The following article was published by the Property Council of Australia on 13 June, 2017
The Clean Energy Finance Corporation's new report identifies 50 best practice initiatives for sustainable buildings, 16 of which can have payback periods of less than five years. Can one small document drive large-scale change?
Energy in Buildings: 50 Best Practice Initiatives, prepared by consultant Norman Disney & Young, reflects the insights of major investors across the property sector and details energy efficiency opportunities across a wide range of building types, from offices, retail and hotels to industrial, healthcare, education and residential.
This initiative is timely given the property industry contemplates the findings of the Finkel Report released last week. Wholesale electricity prices have doubled in the past few years and energy users are feeling the impacts of the policy vacuum. There's never been a better time to focus on saving energy.
Chris Wade, CEFC's property sector lead, says his team was having regular conversations with potential partners about the benefits of specific energy efficiency measures, but lacked the hard evidence to turn talk into action.
"One of the key strategies for improving the energy efficiency of buildings is information. This report not only provides information in terms of technology and where it is being practically applied, but also paybacks and upfront costs," Wade says.
"Sixteen of the initiatives have a potential payback of less than five years, and two thirds less than 10 years," he adds. These initiatives should be the first port of call for companies reviewing their energy strategies.
"We've been getting great feedback from a number of leading REITs, who have told us it's helping them engage with their investment managers. It has also been pitched to appeal to CFOs and CEOs - those people who hold the purse strings."
Bruce Precious, national sustainability manager at The GPT Group, agrees that "it's handy to have a summary of the options depending on your building type, climate zone and budget".
Precious says his company continues improvement focus on energy efficiency with LED lighting upgrades showing exceptional paybacks, and "we continue to enhance our sub metering systems and upgrade our building management systems".
"To be able to pull out a document, point to these initiatives and their payback periods, makes the opportunities more tangible with investment managers.
"Energy efficiency is still our leading strategy to reduce emissions from buildings, and the cheapest emissions reduction is energy you avoid using."
And it's for more than the "premium building guys" Precious says. "It's the kind of resource that can be used across all sectors of the market, and for new and existing buildings."
Tim Bush, NDY Melbourne's sustainability manager and project lead, says it effectively "does the homework for the industry".
He says the most surprising aspect of feedback received from portfolio owners was discovering how cost effective some technological interventions can be when done at scale.
"Some companies are getting 3.5-year payback periods on initiatives we thought would have 10 year returns. When you do things at scale across a portfolio, rather than by taking a building by building approach, the paybacks can improve immensely," Bush says.
"I think the sustainability managers within big portfolios will use it as a conversation starter with their development managers. And we obviously hope it will spark new transactions with the CEFC, as it gives other developers the confidence they can shoot for 5.5 star or even 6 star NABERS Energy," he says.
CEFC has committed around $600 million in property financing. Recent transactions include $110 million equity in the Investa Commercial Property Fund to support the company's commitment to net zero emissions by 2040, and $100 million equity in the AMP Capital Wholesale Office Fund to target a portfolio of net zero carbon emission buildings by 2030.
"By working with major property investors like Investa and AMP, we're looking to influence really large portfolios which are already operating at high standards. We want to help them take their energy efficiency to the next level, which will cascade through the market," Wade says.
CEFC has also financed $170 million to enable SGCH, formerly St George Community Housing, to build 500 new energy efficient homes in Sydney, and committed to $68 million as the sole debt financier for Quintessential Equity's $120 million development in Geelong, which is targeting Victoria's first 5.5 star NABERS rated multi-storey commercial office building outside the Melbourne CBD.
Wade is upbeat about the industry's potential to improve its energy efficiency.
"The technology is readily available now for building owners to improve the energy efficiency of their assets, reduce their emissions and save money," Wade concludes.