Renewable Energy Adoption in Leased Buildings: Part 3

This blog series is authored by Vivienne Zhang and Illina Frankiv who manage the energy program at WeWork, a global co-working company and REBA member. The insights shared by Vivienne and Illina are based on their experiences supporting the sustainability goals of WeWork members. This three-part series will be split into blogs on Accountability, Transparency, and Market Solutions.


Market Solutions – How to buy?

The last question is regarding how to buy. The predicament is best illuminated in an example. An owner of a 30-story building leases one floor to a co-working company, which has 100 members in this space. If a member wants the space to use renewable energy, three scenarios can happen: 

1) The building owner already buys renewable energy and retains the environmental attribute certificates (EACs).[1] The building owner can pass EACs to the coworking company, which can then pass onto the member. This is possible today. However, the process can be a logistical nightmare. Worse, it can inadvertently lead to false claims or double counting given the long chain of custody each EAC undergoes and only the party that retains the certificates can claim using renewable energy.

2) When the building owner doesn’t buy renewable energy, how can a member, twice removed from the landlord, have their requests be heard? Demanding EACs from the building owner is not likely to succeed since an ordinary member may not be expected to know this jargon or be connected to the building owner – Often, as we have seen, a member emails a chain of possible landlord contacts who don’t have the answers.

3) The coworking company might want to act on its member’s request by trying to purchase renewable energy itself. However, as the coworking company is both a landlord and a tenant, it faces the predicaments in both scenario 1 and 2: It may not control the utility account of the leased space and therefore lacks quality data and/or the purchase abilities. At the same time, even if the coworking company does purchase EACs, it doesn’t have an efficient process to pass down the benefit of the purchase to their members. The coworking company is then left paralyzed by inaction between the two stakeholders.

The scenarios seem complicated, but they all highlight one simple problem: Any of the three actors in leased commercial buildings might want to act, but without a solution that addresses the overlapping nature of the emissions of the three stakeholders, as highlighted below in the purple area, confusion abounds, which inevitably results in inaction.

Some landlords and tenants have recognized the challenge and have tried to address this preemptively by offering solutions such as green leases, which standardizes lease clauses on energy management as discussed above.[2]Likewise, some colocation data center vendors, which lease space to clients requiring data storage, have also worked on providing “green energy benefits’ to customers by certifying that the building uses clean energy.[3]

If the existing solutions were to serve as any guide, ways for addressing the overlapping scopes of emissions for landlord, co-working company, and tenant can take any form from a green lease, a lease addendum, a differentiating service, an industry standard, a label, or a product. But until the day that getting renewable energy for a tenant is as simple as going to a local market to buy (or demand) organic food, we don’t think it’s good enough. That is the aspiration we have for the industry of commercial offices.

Conclusion

To solve the puzzle of landlord-tenant split incentive challenge on renewable energy use, we are advocating for accountability (who should buy renewable energy) and transparency (how much to buy), and we are hopeful that the marketplace will follow, do its magic, and come up with great solutions for customers looking to go green (how to buy). Of course, market solutions can come first, and progress is usually not a straight line, but more awareness of how the first two questions are slowing down the market can hopefully accelerate the development of solutions, and these days, we need all the speed we can get!


[1]EACs from renewable energy in the US are tracked through renewable energy certificates (RECs).

[2] https://www.imt.org/resources/green-lease-leaders-using-the-lease-to-create-more-sustainable-coworking-spaces/

[3] https://www.bsr.org/en/collaboration/groups/future-of-internet-power


Stayed tuned for the next blog in this series on Market Solutions.

Interested in learning how to navigate sustainability as a tenant or landlord? Check out REBA’s LESsor Sustainable Energy Network (LESSEN) for additional resources.


Authors:

Illina Frankiv
Global Energy Program Manager
WeWork

Vivienne Zhang
Global Energy Program Manager
WeWork

Mark Porter
Supply Chain and International Collaboration, Director
Renewable Energy Buyers Alliance