Global Sustainability Perspective - latinamerica.jll.com · Jones Lang LaSalle’s CEO Colin Dyer...

Global Sustainability Perspective October 2010

OVERVIEW GLOBAL SUSTAINABILITY SUSTAINABLE PROPERTY GREEN ROOM

Overview Highlights

Renewables and Real Estate: The New Partnership • Has solar energy come of age– what are the

strategy choices? • How are feed-in tariffs impacting the progress of

renewables? • The future for wind farms in the UK

Stop Press • Climate Change Disclosure – Are you ready?

We look at the real estate implications of recently published US Securities and Exchange Commission (SEC) guidelines.

• The Greenprint Foundation announces the release of its first Greenprint Carbon Index™

Cancun Summit COP16: Unexpectedly positive results. Highlights: • Participants agree on a limit of

2°C maximum warming above pre-industrial levels

• Developing nations pledge to j

Global Sustainability • Country differences in carbon efficiency • Renewables – how are they contributing to

electricity production? • How are country sustainability indicators stacking up?

oin the action on Greenhouse Gas limitations

• A Green Climate Fund will be set up to help developing nations adapt to climate change... Read more

Green Room Visit our Green Room where we are in

Your say What do you want to see in future editions of the Global Sustainability

Perspective? Let us know. If you have any comments or questions, get in touch.

con ell versation with Jack Rizzo of ProLogis, as was James Cameron and Tim Mockett of Climate Change Capital

"Our Global Sustainability Perspective website covers the real estate markets' progress with regard to the challenges and opportunities of sustainability. We highlight new trends, tools and tactics and the latest thinking on how to use the benefits of sustainability-led strategies in your real estate world.

We hope you find this of value and please do contact us with your questions, views and opinions."

Dan Probst, Chairman, Energy and Sustainability Services

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Global Sustainability In this section:

• Sustainability Health Monitor • Cancun Climate Summit • Greenprint Foundation launches the first Carbon Index

Global Sustainability Health Monitor In our Sustainability Health Monitor shown below, we have been tracking a number of indicators that tell us about the status of selected countries with regard to their energy and carbon efficiency. We also track the number of certified buildings as a measure of a markets response to sustainability in real estate. In this monitor, we have also added new

indicators relating to renewable energy, specifically solar and wind.

Cancun: Unexpectedly positive results (published 4 January 2011) A year ago the World expected climate negotiators in Copenhagen to clinch a deal to advance into a low carbon economy. The outcome was limited and the most recent annual Climate Change summit in Cancun, Mexico, started with very low expectations. However, due to a very astute handling of the two-week conference, the Mexican foreign secretary, Patricia Espinosa, brought about a surprisingly positive outcome of the meeting. The main points of the, now called, Cancun Agreement, are: COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved 2

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Global Sustainability Perspective, October 2010

• Participants agreed on the limitation of a 2°C maximum warming above pre-industrial levels • Developing nations, most prominently China, pledged to join the action on Greenhouse Gas limitations, alongside the

industrialised nations, covered by the Kyoto Protocol • In order to keep developed nations engaged in the process, agreement was found to try to continue for a successive

commitment period of the Kyoto Protocol, after 2012 • A Green Climate Fund, managed by the World Bank and supervised by a group of 24 developing and developed

countries, will be put in place from 2020 with $100bn annually to help developing nations mitigate and adapt to climate change

• A “fast start” finance package will be provided by advanced nations in favour of developing nations between 2010-2012

• Technology transfers will be established • Deforestation in developing countries will be decreased

Whilst the Cancun Agreement is not a legally binding treaty as one could have hoped for, it nevertheless laid the foundation for such a treaty to be negotiated at the next Climate Change Summit in South Africa at the end of 2011. __________________________________________ All those pre meetings.... (published 29 October 2010)

In preparation for the Cancun summit and to ensure its effectiveness, hundreds and even thousands of representatives of the world’s nations have been meeting since the beginning of the year: between gatherings in Bonn, Germany, New York and earlier this month in Tianjin, China, environment ministry delegates have started to prepare the 12-day negotiations which are due to start on the 29th November. However, there are already mixed signs on the potential outcomes of the Mexican climate meeting.

The Tianjin preparatory discussion ended with the United States and China, the planet’s largest CO2 producers, disagreeing on some of the administrative details of measuring, tracking and, above all, verifying carbon emission reductions over time.

