''Emerging Green Proptech and Circular Construction Practices Set the Stage for a Monumental Year in Sustainable Building''

 

The signing of the Inflation Reduction Act by U.S. President Joe Biden in August 2022 ignited a massive influx of both public and private investment in climate solutions, specifically targeting the building sector, which is responsible for approximately 40% of global greenhouse gas emissions. The legislation commits US$391 billion to climate-focused initiatives, including tax credits for residential energy makeovers, energy efficiency incentives, and various related actions such as new energy efficiency regulations for air conditioning systems and other HVAC equipment. Additionally, the bill provides funding for building retrofits, modernized building energy codes, and tax deductions for commercial properties that reduce their energy usage.

 

The influence of the Inflation Reduction Act reaches beyond the U.S. border, as Canadian Prime Minister Justin Trudeau's Liberal administration aims to ensure that the massive American public funding does not drain green investments from Canada, including those intended to decarbonize the building industry.

 

 

 

Here's a glimpse of the exciting developments 2023 may bring to the realm of eco-friendly construction:

Eco-Smart Property Technologies Gaining Momentum Private equity interest in "proptech" ventures, particularly those focused on environmentally friendly property technology, has grown significantly. A/O PropTech, a venture capital firm with expertise in this area, recently announced an astounding 84% annual growth rate in the sector over the past five years, with global investments totaling US$4.5 billion, a large portion of which has been directed towards European cities. A/O PropTech has stakes in 22 companies, encompassing property management software platforms, electrical device control systems, and a variety of planning analytics tools.

 

In a recent market study titled The Future of Building in a Low Carbon World, the firm highlights several promising investment opportunities in the coming years across different construction-related verticals, including green procurement software, architectural software that supports eco-friendly design strategies, and innovative building materials. Specifically, A/O projects ongoing advancements in modular housing design, as evidenced by the US $1.6 billion invested in the prefab (or modular construction) industry in 2022, an amount two-and-a-half times greater than the previous year.

 

The modular construction sector, which relies on factory-manufactured components and assembly for improved productivity and quality control, has attracted significant attention due to the increasing need for affordable housing in response to rising real estate prices and rents in many cities. Additionally, modular construction is associated with more sustainable building practices, as it allows for faster completion times and reduced waste and emissions.

 

 

Elevating Green Buildings through Carbon Transparency

The growing emphasis on creating energy-efficient buildings can unintentionally lead to a higher use of carbon-intensive construction materials, such as specific types of insulation. Similarly, increased urban density, which lowers transportation-related carbon emissions, often promotes the use of carbon-intensive materials like concrete, steel, and glass.

 

Efforts to encourage developers to calculate and disclose the embodied carbon in their projects and report their buildings' energy performance have been gaining ground in recent years. For instance, New York City's Local Law 97 mandates asset managers to submit energy consumption evaluations by 2025. Additionally, the Toronto Green Standard, updated in May 2022, now requires developers to measure and disclose embodied carbon in order to be eligible for certain green building project rebates. Late in 2022, Canada's federal government also implemented an embodied carbon standard for its construction initiatives.

 

Interestingly, it is the large asset managers who are advocating for more comprehensive disclosure and improved reporting. In a report from October 2022 titled Full Disclosure, the Canada Green Building Council, which represents firms with $110 billion in assets, called on governments to create building energy disclosure guidelines and make data sharing a prerequisite for project approvals. The report states, "Data transparency and benchmarking can help guide energy and emissions reductions, and more broadly, can aid in the development of effective policies and programs." All participating firms have pledged to make their data public, regardless of its implications on their performance.

 

 

Sustainable Building Through Circular Construction

Data and disclosure are not the only driving forces behind sustainable construction. With cities focusing on intensification, there is a rising interest in repurposing construction waste from older buildings to minimize construction-related emissions. As reported in a widely-read October 2022 feature by The New York Times, Dutch architects and builders adopting a circular economy mindset are increasingly turning to "urban mining" as a way to source repurposed materials, such as using discarded clothing to create insulation for new projects.

