s examine the potential for change.

EVORA Global Proptech in Real Estate

Virtual and augmented reality

This technology certainly has the potential to enhance and quicken the design process, allowing the client to get closer to what their space will could look and feel like. Certainly, this technology will impact the way that architects and designers work with their clients, reducing the cycle time from concept to finished product.

However, in reality, is this tech making an existing process more efficient rather that creating a new model?

Internet of Things (IoT)

IoT has the potential to enhance the way that we monitor and control space. It’s noticeable that some BMS vendors are now rebranding as IoT vendors. Closer control and monitoring will enable more cost efficient and environmentally sustainable use of our workspaces. As suggested this technology is already disrupting the BMS market, causing established vendors to shift their stance as new players start to infiltrate their market with new platforms that allow monitoring and control of workspace use, CO2 levels, basic energy use and focussing on a ‘Wellbeing’ agenda.

IoT has the potential to also produce lots of Big Data, but what does that mean?

Big Data

The potential for Big Data within real estate is enormous. At a micro scale, looking at data from IoT sensors and BMS and meter data and also on a macro scale, analysing value trends etc.

But, as Dan Areley of Duke University said:
Big data is like teenage sex: everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it…

There is the potential for Big Data to extract nuance and understanding from complex systems. In real estate terms, to be able to identify how factors such as weather, occupancy and footfall can impact on cost and environmental impact.

The issue with Big Data is that by its very nature, it is big. So big that conventional Business Intelligence tools cannot really cope with the sheer volumes that are in play and the complexity of the relationships between the data. The potential for disruption through enhanced insight is always possible but, with current tech, unlikely.

But there is hope, in the form of AI/Machine Learning, how would this look for the Real Estate industry?

Artificial Intelligence (AI)/Machine Learning

AI/Machine Learning is the new kid on the analytics block and is the key to unlocking the value of the Big Data that could disrupt many aspects of the real estate world, such as valuations, sustainability, planning and market analysis.

The driver behind AI/Machine Learning is Data Science, a whole different approach to analytics. It is not so much about the evolution of Business Intelligence (BI), but more of a completely new approach, a new species.

Data Science offers the opportunity for discovering new questions to be answered and takes the approach of statistically analysing the data, so that the relationships between the different data types can be articulated as a model.Click To Tweet

BI is about KPIs, charts and answering questions that we knew – in very crude terms – sorting, grouping, charting and comparing data that exists in regular structures. Data Science offers the opportunity for discovering new questions to be answered and takes the approach of statistically analysing the data, so that the relationships between the different data types can be articulated as a model. As that model becomes refined and perfected that gives us the intriguing possibility of prediction.

DAaaS – Data Analytics As A Service

Data Science isn’t new, it has been around for around 30 years and arguably, has been driven forward more recently by faster processing, high capacity storage. This is now manifesting itself as DAaaS – Data Analytics as a Service. Cloud providers such as Amazon Web Services and Microsoft Azure are offering storage, data handling and modeling tools to provide the possibility of creating predictive analysis opportunities based on our own data. However, these tools require new skills in our teams, Data Scientists to create the models that we need.

So don’t be surprised to see service providers and end users on the real estate market recruiting and training Data Scientists, which will lead to the creation of value from Big Data. This value, in terms of strategic and operations advice will in turn reveal The Big Answers and also The Big Questions.

Blockchain

Whereas Big Data is a fairly easily understood concept, Blockchain causes a few difficulties. Firstly, what is Blockchain and, secondly, how could impact the real estate world and, in particular, the sustainability agenda?

Blockchain originated back in 2008 as a digital ledger that provides a way of encrypting and providing transparency for cryptocurrency transactions. More recently, it being seen as a way of encrypting transactions between parties in such a way as to provide total transparency and auditability. In the real estate world, this could be used to encapsulate lease transactions, rent payments and rent review agreements. If we extend our crystal ball into the sustainability world then we could see Blockchains between utility companies and consumers, providing investment strength data with regards to energy consumption.

EVORA can help you capture your building data with SIERA Sustainability Software. Contact Us for a demo.

GRESB Support 2018

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GRESB reporting season for real estate and infrastructure participants is here again, and as a GRESB Premier Partner, EVORA is recognised as a leader in the provision of GRESB support, including training and strategic insight.

We have provided GRESB support for the last six years, and in 2017 we directly supported over 50 submissions from organisations that represent a cross section of the European property industry. We have helped clients get on the GRESB ladder and have equally supported clients to be market leaders.

We sit on a number of GRESB benchmark committees and our close working relationship with GRESB ensures that we are prepared and aware of future changes.

With our experience and expertise in this ever-emerging market sector, we ran a webinar last week with participants across Europe on our end to end service Titled “How to overcome GRESB challenges and achieve your best score”.

In this session we shared valuable insights and tips in a 5-point GRESB strategy, to increase awareness on how to get the best out of the reporting process and how you can align GRESB ratings with your long-term sustainability strategy.

Five point GRESB strategy

Our GRESB strategy covered an action plan for a seamless GRESB submission process. A quick recap is set out below.