Voices were also heard criticizing the impracticality of a 194-nation decision making process on climate change in favour of deals amongst a smaller set of nations such as the G20 that includes not only the largest developed economies, but also countries such as India and China that are not obliged to cut emission by the Kyoto Protocol. ... but still not on the same page

Unfortunately, the United States will turn up at the Cancun meeting with not very much to show as the U.S. Senate was unable to pass any meaningful climate legislation to agree carbon emissions cuts by 2020 in time for the negotiations. Things look different on a state level. The fight between proponents of carbon emissions cuts and its opponents is currently reflected in California’s debate on so-called Proposition 23. It is a proposal to suspend California’s 2006 climate law aiming to introduce Greenhouse gas emissions measurements and reductions by 2020. Based on campaign contributions, the proponents of carbon cuts, contrary to the federal level, have raised three times more money than their opponents according to MAPLight, an organization that tracks financial contributions to political campaigns. Fortunately, not all depends on the federal Government to advance the battle against climate change.


http://www.cop17durban.com/Pages/default.aspx


Europe is doing well

Over on the European continent, the latest European Union statistics on carbon reductions look very positive. Over the past few years the EU-15 member states that signed the Kyoto Protocol at the time, show that they will reach the target of reducing CO2 emissions by 8% over the period 2008-12 against its 1990 baseline year - and this is despite economic growth of 45% over the same period. These reductions are underpinned by a clear legislative framework. The European Union's climate and energy package sets climate change targets up to 2020, targeting 20% reduction of greenhouse gas emissions below 1990 levels, 20% of renewable energy consumption and 20% improved energy efficiency. These objectives are known as the 20-20-20 targets. Countries take control

For real estate investors, the more important level of action is not the global level, where nation states negotiate, but on the country levels, where laws and regulations are put in place to create coherent policy frameworks which will have direct effect on their investments and upon which they can base future decisions. So, while the World is waiting one more time for a global deal, real estate investors can already place their bets in markets where climate change legislation has been firmly introduced, such as the UK and France. China taking centre stage

Even if it is not part of the carbon reduction efforts of the Kyoto protocol China has taken giant steps to have an impact on the climate change challenges: It has a market share of 30% of the global clean tech investments and has established itself as the number one manufacturer in the wind power sector worldwide. In its latest five-year plan, covering the period 2011-15, China set an energy target to reduce energy intensity by 15-20%. Its carbon target could be even more ambitious: officials have aired a goal of a 40-45% cut in carbon intensity by 2020, and the new five-year plan will reinforce that with an interim target for 2015. To achieve these goals, China is preparing a big spending programme to boost clean energy that could reach Rmb5,000bn ($753bn) over the next decade. Private sector driving progress

And since the Bali climate summit in 2007, every year the leading corporations of the world have signed a supporting communiqué. They encourage negotiators at the summits to adopt an ambitious and robust international framework to tackle the climate issues. This year’s Cancun Communiqué contains for the first time the explicit demand for financial and policy support to establish energy efficiency and low-carbon energy systems in buildings. Jones Lang LaSalle signs the Cancun Communiqué

Jones Lang LaSalle’s CEO Colin Dyer has signed the Cancun Communiqué re-iterating his support for the climate change summit negotiations as he did last year.

Colin Dyer President and Chief Executive Officer

"Countries and companies around the world need to address the role society plays in the emission of the greenhouse gases that accelerate climate change. Buildings are indirectly responsible for a large portion of greenhouse gases. As the leading global real estate services and investment management company, Jones Lang LaSalle has a responsibility - and welcomes the opportunity - to contribute to solving to this worldwide challenge."

It remains to be seen what additional steps the negotiators will be able to take in Cancun to provide a predictable and realistic legal environment for global climate change action and investments. – Or will we need to wait for the next climate summit in 2011 in South Africa?


http://www.cpsl.cam.ac.uk/pdf/The%20Cancun%20Communique%20final.pdf


Greenprint Foundation Announces Release of Greenprint Carbon Index™ The Greenprint Foundation – a worldwide alliance of leading real estate owners, investors and financial institutions committed to reducing carbon emissions across the global property industry - has announced the release of its first Greenprint Carbon Index™ The index, which measures the carbon footprint of 176 million sq ft (16 million sq m) of property across 36 countries, was compiled by Jones Lang LaSalle’s Energy and Sustainability Services team and establishes a baseline for measuring the carbon footprint of the Greenprint portfolio over time. It quantifies carbon emissions that are produced as a result of building energy use and fugitive emissions from refrigerant leakage. Specifically, the Greenprint Carbon Index:

• Establishes an industry-wide standard for measuring, benchmarking and tracking operational energy usage and carbon emissions trends, aligned with both the International Greenhouse Gas Protocol and the principles of ISO 14064.

• Creates a reliable and transparent platform that enables collection and analysis of accurate property performance data that is verifiable.

