COMMENT: As UK cities prepare to exist and compete in the aspirational world of net zero, Belfast launched its Belfast Resilience Strategy at the end of 2020, with the goal of transitioning to “an inclusive, net-zero emissions, climate-resilient economy in a generation”.
Net zero targets now cover in excess of two-thirds of global GDP and over a fifth of the world’s largest public companies. And it is this global shift, driven by government regulation, investors and corporates, that is now leading to a complete reshaping of the development landscape and greater demand for sustainable buildings. This growing demand for net zero is also not only in respect of the building itself (for example implementing sustainable construction and energy efficiency measures), but in the whole life cycle of the building.
The UK Green Building Council defines net zero as “when the amount of carbon emissions associated with a building’s embodied and operational impacts over the life of the building, including its disposal, are zero or negative”. Corporate occupiers will expand this definition to include the carbon footprint of the supply chain and operating businesses in that location, which adds decarbonisation of transport as an issue for city centre development.
Opportunity for flexibility
With this definition and the global focus on sustainability, how many businesses will soon find themselves out of the supply chain because of being judged to be “too carbon expensive”? If the chief metric for future city centre development and investment is “the carbon footprint of running operations from this location”, what actions can city centre stakeholders take to achieve and participate in a net zero economy in locations where it is difficult to do so, with high daytime power demands and few opportunities to generate renewable energy on the scale required?
Energy efficiency measures and on-site generation such as solar PV is a step in the right direction, but on-site solutions in city centres are generally limited – there are only so many solar panels you can fit on a building.
Offtaking renewable electricity from the grid under a corporate power purchase agreement has been a solution for many high-intensity-energy businesses, such as data centres, but the burden of fixed terms with minimum power offtake requirements are unworkable for most businesses located in a city centre – who could sign up to buy 10 years’ worth of electricity holding a 10-year lease with a five-year break? Is there opportunity for flexibility and more innovative approaches in managing and allocating risk in terms of signing up to a long-term corporate PPA?
With technology advances, generation site capacities are becoming larger and this could facilitate multiple power offtakers and create opportunities for small offtakes of 20-30% of the generation, which could be accommodated under shorter-term corporate PPAs of five years with an option for a further five (or mirror a letting’s term and break). The main offtaker of the generation site gives the financial security to the project covering the funding risk, allowing the operator greater flexibility to provide smaller and shorter PPAs that are needed.
A pooling of energy demand by a number of smaller and medium-sized businesses may also help spread the risk against the long-term nature of, and minimum power offtakes needed by, renewable generators under a PPA.
There is also a levelling-up aspect for small to medium-sized businesses as PPAs would not only reduce their carbon footprints, but also enable them to share in the “additionality” that, to date, has largely been enjoyed only by bigger multinational corporates.
The Belfast Resilience Strategy also recognised that the road to net zero will “require a shift in mindset – so that infrastructure is understood as vital to our economic and social interests, and responsibility for building, maintaining and investing in infrastructure goes beyond central government to a range of partners across the city”.
Considering the challenges that city centres face, the need for collaboration by stakeholders is clear. Developers can consider the whole life cycle of a building at the design and build stage, and occupiers through innovation and foresight can tackle some hurdles to net zero, like negotiating PPAs suited to real estate needs, but providing solutions to decarbonise operations from a city centre highlights the role for local authorities, particularly in providing EV infrastructure and low-emission public transport.
The success of cities in attracting investment and future-focused businesses will depend on their approach to delivering a truly net zero place to live and do business.
John Palmer is a partner at Shoosmiths