  1. Plan your next GRESB submission in advance. Map out a plan on who to talk to, what to ask and which evidence you need to provide.
  2. Reduce the complexity of reporting by engaging in a streamlined process with your property managers. At EVORA, our consultants provide asset-level templates to property managers, to help in the collation of asset-based questions such as technical assessments, tenant engagement and efficiency measures.
  3. Improve scoring, where appropriate. Don’t miss out on easy points, discounting your reporting efforts by not meeting validation requirements. Read more here on our GRESB verification blog on how to ensure your response is accurate and acceptable by GRESB.
  4. Focus on data integrity and performance. Our proprietary software SIERA ensures that the process of data management is transparent, accurate and robust.
  5. Finally set actions for future success. GRESB addresses several key areas of an EMS within their survey such as management responsibilities, communication, training, objectives and, importantly, the results they are delivering. Developing an EMS therefore seems an appropriate approach to score well in GRESB. Find out here how a Plan-Do-Check-Act (EMS) approach can impact your GRESB score.

Final thoughts for GRESB success in 2018;

  • Start early / now!
  • Engage with internal colleagues and external stakeholders
  • Understand indicator intent and scoring requirements
  • Gather evidence and identify alignment to requirements
  • To make it easy on yourself and others – get in touch and our team of experts will be happy to help.

Request the webinar recording

GRESB Premier PartnerWe are perfectly positioned to provide GRESB support. View our official Premier Partner profile.

We can work with you to complete the submission and understand your scoring, as well as develop a sustainability plan that will improve your future GRESB performance and align with your organisation’s key environmental objectives.

Do your buildings meet the Minimum Energy Efficiency Standards (MEES)?

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Are your assets at risk as a result of the Minimum Energy Efficiency Standards (MEES) regulations coming into force on the 1st of April 2018?

In a previous blog post titled “MEES regulations: How they will impact flexible workspace from April 2018” written by my colleague Russ Avery, he gave a 10-point strategy on how you can manage MEES risks before the regulation comes into force on the 1st of April 2018.

The regulation means that landlords cannot let, extend or renew a lease for F and G rated properties unless an exemption applies. One such (temporary) exemption is that the EPC rating cannot be improved through measures that pay for themselves within a 7-year period.

E rated properties may still be at risk from MEES regulations!

Landlords and their professional advisors should also be aware that there was a fundamental change to the EPC calculation methodology effective April 2011.

This means that assets which had their EPCs prepared prior to this date could be at risk even if they were E ratedClick To Tweet

This means that assets which had their EPCs prepared prior to this date could be at risk even if they were E rated. We can identify these assets after reviewing your existing EPC’s and help establish improvement programmes to improve your rating.

What implications will this regulation have on your assets?

MEES regulations will need to be factored into the day-to-day asset management of commercial real estate. We consider below some implications of the regulations.

Transactional value: We have first-hand evidence as a company that poor EPC ratings affect transactional values. We know of transactions where hundreds of thousands of pounds have been ‘chipped’ off the agreed purchase price once the due diligence processes established incorrect EPC certificates were in place.

Valuation: Both yields estimated rental values (ERVs) are ‘at risk’ because of MEES. Research indicates that the effect of disregards at a rent review and under a 1954 Act lease renewal on ERVs could impact capital values by more than the cost of relevant improvements.

There is an assumption by some professionals in the market that MEES will hit secondary and tertiary assets more than prime real estate. This may be incorrect due to the way in which commercial property is typically valued. In its simplest form, capital values are determined largely by the rental value of the premises, either actual or potential. A valuer looks at this income and applies an appropriate ‘all risks yield’ to reflect the security and term of income, and any potential for future growth. This is represented by the simple formula: NI x YP = CV, where NI in net income, YP is years purchase, and CV is capital value.

The cost of the installation (or disregard) of building services is reasonably uniform subject to locational adjustment factors. Technologically speaking, a heat pump installed in London will be the same as a heat pump installed in Hull, and cost is affected by labour rather than the technology itself. A prime yield might be 5%, where as a secondary yield might be 10%. A £1.00 reduction in rental value as a result of MEES will therefore affect capital values by £20.00 on the prime investment (100/5 = 20 YP) and by £10.00 on the secondary investment (100/10 = 10 YP).

Dilapidations: The effect of Section 18 Valuations and supersession generally have the potential to render tenant repairs useless because of MEES. If precedent is established for this, then the dilapidations market could be significantly impacted by MEES. We see this as a potentially market disruptive issue for property. Read more about dilapidations here.

How to manage MEES (our previous 10 step guide)

  1. Review how you store your data
  2. Identify any gaps in the data and any assets at risk
  3. Consider the use of software, such as SIERA
  4. Use CIBSE accredited assessors
  5. Ask your assessor to review the existing EPC for accuracy
  6. If you need a new EPC, ask for an indicative certificate
  7. Review point 6 in the context of the lease
  8. Consider ways to recapture capital costs through energy savings
  9. Retain future access to the energy model used to prepare the EPC
  10. Review how operational performance can be monitored – and even linked to the EPC model

EVORA EDGE can support you in all cases as we employ competent CIBSE qualified level 5 EPC assessors.

