The energy efficiency of commercial buildings should be taken under spotlight

15Feb

The industrial and commercial-service companies consume more than 40% of the total energy in Estonia. Much higher energy saving can be achieved just in these sectors in the future than in case of houses.

The government and Riigikogu soon start to discuss the “Energy Sector Development Plan up to year 2030“. It is stated in the development plan that it is more beneficial to contribute publicly more actively to the energy efficiency of buildings than to keep hoping for the self-regulation of the market. Investing to energy efficiency creates possibilities for development of economy and increase of competitiveness.

The managers and owners of commercial and industrial buildings are motivated to achieve energy efficiency by the fact that this is directly related to the success of their business. Based on the above it is more probable that the complications having occurred in case of support mechanisms directed to the buildings through state structures can be better avoided such as shortcomings in achieving the aims of energy saving, drawbacks in construction and supervision process and final quality. All parties agree with the need to direct the future financial investments also elsewhere besides housing sector.

Estonia proceeds mainly from the directive 2012/27/EU of 2012 in creating the energy saving sector. To implement the latter, the energy management regulation act will become effective, the main aim of which is to take over the framework of measures for the promotion of energy efficiency of the European Union. This guarantees the 20% rise of energy efficiency by the year 2020 and paves the way to further improvement of energy efficiency.

Older buildings should become economical

The weakness of the current energy policies and regulations has been the focus on the new buildings, receding the older ones into the background. According to the assessments of the previous year 50-75% of the contemporary buildings are in use also in the year 2050. The establishing of new energy efficient buildings does not decrease the emission of  greenhouse gases into atmosphere, but only slows down its pace. Therefore more focus should be put on the enhancing of energy use of the existing housing fund for achieving the energy aims.

The existing buildings have many possibilities to improve energy efficiency. These could be also called the “missed opportunities“ of energy saving. The non-implemented decisions of planning, designing, construction and maintenance could have lead to considerable decrease in energy consumption. The major challenge lies in “releasing“ of all this immense saving potential to enjoy environment of the building which is comfortable, effective, reliable and economic.

In case of existing buildings the saving potential lies in old equipment and infrastructure, outdated production technology and adjustment of systems not considering the current needs of the building. The energy efficiency measures to be actually implemented could be hundreds in one building. The energy service companies of local market having implemented measures in tens of buildings and their clients know based on their experience that the investment made to the saving of energy costs has very high efficiency as to cash flow, reputation as well as competition.

The demand for improving the energy efficiency of old buildings could be found also by analyzing the competitiveness of buildings. It is understandable that the increasing number of new office buildings enhances competition and staves the weaker ones off the market. The major differences occur between the modern energy saving and energy producing real estate and obsolescent real estate. The more the real estate with low operating costs is developed, the more outstanding are the buildings with high energy costs.

This in its turn sets the owner of the relevant real estate over a barrel who should contribute to the investments producing energy saving or compensate the higher costs with lower lease.

The lower lease means though lower cash flow and involves the decrease in value and sustainability of assets. Reasonable possibility for staying in competition is to apply energy efficiency measures which are rational to be carried out separately as well as together with general renovation course. The lifetime of technological systems of many buildings established before the exchange of century is reaching its normal end and requires replacement.

The energy saving investments hinder the decrease in value of assets and involve the increase in value of real estate either directly through decrease in costs or through the growth in lease income. In both cases the growth in cash flow involves the increase in value of real estate.

Growth in value related to cash flow

The quality of real estate has indirect impact on the market value of the relevant object through lower capitalisation rate. The energy saving related investments generally involve the replacement of amortized systems and equipment, improvement of management and supervision and postpone the end of the lifetime of the relevant systems. This means that in case of potential sale the possible investor assesses the relevant investment need smaller and is ready to pay more for the object. The income rate of even slightly reasonable energy saving related investments is considerably higher of the capitalisation rate of the real estate investment.

In case of correctly planned investments the quality of exploitation of real estate considerably improves. In the opinion of the manager the change in lifetime of systems, creating of their flexibility through serviceable areas, intensiveness of their use as well as consumption regulation possibility is important.

According to the directive of the European Commission all buildings used by the state authorities from the year 2018 and all remaining buildings from the year 2021 are nearly zero-energy buildings.

Considering that even the fulfilment of current energy efficiency requirements is a major challenge, it is worrisome how will the even higher standards presuming also efficient supervision be achieved. As of today the state supervision has no adequate capacity to control the substantial side of energy labels and audits. On the other hand, the owner of the building finds it complicated to detect a company who could help to achieve the building with such energy costs which were once fixed on the paper. The inadequate control culminates with fictitious energy calculation results and with the buildings with higher energy consumption than planned.

Energy prices start to rise

We have lately enjoyed lower energy prices. The developments at the current energy market could raise questions in the probability of the rise in earlier estimated energy price. The current situation in the long term is temporary, as the current factors of world prices fall off at some moment, as the energy producers need to earn their profit.

Considering the expansion of electricity common market Nord Pool Spot network related to us to the west, it is probable that the low electricity prices at the moment increase. The high electricity price of the western countries also raises our price through the common market in the future.

Due to lower demand the clients can currently get considerably more favourable solutions in the economic as well as technical meaning, thus is it is now right time to settle the energy troubles.

The climate agreement requires the decrease in energy consumption

At the end of the last year the Paris Agreement on climate change was signed, according to which approximately 200 countries start to act together against the warming of climate. The following aims were set:

  • to keep the global warming below 2 ⁰C;
  • to limit the amount of greenhouse gases to the level with absorption of which nature can cope with;
  • to review the individual contribution of countries in every 5 years;
  • the wealthier countries help to finance the less wealthy that they could adapt to new climate requirements and re-switch to renewable energy sources.

To achieve these aims, energy consumption should be decreased or fossil fuels should be replaced with renewable energy sources.

The limiting of temperature rise worded as the main aim of the agreement is complicated to set as the national aim. Though it is sure that this that is ahead of us has wider scope of impact than the current, very strict energy policy of the European Union.

The aims of energy management regulation act

  • the market of energy services should be developed for improvement of energy efficiency;
  • to guarantee the adequate capacity and number of specialists to secure the availability of energy services to all end consumers;
  • to establish the minimum requirements of energy efficiency, qualification standards of auditors and carry out energy audits;
  • to create preconditions for achievement of large energy saving in large companies and industry;
  • to make the public sector the initiator of more energy efficient products, buildings and services. For that purpose the government buildings should be reconstructed at least to the level of minimum requirements of energy efficiency and the public procurements should be completed with the requirements of energy efficiency;
  • to increase the energy efficiency of energy production and to save the primary energy;
  • to direct the end consumers to the control and saving of energy consumption;
  • to achieve the specific amount of saving of final energy in the country by using the energy efficiency liability system and specific national measures of energy efficiency.

Ülari Niinemägi, Country Manager Estonia of BPT Real Estate AS

Aivar Uutar, Manager of OÜ AU Energiateenus