January 11, 2024

Electrification for Commercial Properties: Improvements for 2024


11 Min. Read

With 2024 upon us, now is the time to start thinking about how you can make the most of your commercial spaces in the new year.

Electrification for commercial spaces can bring increased efficiency and safety to commercial settings, from retail stores to office buildings. In this article we’ll explore how switching to electric and implementing energy transition technologies such as heat pumps, solar panels, and EV charger installation can help you save money and improve your commercial spaces in 2024 and beyond.

Make the most of your business with electrification and emerge as a local leader for sustainability while also giving your operations a major boost in our latest article.

The Future is Electric for Commercial Property Owners

While it did not catch on as fast as in multifamily properties, electrification for commercial spaces is here and is rapidly building momentum.

Leading commercial firms like Vornado, Tishman Speyer, and Hines are launching electrification projects, and for good reason. Property managers who wait to transition their buildings and properties will soon find themselves left behind the competition, so taking action now is crucial to the long-term success of your business.

What is Electrification and Why Is It Important to Sustainability?

Electrification is the systematic conversion of carbon fuel devices to electric ones. Boilers, water heaters, air heat pumps, electric water heaters, and networked geothermal or ground-source heat pumps are all examples of technologies that are transitioning from gas-powered to renewable-energy-fueled technologies, and for good measure.

The result of electrification for commercial spaces is clean energy, a major reduction of greenhouse gases, and an increase in occupant comfort. In fact, businesses who incorporate electrification into their strategy often realize greater energy independence and resilience, while also creating increased control over the management of their operations.

The impact of transitioning to renewable energy is also particularly significant as commercial buildings in the United States account for 16% of greenhouse gas production, and electrifying these spaces helps us take major steps toward building a more sustainable future.

The Benefits and Advantages of Electrification for Commercial Owners

There are many advantages to electrification for commercial spaces, including efficiency, safety, and financial performance. Building managers and property owners who recognize the value of building and commercial property electrification are reaping the rewards of their efforts with enhanced employee satisfaction, increased customer retention, and a strengthened reputation as well.

In short, the benefits for electrifying commercial spaces will help businesses continue to grow their operations with greater ease.

How Electrification Can Boost Efficiency and Safety Across Various Commercial Settings

Some of the key technologies in electrification for commercial spaces are rooftop heat pumps, which efficiently take and transfer heat to heat or cool buildings. Heat pumps can be used to heat and cool spaces and fuel water heaters that were previously gas-powered. Since heat pumps have only a few moving parts, they are a low-maintenance alternative.

Buildings with parking should also consider EV charger installation as an opportunity to provide employees and customers with vehicle charging and demonstrate an outward display of the companies’ commitment toward sustainability. Additionally, EV charging stations can be utilized to generate an additional stream of revenue and any fleet vehicles can be converted to electric vehicles to add savings and reduce operations costs in the long-term.

Solar panels can also be effective in powering water heaters, lighting, space heating, or even other energy transition technologies such as EV charging stations. In places such as the Southwest, ample sunshine and solar provide plenty of energy to replace gas and buildings can take advantage of utility net metering programs to sell excess electricity back to the grid for a profit or store energy for later use.

Safety is another benefit of switching to electric. Gas-powered equipment emits carbon monoxide and other harmful gases, and the units must be regularly inspected and maintained.

Save With Electrification

Savings with electrification aren’t just speculation and several case studies already support the savings potential realized through commercial electrification.

One study by Rocky Mountain Institute (RMI), a respected 40-year-old non-profit sustainability think tank, examined different retrofit packages in medium-sized commercial buildings across four major cities: Washington, DC; Chicago; Seattle; and Las Vegas. Each locations was optimally selected to represent diverse climate zones with varying gas and electric rates. The focus was on space heating and domestic hot water systems and determined that electrification was cost-effective across climates, so long as climate-appropriate and complimentary technology bundles were combined.