Our expertise

EVORA can identify and manage MEES derived risk by developing an asset management strategy at the fund and portfolio levels.

Our technical engineering division EVORA EDGE is experienced in using our revolutionary BIM:SAM– Building information modelling for Strategic asset management to manage MEES risks, engineering and energy efficiency, resource efficiency and capital cost planning.

Building Information modelling (BIM) can be used for high-level MEES risk assessments and act as a ‘digital passport’ for your building, recording data and information of the building and its services.

The BIM can be integrated into our SIERA software to create a powerful monitoring and targeting (M&T) toolset.

BIM: SAM merges real intelligence and innovation with strategic asset management.

“By using a dynamic BIM model, alongside monitoring and targeting through our SIERA software, we can bring real intelligence and innovation within the strategic asset management approach.”

Neil Dady, Director, EVORA EDGE

To ensure your buildings remain lettable after the 1st of April 2018. Please don’t hesitate to get in touch with our experts.

Download our BIM: SAM brochure for all the information in a handy PDF and see our BIM:SAM approach in action.

Moving towards lower carbon electricity generation

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The latest UK carbon (‘Carbon’ is being used here as short hand for carbon dioxide emissions – CO2) conversion factors from the Department for Business, Energy & Industrial Strategy (BEIS) demonstrate that a significant and much-needed decarbonisation of the electricity grid is being achieved.

The latest (2017) carbon emissions from UK electricity generation has reached its lowest recorded figure at 349g CO2/kWh. It is worth noting that there is a two-year delay in the release of updated carbon factors in the UK and so, in reality, this rate relates to electricity generated in 2015.  As seen in Figure 1 below, this compares favourably to the latest global average of 506g CO2/kWh2 (although the average for EU countries is still lower than the UK at 302g CO2/kWh).

Figure 1: Average carbon emissions from electricity generation.

Please note: These values relate to the direct (‘Scope 1’) carbon emissions from electricity generation only (i.e. ‘Scope 3’ or ‘well-to-tank’ emissions are excluded).

Given the two year delay between the electricity generated and the reported values, the true carbon emissions from electricity generated in 2017 are expected to be even lower than those stated in the latest carbon emissions. In November 2012 coal contributed 50% of electricity generation, however, in July 2017 the contribution was only 2%.  Based on this, we should expect a greatly reduced 2019 conversion factor given that coal generation in 2017 reached record lows.

Why the decrease?

In short, the observed trends in the fuel mix (and therefore the main driver of emissions) have been:

  • Less coal;
  • More nuclear;
  • More renewables; and,
  • More electricity directly imported from other countries with the use of interconnectors.

The UK is, typically, a net importer of electricity, with the majority sourced from France. This reduces our carbon conversion factor as France has a heavy reliance on nuclear fission which produces zero direct (‘Scope 1’) carbon emissions. For further information, please see Figure 2 which shows how the UK’s fuel mix has changed in recent years.

Figure 2: Quarterly UK electricity generation by fuel source.

As we all know, moving towards less carbon-intensive electricity generation is essential if we are going to meet our statutory carbon reduction commitments, most notability the 80% reduction by 2050 from 1990 (as outlined in the 2008 Climate Change Act).

As demonstrated by the data, the trends are going in the right direction, however, there is still a lot more the UK can do as we continue to lag behind some of the developed European countries (especially the Nordics). Future progress is being halted by a number of factors.

The Challenges

1.  Despite investments in UK clean energy more than doubling from 2010-2015, investments fell by 56% between 2016 to 2017. However with technological advancements in terms of affordability and efficiency, for solar and wind, there could be a reverse in the recent trend. Most notably, the operational costs of offshore wind farms costs have halved to £58/MWh. This is in contrast to the much more expensive rate agreed for Hinckley Point C at £92.5/ MWh6.

2. Continuing with nuclear as our main source of lower carbon electricity is approaching a bottleneck, with many of our active reactors due for decommissioning in the mid-2020s. This creates issues due to the lengthy process involved in commissioning new nuclear plants meaning we may not have enough time to adequately replace them.

3. The current government’s proposal is to substantially increase our reliance on directly importing electricity from other countries, from a current capacity of 5.7 GW to 20 GW by 2024. This equates to a jump of 6.5% to 24%, which further reduces our own energy security. This means the UK will need to become more reliant on mainland Europe than ever before to meet our increasing electricity demand.

4. Carbon efficiency assessments (i.e. conversion factors) often do not consider lifecycle emissions. Therefore, the carbon associated with the materials used in the building of each power station/turbine is ignored. This is especially pertinent to the nuclear power industry which requires huge amounts of concrete (which indirectly emits large amounts of carbon in its manufacturing), combined with a comparatively short operating lifespan.

Final Thoughts

Despite an uncertain future, there is cause for cautious optimism as the UK is moving in the right direction, with appropriate fuel switching as low carbon technologies become more economically viable. However, whether future changes in our fuel mix will be sufficient to meet our climate change obligations whilst simultaneously balancing electricity demand and energy security remains to be seen.