• Strives to harmonise the Index’s methodology with green building accreditation systems. At the launch of the index on October 5, 2010, Charles B Leitner, CEO of Greenprint Foundation, said; “Amidst an explosion of wide-ranging environmental initiatives, it has been difficult to find a common starting point to measure and benchmark carbon emissions across the worldwide property industry. With the help of Jones Lang LaSalle, Greenprint Foundation has launched its Carbon Index to establish that starting point and advance the industry’s efforts to reduce energy usage and carbon emissions while building value.” Julie Hirigoyen, Head of Energy and Sustainability Services at Jones Lang LaSalle EMEA, commented “ In our view the dialogue between owners and occupiers has moved beyond questioning the effect of the built sector on climate change. Increased government regulation and growing investor and tenant demand for green properties, are driving real estate owners to implement cost effective energy and carbon reduction strategies that simultaneously enhance their properties’ long-term value.” Click here to visit the Greenprint Foundation website.


http://www.greenprintfoundation.org/Default.aspx�

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Sustainable Property: Focus on renewable energy In this section:

• Solar energy: Can it shine for your portfolios – A Global and US Perspective • The Impact of Feed-in Tariffs around Europe • What’s fuelling the alternative energy train in Asia Pacific? • Renewable Energy Futures and Indian Real Estate • Onshore wind farms – the future in the UK • Case Studies

The usage of non-traditional renewable energy, such as wind, solar, biomass and the technologies that can exploit it, has been discussed and debated since at least the second oil shock back in 1979. Why is it then that its recognition as a serious alternative, at least in part to fossil fuels, is still in its infancy in the property industry? Surely part of the answer lies in the fact that until a few years ago we have not had to worry quite as much as we do now about rising energy costs, shortages and climate change legislation. So what part can renewables play in the future?

In this issue of the Global Sustainability Perspective we look at the real estate opportunities created by feed-in tariffs for solar power generation, at new business models for revenue generation and the funding of solar installations, and at the march of the wind farms across Scotland and their future in the UK. We also give a view on the forthcoming Cop16 meeting in Cancun.

The renewable energy scene is changing by the day, demand continues to grow, costs are falling, legislation is increasing and the new opportunities are becoming ever clearer. We continue to closely monitor renewables and their adoption in our industry.

Climate Change Disclosure Are you ready?

At the beginning of 2010, US Securities and Exchange Commission published its Guidance Regarding Disclosure Related to Climate Change targeted at publicly-listed companies. In this white paper, Jones Lang LaSalle provides the background and looks at the implications of these guidelines for real estate investors and services companies.






Solar energy: Can it shine for your portfolio? A Global and US Perspective

Solar photovoltaic power is a renewable resource with great potential, but the challenges of understanding all the issues and choosing the best strategy from a multitude of options may seem insurmountable to a real estate asset manager or corporate executive. Faced with issues ranging from return on investment to incentive eligibility and from roof strength to lease-versus-buy options, property owners may take a wait-and-see approach, and thereby miss the best market opportunities. On the other hand, acting in haste may lead to less-than-optimal results.

The time to look into alternative energy option is now <VIDEO CLIP> Dave Gralnik, Head of Renewable Energy Services notes that alternative energy prices are down, efficiency is up and incentives are in place, making solar power more appealing to organizations than ever. The good news is that the complexities of solar power solutions can be greatly simplified by applying a thorough process of establishing goals, surveying physical assets; analyzing options and winnowing out those that do not meet the goals. For some properties, the answer may be that solar power is not a viable solution. But some owners are figuring out how to harness the sun’s energy to manage energy costs while making a powerful environmental statement.

The State of the Solar Market

Over the past 20 years, comparable to computer technology, the capacity of solar generators has risen dramatically, while the cost has dropped sharply. As with computers, the solar industry is maturing, and both capacity increase and cost decrease are now at a relative plateau. In the U.S for example, the cost of generating solar energy through photovoltaic modules has fallen 40 percent in the past two years, from $3.50-$4.00 per watt in mid-2008 to $1.85-$2.25 per watt in the first half of 2010.

Barring an unanticipated breakthrough, improvement should continue at a slower pace, so the timing is currently very good for a venture into solar power, whether as an owner, buyer or solar system host.

Pay Back - Immediate Soft and Longer Term Financial Benefits

Solar power installations still do not provide the short payback period and strong return on investment that some energy efficiency strategies offer. Owners that invest in solar directly have additional motivations. For corporate owned facilities, an intangible benefit is the good will created with employees, customers and investors, which can translate into better employee recruitment and retention as well as enhanced sales. In addition, corporate and investor owners of real estate may face increasing pressure to meet a portion of their energy needs through renewable sources, as a way to meet carbon-reduction goals if not in response to mandates from municipal, state or local governments.

A solar power installation can also be a visible reminder of a company’s commitment to reducing its carbon footprint. On a related note, powering a building with solar energy can generate valuable credits toward desired certifications such as LEED.

From a risk assessment perspective, solar represents a fixed energy cost that reduces an organization’s exposure to energy price increases over a period of up to 25 years. In addition, solar power is generated during daylight hours, which are also the peak usage hours when many utilities charge a higher rate for electricity. The ability to draw on self-generated power at peak times may result in cost savings higher the average cost per kWh.

