Electrification Is Creating A 'Tectonic Shift' In Boston's Commercial Real Estate Sector

In Boston's race to meet climate goals and electrify its buildings, developers and utility companies alike are facing immense pressure to move properties away from fossil fuels and onto the grid.

With an energy grid that has been built up over the course of many decades, pushing an influx of new developments and older buildings onto it to meet the goal of 100% electrification is a challenge that landlords and developers are now facing as ambitious climate goal deadlines approach. 

Experts speaking Tuesday at Bisnow's Boston Smart Buildings and Sustainability event at 501 Boylston St. shared their challenges in moving buildings toward complete electrification in cities like Boston and Cambridge that have set strict emissions requirements. 

"I think that what we need to do as a private sector is say, 'Hey, there is a tectonic shift going on, right?'" Remap CEO Nick Casal said at the event.

Casal said that with this shift, it can be challenging for a developer to plan out how to achieve full electrification. The most crucial part of doing so is developing a strong partnership with the utility companies that are in charge of these services.

"Get in touch with your utility like two years before you're going to actually begin construction on their project or a year before you start converting assets," Casal said. 

In March, Mayor Michelle Wu filed an ordinance with the Boston City Council that seeks to discourage the use of fossil fuels in buildings. The policy would require new buildings reliant on fossil fuel to install solar panels and add wiring in hopes that they could go through an all-electric conversion in the future. It stops short of banning fossil fuels in buildings, which account for nearly one-third of statewide emissions, but it adds expensive requirements for developers looking to install gas connections, the Boston Globe reported. 

Wu's push comes after Boston in late 2021 enacted the sweeping BERDO 2.0 law, an update to the city's Buildings Emissions Reduction and Disclosure Ordinance that requires building owners to report their carbon emissions and sets caps that will become mandatory in 2025. 

Developers trying to keep up with the emissions policies say the struggle comes with planning their electrification needs on a decades-old grid. 

"There is that fundamental disconnect that's happening right now that I don't think the grid is necessarily where it needs to be," said Reihaneh Irani-Famili, vice president of clean energy development at National Grid. "Not that it can't get there, but we need to move really fast." 

Although the grid already powers millions of square feet of real estate in cities like Boston, Irani-Famili said the scale at which projects are coming onto the grid now is greater than what it has faced in the past.

Utility-scale solar capacity in Massachusetts has increased rapidly, with more than 190 megawatts coming online since January 2021, according to the federal Energy Information Administration. In 2020, Massachusetts consumed almost three times as much electricity as it generated.

"You have a whole sector of transportation that is starting to move to rely on the grid, then you have economic development that's happening, then you have actually the challenge you use to create generation near where your loads were," Irani-Famili said.

Cambridge is on its way to finalizing its own carbon-neutral mandates for landlords. The city's Building Energy Use Disclosure Ordinance would require large commercial properties to reduce their emissions to no more than 80% of their 2018 and 2019 levels by 2026 and 40% of those levels by 2030, and then they would have to reach net-zero by 2035 or be subjected to fines, the Boston Business Journal reported.

Dimpesh Darjee, senior vice president of acquisitions for Neighborhood Property Group, said that with the grid's lack of capacity as more buildings move to electrify, landlords will need to pay more to do so, but it could lead to higher property values.

"The demand was suddenly like a switch flipped," Darjee said. "The infrastructure, everything from capital to the physical structure just isn't there to accommodate everyone."

The state is also pushing a stricter climate-friendly action plan. 

Earlier this week, Gov. Maura Healey announced the launch of the Massachusetts Community Climate Bank, the first affordable housing green bank, which is to be used to address the state’s housing crisis and meet its climate goals.

The bank is starting with $50M in seed funding. It will provide low-cost capital to bring more clean energy and energy-efficient technologies into affordable housing projects.

Although many cities have their climate change road map planned out with goals for 2030 and 2050, experts say the utility companies they are relying on aren't as forward-looking.

For National Grid, the anticipatory studies done to track where usage might continue to grow don't really amount to much due to its own regulatory processes.

"If I know that today, the regulatory mechanism, the way that we cost-share these things is not there to look for that longer-term need," Irani-Famili said. "We're stuck in this analysis paralysis of 'What if we build it and they don't come?'" 

Although some electrification goals are years and decades away, bigger commercial projects in the city are going through complex master planning that takes years. Experts said being able to incorporate these green initiatives into planning early will become crucial.

"If you have those goals of 50% reduction by 2030, you're now down to one hand and, frankly, a few fingers," CREF Vice President Patrick Murphy said. "What I'm trying to get at here is you need to bring in [architecture and engineering] early, and you need to bring the right advocates in early during those very early comprehensive planning events."