The shift towards a “greener” environment has resulted in cities and states implementing electrification mandates, which will have a major impact on both current and future building design. Currently, most commercial and residential end users are already all-electric. However, there are some exceptions, such as space and water heating, that use a significant amount of energy. Several states, including California and New York, have cities that have introduced legislation requiring new construction to be all-electric. This means, for example, using electricity for heating rather than fossil fuels such as natural gas. Mandate or not, building owners and developers should consider the risks and rewards of an all-electric design.
General Rewards
- Reaching Climate Goals: As part of the Clean Energy Plan, as described in a previous post, President Biden has created a goal for the United States of achieving a carbon pollution-free American utility sector by 2035. Because residential and commercial building account for 40 percent of energy consumption in the United States, all-electric building designs will help governments and businesses reach the ambitious climate goals that have been set for the coming years.
- Positive Health Outcomes: All-electric building designs will greatly reduce harmful emissions put off into the air. Residential and commercial fossil fuel combustion accounts for almost 30 percent of greenhouse gas emissions in the United States. (See NYC building emission goal in previous post.) Replacing natural gas heating systems in commercial buildings with electric equivalents alone would result in a drastic reduction in emissions and a healthier environment.
Rewards for Landlords and Tenants
- Financial Incentives for Owners: Financial savings from fitting a building with an all-electric design comes from not having to install natural gas lines and savings from the costs of having to switch to an all-electric power grid down the road.
- Attract New Tenants: Tenants are giving the sustainability efforts of potential building spaces greater consideration when deciding where to live or work. As employees are becoming more conscious of the environmental impact of their homes and offices, employers looking to rent space will take this into consideration as an additional way to entice employees, and we are likely to see sustainable building systems as a deciding factor on where companies decide to lease space.
- Smaller Utility Bills: Lower operating expenses are a deciding factor for tenants in selecting a potential space. By using sustainable all-electric systems, owners can create lower energy usage and ultimately a lower utility bill, which is passed through to the tenants.
Possible Risks
- Potentially High Up-Front Costs: While including a new all-electric system into a new building is not a significant increase in cost, replacing a current fossil fuel-based system with an all-electric system can be expensive due to any adjustments necessary to accommodate the new all-electric equipment that may require more space and other material changes to the existing structure.
- Weather Concerns: A building powered by an all-electric system may face issues in inclement weather if utility companies are unable to provide the required electricity to operate the building’s systems. In February, when Texas was hit by an extreme winter storm, the state’s power grid was unable to maintain a constant flow of electricity to the state’s residents. This inability to provide the necessary power would have resulted in a shut down of buildings operating under an all-electric system, whereas buildings operating under traditional fossil fuel-based systems would not have been as severely impacted. This extreme weather is rare in places like Texas, but in other states where cold weather is the norm, this issue could pose a problem.
Both landlords and tenants could benefit greatly from the incorporation of sustainability into building designs and the adoption of all-electric building systems. The trend towards sustainability will continue to grow in the coming years, and as the positive incentives from electrification continue to increase, so too will the number of building developers and owners who make the switch.
We would like to thank summer law clerk Valerie Medina for their contribution to this post.
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