Incentives are Encouraging

A range of tax credits, subsidies and other incentives from utilities and federal, state and local governments allows owners to further defray costs. In the U.S. for example, Federal government offers commercial property owners two primary benefits for investing in solar and other renewable energy systems. The first is a 30 percent corporate investment tax credit (ITC) which carries no dollar limit for total installed costs. The second is the Modified Accelerated Cost-Recovery System (MACRS), which allows owners to depreciate renewable energy investment on a five-year schedule.



A wide range of tax credits, financing programs and other incentives are also available from many U.S. states and Canadian provinces. But the program that shows the most promise for accelerating solar power investment—feed-in tariffs-- is less advanced in North America than it is in many European countries.

Feed-in Tariffs – The US Situation

States set rates that utilities can charge customers, or tariffs. Under a feed-in tariff, countries or states mandate utilities to get a percentage of their energy from renewable sources, and enable utilities to acquire renewable energy from all third-party sources that meet the legal criteria. The price is intended to be sufficient to create a private-sector market as participants see an opportunity for reasonable returns on investment. As market competition increases and utilities reach targeted levels of renewable energy, the amount paid for a kilowatt-hour of solar, wind or geothermal energy declines.

Feed-in tariffs are considered an effective way to leverage market forces in spurring renewable energy development to further greenhouse gas reduction goals.

They are being implemented in more and more countries--including the UK, China and India—and legislation has been introduced in at least 12 U.S. states and Canadian provinces. A similar program already in place in California and a new program starting up in New Jersey helped the U.S. increase its solar capacity 37 percent in 2009 to a total of 2,000 megawatts (MW), with more than 6,000 MW of installations in the pipeline at the beginning of 2010, according to the Solar Energy Industries Association.

Focus on New Jersey’s Solar Revolution

New Jersey’s Renewable Energy Portfolio Standard (RPS) is a timely example of how property owners can achieve a strong return on capital and time invested in solar energy. RPS requires utilities to derive 2.12 percent of energy from solar power by 2021, necessitating growth of capacity from 90 megawatts in 2008 to an estimated 2300 megawatts in 2021. Electricity suppliers that miss the goal will be required to pay a Solar Alternative Compliance Payment (SACP) to cover each megawatt-hour of shortfall. The SACP is $675 in the 2010-2011 period. Rather than produce the renewable energy themselves, utilities are expected to buy it from private-sector producers at market prices that include a reasonable profit but are well below the SACP.

To make the system work, the state has set up a program for issuing and trading Solar Renewable Energy Certificates (SRECs). For each 1000kWh (1MWh) generated by a solar photovoltaic system, the owner receives one SREC, which can be held or traded on an exchange used to pay back the state loan to finance the system. Companies that invest in solar in New Jersey can also avoid paying the 7 percent state sales tax.

Seven Northeast and Mid-Atlantic states and the District of Columbia have SREC markets, and some adjoining states may be able to sell into other states’ SREC markets. However, New Jersey maintains a closed system—its SRECs can not be sold outside the state, and utilities can’t buy from out of state. The high demand for SRECs in New Jersey and the fact that they must be generated in-state, has created a strong opportunity for solar producers. In October 2010, New Jersey SRECs were priced at $640, double the next-highest state, Maryland, where SRECs were trading at $320. In some states, SRECs have traded for as little as $200.

Options for Owners

Owners who are interested in onsite solar power generation must consider several issues. Various technologies and installation options will support an organization’s operational, financial and environmental goals in different ways. The ability to obtain tax incentives and rebates varies from market to market. An experienced advisor with the ability to explain and quantify the pros and cons of different options is key to a successful outcome.

A major question is whether or not to own a system. There are third-party providers that will own, install and maintain solar systems on rooftop or other area. The supplier assumes the capital commitment and operating risks, and the owner negotiates a fixed fee, with a stated annual escalation, for the energy used by the building. An advisor can help owners lock in competitive prices over the length of the agreement, assuring a reliable supply of clean energy at a predictable cost.



Another option for organizations with large flat-roof spaces such as warehouses is to host a solar power site. An owner can rent a building’s roof to a solar developer who generates and sells the power to the building and others in the area. This option allows the owner to receive affordable solar power and generate revenue from unused roof space. To create economies of scale that interest solar development companies, a third-party advisor can aggregate several properties with different owners in the area and negotiate a portfolio-wide lease agreements

While several potentially attractive solar energy options exist, few property owners have the internal resources and experience to fully explore all the options and make the best choice for their organization. Consider engaging a third-party expert as a partner in assessing needs, accurately determining the costs and ROI of each option and helping to determine the brightest course for your solar future.

