Introduction
- By applying machine learning, artificial intelligence and physics-based Modeling allows building portfolio owners to identify building decarbonization opportunities faster.
- Algorithms can analyze and propose solutions by using data from satellites, geospatial analysis, regulations, labor and equipment costs, and assessing the feasibility of heating and cooling systems, insulation levels, and solar or geothermal energy. Achieving net zero emissions for the building portfolio.
- With this new approach, financial optimization plans can be developed for the entire portfolio within weeks, taking into account the regulatory environment as well as the building’s unique characteristics and lease structure, experts said in the report.
INSIGHTS
McKinsey experts say that given that buildings account for 40% of global combustion-related emissions, direct emissions must be reduced by 2030 Only by reducing building emissions by 50% and indirect emissions by 60% can we achieve net-zero carbon emissions from the building stock in 2050. McKinsey said traditional approaches to decarbonisation, including physical energy audits and building-by-building net-zero strategies, were considered laborious and expensive. Furthermore, the lack of centralized inventory and standardization has led to the perception that decarbonizing buildings is unprofitable.
The report states that the AI-driven approach increases the speed and scale of decarbonization planning by more than 100 times compared to traditional energy audits and net zero studies, eliminating the reliance on vague building prototypes.
This highlights the potential for AI-based approaches to deliver neutral or positive returns on real estate portfolios, assuming there are no factors such as future incremental regulation, carbon pricing and rents, or green premiums on property valuations. The report highlights that optimizing renewable energy procurement at the portfolio level, while implementing energy efficiency and electrification measures for each building, enables building owners and occupants to recoup investments by achieving energy savings, optimizing capital costs and avoiding regulatory penalties.
Characteristics of the Best Building Decarbonization Plans
McKinsey emphasized that achieving the most effective building decarbonization plan consists of seven parts, which can be achieved through the use of artificial intelligence and machine learning. Methods to Optimize:
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Efficient Net Zero Planning: Owners can ensure a coordinated, comprehensive plan for their entire portfolio through joint procurement and strategic sequencing, unlike traditional Decarbonization plans typically target selected buildings based on emissions or existing regulations.
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Asset Specific Plans: Customized plans that consider aspects such as building layout and insulation type are required to achieve cost-effective decarbonization. Each building requires a unique strategy that takes into account its starting point, local conditions and asset details such as tenant mix and lease structure.
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The complete pathway to net zero: This includes avoiding parts of the plan that harm long-term outcomes. Companies must take comprehensive, forward-looking decisions because short-term strategies may increase costs and ignore synergies such as insulation measures that impact future HVAC requirements.
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Integrated Scope 1 and Scope 2 Plans: A disconnected approach to energy efficiency and electrification is hampering efficiency, the report says. Failure to take full advantage of interdependencies could lead to slower and more costly renewable energy procurement.
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Actionable Steps: Construction plans must provide precise instructions to facilities managers and enable easy communication between vendors and facilities management teams to ensure rapid execution.
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Quantification: Plans must be specific enough to provide detailed insights for financial planning, including net zero targets, capital investment challenges, operating costs, potential debt and costs between landlords and tenants and benefit distribution so leaders can understand the exact costs of achieving net zero emissions.
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Net Zero Oriented Decision-Making: Owners and operators can integrate decarbonization plans into organizational operations by aligning processes, incentives and governance structures. This includes updating capital plans, low-emission systems budgets and incorporating decarbonization analysis into new asset acquisitions.
Decarbonization challenges related to scaling supply chains to meet new demand, training skilled workers to deploy retrofits and other electrification efforts will also impact the industry, the report said.
McKinsey said adopting an AI-powered lifecycle decarbonisation approach could make significant progress in tackling building-related emissions by streamlining plans, speeding up processes and reducing costs.
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