Despite an uncertain future, there is cause for cautious optimism as the UK is moving in the right direction, with appropriate fuel switching as low carbon technologies become more economically viable.Click To Tweet

 

Real Estate Sustainability: Planning for 2018

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The new year heralds new journeys for individuals and organisations as we seek to learn from experiences in 2017 and focus on opportunities that preserve and enhance ‘value’ in the myriad forms that it takes.

It is a tremendously exciting 2018 for EVORA and one that has started incredibly positively. We are looking to forward to working with existing and new clients as we implement best practice solutions that deliver value to their funds, assets and the environment.

Below I identify my predictions for 2018 across five topics. In addition, where risks are identified, I propose solutions, to mitigate and manage.

There are many more areas and topics that could be covered, and this reflects the rapid changes the industry is currently seeing. I’d love to hear your thoughts on my predictions plus any of your own.  I will commit to reviewing these predictions at the end of 2018, to see how things panned out.

GRESB: an evolution

The GRESB survey is in its ninth year and participation shows no sign of waning, particularly in the Real Estate assessments.

GRESB does not suit all fund strategies and our research demonstrates that Core funds, particularly those with a high percentage of directly managed (multi-let) assets, do perform better than those with Opportunistic strategies and / or a high percentage of indirectly managed (single-let) assets. Perhaps this is no surprise. Consequently, GRESB is reviewing the method in which is benchmarks and scores data availability for indirectly managed (single let assets).

Early adopters of GRESB tend to perform better, as investment managers develop (and align) their ESG strategies with GRESB criteria, particularly through the use of structured frameworks such as an Environmental Management System.Click To Tweet

Early adopters of GRESB (with years of experience) also tend to perform better, as investment managers develop (and align) their ESG strategies with GRESB criteria, particularly through the use of structured frameworks such as an Environmental Management System.

To counter the above two points, GRESB has launched a Pre-Assessment module. This survey is designed for:

  • New investment products that are raising capital and / or undergoing initial investor due diligence;
  • Real estate strategies with opportunistic, short-hold or development focus;
  • Real estate vehicles beginning to incorporate ESG into their operations

I expect this ‘toe in the water’ approach will lead on to greater participation in the full survey, despite the fact that GRESB is now charging participants that complete the main and/or pre-assessment survey. This change will have limited impact for participants who are already members or those who pay for the benchmarking reports (which will be issued automatically as part of the service)

The final, encouraging point for 2018, is the increased engagement by GRESB with a wide range of stakeholders as they seek to shape survey components. This is an important facet to ensure that the survey remains relevant to market needs, whilst continuing to push ESG strategies to deliver meaningful performance improvement.

Prediction: Continued growth in the main Real Estate survey, with respondents in North America and Europe leading the field in terms of number of participants. As it is the first year of operation, I expect a small uptake in the Pre-Assessment, which will increase over time as investors and their managers gain awareness of this approach.

I expect the main GRESB survey to incorporate more Health & Wellbeing (H&WB) questions, possibly at the expense of the separate H&WB module. I expect ‘pilot indicators’ for the measurement of social value, H&WB impacts and potentially governance scorecards. Measurement of environmental impacts alone will not be sufficient as the sole indicator of performance for too much longer.

Debbie Hobbs, Head of Sustainability at Legal & General Real Assets will be speaking about measuring social value, alongside Sander Paul Van Tongeren, MD of GRESB, at our industry event on 7th February. Get in touch if you would like to attend.

Resolution: Continue to work proactively with both GRESB and our participant clients.  Last year we supported over 55 submissions.  We expect this to increase significantly in 2018.

Maintain and enhance our clients GRESB ratings through practical and value driven sustainability programmes, as appropriate to their investment strategy. In 2017, our client Hines achieved Sector Leader status and was rated the number 1 non-listed European fund.

Building certifications: more than just a tick-box exercise

Sustainability building certifications have been in operation for around 28 years following the launch of BREEAM in 1990. There are now numerous in-use and design/construction stage standards around the world. Schemes cover individual topics such as water and air quality, to comprehensive multi-themed sustainability / health and wellbeing  standards.

Whilst the use of these standards for new developments is fairly common-place (particularly in the office sector within major cities), the application for existing (in-use) buildings is less so. However, market drivers such as GRESB, who reward participants for holding certification, together with (future) policy standards and incentives for efficient retrofits have, in our experience, increased the interest for in-use schemes such as BREEAM In-Use and Fitwel. It is important that the application of these schemes leads to performance improvement rather than just a tick box exercise.

It is important that the application of these schemes leads to performance improvement rather than just a tick box exercise.Click To Tweet

Prediction: Increased application of certification for standing investments through schemes such as BREEAM In-Use and Fitwel for major refurbishments.

I also predict more, but not many, WELL certifications for new developments. It will be interesting to see if WELL issue a ‘lighter’ certification route that has wider commercial application that the full WELL standard.

Resolution: Grow the number of EVORA employees that are accredited professionals for sustainability building certification schemes.

Support completion of health and wellbeing certifications through the recognised standards (WELL, Fitwel, RESET) that EVORA has expertise in.

MEES: you might feel the pinch come April

I am sure it is well known to most (but probably not all) real estate professionals, that as of 1st April 2018 landlords will no longer able to lease (via new leases and lease renewals) commercial or domestic space in buildings with an EPC lower than an E rating. Unless that is, a five year time-limited exemption applies and is registered on an Exemptions Register.

