Remember December 4, 2013 in terms of your commercial building and its potential to achieve zero net energy. This is the date that Solar City began offering a 10-year lease for their Tesla-based battery technology to commercial businesses. The lease’s financial attractiveness is its guarantee of a 20% reduction in a commercial building’s kW demand. The demand charge in many electric utility rate designs for commercial buildings can account for up to half of the total monthly bill. Solar City’s lease that guarantees a performance result allows a business to avoid a significant upfront cash investment while still realizing positive cash flows when the monthly lease payment is lower than the electric bill savings achieved by reducing kW charges. Offerings like Solar City’s that supply both advanced technologies and guaranteed financial results are the first wave of a Zero Net Energy (ZNE) technology revolution that will reshape your hotel, store, office building or warehouse into a “smart building.” This article outlines the three steps for turning your commercial building into a ZNE building.
What is a ZNE building?
A ZNE building annually produces onsite renewable energy equal to the building’s annual energy consumption. Achieving this result is more than putting solar panels on a building’s roof. ZNE buildings are designed using a pyramid approach of progressively investing in least-cost technology options that combine to achieve ZNE results. The ZNE technology revolution is being driven by market disrupting price declines in these technologies as they grow their economics of scale. California’s 2014 launch of revised building codes will accelerate this economies of scale path toward price competitiveness by creating demand for ZNE technologies similar to how California drove down rooftop solar panel costs through the state’s Million Solar Roof initiative. California’s efforts hold the potential for ZNE building technologies to achieve economies of scale that will make them affordable to commercial businesses across the U.S.
Electric utilities and ZNE buildings
Your ability to design a ZNE building will be influenced by your electric utility. Some utilities will align with this technology-wave and serve their customers in a manner similar to how Amazon and Google provide Internet “cloud” services. Customers served by these utilities will be able to buy and sell energy through their utility. These customers will view the grid and their utility as a valued resource.
Other utilities will create or maintain barriers to their customers’ adoption of ZNE buildings. These utilities do so at the risk of generating a future customer rebellion when the price and operational ability of ZNE buildings are competitive with the grid. Until this crossroads is reached the customers served by these utilities will be limited to investing in energy efficiency and intelligent building technologies that form two of the legs of the ZNE technology stool.
Three steps to achieving a ZNE building
ZNE building design integrates a least-cost technology mix to achieve annual zero net energy. The three key technology design groups for a ZNE building are:
- Onsite energy generation and storage
The design process is initially focused upon reducing a building’s energy and environmental footprint because at today’s technology prices these investments offer the most attractive and immediate return on investment. The final step is to add the higher investment-cost technologies of onsite renewable generation and storage to enable a building to achieve annual zero net energy results.
Efficiency is a “low hanging fruit”
Efficiency is the “low hanging fruit” of ZNE building design. The cost to install efficient end-use equipment continues to fall at the same time grid prices rise. For example, installing higher efficiency fluorescent or LED lighting will typically generate six to twenty-four month financial payments through electric bill savings. Today the typical major retailer re-lamps their stores every 2-4 years to harvest additional cost savings and to improve light quality. Walmart is pioneering a store design that will be one hundred percent lit by LED lights. A business best practice for generating attractive and near term cash flows is to have a process for identifying and investing in energy efficiency.
Commercial buildings are joining the Information Age
Smart technologies will bring commercial buildings into the Information Age. Today’s automobiles are achieving record high MPG results, increased performance and enhanced driver experience through the incorporation of over 100 microprocessors. This is the future for your building. Smart sensors integrated through predictive and proactive software systems will enable real time building optimization to minimize cost, enhance occupant experience and reduce environmental impacts. The continued maturation of LED lighting technology will convert them into a communications path for hanging smart sensors throughout your smart buildings. This smart system will learn and then act upon this learning to reduce energy and waste streams without negatively impacting the human experience. Intelligent buildings will price arbitrage to reduce costs and insure reliability across a range of energy options including the purchase of grid electricity, onsite generation and operation of battery systems.
Investing path for achieving a smart building
Investing in smart building technologies is similar to investing in computers. There is a learning curve. The next generation will have more intelligence and cost less. A business best practice is to prudentially start now with these technologies and ride their maturation wave to their ultimate achievement of a smart building.
The role of solar and batteries in ZNE building design
Rooftop solar and battery storage technologies are the final leg of the smart building technology stool. Most roofs on commercial buildings generate zero value. The historic decline in solar panel prices now makes your roof a valuable piece of real estate. Rooftop solar is a very attractive financial opportunity where the local utility allows net metering allows the electricity from a rooftop solar system to be netted against the building’s purchase of utility electricity.
But both solar panels and batteries are still the most capital-intensive investment in a ZNE building design. The good news is that growing economies of scale for these technologies are pushing their prices down. Today a rooftop solar system combined with a smart battery system can be price competitive when grid prices are highest.
Example of how solar power is winning commercial building customers
For a growing number of commercial customers the future is now. The top 25 commercial users of solar power ranked by their number of installation are Walmart, Costco, Kohl’s, Apple, IKEA, Macy’s, Johnson & Johnson, McGraw Hill, Staples, Campbell’s Soup, U.S. Foods, Bed Bath & Beyond, Kaiser Permanente, Volkswagen, Walgreens, Target, Safeway, FedEx, Intel, L’OREAL, General Motors, Toys “R” Us, White Rose Foods, Toyota, and Dow Jones & Company.
Your path to ZNE building results
Your building’s technology path will mirror how your phone has morphed into a smart phone. All the technologies to enable a ZNE building have been developed. Just like the smart phone the path toward smart buildings and ZNE results will be paved by declining prices for the enabling technologies. Investing now in ZNE technologies will reduce your costs. As importantly it will start you down the learning curve toward the future where most buildings will be smart buildings delivering ZNE results.
About the author
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