Carbon Reduction, a Vital Part of Any Recovery Strategy: Q&A

March 29, 2021

Technology advances that help meet the needs of the moment while increasing NOI, from Carbon Lighthouse’s CEO Raphael Rosen.

Raphael Rosen, CEO, Carbon Lighthouse. Image courtesy of Carbon Lighthouse

In the simplest terms, net-zero carbon or carbon neutrality means that every entity that has committed to this purpose is not adding new emissions to the atmosphere, because, even though these will continue to be produced, they will be balanced by equivalent absorption from the atmosphere. But is this enough to safeguard the planet and the people living here?

The year 2050 was set as goal for reaching carbon neutrality, which, under the climate goals of the current administration, seems more of a reality than a fantasy. However, it is an ambitious target that requires sustained efforts.

Carbon Lighthouse, a Bay Area company, uses rigorous data collection and advanced analytics to increase energy efficiency in buildings, serving both the planet by working toward solving the climate crisis, and the clients by increasing profitability. Commercial Property Executive spoke with Raphael Rosen, the CEO of Carbon Lighthouse, about carbon neutrality and the steps companies need to take to ensure their net-zero commitments are returning the proper results.

Carbon Lighthouse clients include high-profile companies, which turned to you for help in reaching their carbon emissions goals, making a clear statement that sustainable decision making has financial staying power in the long term. Are there any recent projects that you wish to talk about?

Rosen: Carbon Lighthouse has spent the past decade honing our HVAC expertise to deliver energy savings and carbon reduction impact for clients like Goldman Sachs, Hawaiian Airlines, The Carlyle Group, Madison International Realty and AEW.

L&B Realty Advisors and Ohana Real Estate Investors are among CRE leaders in office and hospitality that are already implementing the solution. Both have long invested in technology solutions, like our Efficiency Production service, to create more efficient buildings. Now, with the IAQ solution, they will be armed with insights from continuous data streams that will allow them to satisfy the public’s desire for healthy, comfortable indoor air. In the long term, IAQ will remain a key differentiator for buildings as the healthy-building movement and demonstrable ESG impact continue to gain traction.

How has your technology advanced since you founded Carbon Lighthouse more than a decade ago?

Rosen: In our early days, we developed technologies that enabled us to gather and analyze large amounts of building data to reduce a building’s energy consumption. Over time, our machine-learning algorithms have collected data from more than 100 million square feet of real buildings, dramatically improving the accuracy of the energy-efficiency measures we recommend to each client. Our technology continuously draws on real building data and further broadens its intelligence with every square foot analyzed, transforming data into actionable insights for portfolio-wide business decisions.

The AI-driven Efficiency Production service uses that growing set of data to capture new value from carbon reduction operational efficiencies in commercial buildings, which helps building owners and operators quickly achieve their occupant, climate and business goals.

What are the biggest carbon dioxide emitters in commercial buildings and how can emissions be reduced?

Rosen: HVAC systems are often one of the largest energy consumers, and, therefore, emitters of carbon dioxide, as the building works to heat, cool and filter the air inside the building. The HVAC system’s extreme complexities can make it challenging to manage and maintain optimized building operations, especially since many are outdated. However, having the right data and analytical power, one can better manage the interdependencies between existing equipment and automate and optimize individual pieces, so the HVAC system as a whole is running more efficiently and effectively.

Now, as CRE faces increased pressure to provide demonstrable ESG impact from investors and tenants alike, having data that helps you measure, track and report back your energy use and carbon emissions reduction will offer a competitive edge in today’s market.If a property manager were to invest in the systems of a building, which would bring the company the biggest savings in operational costs?

Rosen: No two buildings or their systems are the same—each has its unique mix of building management systems, equipment, maintenance schedules and tenant needs. Correctly identifying where a building can offer the most savings requires looking at a deeper data stream to reveal the interdependencies across the system as a whole, which only today’s AI technologies can deliver. Truly optimizing a building’s operations can’t be done on an individual equipment level since all the different pieces must work together to provide comfortable, stable air quality to occupants.

Take, for example, Ohana Real Estate Investors. After analyzing one of their hotel building systems, Carbon Lighthouse uncovered that the biggest opportunity was in its central plant, where the building’s chiller, cooling tower and pump work together. Specifically, there was an opportunity to optimize the chilled water plan by increasing condenser pump speed, allowing all other equipment to run more efficiently and creating a net reduction in energy usage.

