Yahoo Finance Renewable energy adoption will power Apac’s race for low-carbon built environment
Four in 10 occupiers in JLL’s research state that on-site renewable energy will become non-negotiable for their organisation by 2030 (Photo: Bloomberg)
Organisations in Asia Pacific (Apac) are intensifying their pursuit of net-zero goals, but they see a significant gap between supply and demand for sustainable buildings in the region. Simply put, having green ambitions is no longer enough. Occupiers and landlords need to invest time and effort in ensuring that the energy used to power green buildings is under their control.
However, the challenge is that, across Apac, for every five sq ft of demand, only two sq ft of new and existing low-carbon space will be available from now until 2028, placing sizeable emphasis on how renewable energy is sourced.
In this race for net zero, tapping into renewable energy will be key to catalysing low-carbon buildings, as the kilowatts of renewable energy used in buildings largely define the carbon emissions of an asset.
Occupiers and investors are recognising the growth potential of tapping into renewable energy in their real estate portfolios. In Asia, we are seeing a monumental leap in appetite for renewable energy use, with 75% of occupiers surveyed wanting at least half their office portfolio fuelled by renewable sources by 2030, up from 9% today. At the same time, real estate investors are increasingly considering direct involvement in renewable energy projects to meet their needs.
The shift towards renewable energy is crucial to achieving a low-carbon built environment. It calls upon the real estate sector to revamp buildings from passive energy users to active contributors by generating renewable energy on-site or via off-site procurement. However, scaling up the use of renewables requires a range of well-planned strategies and considerations, given the different maturity of the energy markets in Apac and the need to align to global frameworks like the Science Based Targets initiative and RE100.
In our experience, organisations can increase their renewables shares in four ways: Firstly, via a combination of on-site renewables depending on location; secondly, by purchasing power agreements (PPAs) or renewable energy from energy retailers; thirdly, through opting for a corporate power purchase agreement (corporate PPA); and finally, through renewable energy certificates (RECs).
Scaling up renewable energy use with on-site renewables
On-site energy has the benefit of high visibility and reduced exposure to energy price volatility, and investors and occupiers are expressing interest in this option. Four in 10 occupiers in our research state that on-site renewable energy will become non-negotiable for their organisation by 2030.
The ANZ Centre in Melbourne has harnessed solar energy to power its climate goals. With a target to power 100% of its Australian operations by 2025, we worked with them to deliver an upgraded solar energy system. Most of the energy generated is used by the building, with a minimal amount exported to the grid. To date, it has generated more than 500MWh of clean energy.
However, on-site renewables like this require a degree of cooperation between the landlord and occupier as there are many issues to address, including the deal structure, ownership of assets, payment for solar electricity production, access to certificate creation and more.
Furthermore, sites also need to be assessed to determine the feasibility for solar photovoltaic installation, as well as local grid connection or even the ability to share energy with other buildings within the portfolio. Landlords and occupiers need to evaluate whether a simple roof leasing with tenant system investment, a third-party-financed solar PPA, or landlord capital investment is feasible considering their broader business objectives.
Purchasing renewable energy can help to meet net-zero carbon goals
For some building owners and occupiers, on-site renewables may not be feasible, but purchasing renewable energy is an alternative option in their race for low-carbon buildings.
They can opt for corporate PPAs, contracts that enable companies to source renewable electricity without making upfront investments.
However, corporate PPAs are only possible if the necessary energy market structure and regulatory frameworks exist.
Within Apac, the absence of universal regulations, coupled with the long-term and larger volume of purchasing required, leaves many good-intentioned renewable energy purchasing corporations at the mercy of certificated markets, where double-counting, double-claiming, and other problems exist.
That means Apac lags behind Europe and North America in the volume of corporate PPAs signed to date.
The role and validity of renewable energy certificates
However, that is not to say that the purchase of RECs is not encouraged. Corporate buyers can address these issues by purchasing certificates from quality, well-audited projects to ensure they meet their corporate renewable energy or net-zero commitments without the spectre of greenwashing claims.
They also need to assess local market and regulatory conditions to capture the opportunities that maximise the renewable energy potential and support the transition within each jurisdiction in the most cost-efficient manner.
No silver bullet to meeting net-zero carbon goals
There is no one-size-fits-all solution to renewable energy adoption. A comprehensive on- and off-site renewable strategy is essential as organisations race towards their net-zero carbon goals.
Asia is at the forefront of global renewable energy growth. The region has contributed about 60% of new renewable energy capacity added globally in the last few years, with Australia, China, Vietnam and India leading the growth. Renewables are projected to surpass coal, making up more than one-third of total electricity generation by early 2025, according to various estimates.
Real estate owners and occupiers will stand to reduce long-term energy costs by strategically choosing renewable energy sources and investing in buildings ready for renewables-powered grids. They will also be able to achieve sustainability goals within their real estate portfolios.
Ultimately, in pursuing net-zero carbon goals, we need to remember that inaction is not an option. It begins with a change in mindset. Occupiers need to see that there are potential costs to not making their portfolios environmentally friendly. They need to begin demonstrating tangible action, with renewable energy as one of the key tenets.
Elke Kornalijnslijper is head of sustainability consulting, Asia Pacific, JLL
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