 

Amsterdam has taken this concept a step further by tracking its circular economy performance and sharing the results with the public. The city's initial assessment was self-critical, stating, "Despite many initiatives, the bulk of Amsterdam's economy is still based on intensive primary material consumption." As the old adage goes, you can't manage what you don't measure.

 

Combining Renewables with Storage Solutions The rapid rise of solar energy is propelled by decreasing expenses, increasing incentives, and in some regions like Tokyo and parts of the EU, mandates on new construction projects. With the growing adoption of electric vehicles and the subsequent demand for renewable electricity, marrying solar panels with large-scale storage solutions is anticipated to see a notable increase in the coming years. Indeed, the broader use of solar and storage will facilitate more residential and commercial properties shifting to electric heating.

 

The significant expansion of renewable energy sources is an essential aspect of the energy transition, but it is insufficient due to challenges associated with inconsistent supply. Local grids, burdened by heightened electricity demand, necessitate new implementations of both local renewables and storage systems that can store and later provide off-peak power. "By 2025, over 29% of all new behind-the-meter solar systems will be paired with storage, compared to under 11% in 2021," according to the Solar Energy Industries Association. "The utility-scale market is also recognizing the benefits of pairing solar with storage, with over 45 [gigawatts] of commissioned or announced projects paired with storage, representing over 50 [gigawatt hours] of storage capacity."

 

Various types of storage initiatives exist, such as battery farms, pumped hydro (excess power used to pump water into reservoirs), or the production of green hydrogen for fuel cells with industrial-scale electrolyzers. In its 2022 budget, Canada's federal government introduced a 30% tax credit for companies developing battery storage and clean hydrogen solutions. The Biden administration in 2021 injected US$9.5 billion into clean hydrogen development, with more anticipated under the Inflation Reduction Act. However, clean hydrogen for home energy has yet to prove itself; a highly-touted "world-first" project in Scotland, intended to use green hydrogen to replace natural gas, has faced delays and technical issues.

 

Investor interest in offshore wind will also propel investments in storage and green hydrogen production. According to a 2022 year-end review by the U.S. Office of Energy Efficiency and Renewable Energy, the amount of offshore capacity in the development pipeline grew 13%, with over 40,000 megawatts planned or under construction. The demand will be fueled by tax credits and grants enabled by the Inflation Reduction Act. The European Union and the United Kingdom have 100 gigawatts of offshore wind planned by 2030, sufficient to power 75 million homes. Despite its extensive coastline, Canada lags behind the U.S., with 5 GW of offshore wind to be built off the coast of Nova Scotia by 2030.

 

The wave of investment that will be triggered this year by the Inflation Reduction Act arrives at an opportune time, aligning with crucial advancements in renewable energy systems, green building technology, and evolving consumer/developer perspectives on the importance of decarbonizing the built environment in the fight against climate change. 2023 might just be the year when all these components begin to come together.

 

The convergence of these factors in 2023 has the potential to create a tipping point in the green building industry. As new policies and regulations are implemented, along with the increased adoption of green technologies, a momentum shift is expected to take place. This momentum could create a positive feedback loop, encouraging further innovation and investment in sustainable construction practices and materials.

 

Market demand for eco-friendly buildings is also likely to increase as public awareness and concern for the environment grow. This heightened demand will spur developers and builders to embrace green building technologies and strategies, ultimately contributing to a more sustainable built environment.

 

Furthermore, the growth in renewable energy and storage solutions will not only support the transition to green buildings but also create new employment opportunities and stimulate economic growth. As the green building and renewable energy sectors expand, they will open up new possibilities for skilled workers and professionals, fostering economic development while addressing the urgent need to combat climate change.

 

In conclusion, 2023 has the potential to become a pivotal year in the realm of green buildings. The alignment of policy, technology, and public sentiment is creating a unique opportunity for the sustainable construction industry to flourish. As the world continues to confront the climate crisis, embracing green buildings and renewable energy will be crucial in our collective efforts to mitigate the effects of climate change and build a more sustainable future for generations to come.