The City of Toronto recently approved its plan to reduce community-wide greenhouse gas (GHG) emissions to net-zero by 2050 or sooner.
The move will impact both condos and rental properties in Toronto, and it’s safe to assume other nearby municipalities will follow suit.
According to the city, the program will be voluntary at first, but mandatory by 2025. It will be similar to programs that have launched in other metropolitan centres including New York City and Vancouver.
Although there are no details yet related to penalties, complying with this new plan will certainly come at a cost to building owners.
While some financing will be available, changes are still likely to require a significant — and likely unplanned — investment that will put pressure on the financial wellness of multifamily building owners and managers.
The good news is, there are strategies that can help mitigate the potential negative financial impact of these changes. Let’s look at three options for reducing carbon emissions, how they can impact a building’s financial health and how energy management technology can help.
Technology to operate more efficiently
Despite advances in technology, most residential building heating and cooling systems run on outdated systems, resulting in unnecessary financial and environmental costs. It is, however, possible to simultaneously increase a building’s energy efficiency, decrease its carbon footprint and save money – all with no upfront costs.
“Cloud-based AI technology now exists that can optimize a building’s heating, cooling and ventilation (HVAC) system automatically, by learning the energy use patterns of the building and adjusting the HVAC system in real time,” said Mike Mulqueen, SVP of sales and business development at Parity, and long-time city energy policy advisor.
“In this way, HVAC costs can be reduced by up to 30 per cent and GHGs by up to 50 per cent depending on their fuel source.”
The best part? Platforms like this require no upfront cost — they can be installed alongside existing building systems and are paid for by the energy savings the system delivers.
Capital projects: The major retrofits
Building owners, contractors and efficiency professionals frequently focus on capital upgrades to achieve energy efficiencies, with the obvious target being older equipment at end-of-life. While many of these projects address the low-hanging fruit of aging equipment to reduce energy consumption, major retrofit projects can often be expensive, wasteful and disruptive.
In addition, many retrofits are premature, replacing equipment when there is still life left in the units. Likewise, those leading these projects are often flying blind, making decisions about the need for change without an engineer having properly measured the building’s true energy demand with trend data, which makes it nearly impossible to right-size the equipment or approach.
Without ongoing attention, assessments or adjustments, even state-of-the-art equipment will experience performance gaps. These gaps between how a building and its equipment are designed and how they operate in the real world will also likely increase over time — at a noticeable cost to both performance and the bottom line.
From a financial point of view, building managers and owners traditionally think about capital expenses as a line item against the building’s reserve fund; something breaks, and the funds are used to replace it. Where building management runs into trouble is when something breaks and there’s not enough money in the fund to cover the expense.
In this case, funds are pulled from the operational budget or condo fees are increased to cover the investment. Neither is an ideal scenario, particularly when solutions now exist that can address the need for improved energy efficiency and equipment performance without the need for cash output.
Adopting technology-based smart solutions offers a way for buildings to remain cash-flow positive while seeing results in real-time.
Though less common in the multi-residential sector, emissions offsetting is a process through which energy credits earned by those who have reduced their GHG emissions can be sold to other organizations to compensate for their continued emissions.
The challenge with emissions offsetting is related to transparency, measurement and accountability when investing in offsets, compared to the ability to verify savings and GHG emissions at the source.
The unavoidable question remains as to whether it is viable — or even responsible — to externalize our pollution by simply buying our way out of the problem, without a firm commitment to real and measurable improvements.
Likewise, emissions offsetting is often not the most cost-effective approach to reduce emissions. Purchasing offsets ignores better opportunities to implement low-cost investments onsite to improve operational efficiencies. Ideally, asset owners and managers should address emission sources onsite, in their own local markets.
At the end of the day, there are many ways buildings and their owners can achieve the targets set out by the City of Toronto.
“The net-zero regulations are an important and welcome policy change that will force multifamily buildings to adopt a smarter, more comprehensive view of energy consumption and efficiency,” says Mulqueen. “The timelines are fair, and the rules encourage everyone to educate themselves in order to make solid, strategic decisions for their organization.”
The multifamily sector has typically been slower to adopt smart building technologies and is relatively under-resourced when compared to commercial building operations, which have full-time engineers and managers at site tasked with fine-tuning equipment to minimize operational costs.
Condominiums and cooperatives typically rely on contracted consultants and mechanical providers for advice on efficiency opportunities, rather than in-house expertise.
As a result, recommendations will often focus on lucrative capital improvements that can be implemented by those recommending the projects, rather than low-cost and no-cost opportunities to enhance building operations simply by running existing equipment more efficiently.
Conversely, in rental buildings, asset managers can often be siloed from building operations staff so equipment replacement decisions are made without sufficient regard to operational changes that can eliminate energy waste and extend equipment life.
Current asset management practices tend to reinforce the status quo with a preference for predictability and standardization, rather than tailored control and HVAC optimization solutions for each unique building.
Now is the time to reimagine the solutions that will pave the most direct path for reducing CO2 emissions. Smart technology offers us a different way forward, both from a cost and impact point of view.
All things considered, the real ideal is this: equipment and operational efficiencies should go hand-in-hand as we move forward toward achieving our net-zero goals.