Time to Perform an Energy Audit? Understanding Their Value for Commercial Real Estate

The way energy in commercial buildings is monitored and consumed has become unsustainable for tenants, operators, and the environment.

The average building and its local grid are unprepared for increases in energy consumption and many buildings still feature outdated infrastructure, leading to inefficient energy use. According to the EPA, 30 percent of the energy consumed by commercial buildings goes to waste.

Energy waste and inefficiencies in commercial real estate are also damaging for the environment at a time when businesses, utilities and homeowners are seeking ways to lower their carbon footprint and transition to cleaner energy sources. In 2020, direct greenhouse gas emissions from homes and businesses accounted for 13% of total U.S. greenhouse gas emissions.

Property owners are experiencing tremendous pressure to make commercial buildings more green while also coping with the financial burden of higher energy costs and inefficient buildings. Performing an energy audit is essential to identify actions to lower costs, improve energy efficiency and invest in a building’s future.

How the Audit Works

An energy audit evaluates an entire building’s energy use and efficiency. These audits can reveal basic repair needs, outdated, failing energy systems and potential problems that can be resolved with repairs before they become more significant.

A commercial energy audit is catered to the unique use cases and challenges seen in commercial buildings and will evaluate:

 ●    The building’s utility bill, including gas and electric meters.

●     Building management systems and data loggers for operational and equipment data.

●     Information for all energy-using systems and equipment, including lighting systems, heating, cooling, exhaust fans and hot water.  

 Heating and cooling systems are crucial for maintaining indoor air quality. However, in commercial buildings they are also the leading sources of energy waste as spaces still need to be heated and cooled even when unoccupied. An energy audit can identify common issues leading to higher heating and cooling costs.

High heating and cooling bills can commonly be attributed to air leaks in the building envelope, poorly maintained HVAC systems and problems with thermostat settings, just to name a few. When left on, lights can contribute to higher energy consumption than computers and other office appliances. By monitoring and analyzing use, an audit can reveal specific areas where energy is being wasted due to operational inefficiencies or tenant behavior and identify actions and tools to address these issues.

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Taking Action After an Audit

The results of an energy audit are designed to drive meaningful action for a building operator. Some of these actions are low- or no-cost, such as committing to lowering/raising a building’s temperature when it's unoccupied or ensuring windows and doors aren’t left open while heat or air conditioning is running.

For longer term impact, investments into new technologies and building upgrades will need to be made. If an audit reveals that a building’s light system is a major consumer of energy, energy-efficient lighting and smart sensor systems can be installed to keep lights off when certain rooms and building areas are unoccupied. Similar smart controls can be installed to manage and monitor HVAC settings, even remotely, so a building’s manager can react to occupancy and seasonal changes in real-time to make efficient use of energy.

This is becoming even more important as companies commit to remote and hybrid working models, where office traffic and occupation can be inconsistent.

If air leaks and other building inefficiencies are revealed through an energy audit, insulation checks and upgrades may be needed. This includes replacing older windows and doors to ensure heating and cooling isn’t being lost in those places. While home appliances are less of a concern in commercial buildings, switching out HVAC systems, water heaters and more for certified energy-efficient versions will result in lower energy costs. 

After an audit, a building operator may want to integrate clean energy generation with on-site solar and energy storage. While an initial investment is required for these technologies, self-consumption of clean energy will lower costs over time and reduce a building’s reliance on fossil fuels. With tax credits and rebates available for businesses who install solar and efficient appliances, making these upgrades will only become more lucrative for property owners.

The Inflation Reduction Act contains two significant tax incentives – 179D (a tax deduction) and 45L (a tax credit) – for commercial landlords who reduce the energy usage in their buildings, which can apply to both new builds and retrofits. 179D provides owners with a dollar amount per square foot if their building meets a certain efficiency standard. Owners can make up to $5 per square foot of a new construction or retrofitted building. With 179D, owners can also benefit every three to four years if a new capital event has led to additional reductions in the building's carbon footprint.

Benefits of an Energy Audit

Simple things like new appliances, installation of smart thermostats and light controls and improved building insulation can help you use less energy, lowering costs. This is an incredibly important benefit as energy prices continue to rise. Many operators and property owners may quickly be facing unsustainable utility prices, compounded by maintenance costs that can be incurred when a building is run inefficiently for long periods of time. Energy efficiency also reduces health and safety hazards in a building. When a system is energy-efficient, mold, mildew and deterioration are less likely to occur.

As the reliability of the energy grid continues to be a concern, efficiency and clean energy generation upgrades can future-proof a building against rising energy costs and potential outages. For instance, installing a solar and storage system provides backup power to keep a building and its occupants working when the grid goes down and can help reduce strain on the grid during times of high energy consumption by allowing the building to run on stored solar energy. On-site energy storage will also become essential for commercial sites that look to adopt EV charging stations and to mitigate high energy demand and costs associated with vehicle charging.

With more states and regions introducing clean energy and efficiency standards for commercial buildings, getting ahead of the curve with an audit and subsequent upgrades will benefit a building and its operators in the long run. With public attention turned to efforts to reduce emissions, rising costs and favorable legislation in place to support the energy transition in commercial real estate, now is the time to invest in an energy audit and take action toward improving a building’s energy use and efficiency.  

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