Media Mention – Crain’s: Emissions cap has landlords scrambling for clean energy

EnergyWatch’s Managing Director and Partner, Andy Anderson, was quoted in a Crain’s New York Business article written by Daniel Geiger, titled “Emissions cap has landlords scrambling for clean energy”.  Read the full article below or by clicking here.

New York, NY – April 29th, 2019

Throughout the past decade, Rudin Management has outfitted its roughly 10 million-square-foot portfolio of Manhattan office buildings with a range of power-saving equipment and systems, including software it developed to optimize energy efficiency and identify waste.

To take its green efforts a step further, the company had been in talks to enter an exclusive agreement to purchase power from a planned cable that will traverse the state, traveling underground and underwater to deliver 1,000 megawatts to the city from a hydropower station 330 miles away, in Quebec.

Now the company will have to wait in line.

On April 18 the City Council passed legislation that will require buildings 25,000 square feet or larger to cut greenhouse-gas emissions by 40% by 2030 and make further cuts in subsequent years to help the city reach a goal of an 80% reduction in carbon emissions by 2050.

The roughly 50,000 buildings that are subject to new rules account for a third of the city’s carbon footprint. Energy experts and landlords expect the ambitious reduction target to drive a surge of demand for carbon-free electricity, raising questions about whether there will be enough green power to go around and how much it will cost.

Those concerns were exacerbated last week, when Mayor Bill de Blasio revealed that the city would buy up about half of the electricity from the Champlain Hudson Power Express, the coming hydroelectric line, to power municipal buildings. That would leave only about 500 megawatts for landlords, far less than what they likely will need to hit the proscribed emissions targets.

Other green transmission lines have been planned, but only the Champlain, which is owned by a company controlled by private-equity giant Blackstone Group, has secured the tangle of federal and state permits necessary to proceed.

Two other proposed power lines, which together would connect the city’s grid with about 1,250 megawatts of cleaner power from upstate, have yet to receive clearance—a process that can take years. The Champlain line, for example, was first proposed in 2008 but might not be completed until 2025.

“There is for sure going to be heightened demand for green electricity, and at this point, supply is the question,” said Andy Anderson, a partner at EnergyWatch, a power-management software company. “Right now there’s only one shovel-ready project, and there’s only so much space on that line. If nothing changes from today, there will be a shortage.”

The sudden rush for low-carbon or emissions-free electricity underscores the challenges for landlords created by the new legislation. The rules establish caps on the amount of greenhouse gas emissions permitted per square foot, depending on a building’s use. Landlords have complained, however, that it’s their tenants, not them, that consume the bulk of a building’s power, and they are being unfairly penalized for consumption that is out of their control. The new laws, they say, also don’t take into account the substantial investments many owners already have made in power-saving systems and equipment.

“You can have a self-storage facility in Queens that is the most inefficient building but uses very little power because it’s barely occupied, and it gets far better treatment under these rules than a state-of-the-art office building in Midtown,” said John Gilbert, chief operating officer at Rudin Management. “If I have an accounting firm and it’s tax season, am I supposed to tell them to stop working around the clock because they’re consuming too much power? It puts me in an impossible position.”

Many office buildings in the city are filled with tenants who gorge on power regardless of how energy efficient a property is, including financial firms that use sophisticated computers and servers to trade securities, tech firms that operate software-development platforms, and media companies that generate digital content. Office tenants across the city in recent years have pushed to more densely occupy their space to save on real estate costs, driving up the levels of power consumed per square foot and requiring more energy to heat and cool spaces populated by more bodies.

Plugging those tenants into green electricity and connecting power-intensive operations such as ventilation and hot water systems that are now primarily fueled by natural gas or oil into a clean electrical grid are seen as prime strategies to meet emissions goals.

“The only option for many landlords is going to be to plug their buildings into green power through the grid,” Gilbert said.

The city’s power supply is actually poised to become dirtier in the immediate future with the impending closure of the Indian Point nuclear power plant 40 miles up the Hudson River. That station, which is nearing the end of its lifespan after decades of use, produces more than 2,000 megawatts, roughly a quarter to a third of the city’s energy load, virtually carbon-free. Its exit from the market could create more business for oil- and natural gas-fired electrical plants that will produce more emissions in the near term.

Energy experts argue that the council’s emission-reduction targets, while jarring to landlords, will offset that trend by creating a market nearly overnight for green electricity, spurring more supply, and creating more options.

“This legislation was critical to building demand for a greener grid in the city,” said John Mandyck, CEO of the Urban Green Council. “And where there’s demand, supply will follow. The council effectively primed the pump.”

The development of solar arrays and battery systems that can store green power generated during lulls in consumption also are expected to add to the supply.

“The city is targeting 1,000 megawatts of solar installed by 2030 and 500 megawatts of battery storage by 2025,” a City Hall spokesman said. “In addition, we will continue to work with the state to foster the development of additional transmission from upstate to downstate to take advantage of renewable energy generation upstate.”

There are only about 154 megawatts of solar generation in the city and no significant battery storage capacity, in part because of FDNY rules that prohibit lithium-ion batteries because of their fire risk.

“The problem with solar is it requires space and consistent sunshine, something that the city is not known for having,” Anderson said. “It’s hard to say definitively, but 1,000 megawatts of solar generation seems ambitious.”

Finding green power sources will be part of a host of carbon-reducing steps that landlords may have to undertake. Installing energy-efficient equipment likely will still be necessary for many landlords to try to curb consumption. Owners also could have the option to purchase carbon offsets.

Jeff Perlman, founder, and chief executive of energy auditing and retrofitting firm Bright Power, estimated that buildings subject to the law will need to cut roughly 7 million of the 17 million metric tons of carbon dioxide they collectively produce annually. About half those cuts, he said, could come from drawing clean energy from the grid, which would require about 1,400 megawatts of green capacity a year, he calculates, a total he says is well within reach.

The Champlain and the two other proposed transmission lines “would more than cover the capacity of clean energy required by 2030,” Perlman said.

The law requires even deeper emissions cuts beyond that date, but landlords by then are expected to get a reprieve. Gov. Andrew Cuomo has committed to buying up to 9,000 megawatts of power from offshore wind farms by 2035.