The mix of energy management and regulation compliance

If you feel like climate change is gaining more momentum in conversations, news feed, radio, or tv time, you’re not alone

September 15, 2022Real Estate
Heatwaves, droughts, wildfires, and floods, along with the Russian wars in Ukraine, have been the protagonists of the summer. In Europe, one of the consequences of these unfortunate events is that energy prices are soaring. 

The European Union has been formulating bold objectives to decrease environmental damage, by reducing greenhouse gas emissions in the real estate sector.

Those medium to long-term strategies, combined with short-term tactics (for example, energy sobriety), proposed for 2022, are multiplying with the growing concern of climate change. 

Regarding decision-makers on the owner and occupant side of the real estate sector, several regulation deadlines are coming up, along with the complications of energy saving throughout the heavy winters – this should be more than enough to motivate them to strengthen their strategies.

Energy sobriety

A study by the Met Office Hadley Centre in the UK revealed that even if all countries reduce greenhouse gas emissions as they’ve pledged, 2022’s record-breaking heat wave will become the new normal summer in Europe by 2035.

As a result of this hot and dry weather, the droughts manifested all over the area hitting new records as well as the raging wildfires sweeping Portugal and France during the past weeks have left the feeling of irreversible consequences all over the world.

Adding to this scenario and because of Russia's invasion of Ukraine on February 24, 2022, the amount of natural gas flowing to Europe from Russia has dropped by more than half, driving energy prices to record levels.

This is a significant issue, as many eurozone countries rely heavily on Russian fossil fuels to heat or cool their homes, let alone power their economies. 

In May, the European Commission introduced the REPowerEU plan aiming to fast-track the green transition and reduce dependence on Russian fossil fuels.

Through energy savings, diversification of energy supplies, and accelerated deployment of renewable energy to replace fossil fuels in homes, industry, or power production, the REPowerEU Plan helps achieve this goal. The expected result is for Europe to strengthen its economic growth, security, and climate action.

Last week, after the G7 had agreed to cap Russian oil prices in an effort to stem funds flowing to Vladimir Putin, Gazprom extended the shutdown of its Nord Stream 1 pipeline to Germany, without specifying when it will reopen. Energy ministers plan to meet soon after three countries announced relief measures.

The importance of energy management

Projections look pretty grim regarding energy costs for renters as CFOs of major retailers will need to address the urgency of energy management.

On July 26th, the Perifem Federation, -- which brings together all the actors of the distribution and their suppliers around the concerns of environment, energy, security, and technological innovation — presented a crisis energy protocol that will be implemented by the end of the year.

The leaders of the biggest retail brands in France and Europe (Système U, Leclerc, Carrefour, Auchan,  Franprix, Casino, Lidl, Monoprix, Picard, and more) have already adopted this protocol, of which the main measures are aimed at extinguishing the luminous signs as soon as the store closes and systematizing the drop in light intensity during the day.

Not to mention the ambition to apply more sober management of energy, like the interruption of the air renewal at night.

But this might not be enough. As retail actors need to reduce their energy consumption, produce additional energy on their own, and comply with regulatory obligations, it is unlikely that the sector will be able to finance everything from both upgrades and transition investments without support.

Moreover, support based on data and ESG / Energy management expertise will be required.

The regulation ecosystem and deadlines

The EU keeps pushing for tighter ESG regulations to achieve its 2030 and 2050 climate change objectives. The goal of these regulations is to reach carbon neutrality across the continent by 2050, prevent greenwashing as well as provide transparency to investors.

The most famous examples are the Taxonomy Regulation and the SFDR but several countries went ahead and implemented additional regulations at the national level, such as the Tertiary Decree. These three examples, like others, have their first deadlines in 2022.

It’s evident that in the last few years the regulatory ecosystem for ESG has grown exponentially and with the current and future scenarios, the layout will surely continue to develop efforts to mitigate the damages.

Given this year's deadlines, the real estate industry will soon receive further results on the submissions, and we’ll have some insights into their short-term impact. One way or another, changes will be implemented based on the feedback.

A combination of goals

Energy management and regulatory compliance are complex, and their planning and execution take time and effort from a team of aligned stakeholders.

They are the strategies that the real estate sector needs to urgently put in place, not only to mitigate climate risk but also to preserve the value of their portfolios.

As 2050 approaches, these efforts will need to escalate exponentially. So, if real estate actors want to keep up, this is the moment to start.

Aside from the resources needed to put in place a proper strategy, the data collection, action plan, and follow-up are important duties to take care of. 

Written by: Maria Eugenia Ortiz, from Deepki