Renewables on the Political Agenda Organisations are also seeing a changing landscape unfold in terms of energy and climate legislation. Laws passed in recent years in many countries, including the April 2010 Feed in Tariff programme in the UK, have demonstrated that political leaders are serious about encouraging the use of renewable energy. In the US at the national level, 7.5% of energy used by federal agencies must be from renewable sources by 2013. In addition, many states such as California and New Jersey have Renewable Portfolio Standards for utilities, with mandates such as 20% of energy from renewable sources by 2020. In the face of expected dramatic upcoming increases in non-renewable energy costs, growing solar as a percentage of total energy needs now can help keep future costs manageable and predictable.

Self-generated solar power

Considerable as the benefits of solar power may be, do they justify the investment in equipment and maintenance? The answer depends largely on the type of system used and characteristics of the user. The most common solar installations are rigid crystalline (glass) panels, most often mounted on rooftops. With features such as the ability to be tilted toward the sun to maximize energy production, they enable the highest output per square foot of solar equipment for large buildings. Though rooftop installations are most common, crystalline panels can be incorporated into any flat surface such as shade structures over parking spaces or mass transit waiting areas, even unused land on a business property.

The ballasted systems of crystalline installations avoid or minimize roof penetrations, so they can be removed without damaging the top of the building. Still, removing solar panels unnecessarily is an expense worth avoiding. Since the warranted service capacity of solar panels is typically 20 years, it is often not advisable to install them on a roof more than five to seven years old, which may have to be replaced while the panels are in place. Also, the roof should have a load capacity of over four pounds per square foot.

An option gaining traction, especially for older roofs, is thin-film photovoltaic (PV) solar generators. These flexible films can attach to roofing membranes or metal sheets, so they can actually reinforce many older roofs, extending their service life. If you need to replace a roof in the near future, a PV overlay can help justify its cost by possibly eliminating the expense of re-roofing the building. A PV system is also lighter in weight than a crystalline structure, so it requires less roof strength.

Investing in solar power

Depending on the country, investments in solar systems may qualify for certain tax incentives and rebates from the state and local entities, though such allurements only partially defray the cost of implementing a self-owned solar system. Here are some questions real estate owners should ponder in weighing the cost-versus-benefit of a self-owned solar energy system: How can I get upper management buy-in for a technology that is sustainable, but slow to generate ROI? Solar installations must be used for their entire 20-year life cycle to gain significant cost advantage over outside power suppliers, though that span could drop sharply depending on the future volatility of utility energy from non-renewable sources.



Is my site’s energy need large enough to achieve economies of scale from a solar installation?

Since maintenance of solar equipment falls outside the experience of typical building engineering crews, can we train our personnel to adequately service them or will we need to rely on third-party technicians?

Can we generate solar energy beyond our needs and defray costs by selling it to others? For example, a building owner who installs a solar system might be able to not just meet overall common area needs, but sell power to tenants.

How to Assess the Payback

Owners considering solar installations must weigh several factors. To measure financial payback against outside energy suppliers, the value of solar must be calculated over the system’s anticipated 20-year lifespan, although the time horizon could decrease if fossil fuel prices rise sharply. A corporate owner must consider whether the firm will occupy the building long enough to realize the full economic benefit. Owners must also consider whether a sites energy need is large enough to achieve economies of scale from a solar installation; whether existing property management staff can be trained to adequately maintain and repair installations; and whether there is an opportunity to generate solar energy beyond our needs and defray costs by selling it to others.

Non-ownership Options

If ownership of a solar installation does not make financial sense, consider non-ownership options that might be more attractive. One alternative is to buy solar power from a third-party provider that owns, installs and maintains a solar system on your building’s roof or other area. The supplier assumes the financial commitment and operating risks, and you negotiate a fee for the energy you use.

Yet another choice for organizations with large collective flat-roof spaces, such as a network of warehouses, is to host a solar power site. Under this arrangement, roofs are rented to a solar developer who in turn sells power to utilities. Although the roof owners can purchase solar power for their own needs, most energy is fed directly into the grid. For the right building owners, this can be an optimum strategy for both receiving affordable solar power and generating revenue from unused roof space. One major logistics company has leased 20 million square feet of roof space to a large utility, which will install solar panels capable of generating 100 megawatts of electricity.

While several potentially attractive solar energy options exist, few CRE groups have the internal resources and experience to fully explore all the options and make the best choice for their organization. Consider engaging a third-party expert as a partner in assessing needs, accurately determining the costs and ROI of each option and helping to determine the brightest course for your solar future.

The Impact of Feed-in Tariffs across Europe

The Feed-in-Tariff (FiT) has, since the 1990s, become an increasingly popular and widely adopted method for governments of every political colour to intervene in their electricity markets. The aim of this policy instrument has been to accelerate the uptake of renewable energy generation technologies and address market distortions generated in part by subsidies for more carbon intensive and less sustainable technologies. In Europe FiT schemes continue to drive renewable electricity generation where some of the world’s most long running and effective regimes are currently in place.

