Industrial Real Estate’s Slow, Steady Steps Toward Electrification

Paul Wellener, Vice Chairman & U.S. Industrial Products and Construction Leader Deloitte. Image courtesy of Deloitte

Fully half of manufacturing leaders have targeted electrification of space and water heating by 2030, while 70 percent of respondents reported that they had agreed to move toward the electrification of industrial processes, according to a recent executive survey by Deloitte.

“We expect that there will be a continued transition toward electric sources for space and water heating in the coming decade,” said Paul Wellener, Deloitte vice chairman & U.S. industrial products and construction leader, and author of a research study titled “Electrification in Industrials.” Wellener added that the confluence of electric-powered facility heating and cooling systems and the rise of smart, connected building management systems are “a powerful combination—one that could be a catalyst for using electricity to optimize industrial spaces, including factories, warehouses, and offices.”

Further, sustainability-minded companies that have made commitments to reduce their carbon footprint in the properties they occupy are a catalyst for change. Improvements are most likely to be found in the retrofits than in all-electric new construction, with the speed of the overall market conversion being driven by clients, according to Wellener.

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So far, more than 1,600 industrial manufacturing projects globally have achieved LEED certification, 90 percent of them for new construction, according to the U.S. Green Building Council. The U.S. leads in LEED certifications, followed by Canada and China.

State-Level Action 

While the federal government has largely taken a back seat on climate leadership, many states are taking ambitious actions to reduce greenhouse gas emissions. Fifteen 15 states and territories have taken action so far to adopt 100 percent clean electricity policies and greenhouse gas reduction programs. 

The New York State Energy Research and Development Authority (NYSERDA) states that electrifying the industrial real estate sector is a key component of the a statewide electrification program that aims to reduce greenhouse gas emissions 40 percent by 2030.

As part of the initiative, NYSERDA is currently funding studies over the next three years and demonstration projects over the next two to five years to establish innovative solutions for electrifying the sector. Simultaneously, the state is encouraging the use of heat pumps, which have proven to be highly efficient and cost-effective for buildings with high cooling loads and for those without access to natural gas.

READ ALSO: Speeding the Transition to Renewable Power

Ed Rightor, Director, Industrial Program at The American Council for an Energy-Efficient Economy. Image courtesy of ACEEE

Industry, transportation, and real estate each account for about a third of emissions and society’s goal should be to keep Earth’s temperature from rising more than 1.5 degrees centigrade to 2 degrees centigrade. So says Ed Rightor, director of the American Council for an Energy-Efficient Economy’s Industrial Program and an author of a recent ACEEE research report titled “Beneficial Electrification in Industry.” As such, companies, states, and communities are setting targets to reach those goals.

Electrification from renewable energy sources can be useful in reducing greenhouse emissions. The report calls for “considerable investment in electric infrastructure, energy storage, and interconnections to make electrification a viable beneficial pathway,” the key factors to achieving net-zero greenhouse gas emissions by 2050. 

Electrification Efforts

Regional planning boards and states should find more ways to incentivize building owners and developers to focus on energy efficiency. That goal can be achieved by expanding incentive programs, as well as encouraging collaboration among utilities, grid owners and technology providers to increase adoption of efficient technologies like electric heat pumps and boilers, Wellner contends.

“These electrification efforts should positively contribute to ESG goals for owners and operators, assuming that the changes are made as part of a deliberate initiative guided by a road map that targets a specific return on investment,” he said.

Francisco Acoba, Managing Director & National Practice Lead, Deloitte. Image courtesy of Deloitte

According to Francisco Acoba, managing director & national practice lead for real estate and location strategy at Deloitte and an author of the report, grid-interactive efficient buildings are expected to have an increasing role. “(They) use smart controls to flatten their load, manage energy to maximize onsite and offsite renewable energy use and optimize interactions with the grid by providing and monetizing flexibility as a grid service,” Acoba said.

Grid-interactive buildings, retrofitting, or deploying new HVAC systems and installing new energy management systems may be challenged by the pandemic across commercial real estate.

But energy transitions take time. Over the last several hundred years, energy sources have evolved from wood to coal and petroleum-based products. The next transition, to renewables, is now in process, Rightor noted. “It’s not going to be fast, it’s not going to be easy,” he noted. “And it’s going to require coordination across many different segments—industry, vehicles, and buildings—all three of those areas,” he concluded.