For example, in the cold-climate cities that RMI studied—Washington, DC, and Chicago—energy-recovery ventilation as part of a heat-pump rooftop unit had notable energy savings. By capturing heat from the outside, this package of measures saved energy and reduced the load on the grid for this type of climate.

Alternatively, replacing gas-powered RTU HVACs with fully electric heat-pump units in Seattle provided the best savings given its moderate climate, and in sunny Las Vegas, adding a rooftop solar array to power heat pumps and other equipment provided the best total performance thanks to the plethora of sunlight the area received.

By working with a licensed electrician who is skilled and knowledgeable in energy transition technologies, your electrical contractor can help establish an electrification plan that makes sense for your property. Additionally, it is important to note that gas and electricity prices are a key factor in electrification cost performance. For example, Washington, DC’s savings were not as significant as Chicago’s because DC’s gas rates were already low, relative to Chicago’s gas prices.

In another study focused on retail properties, RMI found that a major U.S. retailer could reduce energy costs by 37% and cut carbon emissions by 27% with a portfolio of 113 properties across seven climate zones, 43 states, and seven utility tariff zones. The solution once again was maximized with optimized bundles of technology for each climate zone including heat pump RTUs, solar panels, and battery storage where appropriate.

Effective management also helps to ensure success, and there are many new management programs that can monitor energy usage with smart technologies, smart panels, incorproated AI programs, and predictive analysis. Working with an experienced partner who is familiar with these types of programs can be a great way to determine if a management software is best suited to support your business needs.

Electrification, Corporate Responsibility, and Environmental, Social and Governance (ESG)

With their substantial production of greenhouse gases, commercial buildings have become a focus point for reduction through electrification.

The federal government has set a goal of 40% reduction of these gases by 2030 and 50% by 2050 and the opportunity is there. One study by the American Council for an Energy-Efficient Economy showed that commercial buildings could reduce greenhouse gas emissions by 44% by simply replacing gas heating with electric units.

As an early adopter and the first state to do so, Washington State, passed a state law requiring electrification of commercial buildings in 2021. The New York State Assembly also recently passed the all-electric Building Act that requires that almost all new buildings use electric-powered heating and appliances by 2026. The trend is growing across the country and the world, as more states and countries begin to support the shift toward sustainability and electrification.

As a result, leading commercial real estate owners see the trend toward electrification of commercial spaces and have adopted sustainability as a key part of their Environmental, Social, and Governance (ESG) platforms as a commitment to these environmental goals and as a smart business move to be an early adopter to the space.

Electrifying Your Property

Electrifying your property will require a data-driven approach that takes into consideration your energy usage and electricity, month-over-month, with an understanding of how the average temperature by month impacts your energy needs and typical demand. This will help you to predict future needs and incorporate the correct technology and capacity to meet your building’s energy demands each month.

Conducting a detailed survey to document your energy usage by type, inventory all your gas and electric-powered equipment, and analyze past billings by supplier can help you to develop categories of application and cost, such as space heating, water heating, and cooling. Additionally, determine your current maintenance costs of gas-powered equipment, including in-house and external labor costs.

These are just a sample of what you need to do, and your electrical contractor can assist you in creating a more detailed and complex strategy to determine your current and future costs and needs. The result of your analysis should be a complete and accurate database that you can use to analyze and zero-in on opportunities, and build a plan to address them.

Keep in mind that while there may be a large scope of work to fully upgrade and electrify your property, you can work with your electrical contractor to break the plan into discrete, manageable stages. This is a rigorous process that will require the assistance of trusted, experienced electrification professionals, so ensure you do your due diligence and hire qualified individuals to avoid any future issues with your projects.

Exploring Options and Methods for Electrification Projects on Existing Buildings

Heat pumps, electric water heating, solar panels, battery storage, and EV charger installation are some key options for electrifying and improving commercial spaces. The best ones will surface in your analysis. Most important is to understand the best solutions for your climate. Mild climates may be able to utilize certain technologies well, such as solar, but others may not. Even certain types of heat pumps work better in different climates. Along with conforming to the climate, remember that combining compatible technologies, such as electric heat pumps and electric water heaters, yields the best result for electrification for commercial spaces.