Previous studies have indicated as much as 20% of the market could be impacted. From our experience, a high proportion of ‘sub-standard’ EPCs (those lower than an E) have improved their ratings when reassessed by a trusted and competent EPC assessor. Many EPCs issued in 2008-09 were completed quickly using default setting for efficiency ratings. Whilst this was acceptable and legally compliant at the time, the resulting EPC typically did not reflect the state of the energy system in place.

That said, there will be a number of F and G rated units that may leave landlords scratching their heads on what to do, when to do it and crucially, IF they have to do anything at all – noting the relative ease that exemptions could be achieved, albeit with some resource implications to administer.

Prediction: Organisations that were slow to respond may feel the bite come April. I expect the regulation to be largely self-policing, via appointed solicitors, as is the case for the availability of an EPCs for lettings (and sales). However, I also expect enforcement (by local authorities) to be weak based on the relative ease of gaining an exemption and the convoluted nature of MEES guidance.

Resolution: Continue to utilise SIERA’s EPC profiling capabilities to assist clients to quantify the risk of MEES against Estimated Rental Value (ERV), lease and EPC expiry dates. We shall look ahead to the hard backstop of 2023 for existing leases.

Blockchain: new ways of working

Beyond cryptocurrencies such as Bitcoin, blockchain has the potential to revolutionise the method in which individuals and organisations digitally transact with one another in a secure and verified environment.

Blockchain came into operation ten years ago. It’s use beyond cryptocurrency is becoming clear (in property and sustainability) through applications such as:

  • Smart contracts – simplifying the retrieval of data through distributed ledgers
  • Governance – transparency is key to blockchain and it could increase the range of publicly available documentation.
  • Intelligent grids – facilitating the buying and selling of renewable energy generated by decentralized systems
  • Data management – countless possibilities for swiftly transferring secure and validated data

One final comment on blockchain (particularly mining of crypto-coins) that needs to be made, is how immensely energy inefficient it is. The process of using individual PCs to mine coins has led to Bitcoin alone having the annual energy footprint equivalent to Hungary, at the time of writing, and this is increasing on a daily basis as more ‘nodes’ are added to the blockchain. Bitcoin transactions require several thousand times the energy of other means, such as Visa transactions (source).

The process of using individual PCs to mine coins has led to Bitcoin alone having the annual energy footprint equivalent to HungaryClick To Tweet

Prediction: An exciting year where I expect Proptech companies to introduce new ways of working (more efficiently) through utilising blockchain applications. It is something that our SIERA team is busily exploring.

Resolution: Continue to track the emerging blockchain market (I will do this on a personal level to ensure I can understand what my software colleagues are talking about!)

Policy Landscape: hopeful for clearer messaging

A continued lack of clarity on future policy measures is one prediction that can (unfortunately) be confidently made for 2018. Through BREXIT and the fragility of global politics, uncertainty on the future of medium term policy instruments shall, I think, remain.

Long term achievements have been ratified by global leaders (minus one), however, specific programmes for achieving this for the building sector will not become clear until 2020. The UK government is yet to confirm the replacement to the CRC or ESOS  (carbon and energy assessment and reporting schemes) beyond 2019, although I do appreciate that consultations are ongoing.

Recent UK government publications such as the Industrial Strategy and 25 Year Environment Plan are welcomed. However, industry needs to understand how the government intends to act on these strategy papers, rather than see recognition that the points covered are important.

Prediction: 2018 is unlikely to herald the launch of forward-thinking and fit for purpose policies that will progress the sustainability agenda.  However, I am hopeful of a clearer message on the future of carbon reporting and disclosure requirements for organisations towards the end of the year.

Resolution: Continue to voice our concerns and aspirations for clear and forward thinking policy through participation in government / industry consultations and working groups.

Join us on 7th February for an industry event that that looks at planning for Real Estate sustainability in 2018 and beyond.

 

ESOS Phase 2 – time to start planning!

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It is now just two years to the day until the ESOS Phase 2 compliance deadline of 5 December 2019. Don’t be complacent – two years might sound like a long time away, but you will save time, stress, and money if you start taking action now by carrying out energy audits. Read on!

The Environment Agency, Scottish Environment Protection Agency (SEPA), Northern Ireland Environment Agency (NIEA) and Natural Resources Wales (NRW) have jointly advised organisations that they should all start now carrying out energy audits as part of the compliance process for ESOS Phase 2.

With just two years to go until ESOS Phase 2 compliance deadline – start carrying out energy audits now!Click To Tweet

With only a few exemptions for public bodies, the regulations require all other large UK organisations to take three important steps before the compliance date of 5 December 2019 for ESOS Phase 2:

  1. measure their total energy consumption;
  2. conduct audits to identify cost-effective energy efficiency opportunities; and
  3. report compliance to their national scheme administrator – the Environment Agency in England, SEPA in Scotland, NIEA in Northern Ireland and NRW in Wales.