We also found that the hotel’s three identical cooling towers worked at different rates, causing performance issues. By optimizing the water plants to work at equal rates and enabling the pumps to run more efficiently, the hotel improved the net operating income of the property, reduced the total energy bill by 8 percent and reduced carbon emissions by 1,789 tons.

What challenges do owners and landlords face when addressing the costs associated with energy-related upgrades and how can they be solved?

Rosen: Owners and landlords are often challenged with addressing energy usage because there are two ways to approach it—you have tenant energy usage and building energy usage. You cannot solve for one and not the other, so it is critical to find solutions that solve for both.

With technology now playing a more prominent role in driving efficiency, the good news is that energy retrofits are less expensive and less time-consuming for landlords. New solutions can work with existing building systems and do not require considerable disruptions to the tenants. If the energy savings that result from a retrofit are mutually beneficial to both tenants and the building overall, it becomes an easier sell for the landlord.

Can technological solutions for carbon dioxide removal alone compensate for present-day emissions? What complementary measures need immediate implementation?

Rosen: The built environment is responsible for 40 percent of all U.S. carbon emissions. It will take a collective effort with varying strategies to end climate change and reach net-zero. However, no matter how effective technology is at compensating for carbon emissions, it cannot fix the problem until we see widespread adoption.

Still, it is encouraging seeing that there has been an uptick in the adoption of carbon reduction solutions as companies realize it is in their best interest, in both the long and short term, to address their climate footprint.

Countries and corporations are focusing on 2050 as the year that everything will change for the better. While it’s an admirable goal, isn’t it too distant? What can and what is being done presently to reduce emissions?

Rosen: The new administration’s plan specifically calls out the need to reduce building carbon emissions as one of the key areas of focus, with penalties to those who don’t comply.

We also see more immediate compliance requirements at the state and local levels, like Local Law 97 in New York City, which requires buildings larger than 25,000 square feet to reduce carbon emissions by 40 percent by 2030 and 80 percent by 2050. In its first phase, starting in 2024, around 20 percent of the city’s most carbon-intensive buildings will have to meet a lowered emission threshold, facing fines administered as early as 2025 for noncompliance.

The good news is that technology solutions for CRE have greatly improved, decreased costs and delivered real carbon reduction and ESG impact. CRE owners and operators should seek partners, solutions and technologies to lay the foundation for continued impact-driven strategies.

How has the pandemic affected property owners and operators’ interest in investing in energy efficiency and operations systems upgrades?

Rosen: The pandemic has had a devastating impact on the CRE industry. As owners and operators look toward recovery, it is becoming increasingly clear that carbon-reduction needs to be a part of any recovery strategy.

COVID-19 has brought a new consumer awareness about air quality. Today and in the future, tenants and guests will consider air quality and commercial buildings’ environmental impact when deciding where to spend their time. In fact, according to our recent survey, 91 percent of consumers believe that IAQ is important in the prevention of COVID-19 spread.

Consumers—not owners or operators—are in the driver’s seat of CRE’s economic recovery. To get workers back into the office, instilling confidence that commercial buildings are clean and safe is the only way forward. As consumer awareness of climate change and air quality has reached an all-time high, the tried-and-true attraction/retention strategies that worked a year ago are no longer viable. Only those landlords and property teams that can confidently market the air safety in their buildings will win back the trust needed to rebuild occupancy.

With the health crisis changing the way properties are operated, what is the impact of air safety measures on a building’s carbon emissions and how can it be limited?

Rosen: CRE is now confronted with a tech-savvy and battle-tested public that is reemerging vastly different from when they left in early 2020. The world knows more about healthy air than ever before. Unless occupants can see for themselves that the air in their office building, a nearby hotel or their favorite restaurant is healthy, CRE won’t be able to attract tenants and guests back to fuel the industry’s need for immediate and meaningful economic recovery.

As owners and operators prepare for reopening, they’ve rightfully prioritized their occupants’ and employees’ health and safety by investing in various solutions. Unfortunately, depending on the state of a building, some of those investments can mean updated best practices around ventilation, air filtration and circulation, or even new equipment altogether—all of which can drive significant increases in expenses and associated energy costs and carbon emissions.

Buildings must assess the HVAC equipment and control systems’ data to take the proper air safety precautions while balancing energy use and carbon emissions increases. Optimizing these systems using data insights to work more efficiently can achieve the necessary health and safety requirements while reducing carbon emissions and increasing energy savings and operational efficiencies.