Electrification of Heat Gaining Steam in CRE

December 2, 2022 • Rhonda Smith

As decarbonization efforts gain momentum, the commercial real estate industry will face critical challenges in the next few years tied to how to heat buildings.

“The big trend in the industry right now is electrification of heat—how to generate heat using electricity, rather than burning fossil fuels to do so,” says Eric Sturm, applications engineer at Trane Technologies.

Trane noted in a recent newsletter on this topic: “As sustainability continues to gain public concern and visibility, companies and property managers are receiving pressure from all fronts to report emissions, set sustainability goals, and take transparent and measurable action to reduce emissions.”

Electrification of heat is just a small, though important, piece of the decarbonization challenges facing the CRE sector in the U.S. Moving targets are everywhere, JLL noted in its advisory titled “The real estate leader’s guide to decarbonizing your portfolio.”

“Amid increased scrutiny and market pressure, real estate leaders face a crowded and fragmented ESG [environmental, social and governance] space, and a confusing array of regulations, pathways and metrics,” the guide states. JLL also pointed out that there isn’t a comprehensive federal strategy in the U.S. to address carbon reduction.

A Hodgepodge of Electric Production

The mix of electric production varies from region to region in the U.S., Sturm says, and the electrical grid is greener, or cleaner, in some areas than in others.

Another challenge is policy. “There are certain jurisdictions mandating electrified heat,” he explains.

Certain municipalities have banned the hookup of natural gas to new buildings. “After such bans take effect,” he says, “buildings that need heat will likely use electrified heat.

Natural Gas Bans Prevalent on East and West Coasts

On the West Coast, natural gas bans have been enacted in Washington, Oregon and California, Sturm says. On the East Coast, they can be found in Massachusetts, while others have been proposed in states along the East Coast.

The Boston City Council adopted amendments in late 2021 that fortify the Building Energy Reduction and Disclosure Ordinance, the JLL guide notes. This mandated that large buildings monitor and disclose their greenhouse gas emissions and use audits and energy efficiency upgrades to reach emissions-reduction goals in the next several years.

New York City’s Climate Mobilization Act’s Local Law 97 requires buildings larger than 25,000 square feet to meet challenging carbon reduction targets.

“For building owners, the type of equipment that’s going to be used to produce heat in buildings will likely be different than what they may have become accustomed to,” Sturm says. “In heating, ventilation and air conditioning [HVAC], we are seeing the growing use of heat pump equipment and equipment that’s able to recover heat from cooling equipment.”

More Changes Expected in 3 to 5 Years

Sturm predicts that in the next three to five years, “we expect that more jurisdictions will adopt natural gas bans, and more projects will require electrified heat.” This means similar, but different, types of air conditioning equipment will be required in new buildings, he says.

These changes may not have as large of an impact on existing buildings, Sturm says, because systems in those buildings will likely be grandfathered in, and therefore not be covered by the new laws.

For stakeholders likely to face higher heat electrification hurdles in the not-too-distant future, rest assured.  “HVAC manufacturers have been preparing for this for a long time,” Sturm says.

BOMA International will be releasing a Policy Brief in December 2022 that explores the electrification issue in more detail. For more information on BOMA’s carbon reduction resources, go to www.boma.org/carbon.