Build the Right Infrastructure

Given the long life of commercial buildings, it’s important to future-proof your structure.

Adding a large amount of electrical equipment may require the expansion of electrical power and energy distribution of with panel upgrades, increased electrical service from the grid, or even a load management device depending on the nature of the work and existing electrical infrastructure in your building. Be sure to make allowances in your budget and timeline for unexpected costs and delays during discovery, as retrofitting is expensive and disruptive.

Your electrical contractor will work with you to set expectations and determine the scope of the project, but it’s important to understand that there may be changes to the project plan depending on the age of the building, existing electrical wiring, and any other findings made during the project.

Electrification for commercial spaces also involves cabling to network devices and as we enter into a more interconnected future, it’s important to provide conduit capacity for the future to reduce the need for further major projects in the future.

Leverage Partnerships

Check in with your local utility for assistance with electrification programs. You will need their assistance in reviewing and evaluating your energy costs, and they can help you justify your investments in the electrification of commercial spaces. Additionally, there may be further incentives or partners they can connect you with to further reduce your upfront or long-term investment costs for electrifying your property.

You should also work with a trusted electrification partner to ensure the work is safely and efficiently completed, up to code, and to avoid future liability issues resulting in damages or injury caused by a faulty installation. The experience of such a partner is invaluable to mitigate risk and ensure the long-term value of your investment. Since you are building for the long term, hiring licensed electrical contractors with electrification experience is one of the best ways to ensure your investment adds value for years to come.

Government Incentives

The federal government offers the most meaningful incentives for electrification for commercial spaces as a result of the Inflation Reduction Act (IRA).  The IRS now offers an enhanced tax deduction of $0.50 to $5.00 per square foot of new or improved building under Section 179D.

This deduction, not a credit, is based on the percentage of cost savings and certain labor requirements. Other incentives are coming online but still require definition, so ensure you stay updated on available incentives and rebates for your project to maintain eligibility.

Incentives on the state-wide level can vary, but there are many wonderful programs that exist to support commercial building electrification. For example, Colorado’s Building Performance program offers support for electrification for commercial spaces. So does the State of Washington, with $9.7 million in grants available for electrification in commercial buildings.

The federal government also offers tax credits of up to 30% for EV charger installation, making it easier for commercial owners to install this convenience for occupants and customers. There are many incentives for various components relating to electrification for commercial spaces, including smart panels, lighting, heat pumps, solar panels, electric vehicles and EV charging stations, and storage batteries, so be sure to take advantage of any available credits to reduce your costs.

Taking the Next Steps for 2024

Electrification for commercial spaces can play a major role in improving your building performance in 2024. It is crucial to thoroughly understand your building’s energy usage and its current condition. With the right planning and preparation, you can make the most of your commercial space in 2024 and for many years to come.

An experienced partner can help save time and mitigate risk in electrification for commercial spaces. Be sure to ensure project quality by hiring licensed, electrification-trained electricians.

Finally, while federal incentives are fairly straightforward, state programs vary widely and are evolving. It may make sense to seek help to make sure you capture all the value available.

About Qmerit

With over 18,500 battery storage installations, 450,000 EV charger installations, 53,000 solar system integrations, and 86,700 electrical panel upgrades, no one is more trusted or experienced than Qmerit when it comes to installing and supporting energy transition technologies.

We can help you with every stage of your electrification and will expertly navigate your project from the beginning analysis with recommendations that meets your needs to the final implementation that sets your business up for a successful, electrified future.

Contact Qmerit today to start the conversation and let’s electrify your future!

Author: Tom Bowen

Tom Bowen

President, Qmerit Solutions and Commercial Electrification