By Ian Jeffries, Managing Director, EEVS
As published in Property Week (November 2020)
With lockdown 2.0 and Government guidance now requiring everyone who can work effectively from home to do so, there is a likelihood that some office buildings are consuming energy at rate similar to that of the annual Christmas break.
The silver lining to this under-utilisation of prime real estate is that energy and carbon savings for businesses with large estates are likely to be significant. But will these significant energy savings made during 2020 have a positive impact on the occupiers’ bottom lines?
For many, the answer will depend on the nature of agreements made with outsourced facilities managers (FM) paid to manage the building which includes regulating the electricity and heating. However, there are many businesses that do not stipulate in their contracts with these third party providers how the financial savings derived from lower energy consumption should be attributed. Even if they do, many have no way of independently verifying the savings and ensuring that they – rather than the provider reaps the financial rewards. It’s a costly oversight and in the age of Covid-19 means that some businesses will not recover all or a significant proportion of the savings.
There is no doubt that across a large estate, third party contractors have earned their fees during the pandemic. The reality is that you can’t just turn buildings off. There is a clear need for assets to be professionally managed even when office occupancy is low, so that heating and cooling systems are operating sufficiently to prevent water stagnation which can lead to legionella.
So, how should companies structure a contract with a third party provider tasked with energy performance? Some corporate estate and property teams opt for a simple system where any energy costs savings are split 50:50 between client and contractor. Other options might use an incentivised energy reduction programme with clear targets and an agreed percentage shared with the providers.
Businesses also need to consider contracts in the context of their building energy in a post Covid world. There is the potential that energy usage in buildings will significantly increase in the near future. This is because we will likely also see innovation in ventilation, and the subsequent installation of sophisticated ventilation systems in buildings.
The German government has already said ventilation was “one of the cheapest and most effective ways” to contain the spread of the virus. We can therefore expect to see ventilation technology play a greater role in the buildings of the near future. This will come with more energy requirements at a time when the property sector and wider built environment must play an active role in the transition to net zero.
Beyond putting in place appropriate contracts there is a need for clients to have energy reduction and associated annual cost savings independently verified.
A detailed qualitative and quantitative assessment of all the methodologies and calculations used to generate a savings figure is essential if an occupier is to truly understand how it has been calculated. It typically should involve a full review of all relevant contractual documentation, datasets and analytical processes.
This independent verification is important to provide greater certainty and transparency. The aim should be to spot contractual breaches and so-called ‘savings’ which do not account for unrelated changes such as a pandemic or events like a power cut.
In a world adjusting to Covid-19 where buildings are currently not consuming as much energy as they once did, all occupiers need a clear understanding of energy usage, and whether and how the financial savings will be correctly and fairly attributed.
Read our latest Energy Efficiency Trends report
The research was undertaken between April and June 2021 and completed by 69 UK-based respondents, including 33 participants from organisations consuming energy efficiency products/services and 36 participants from suppliers of energy efficiency products and services.