Energy Management Advice For Industrial Asset Owners

Blog Post

14 Oct

Good energy management should be one of the top priorities for industrial commercial real estate owners. As ESG regulations continue to rise, industrial property owners face increasing pressure to adopt sustainable energy practices.

In this post, we’ll be exploring what makes energy management a priority for industrial CRE owners, how data should be collected and optimised, and why Energy-as-a-Service (EaaS) could well be a game-changer for reducing carbon footprints while providing value to tenants.

Why Should Energy Management Be a Priority for Industrial CRE Owners?

Energy management has become a critical concern for industrial CRE owners as a result of the increasing focus on ESG standards. Research shows that ESG regulation has surged by 155% over the past decade, reflecting the quick growth of sustainability-based policy interventions. This upward trend is only expected to continue, as both regulatory bodies and markets push for greater transparency and accountability in driving capital toward sustainable business practices.

The industrial sector, which accounts for a whopping 54% of all global energy consumption, faces unique challenges and opportunities when it comes to energy management. As one of the largest energy consumers worldwide, the sector must adopt more efficient and sustainable energy strategies. Improving energy management not only helps reduce operating costs, but it is also becoming essential for compliance with the expanding regulatory landscape around emissions and sustainability.

The growing importance of ESG issues is also clear in how institutional investors are evaluating their portfolios. According to the 2020 EY Climate Change and Sustainability Services (CCaSS) Institutional Investor survey, 98% of investors now assess ESG performance, with 72% conducting a structured review—up from just 32% two years prior. This is a monumental shift away from considering ESG as a niche “responsible investment” strategy and toward viewing it as integral to the overall performance of all investments. In response, many investors are aligning their portfolios to focus on better ESG outcomes.

For industrial CRE owners, this means that it has now become vital to effectively manage energy use, as opposed to just an operational concern. With the pressure from investors, tenants, and regulatory bodies mounting, CRE owners who properly optimise their energy usage and demonstrate a true commitment to sustainability are much better positioned to attract investment while simultaneously reducing operational costs and future-proofing their assets.

What Data Do CRE Owners Need To Collect for Effective Energy Management?

To reduce operational costs and meet sustainability targets, CRE owners need to collect a comprehensive set of data that captures both overall energy usage and the factors driving that consumption.

Some key categories of data are:

Energy Consumption Data

Total Usage: CRE owners must track total energy consumption, including electricity, gas, water, steam, and heat transfer. This data provides an overview of the building's energy footprint and is fundamental for identifying inefficiencies.
Peak Usage Periods: Collecting data on peak consumption times helps identify when energy usage is highest, enabling owners to implement demand-side management strategies to reduce energy costs during these periods.
Equipment-Specific Data: Understanding how much energy individual pieces of equipment consume, such as HVAC systems, lighting, and refrigeration, enables targeted optimisations.

Granular Data Collection

In industrial settings, collecting granular data can be more challenging, especially in properties where tenants control most of the energy consumption under triple-net leases (NNN). In these cases, landlords face difficulties gathering detailed data without tenant cooperation. However, granular data is essential for accurately attributing energy consumption and identifying savings opportunities.
Shadow Metering: One solution for collecting more precise data is shadow metering. Shadow meters allow landlords to monitor energy consumption without directly interfering with tenant privacy or operations. These meters track energy use at the tenant or submeter level, providing the granular data needed for detailed energy management without compromising privacy.

Tenant level data

In multi-tenant industrial spaces, landlords need to separate energy consumption between tenant-controlled spaces and common areas. This tenant-specific data helps in fair energy usage allocation and is crucial for compliance with sustainability reporting and carbon accounting.
Under triple-net leases, tenants are often responsible for their own energy costs, but landlords still need to gather this data to optimise building-wide energy performance and ensure compliance with sustainability goals.

Challenges in Data Collection and Privacy Concerns

Data collection in industrial CRE presents several challenges, particularly around tenant privacy and cooperation. Collecting energy data at a granular level, such as from individual tenant spaces, often leads to concerns about privacy. Tenants may be wary of providing detailed consumption data, fearing that it may be used against them in lease negotiations or other situations.

This issue is especially pronounced in properties with NNN leases, where tenants handle their own utility payments. In these scenarios, landlords often lack access to detailed consumption data, which limits their ability to manage energy use effectively across the entire building.

Transparent and Ethical Data Collection

To address these concerns, it’s critical for industrial CRE owners to implement transparent data collection methods that respect tenant privacy while providing the insights necessary for effective energy management. One example is Infogrid’s energy reduction solution, which leverages IoT devices, automated data collection, and machine learning to capture high-quality energy data across a portfolio, all without intruding on tenant privacy.

