Developing an Energy Strategy for Commercial Real Estate

Energy has transitioned from being just an expense to a vital element in the competitiveness of commercial real estate. Rising tariffs, new supply models, and greater investor expectations suggest that a building’s energy consumption and sourcing significantly influence operating margins and long-term sustainability. Investors are now evaluating portfolios based on these criteria.

There isn’t a universal solution. Solar energy, batteries, and the wheeling of renewable energy all have key roles, but they should be integrated rather than used in isolation.

Listen/read: Consumers facing the repercussions of Nersa’s costly Eskom tariff miscalculation.

An effective strategy utilizes a layered approach that starts with improving efficiency, then moves to renewables, wheeling, and storage as conditions allow. The sequence of these steps is essential, with each step demanding financial and operational justification.

Effective energy management begins with insightful data.

Without precise measurements, waste can go unnoticed. A single meter for an entire building can obscure issues, but employing multiple meters, benchmarks, and dashboards can bring clarity. For example, they may reveal an office that uses as much electricity on weekends as during weekdays or a tenant whose usage is substantially higher than that of similarly sized peers.

Identifying these patterns opens the door for discussions, which can lead to changes in habits. Air conditioning can better match occupancy levels, lights can be turned off earlier, and energy consumption can decrease during slower periods.

Illuminating inefficiencies through data allows for targeted actions. The next step is to implement measures that facilitate sustained demand reduction.

Reducing consumption to enhance benefits

Energy efficiency is often referred to as the first fuel, as the most effective energy strategy begins with minimizing consumption. Though it might appear incremental, enhancing efficiency usually yields the most significant and reliable returns.

Upgrading to LED lighting, replacing outdated cooling systems with energy-efficient alternatives, or conditioning buildings only when occupied results in immediate reductions in consumption.

Read: Affordable tips to lower your energy bill.

While these efforts may not be highly visible, they permanently reshape the energy baseline. Reduced demand leads to lower costs, making subsequent actions—from installing solar panels to investing in energy storage—more economically feasible.

In commercial real estate, where utility costs are among the largest controllable expenses, efficiency underpins every facet of an energy strategy.

The case for onsite renewables

After reducing demand, onsite renewables typically become the next consideration. In South Africa, retail centers are particularly well-suited for this. They feature ample rooftop space and consistent demand throughout the week, making onsite solar power generation and consumption viable.

In contrast, office spaces face more constraints: smaller, often shaded rooftops, and weekday occupancy that may not sync with solar output. This is reflected in Redefine’s portfolio, where over 40MW of its installed 52MW capacity is in retail, while only 4.6MW is in office spaces and 7.4MW in the industrial sector.

Read/listen:
Rooftop solar reaches 7,300MW, surpassing all of Eskom’s IPP capacity.
A prominent woman spearheading Redefine’s net-zero initiatives.

Solar installations on carports are also becoming popular, especially in retail settings. They maximize available space for solar panels while offering practical benefits like shade for vehicles.

Together, these initiatives illustrate a trend across the industry to ensure every inch of space contributes to energy generation.

Wheeling

While onsite generation is advantageous, it has limitations. Office rooftops may be small, industrial demand might be low, and even the largest retail setups may not satisfy year-round needs. To address these challenges, property owners are exploring the concept of wheeling.

This method allows electricity generated in one location to offset consumption in another, utilizing the national grid for balance.

For commercial properties, this means that a solar farm in one province can effectively reduce operating costs for an office in another province.

The move towards virtual wheeling is underway. Many properties are operating under municipalities that currently lack established wheeling frameworks.

Read:
Kimberly-Clark seeks renewable wheeled energy for its South African facilities.
Redefine partners with NOA for green energy purchasing.
Shoprite Group experiments with electricity wheeling at its Cape Town headquarters.

Virtual wheeling enables businesses to continue receiving utility bills from their municipality while Eskom manages reconciliations and refunds for the wheeled energy.

This setup allows for cleaner and more cost-effective energy procurement without requiring immediate changes to tenant billing systems, although updates to metering, contracts, or data requirements may be necessary.

Energy storage

Even with onsite generation and wheeling arrangements in place, the cost of electricity is greatly influenced by when it’s consumed. Peak tariffs during early mornings and late evenings can dilute the savings from cheaper supplies, underscoring the necessity for battery storage.

The primary goal of batteries is to optimize costs: charging during low-tariff periods and discharging during high-tariff periods. This approach reduces exposure to peak pricing and helps manage demand.

Recent studies in South Africa show that businesses utilizing solar combined with battery storage under time-of-use tariffs are already realizing significant savings.

Batteries also augment the value of onsite renewables. Excess solar energy generated during peak sunlight hours can be stored and used in the evening when demand rises. As technology progresses—leading to longer battery lifespans and lower costs—the argument for batteries as a cost-control tool becomes increasingly compelling.

In a context where utility expenses rank among the most significant controllable costs, batteries are emerging as an essential element of the energy strategy.

Advancing through practice

No single technology can fundamentally transform the energy profile of commercial real estate. Instead, advancement comes from a layered methodology starting with insightful data, advancing through efficiency, and incorporating onsite generation, wheeling, and storage when relevant.

Each strategy not only mitigates risk but also protects profit margins and enhances resilience, provided they are implemented thoughtfully. Energy strategy is not about reaching a perfect endpoint but about continuous improvement.

By minimizing waste, generating energy where feasible, procuring intelligently, and continuously optimizing, businesses can develop greener buildings and more competitive assets that can withstand cost pressures, meeting the demands of both tenants and investors.

Leon Kok is the Chief Operating Officer at Redefine Properties.

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