Consideration should also be given at this early stage as to whether adopting an approved energy management system such as ISO50001 may be a more suitable route to achieving compliance (ISO50001 is the internationally recognised standard for best practice in energy management).

If you plan to implement ISO5001, then early action is definitely required. Alternatively organisations caught under the ESOS regulations should now start conducting audits to identify their cost-effective energy efficiency opportunities for ESOS Phase 2.

Organisations should now start conducting audits to identify their cost-effective energy efficiency opportunities for Phase 2Click To Tweet

Early action should avoid some of the issues and that occurred during the first phase of ESOS. According to Carbon Trust, around 2,800 organisations had to send notifications advising that they would be late in reporting compliance, and a number were ultimately fined.

Carbon Trust also reported that of the hundreds of compliance audits conducted for Phase 1, it was found that that just 16 percent of participants were fully compliant. A full three-quarters of audited participants needed to undertake remedial actions in order to become compliant.

A full three-quarters of audited participants needed to undertake remedial actions in order to become compliant.

The Environment Agency has also indicated that in England there were approximately 500 organisations that qualified for ESOS in the first phase but had not engaged with the scheme. There have been over 300 enforcement notifications sent out to date, more will be going out in the near future. Civil penalty proceedings have also been commenced against a number of non-compliant organisations.

During the first phase of ESOS, EVORA helped a number of organisations to comply with the regulation and we would concur with the Carbon trust’s reported findings that cost-effective measures could usually cut energy costs in buildings, transport fleets and industrial processes by about 20 percent.

ESOS reports have been proven to identify real energy saving opportunities. Good governance requires that Directors consider the report recommendations.

Further reading on ESOS:

ESOS Phase 2 Practical Hints and Tips

The EVORA team is ready to support you with ESOS Phase 2 compliance. Please don’t hesitate to get in touch to learn more.

Does the UK’s net zero future need the EU ETS?

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The 2008 Climate Change Act already commits the UK to an 80% reduction in emissions compared to 1990 levels by 2050. However, the unwritten long-term target hopefully is, or at least should be, to achieve complete carbon neutrality.

Since its inception in 2005, the European Union Emissions Trading Scheme (EU ETS) has been Europe’s flagship climate policy. It has two stated aims, namely:

  • To reduce greenhouse gas emissions in an economically efficient manner.
  • To promote investment in low-carbon technologies and energy efficiency improvements.

Approximately 15400 installations, accounting for around 45% of EU greenhouse gas emissions, are now covered by the Scheme, over 1000 of which are in the UK. However, with the Brexit negotiations looming, the UK’s place in the EU ETS is under threat.

As an EU member, the UK is currently subject to the Emissions Trading Directive, but this is unlikely to be the case by the end of the negotiation process as such a position is not compatible with the incumbent government’s Brexit rhetoric of removing European Court of Justice (ECJ) jurisprudence.

The only obvious option for the UK to remain involved in the EU ETS, whilst avoiding ECJ jurisprudence, would be to create a UK ETS and then negotiate a unilateral or bilateral linkage. Switzerland has been undergoing just such a process over the past decade, culminating in a technical-level agreement in January 2016 that is awaiting ratification.

Before beginning to debate how a UK-EU ETS relationship should be formed however, the question that we should be asking first is: is it worth it?

This seemingly simple question has a rather more complex answer. The UK economy is large enough to have an emissions trading scheme of its own, however being part of a larger trading scheme with more participants carries efficiency benefits, through increasing the volume of available low-cost abatement options and through increasing market liquidity and stability.

What is not clear is the extent to which the UK receives these benefits. Given that the EU ETS is now in its twelfth compliance cycle, there seems to be remarkably little research into the extent of the benefits the Scheme produces. With the March 2019 Brexit negotiation deadline fast approaching, the Government should give serious consideration to commissioning such a study for the UK.

The EU ETS is also far from perfect which, to be fair, is to be expected given that it was the first, and continues to be the largest, emissions trading scheme in the world. The large surplus of allowances, a lingering remnant of the 2008 financial crisis, and the persistently low and unstable allowance price are the stand out issues, and add up to mean the EU ETS is not functioning as well as it could.

The majority of the EU ETS’ regulatory design features could simply be replicated in an independent UK ETSClick To Tweet

If the UK Government wishes, the majority of the EU ETS’ regulatory design features could simply be replicated in an independent UK ETS. Therefore, the decision of whether to remain involved in the Scheme boils down to weighing the aforementioned economic efficiency benefits against the issues the EU ETS is facing and the challenges of negotiating an acceptable linkage deal for both parties.

The UK business community should seek to take greater ownership of this issue, firstly by pushing the Government to conduct the necessary research to make this decision properly, and secondly by each firm reflecting themselves on what the EU ETS does or does not do for them in the pursuit of carbon neutrality. As the global threat of climate change grows, stricter environmental regulations are inevitable, but high costs don’t have to be. Emissions trading schemes are a proven mechanism for producing low-cost emissions abatement, but to get the most out of them they must have the right design. Is the EU ETS right for the UK? This is something we need to work out.

This blog was originally published on Edie.net

Using BIM for Net Zero: How to use BIM to Design Net Zero Energy Buildings

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This blog is part of our Net Zero series for World Green Building Week 2017 – read more here.

