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Building the business case for a low-carbon retrofit

KingSett executive outlines how a decarbonization upgrade won over senior leadership

An argument built around the cost savings of a retrofit won over the senior leadership of KingSett Capital to decarbonize 100 Yonge St. (Courtesy Canada Green Building Council)

KingSett Capital's success of establishing a compelling business case for a decarbonization retrofit at Scotia Plaza’s 100 Yonge St. building serves as an example for similar projects, according to an executive behind the award-winning upgrade.

The approximately 250,000-square-foot office building was given the Deep Carbon Retrofit award by the Canada Green Building Council in June 2023. The recognition was given for a series of retrofits such as replacing end-of-life boilers and chillers and redesigning the HVAC system for efficiency.

100 Yonge St. will cut its greenhouse gas emission by 76 per cent per year, or approximately 549 tonnes of carbon. It is owned by KingSett and Alberta Investment Management Corporation, and managed by BentallGreenOak.

The first step, according to Kit Milnes, vice-president of sustainability and resilience at KingSett, was developing an overarching strategy. That involves asking how to define decarbonization, finding areas of focus and identifying opportunities to get buy-in from senior leadership and investors for the retrofit.

“At the end of the day, all of this does become a financial question. If you can’t make the financial business case work by capturing efficiency, then it’s pretty unlikely that you’re gonna get that senior leadership buy-in to actually move forward with the execution,” Milnes said on a webinar held Dec. 14.

Decarbonizing 100 Yonge St.

Before the retrofit, 100 Yonge St. operated in a typical fashion to similar buildings in Toronto. It ran on grid electricity for cooling and natural gas for heating and hot water. The major mechanical system was at its end-of-life, making it a prime candidate for decarbonization, Milnes explained.

The opportunity aligned with KingSett’s decarbonization strategy that affects 40 per cent of its portfolio by square footage by 2027.

KingSett was able to design a strategy because of the high-quality data available at 100 Yonge St., Milnes said, which allowed the company to understand the peaks, loads and operations at the building year-round, and the impact of a cold-climate heat pump.

A strategy was devised around:

  • removing end-of-life boiler and chillers;
  • replacing the heating plant with air source heat pumps;
  • revamping the HVAC system; and
  • upgrading the air handlers and water risers.

Overcoming barriers to retrofits

When asked about the biggest roadblock to fulfilling a retrofit, Milnes identified the lack of drive from senior leadership, which is a unique problem for every company.

“I would say in order to get that first step of senior leadership, canvass your entire portfolio, look at your clients’ properties, find the easiest win,” he said.

For KingSett, the easiest win was pointing to its previous decarbonization project at 40 King St. W to show its leadership and investors that an all-electric building in Toronto’s downtown core is possible without sacrificing on rent. Satisfied, senior leadership asked how it could continue this progress and find the right partners.

Building a case for decarbonization

KingSett’s sustainability team had to make a convincing argument for the investment. Milnes said the team performed a modelling exercise looking decades into the future that tried to answer the question of when the zero-carbon strategy pays off compared to a high-efficiency scenario that does not rely on electrification and fuel switching.

The sustainability team calculated the retrofit comes at a 28 per cent cost premium and would pay back in 10 to 13 years and last over 20 years, which is an “acceptable payback period.”

To bolster the argument for decarbonization, the calculation considered whether the retrofit would generate savings if there was no carbon tax. The answer was yes.

“You’re driving efficiency so much that even fuel-switching to a more expensive fuel source it makes financial sense, not to mention the type of transitional risk mitigation you have and de-risking your asset from a very volatile global commodity,” Milnes said.

The retrofit is already making itself felt, he added. From September 2022 to September 2023, 100 Yonge St.’s energy consumption was cut by 30 per cent, marking a 369-tonne reduction in carbon emissions. The retrofit is on track to hitting KingSett’s target of offsetting over 500 tonnes of carbon per year. Tens of thousands of dollars are saved per month on electricity and gas bills.

By proving the retrofit would generate significant energy performance improvement and cut costs with a breakeven operating expense, it is a “significant win,” Milnes said.

The efforts to decarbonize 100 Yonge St. led to the building being certified gold by BOMA BEST and LEED.

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