A major catalyst for introducing or further expanding FiT across Europe was the adoption of the EU Renewables Directive in 2008 (Directive on the Promotion of Electricity from Renewable Energy Sources in the Internal Electricity Market (2001/77/EC)). Under this Directive, each country adopted a target to achieve an increasing percentage of renewables in the energy mix by 2020. The overall EU target currently stands at 20% of renewables in the overall energy mix by 2020.

The most mature FiT regimes in Europe can be found in Germany, Spain, France and Italy. What follows is a review of the FiT schemes in these countries as well as a number of other EU Member States.


http://ec.europa.eu/energy/renewables/targets_en.htm


Feed-in Tariffs - European Summary

Country Launch Technology supported

Preferred technology Range of incentives

UK 2010 On-shore' wind; Solar Photovoltaics, Biomass; Hydro , Anaerobic Digestion; Micro CHP

Small scale solar and wind

0.45£/kWh – 0.145£/kWh for wind 0.361£/kWh – 0.293£/kWh for solar PV 0.19£/kWh – 0.178£/kWh for Hydro

Spain 1997 On-shore' wind; 'Off-shore' wind power; Solar Photovoltaics, Biomass; Hydro

Wind 0.32 – 0.34€/kWh for solar but cuts announced;

Italy 2005 On-shore' wind; 'Off-shore' wind power; Solar Photovoltaics, Biomass; Hydro

0.402€/kWh – 0.33€/kWh for roof PV, 0.362€/kWh – 0.297€/kWh for other PV, depending on capacity, effective from 1Jan 2011

France 2006 On-shore' wind; 'Off-shore' wind power; Solar Photovoltaics, Biomass; Hydro

Building integrated and ground mounted PV

0.58€/kWh – 0.51€/kWh for BIPV commercial buildings; 0.14 €/kWh for ground mounted systems

Germany 1991 On-shore' wind; 'Off-shore' wind power; Solar Photovoltaics, Biomass; Hydro

On shore and off shore wind 0.319€/kWh – 0.16€/kWh for solar

Czech Republic 2005

On-shore' wind; 'Off-shore' wind power; Solar Photovoltaics, Biomass; Hydro

0.49€/kW – 0.455€/kWh for solar to 0.81€/kWh for hydro

Netherlands 2009 On-shore' wind; 'Off-shore' wind power; Solar Photovoltaics, Biomass; CHP

Possibly focusing on nuclear going forward

0.459€/kWh – 0.583€/kWh for solar, 0.118€/kWh – 0.186€/kWh for wind

Belgium 2005 On-shore' wind; 'Off-shore' wind power; Solar Photovoltaics, Biomass; Biogas

0.455 – 0.1€/kWh for solar; 0.078€/kWh for wind

Ireland 2005 On-shore' wind; 'Off-shore' wind power; Solar Photovoltaics, CHP; Hydro

0.19€/kWh for solar; 0.59€/kWh for wind

Slovenia 2009 On-shore' wind; 'Off-shore' wind power; Solar Photovoltaics, Biomass; Hydro

0.267€/kWh – 0.414€/kWh for solar, 0.077€/kWh – 0.105€/kWh for hydro

Greece 2006 On-shore' wind; 'Off-shore' wind power; Solar Photovoltaics, Biomass; Hydro

0.55€/kWh for solar, 0.07 – 0.08€/kWh for other renewables



Germany

Germany currently represents the most mature FiT regime in the world which was established as a prototype in 1991 and further enhanced in 2000 to increase the rates of subsidy. In 2009 the German electricity mix achieved an impressive 16% renewables content, with roof-top solar photovoltaic (PV) installations being common place.

Germany has traditionally had one of the most transparent and comprehensive Feed-in Tariff structures. The aim of the tariff is to stimulate green jobs and renewable energy generation, while having due regard to the changing conditions in the e.g. solar market and avoid situations of excessive returns for solar projects developers. German Feed-in tariffs are revised once every four years when annual tariff degression is fixed in advance. In response to a significantly increased pace of solar PV installations, the government recently introduced an upper threshold of PV capacity installation – if the market exceeds the set threshold, then a higher tariff degression would be applied the next year. If however, the target threshold has not been achieved, the pace of tariff degression is reduced to boost renewable energy installations. Earlier this year, the news of likely ‘out-of-cycle’ cuts to solar PV tariffs were announced to reflect the changing PV market conditions in Germany following a dramatic fall in PV demand in Spain. The anticipation of FiT cuts created a solar ‘rush’ earlier in 2010 which resulted in c3.4GW of installed capacity. Spain