The target for all of us involved within sustainability is ‘net zero’ energy buildings.

Roughly a third of all global green house gas emissions can be attributed to the built environment so it’s hardly surprising that there is a growing interest in net zero buildings; buildings that produce as much clean renewable energy on site as they consume in any given year.

Net Zero is achievable, but only with the collaboration in the planning, designing, constructing and operating stages. There is no ‘one size fits all’ solution for delivering a net zero building. Each project will require its own tailored approach, siting, orientation, climate, occupant profile, control optimisation and then, crucially, ongoing asset management.

Net Zero is achievable but only with the collaboration in the planning, designing, constructing and operating stagesClick To Tweet

Building Information Modelling (BIM), an intelligent 3D model-based process that allows scenarios to be modelled in a virtual environment, is the new tool of choice for designers, proving to be a reliable time-saving method of collaboration amongst all stakeholders.

BIM started out as a tool for spatial coordination and project collaboration but has now evolved to empower designers to model energy performance at all stages of project delivery. Thermal and dynamic simulation modelling, through BIM, is leading to better decision making, informing the delivery of net zero buildings.

Increasingly, EVORA has been creating building models that facilitate BIM collaboration as part of our Strategic Asset Management (BIM:SAM) solution. This innovative approach to managing the whole life cycle of a building is our way of ensuring that ‘net zero’ building design is followed through into actual operational performance.

Take a look at our Guildford case study or contact us to learn more about BIM:SAM.

Net Zero and Solar: Challenges in the Industry

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This blog is part of our Net Zero series for World Green Building Week 2017 – read more here.

The concept of achieving a net zero energy building is becoming increasingly popular, although, in reality, only a very small number actually achieve this. No matter how efficient a building is, it will not reach net zero energy consumption without the help of renewables; the most popular being Solar PV, particularly for on-site generation. Solar PV has increased rapidly over the last decade but in early 2016, the UK solar industry took a significant blow due to government feed in tariffs being cut by 65%.

“Do not let this discourage you in reaching your goals; there is probably a lot more that can be done first.”

The cuts lead to a drop in solar installations of more than 80%, since the payback periods are now often deemed too long to make the projects feasible. However, do not let this discourage you in reaching your goals; there is probably a lot more that can be done first. Below highlights some of the areas that can be looked at to improve efficiency, before trying to hit zero emissions through renewables. It’s a lot easier to offset your emissions if you don’t produce many to begin with.

Taking a holistic approach to net zero buildings

Understand your energy – Compare the performance against benchmarks, such as the Real Estate Environmental Benchmark (REEB). Establish a metering and energy management plan and utilise data management software, such as SIERA, to identify the high energy users. If you can’t monitor it, you can’t manage it.

Establish a metering and energy management plan and utilise data management software, such as SIERA, to identify the high energy users. Click To Tweet

Building Fabric – Find a sensible balance between daylight, heat loss and solar gain. Is air leakage evident? Is there a need for solar reflective film?

Ventilation – Focus on minimising fan power and running hours. Can the windows be opened and a combination of natural and mechanical methods be adopted?

Heating and cooling – Systems should be designed for efficient year-round operation and not just to meet peak demand. Implement controls such as a seasonal set point strategy.

Lighting – Develop a lighting strategy using daylight, efficient fittings and controls. The appropriate amount of light should only be provided where it is needed.

Equipment – Implement power management strategies and switch equipment off at night. Where possible, use energy efficient servers, computers, monitors and appliances.

Other services – Saving water saves energy. Are the urinals on a sensor flushing system? Minimise unnecessary lift use. Has power factor correction been considered?

People – Engage with occupants on sustainability issues. Establish ‘green teams’ and provide simple user guides making it easy for them to save energy.

The above provides an example of some of the steps that can be taken to help achieve a net zero building and illustrates the holistic approach it requires. In practice, a comprehensive energy management plan should be implemented, including the conducting of detailed energy audits and execution of identified energy reduction measures.

A comprehensive energy management plan should be implemented, including the conducting of detailed energy audits Click To Tweet

Although renewables are a fundamental component in achieving net zero, they are by no means a prerequisite for setting a goal to achieve a net zero energy building. In time, subsidy-free Solar PV investment will become more attractive as cost continue to fall, so it’s important that buildings are ready to maximise the benefits when they do.

If you would like to learn more, please contact the EVORA team.

Net Zero and On-Site Renewables: Opportunities and Considerations for Net Zero Energy Buildings

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This blog is part of our Net Zero series for World Green Building Week 2017 – read more here.

As part of the World Green Building Week 2017 theme #OurHeroisZero, this blog explores the opportunities and considerations for on-site renewables in the wider context of net zero energy buildings.

What are net zero energy buildings?

Net zero energy buildings can be defined in many ways, but on a simple level, it is a building connected to the grid where the energy generation matches energy consumption and balanced out to net zero. Net zero is usually assessed at the annual level, but it is becoming increasingly common to account for finer timescales in calculations to improve analyses to inform decision-making. This can be achieved by finding opportunities at all phases of the building life-cycle from construction materials at the design stage, reduction in energy consumption during operation, implementation of efficiency measures and incorporating renewable energy systems.

