Trend: Commercial buildings go all-electric

The following is adapted from State of Green Business 2020, published by GreenBiz in partnership with Trucost, part of financial information and analytics giant S&P Global.

We’re in the midst of a building boom. Commercial floor space is projected to grow by 40.5 percent by 2050. And once built, buildings stick around for a while: About half of all existing buildings were constructed before 1980.

That means the way we build today — the type of energy a building uses, its level of efficiency, the way it is designed — will lock us into a level of emissions for decades. With 40 percent of emissions coming from buildings, communities and companies want to get the next generation of buildings right.

To reach deep decarbonization goals, mounting research reveals buildings must be electrified — from homes to high-rises.

The good news is that buildings are already most of the way there. With the notable exceptions of space heating, water heating, clothes drying and cooking, modern buildings are electric. The bad news is that the problem is distributed. About 93 percent of commercial buildings (PDF) use some kind of non-electric heating fuel, according to the Lawrence Berkeley National Laboratory.

So, the time is right for electrification.

All signs point to the next generation of commercial buildings becoming all-electric. Major indicators include:

  • Policies restricting natural gas on new construction. In the United States, more than 50 cities and counties, primarily in California so far (with policies emerging in New York, Massachusetts and Washington), are looking to enact, or already have enacted, some sort of restriction on new natural gas hook-ups. Many of the policies emphasize residential homes before commercial buildings, yet the move is sure to spur on the market for electric appliances, leading to more options and examples commercial construction could emulate.
  • The falling cost of renewables. While natural gas was once thought of as the more environmentally friendly alternative to a coal-intensive electric grid, the grid is getting cleaner, making electrification increasingly environmentally beneficial (and that doesn’t even factor in methane seepage). Cheaper renewables also makes transitioning from fossil fuels more economically attractive, especially given the unknown infrastructure costs (PDF) of the aging natural gas infrastructure.
  • The growing market of electric appliances. While using electricity for heating was once inefficient, the equipment itself has become significantly better. For example, several electric heat pumps on the market are two to three times more efficient at converting electricity into heat than conventional models. While the upfront costs of electric appliances can be more than for gas appliances — and cost is thought of as a primary barrier to electrification (PDF) — a study from the National Resource Defense Council (PDF) shows that added costs are more than offset by avoiding plumbing the building for gas. And as more buildings go electric, appliance costs are sure to fall.
  • Natural gas falling out of favor. Natural gas use, once billed as a bridge fuel, is quickly growing to become one of the largest sources of greenhouse gas emissions in the United States. Meanwhile, studies show that natural gas leakage — in the form of methane, a potent greenhouse gas — is higher than originally thought, making the climate benefits of natural gas less attractive. Additionally, there is rising awareness around the indoor air pollution concerns associated with gas appliances.

All-electric commercial building early adopters are already here. Last summer, Adobe broke ground on its North Tower, which it says will be the first all-electric office building in Silicon Valley. The move is in line with the company’s sustainability goals — and its spirit to set ambitious targets first and figure out how to make it work later.

“When you look at buildings and builds and new construction, it’s easiest to go with what’s tried and true and well-known,” said Vince Digneo, Adobe’s sustainability strategist, in an interview with GreenBiz in 2019. “It’s really difficult to evaluate something that hasn’t been done before.”

By spearheading the project, Adobe recognizes that it’s also creating a model for other companies to follow suit.

Adobe’s Silicon Valley neighbor, Google, is in the midst of building its Mission Bay campus in San Francisco, which will be more than a million square feet and heated and cooled using electric geothermal heat pumps. The building looks like a dragon, with scale-like solar panels, adding a cool-factor one could expect from a brand such as Google.

Kilroy Realty, a commercial real estate developer and investor, already has 17 percent (PDF) of its portfolio all-electric. Kilroy’s approach doesn’t put electrification front and center, which may help normalize the electric adoption. “There really is no reaction from tenants or buyers,” says Sara Neff, senior vice president, sustainability at Kilroy Realty. “People don’t know it’s electric. They just want a comfortable space.”

What excites design enthusiasts about the new generation of all-electric buildings is the potential for architects to reimagine these structures from the ground up. When looking at a building holistically, there’s potential to improve how elements work together, essentially applying circular economy principles to building design. This could include elements such as incorporating heat recovery heat pumps, increasing efficiency and mitigating capacity constraints and including on-site renewables. When combined, there is potential for compounding benefits that make the system cheaper than those in a conventional building.

Much of the negative feedback about electric buildings comes from designs that simply swap out gas-based appliances and replace them with electric. Doing this is often more expensive to operate and have some of the same circulation losses as gas boilers.

The smarter early adopters are reconceptualizing how building elements work together — systems such as rainwater catchment, garden roofs and passive heating and cooling. Examples include the Bullitt Center (PDF) in Seattle, which explicitly states that its goal “is to drive change in the marketplace faster and further by showing what’s possible today.”

A harder nut to crack is decarbonizing our current commercial building stock.

Adobe’s Digneo says he’d like to fuel-switch his existing portfolio, but the other buildings in Adobe’s portfolio were built 10 or 15 years ago and aren’t made for natural gas to be taken out easily. “It’s going to be the last mile, for sure,” Digneo says.

There are numerous barriers to commercial retrofits: lack of knowledgeable contractors and architects, high costs, lack of education and awareness and lack of performance data, to name a few (PDF). It’s also a distributed problem, with millions of existing residents and office buildings using gas-fired appliances that would require massive investments and education to address.

Still, some facilities are plugging in to the trend, including the University of California and Stanford University. Organizations such as the Urban Land Institute (ULI) Greenprint Center for Building Performance realize that as the market heads towards electrification, more resources are needed for commercial building owners on such details as technology, cost and feasibility to help guide decision-makers through retrofits.

Emily McLaughlin, director, ULI Greenprint Center for Building Performance, explains: “We’re increasingly hearing that while electrification may be inevitable, implementing the needed upgrades in existing buildings poses practical, technical and financial challenges for which the market isn’t overwhelmingly prepared. As more local jurisdictions set net-zero energy building codes for new construction, owners realize that it’s only a matter of time before those apply to existing buildings as well.”

The barrier to retrofits also highlights the imperative to get buildings right the first time. Which is why energy- and climate-conscious companies are charging ahead.