Spain’s system is less transparent and flexible when compared to Germany, however, it has been very generous in the past, supporting internal rates of return (IRR) of 15% on projects. The market peaked in 2008 when very attractive tariffs were introduced, but has since slowed down due to tariff degression. The FiT is financed by the government and the taxpayer, rather then the utility ratepayer, and the sovereign debt problems that have arisen in Southern European countries, including Spain, impacted upon the level of the FiT support which was considered affordable. The latest cycle of FiT revisions announced in August 2010 brings forward a cut by 25% for large roof-based systems and by a staggering 45% for ground-mounted solar installations. This, combined with the prospect of retrospective cuts to projects already in place, created significant uncertainty and nervousness amongst investors. No firm decision has been announced yet, and uncertainty is simply being translated in higher returns demanded by investors for renewable energy installation projects. Overall, although Spain looks to implement significant cuts, it must be remembered that these are applied to a much higher pre-existing FiT level than on average; damage to the market is therefore a function of the wider economic uncertainties generated by the global recession and resulting instability in the markets.

France

France’s Feed-in tariff regime presents a significant opportunity as the French market is still in a growth phase and yet to mature. France claims to have the world’s highest FiT with the latest revision in 2010 resulting in higher payments for all renewable technologies covered by the Scheme. The French FiT is unique in that it includes Building Integrated PV (BIPV) installations. FiTs for biomass and geothermal are also in existence and have been significantly increased in the 2010 cycle of revisions (50% and 70% respectively). However the seeming preference of the government towards BIPV has raised concerns that FiT ‘abuse’ might ultimately take place where ‘empty’ units are constructed with BIPVs, purely to reap the benefit of FiT - a distortion that would need to be addressed.

France is currently trialling a scheme for commercial PV installations (capacity > 250 kW) with varying FiT payments depending on the region where an installation is located, and hence the number of insolation days. This will mean that an installation in a northern département will receive a higher FiT than a facility in the south of France.

Going forward, the French market will continue to present opportunities, and due to high solar FiT, PVs will likely to constitute a bulk of the country’s renewable energy generation in the foreseeable future. Positive changes to the rates



payable on wind power mean there will be no generation threshold for onshore wind farms to benefit from the FiT, with a requirement to have a minimum of five turbines. The recent adoption of Grenelle 1& 2 environmental regulation and further development of this policy highlights the French government’s commitment to renewable energy, including changes to improve procedures for obtaining consent for renewables installations, especially in regards to off site wind power.

UK

The UK lags behind other EU Member States in terms of the proportion of renewable energy generation in its overall energy mix (circa 3% in 2009, DECC 2009). FiTs only came into force in April 2010, and apply to projects with generating capacity less than 5MW. Although the scheme targets the residential sector with a focus on micro-generation, the new Coalition Government which came to power in May 2010 indicated that it may expand the FiT to larger scale projects, in particular, off shore wind installations, while keeping Renewable Obligation Certificates (already in place to ensure energy suppliers generate a certain amount of electricity from renewables) for existing projects.

Unlike some other FiT models, the tariff in the UK is composed of two elements:

• generation tariff (paid by the energy supplier for each kWh of energy produced and used on site; rates vary for every technology)

• export tariff – this amounts to 3p per kWh of electricity that is sold back to the grid (same rate for any technology).

Most tariffs have a lifetime of 20-25 years and are linked to the retail price index (RPI) over the previous 12 months to ensure they are aligned with the inflation rate. Solar tariffs are relatively high (above those of Germany) for small to medium sized installations, and are less relevant for larger scale facilities. The UK FiT was devised to drive an IRR of 5-8%, which could mean a nominal IRR rate in excess of 7%.

Italy Italy first launched a FiT in 2005, and had a 462% growth in solar PV installations in the first year, and has since seen a doubling of its PV capacity between 2008 and 2009. Ireland More recently, the government introduced a FiT for bio-energy installations that will be subsidised by between €0.085-0.15 per kWh; for a period of 15 years, this includes anaerobic digestion plants (capacity up to 50 MW) and biomass Combined Heat and Power installations (capacity up to 100MW).

Czech Republic Similar to its European neighbours, the introduction of FiT in Czech Republic created a surge in installation of solar PVs with payback periods as low as six years. This growth has been slowed by the constraint of the electricity grid capacity and the inability to meet requirements of renewable energy growth. An alternative to a FiT in Belgium, the government incentive called “Green Current Certificates” (GCC) is paid in addition to electricity prices for energy generated from the renewable sources over a 20 year period. What’s fuelling the alternative energy train in Asia Pacific?

The development of alternative energy across Asia Pacific has been driven by strong political commitment underpinned by three key interrelated drivers:

1. energy supply concerns associated with rapid growth and poor energy infrastructure,


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2. economic opportunities presented by the low carbon and ‘green’ economy

3. global moves to reduce carbon emissions.

