Commercial Real Estate Energy Consumption Trends in 2020
The first outbreak of COVID-19 earlier in 2020 was the beginning of a major shift in commercial real estate energy consumption. On a national level, power consumption dropped 4% compared to last year. Meanwhile, during the most intense lockdown periods, power demand on the weekdays dropped to Sunday levels.
What does this mean for those in the commercial real estate industry, i.e. retail business owners, property owners and managers, etc.? In this article, we’ll take a deeper look at what’s occurring in the industry in terms of energy consumption, discuss possible challenges, and present ways you can manage them in 2021 and beyond.
Major Trends in 2020
1. Going Green
With so many brick and mortar retail locations closed or offering limited hours during the pandemic, the commercial sector dropped 11% year-over-year, consuming around 35 billion less kWhs of energy. Now it appears that the energy still being used is coming more and more from natural gas and renewable sources. In the first half of the year, natural gas made up 40% of the energy requirements in the U.S. Then, between April and June, energy from renewable sources rose to 23% of total energy sales, leaving coal in the dust (no pun intended!). Part of that increase is due to the fact that renewable power plants cannot be shut down like regular power plants are when demand falls.
2. State by State
Different states have faced different challenges during the COVID-19 pandemic. Commercial energy consumption in Hawaii fell 22% this spring and summer as hotels, restaurants, and other hospitality businesses were devoid of most tourist traffic. In Pennsylvania and Washington, D.C., commercial energy consumption dropped 21% and 20%, respectively. Meanwhile, in Michigan, energy requirements fell 32% as auto-manufacturing slowed down.
3. Easy Like Sunday Morning
According to the International Energy Agency (IEA) weekday patterns of consumption now resemble a prolonged Sunday. Restaurants, offices, and businesses that were usually humming with activity on the weekdays are now quiet as people work from home, shop online, and order takeout. According to the IEA, energy usage typically falls by up to 20% for each month a nation’s lockdown continues. Domestic demand did rise 40% as people worked from home, but this was not enough to offset the effects of demand loss in the commercial sector.
Potential Challenge: Unexpected Energy Costs
Watch out for those pesky terms and conditions! While energy demand and wholesale energy prices have fallen for commercial buyers during the pandemic, this does not necessarily translate into low energy costs. Why? Mainly because retail supply agreements for both electricity and natural gas have clauses for bandwidth and/or swing tolerance. These clauses are meant to protect retail suppliers from unexpected, short-term changes in a customer’s energy use patterns by requiring that said customers buy certain amounts of energy. Swing tolerances and bandwidth provisions can range from 0% to 100%. Any departure from the specified tolerance can result in spot market prices and fees. For example, let’s say you entered into a retail electric agreement for 1,000,000 kWh per month and 25% bandwidth. You can use as much as 125,000,000 kWh and as little as 750,000 kWh/month, but any amount above or below those volumes and you could be hit with additional and unexpected costs. When it comes to long-term changes in energy consumption, material usage deviations are put in place to protect energy suppliers. Provisions around material usage deviation can vary considerably across contracts and suppliers, so make sure you understand what yours are to avoid surprise charges, especially since the duration of the pandemic is still unknown.
What You Can Do
To avoid surprise fees during the rest of the pandemic, it’s important to understand not only your agreements and contracts, but also your energy use. Knowing how much energy you are using will help you plan ahead. Some ways you can determine your energy use are:
- Real-time data monitoring shows you exactly when and where, and how much energy your buildings are using.
- Use energy management software to gather data on when peak load times During peak load times, buildings in your area are using the most energy, and with that higher demand comes higher electricity prices. If you know when peak load times occur, you can procure energy at non-peak times, when prices are cheaper. (when your building uses the most energy) can show Energy management software, like EnergyWatch’s watchwire platform,
- Use benchmarking to 1. see how much energy the most efficient buildings in your area are using and 2. if you own more than one property, to compare the energy use between them.
EnergyWatch’s watchwire software gives you the ability to utilize real-time data monitoring, peak load management, energy benchmarking, and more, all in one place. Additionally, watchwire can help you identify inefficiencies in your energy use so you can lower your utility bills and improve your bottom line during the pandemic. For more information on watchwire, download the Watchwire Solution Brief.