Automated Data Collection: Infogrid’s platform automatically collects utility and real-time meter data across properties, ensuring the landlord has access to validated, high-quality data while maintaining tenant privacy.
Contextual Insights: By integrating energy consumption data with occupancy and air quality metrics, the system provides a comprehensive view of how energy usage correlates with building conditions and usage patterns.
Energy Usage Allocation: Infogrid’s platform allows for accurate energy usage allocation across landlord-controlled and tenanted spaces, enabling landlords to manage both operational and environmental metrics while keeping tenants’ data secure.

How Can You Optimise Energy Use Once You Have the Data?

Once you’ve gathered comprehensive energy data, the next step is using that information to drive meaningful improvements. This is possible for all types of industrial spaces, though it is important to note that warehouse owners may not have access to the same breadth of data as other CRE owners.

Here’s how to optimise energy use once the data is in your hands:

1. Real-Time Energy Monitoring

Real-time energy monitoring allows you to continuously track energy usage, identify inefficiencies, and optimise performance. By having live data on how much energy your facility is using at any given time, you can quickly spot anomalies, such as equipment that’s running when it shouldn’t or systems consuming more energy than expected.

As an example, if peak usage is identified during non-operational hours, this signals that equipment may be unnecessarily running overnight. With real-time insights, these inefficiencies can be addressed promptly, preventing wasted energy and saving on costs.

2. Equipment Upgrades and System Optimisation

Once inefficiencies are identified, data can guide targeted actions such as upgrading or optimising equipment. Upgrading heating and cooling systems, in particular, can lead to significant savings. By combining proper equipment maintenance and upgrades with insulation, air sealing, and adjusting thermostat settings, you can reduce energy use for heating and cooling by 20% to 50%.

Older HVAC systems or inefficient lighting, for example, often consume more energy than necessary. Replacing outdated equipment with modern, energy-efficient alternatives not only cuts energy use but also enhances overall building performance. Additionally, optimising your heating and cooling systems through temperature controls, zoning, and using energy-efficient settings can further boost savings.

3. Regular Maintenance to Avoid Waste

Equipment maintenance plays a crucial role in optimising energy use. Studies from the New Buildings Institute have found that regular maintenance alone can reduce energy use by 10% to 20%. In contrast, lack of maintenance can increase energy consumption by 30% to 60%.

This highlights the importance of staying on top of maintenance schedules. Simple tasks like cleaning filters, lubricating moving parts, and checking for leaks in compressed air systems can prevent costly energy waste. It’s important to note that only about 10% of industrial equipment actually wears out, meaning most mechanical failures can be avoided through proactive care.

4. Predictive Analytics

Data-driven decision-making is critical for optimising energy use in industrial properties. Predictive analytics enables you to anticipate equipment failures before they happen, saving both energy and maintenance costs. By monitoring equipment performance data and detecting patterns, predictive analytics can flag potential issues, allowing you to fix them before they lead to energy-wasting failures.

The return on investment for predictive analytics is significant, often delivering tenfold ROI and yielding 30% to 40% energy savings. This proactive approach not only extends the life of your equipment but also prevents unplanned downtime, which can be costly in industrial settings.

We discuss predictive analytics in more depth here.

Can Energy-As-A-Service Create New Revenue Streams for CRE Owners?

Energy-as-a-Service (EaaS) is a fairly new model in the industrial real estate game. It allows industrial CRE owners to provide tenants with energy solutions like solar panels, energy storage, and EV charging stations. These services can significantly lower energy costs, boost revenue, and make properties more attractive to more environmentally conscious tenants.

Cutting Costs and Generating Revenue

By installing solar panels, businesses can reduce their electricity bills by 30% to 65%, leading to substantial savings. For CRE owners, these investments both help offset operational costs and also create new income streams by selling renewable energy back to tenants or the grid. Additionally, offering EV charging stations can attract tenants focused on sustainability while generating extra revenue through charging fees.

Reducing Scope 3 Emissions

EaaS also plays a big role in reducing Scope 3 emissions, which currently account for over 70% of a business’s carbon footprint, according to the UN Global Compact. By providing clean energy options and other services, CRE owners can help tenants meet their sustainability goals, lowering emissions across the supply chain. This enhances the property’s overall environmental impact and contributes to the owner's sustainability initiatives.

Making Properties More Attractive

EaaS can make properties more appealing to tenants, especially those prioritising ESG goals. Offering energy-efficient solutions like solar power or EV charging stations usually aligns with tenants’ sustainability targets, making your property stand out in a competitive market. With increasing pressure on businesses to reduce carbon footprints, having these energy solutions on-site adds significant value to potential tenants. This has been very successful for CRE company Prologis, who instals bespoke solar PV systems on all of their buildings.

Final Thoughts

Energy management is becoming a crucial priority for industrial CRE owners, especially as sustainability and ESG goals take centre stage. Using data and other advanced technologies like Infogrid’s energy management and reporting platforms is key to optimising energy use and reducing emissions across your properties.

Jonathan Bradford