How Hybrid Electric Buildings Will Transform Real Estate

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Mesa---building-sun-450America’s commercial buildings are on the cusp of being radically redesigned into Prius-like hybrid energy centers. These buildings will create value by guaranteeing lower electric bills plus increased worker productivity while also delivering climate-changing environmental impacts. Like hybrid electric cars this is a global trend. The cost of enabling technologies are falling driven by global economies of scale. In the U.S. the only question on when hybrid electric buildings will be built in your town is tied to the pace of change in utility/regulatory policies that remove the legacy distinctions between energy solutions that sit behind the meter versus those supplied through the utility grid.

Hybrid electric building design

Today’s hybrid electric car uses over a 100 microprocessors to collect data that is feed into a smart operating system. These microprocessors integrate traditional gasoline engines with electric generators and regenerative brakes to achieve superior MPG results. The car’s microprocessors also feed information into dashboards designed to be a productivity tool that coaches a driver on how their behaviors can reduced costs and emissions.

Hybrid electric building will mirror this hybrid electric car design. Hybrid electric buildings will have an extensive sensor system collecting big data that the building’s smart system will use to optimize integrated design components like roof top solar, onsite batteries and load controlling technologies to achieve occupant comfort, electrical reliability and lower cost.

Hybrid electric buildings are a quantum technology leap. The difference is similar to the difference between a landline phone and a mobile smart phone. Hybrid electric buildings are a bridge linking the values of grid service and the building’s onsite electrical system to deliver guaranteed lower electric bills. A hybrid electric building will link utility service and the building’s onsite technologies to create owner and tenant value while also offering to the utility a value in the form of stored electricity and/or solar generation accessible during local or system critical-voltage time periods.

Hybrid electric building’s drivers and implementation barrier

The following are the three drivers and key barrier to adoption of hybrid-energy building designs by the commercial real estate industry:

Escalating electric bills drive adoption. Similar to the Prius customer, reducing pain at the meter is the number one driver pushing the adoption of hybrid electric buildings. The hybrid electric building is a disruptive leap beyond utility-sponsored energy efficiency rebates. For example, utility rebate programs target a specific replacement of one technology for a more energy efficient technology. To the frustration of the commercial real estate industry the utility does not financially guarantee a lower monthly electric bill as a result of a building owner investing in the purchase of a rebate-linked technology. In comparison, a hybrid electric building is designed to achieve guaranteed electric bill reductions. Guaranteed results are achieved through a hybrid electric building’s ability to assure a measured resulted that can be financially back-stopped with commercial performance insurance. An owner of a hybrid electric building will see a lower electric bill either through building operations or through a payment from the insurer. Unlike utility conservation programs hybrid electric buildings are designed to achieve a guaranteed reduced electric bill.

Increasing utility service interruptions drive adoption. Disruption of utility service from weather volatility is now a business norm. Hybrid electric buildings are designed to continue operations during a utility’s service interruption. The hybrid electric building has onsite renewable generation plus onsite battery systems that can bridge six or more hours of utility service interruptions. They also have predictive operating systems that can optimize building operations to enable continued operations of key activities during a utility service disruption. A hybrid electric building can make the difference between a business making money after a storm or closing down operations.

Millennials drive hybrid electric building designs. The millennial generation’s entry into the workforce is reshaping how commercial workspace is designed. The boomer generation’s office design legacy is the VP’s corner office with a view, interior cubes for work associates and lots of file cabinets. The millennial generation is pushing digital-centric open office designs that increase collaboration between work associates, accelerate learning and provide a more humane/social experience. The open office design preferred by the millennial generation also increases productivity per square foot that enables reduced office sizes, less energy consumption and reduced emissions. The open office design also enables hybrid electric building innovations by enabling more daylight compared to electric light plus increased deployment of sensor-based smart systems that can conserve electricity by operating electrical equipment in alignment with a building’s occupant needs and location.

The barrier: utility/regulatory policies. The utility industry views a hybrid electric building as a micro-grid that combines onsite generation and onsite energy storage. Utilities often view a micro-grid as a threat to their revenues.

One path to align the interests of utilities and building owners is to re-position hybrid electric buildings as a capacity resource that utilities can aggregate like power plants. The aggregation of thousands of micro-grids will require a disruptive transformation in a utility’s system controls, the pricing of behind the meter sourced capacity and regulatory policy on how utilities should be compensated for their service. These issues of public and utility policy, rather than technology costs or capabilities, are the largest barrier to the adoption of hybrid electric buildings.

Susan Kennedy, founder of Advanced Microgrid Solutions, is pioneering a bridging solution. Kennedy is simultaneously approaching the California Energy Commission, the California Public Utility Commission and California’s utilities to develop a pilot project that will surface needed public and utility policy innovations to enable hybrid electric buildings to participate in utility’s bid solicitations for new generating capacity or electric storage. If such a project can be implemented it will offer new precedents for the utility industry on how a utility can make money integrating hybrid electric buildings into their operations while also aligning with their customer’s growing search for technology solutions to higher electric bills.

Insights referenced in this article were drawn from the recently held Verexhange in Los Angeles, California.

Bill Roth is an economist and the Founder of Earth 2017. He coaches business owners and leaders on proven best practices in pricing, marketing and operations that make money and create a positive difference. His book, The Secret Green Sauce, profiles business case studies of pioneering best practices that are proven to win customers and grow product revenues. Follow him on Twitter: @earth2017

About Bill Roth

Bill Roth is the founder of Earth 2017, author of The Secret Green Sauce and a nationally-followed contributor to Entrepreneur.com, Triple Pundit, The Green Economy Post and Media Post on best business practices emerging from the smart, healthy and green global economy. He coaches entrepreneurs, business and community leaders on how to grow revenues, profits and jobs by going smart and green.
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