Future-Proofing the Fruits of Austin's Building Boom

During the worst of last month's Winter Storm Uri, images of Downtown Austin with its lights ablaze circulated widely on social media, prompting outrage among Austinites going days without power or heat or water. The city center retained electric service because it includes critical infrastructure like the Capitol Complex alongside its office and condo towers. But what if those buildings could produce enough energy on-site to be self-sufficient when the Texas power grid, inevitably, fails again?

That's the kind of construction the Urban Land Institute's Greenprint Center for Building Performance – a worldwide alliance of real estate owners, investors, and partners in 32 different countries – is trying to incentivize, aiming for a goal of net-zero carbon emissions from its members' commercial buildings by 2050. Last week, at a panel hosted by ULI's Austin chapter, local and national developers and investors joined city sustainability officer Lucia Athens to discuss how and why Austin could make this transition.

"Net-zero," in ULI's definition, means buildings powered by renewable energy generated on-site or received through the utility grid, with any residual emissions offset by credits. "It's absolutely crucial to have a thorough understanding of your carbon footprint before you do anything. If you can't measure, you can't optimize," says Etienne Cadestin, founder and CEO of Longevity Partners, a real estate investment advisory firm whose U.S. headquarters is in Austin. Different landscapes can accommodate different types of renewables: "Luckily enough," says Cadestin, "Austin has [some] of the best solar radiation in the world and the return on investments [is] extremely good."

Austin Energy's resource plan calls for the utility to be 100% carbon-free by 2035. Right now, about 50% of Austin's emissions come from buildings' use of nonrenewable energy (either from the grid or from natural gas), according to Athens. Another 40% comes from transportation, which Athens hopes will be mitigated by Project Connect; she stresses, "It's really important not just how you design and operate your project, but also where you're building." One of Austin's goals "is for 80% of new nonresidential development to be located in the city's growth centers and corridors," says Athens. "So we really want to try to attract the development into those places that are closer in and that are served by public transportation."

As for the energy diets of those buildings themselves, developers increasingly see the benefits of renewables and electrification outweighing the costs – especially as a way to mitigate risk. That includes both direct climate impacts and risks encountered in capital markets, where investors are increasingly interested in "ESG" (environmental, social, and governmental) factors. As Cadestin points out, "It's not just a cost – it's also a huge opportunity for asset owners to increase the value of their properties ... [while] at the same time future-proofing their assets." As panelist Andrew Bush of Morgan Creek Ventures put it, "If you look at a building with 40-year-old systems that consume lots of energy and it's all based on gas, it's a much riskier building than [one] that's all electric."

Future-proofing against climate change rings especially true to Austinites in light of last month's crisis. "Those facilities that have the ability to generate their own energy, maybe have backup battery power, maybe even have on-site water systems that can treat to potable standards – those facilities are going to be the ones that are able to stay up and running" in the event of another event like Winter Storm Uri, Athens explains.

The private-sector panelists all agree that the question facing real estate is not whether but when to commit to these strategies. To make the shift, "the [public-private] partnership piece is key," says Athens, noting that in fossil-fuel-friendly Texas, local land-use regulators cannot impose net-zero strategies by decree: "We are hobbled somewhat by the state in terms of how far we can go with our energy code."

But the government can straighten the path for private enterprise to achieve the same outcomes. "I do think things like a carbon tax will ultimately make it unprofitable to operate old gas-powered buildings ... and [will] displace coal-fired [power plants] out of the market," says Bush. "It's going to be a combination of [energy] prices, appropriate government intervention, and some really creative minds figuring out how to do conversions on existing buildings."