A building connected to the grid where the energy generation matches energy consumption and balanced out to net zeroClick To Tweet

What are the opportunities for on-site renewable technologies to help achieve net zero energy buildings?

Alongside design, construction, building management factors and small-scale retrofitting such as efficient lighting, on-site renewables have also played a key role in achieving net zero energy for building energy generation and operation. On-site renewable energy generation have helped to harness clean energy, improve efficiencies and reduce dependency on the energy grid.

On-site renewable energy generation have helped to harness clean energy, improve efficiencies and reduce dependency on the energy grid.Click To Tweet

On-site renewable energy is a popular approach as the energy generated can be used to offset the actual energy use of the building and can even be integrated as part of sustainable building envelope design. It is not possible to strive for net zero at the design phase only, as net zero energy must be realised through on-going operation and maintenance throughout the building life cycle.

The technologies and mechanisms available are:

  • Solar Photovoltaics (Solar PV)
  • Purchase of green energy from the grid
  • Micro heat and power generation systems
  • Wind turbines
  • Energy storage technologies (battery and heat storage solutions)

More advanced approaches are:

  • DC microgrids
  • Smart grid and digital technologies
  • Active facades, e.g. artificial leaf technologies

Solar PV and Systems Integration

Solar PV is becoming a more viable option because of decreasing costs of materials and maturity in the marketplace. The mature status of the key solar technologies makes them key players in the energy world. According to the IEA’s Technology Roadmap for Solar Photovoltaic Energy (2014), it is projected that solar power could generate 22% of the world’s electricity by 2050. Solar energy is therefore a viable contender for energy and CO2 mitigation. Solar PV is also more versatile due its multi-disciplinary approach and scalability. In comparison, micro-heat and power generation is less scalable and wind energy through turbines are usually applied as off-site renewables.

It's projected that solar could generate 22% of world’s electricity by 2050 making it a contender for CO2 mitigationClick To Tweet

Of course, climate and locational factors have roles to play in determining the level of renewable energy generating capacities as well as cost and scalability. On-site renewables are however most effective when technologies are coupled together into a system to create a smart on-site renewables DC microgrid, with the application of energy storage and digital technologies. This can prove to be effective for local energy management, as well as scaling up net-zero energy buildings from the single building to the regional scale.

Solar PV as Design

In terms of sustainable building envelope design, there is an opportunity for integration into buildings materials, such as rooftops and facades. Solar PV has been especially popular due to its versatility as in the case of building integrated PV. As well as being decorative and architectural interests, innovative designs can make construction materials more productive and cost-effective compared to traditional building materials. Another element of building design is comfort for occupants which is linked to the wider issue of health & wellbeing as a value indicator for buildings.

What are the considerations for on-site renewable technologies to help achieve net zero energy buildings?

Economics

Market incentivisation is key to paving the way for net-zero energy buildings. This boils down to more cost-effective design and construction. Falling costs of renewable energy technologies have helped to increase the use of on-site renewable energy. Increasing digital technologies can help to align tariffs to real-time pricing strategies.

Balancing Loads and interactions with the wider power grid

For building energy management, there always the need to link power generation to building loads. Opportunities can be gained from balancing supply and demand to optimise performance in terms of energy and costs. On top of this, the peak load times and peak consumption reduction prospects must also be considered, as well as interactions with the wider power grid. Digital technology is creating ways to optimise and adjust demand and supply in real-time which improves energy security from outages, systems integration, reducing operation and maintenance costs.

Scaling it up!

Net zero energy buildings should be viewed at both the local and regional scale since net-zero could be achieved at the single building level, but also with the wider energy grid which is becoming smarter with the application of the smart grid. With more digital data available, it is becoming increasingly possible to use this to inform decision-making.

Holistic approach of design, construction and operation

There is a common view that most opportunities will be achieved at the building design stage. This must however be integrated into the operation of the building and integrated across the building life cycle. This is where on-site renewables present an opportunity for energy generation. A joined-up view must be taken for net-zero energy buildings. This is because a building may be designed to be net-zero, but building operation is the challenge when it comes to energy performance despite the intention at design phase and lead to deviations between modelled vs. actual energy performance.

Concluding Remarks

The role of systems thinking can be appreciated within the contexts of energy management, technological developments, economics and policy. Advances and trends in energy storage technology in the microgrid have opened opportunities for net zero buildings and on-site renewable energy generation. For grid and microgrid management, a mismatch of supply and demand is an issue, however this is being resolved by energy storage. For net zero energy buildings to be realised, a coupling between technologies, systems, solutions as well as an eye for scale is required. This can be achieved by finding opportunities at all phases of the building life-cycle from construction materials at the design stage, reduction in energy consumption during operation and implementation of efficiency measures and incorporating renewable energy systems. It is not possible to strive for net zero at the design phase only, as net zero energy can be realised through on-going operation and maintenance.

For net zero energy buildings to be realised, a coupling between of technologies, systems, solutions as well as an eye for scale is requiredClick To Tweet

If you would like to learn more about EVORA and how we can help your organisation, please contact a member of the team.