Continual demand for energy spurred by population and economic growth particularly in China and India has highlighted the considerable challenges exacerbated by energy security concerns. This in turn is impacted upon by ever increasing completion for fossil fuels forcing nations to compete for raw materials in more remote and less stable countries, leading to higher and more volatile energy prices.

Although the current pricing of non-renewable energy sources such as fossil fuel is lower than that from renewable ones, government support through promotion policies such as capital subsidies, grants, public investment or loans have pushed the development of such alternative energy industries across Asia Pacific. Public investments in the clean energy sector have also led to China becoming the world’s largest producer of wind turbines and solar panels. The potential development of new industries and the creation of new jobs have been another significant factor. The global alternative energy industries generate an estimated 3 million jobs and this is set to increase further. In Singapore, for example, the government has projected that its clean energy industry will generate 7,000 new jobs and add S$1.7 billion to the GDP by 2015. China China continues to push ahead in fulfilling the policy commitments made at the Copenhagen Climate Summit to provide 15% of total energy consumption from renewable sources by 2020 and reduce carbon intensity by 40-45% of 2005 levels by 2020. With strong government support through active policies ranging from capital subsidies, tax credits, public investments, loans and financing, it has surged ahead and emerged as a world producer of wind turbines as well as solar panels. The government’s stance on the renewable energy front is likely to gain further support and promotion in the upcoming 12th Five-year National Plan, expected to be released in November 2010.

India Power shortages in India have become a common phenomenon as demand exceeds supply. Average deficit is reportedly 12% during peak demand and 10% at other times. Ensuring that energy supply meets the demand and also being one of the larger carbon emitters, the role of alternative energy plays an increasingly critical role as the economy expands. The government of India has thus placed substantial focus on driving solar energy, wind, hydropower and biomass power through tax benefits, incentives, concessions and subsidies. Overall India’s National Action Plan for Climate Change has set the target for the share of the renewable energy in the nation’s total electricity consumption to 15% by 2020 (See focus on India).

Australia The Government’s Renewable Energy Target (RET) requires that 20% of the nation’s total electricity supply is generated from renewable sources such as solar, wind and geothermal by 2020. Earlier in 2010, the government implemented changes to the scheme to address a collapse in the price of renewable energy certificates (RECS), due to an over-abundance of small scale technologies such as residential solar panel, and hot water systems. It is expected that the changes will see an upswing in renewable energy projects beyond the original 20% target, ensuring a meaningful change in Australia’s electricity mix. In spite of the positive changes to the RET, ongoing uncertainty regarding mechanisms to put a price on carbon, including whether such a price will be implemented at all, remains a significant concern to the industry and is eroding investor sentiment in this area.

The last decade has seen significant changes in how – and what – energy is bought and sold in Australia. Changes such as deregulation, privatization and a change in the fuel mix to include renewables energy types have led to significant changes in energy pricing; “Do you have the energy to keep up with the pack” gives our latest perspective on energy pricing and future efficiency initiatives. Download the full report.


http://www.joneslanglasalle.com/MediaResources/AP/Marketing/Australia/EnergyPerspective-AU-2010.pdf


South East Asia / Singapore

Most governments in the emerging countries of South East Asia (SEA) remain committed in their support for the promotion of renewable energy in their homeland. Indonesia, the world’s 4th most populous nation, has set a target of 17% of all energy consumption to come from renewable sources by 2025 while Thailand has set it at 20% by 2022 and Vietnam 11% by 2050. The governments’ commitment to the continual development of their clean industries in these countries in SEA is remarkable going by the level of renewable energy promotion policies and government funds being pumped into these sectors. In Singapore, over S$110 million has been set aside to support and promote the clean energy sector which is expected to reap some S$1.7billion in GDP and create 7,000 new jobs by 2015. Typical of the country’s other economic programmes, the government has identified five key pillars in driving the growth of its clean energy sector; R&D, manpower development, grooming Singapore-based enterprises, branding the industry internationally, and growing a vibrant industry ecosystem. Testament to the government’s effort; Vestas Wind Systems - the world’s top wind technology company from Denmark, will be developing the largest R&D centre outside of its home country while Renewable Energy Corporation of Norway has settled in Singapore after screening over 200 possible locations globally. As a financial and legal hub in Asia, Singapore is also fast becoming a carbon services hub serving SEA which has the biggest sources of carbon credits after China and India.

Renewable Energy Futures and Indian Real Estate

A Countrywide Energy Overview

The energy crisis in India is increasing with its fast growing economy. The average per capita consumption of energy in India is around 520 kWh which is much lower than the global average of approximately 2,613 kWh. India is forced to import energy as it has had a negative energy balance (gap between energy consumption and production) for decades. With the country’s GDP expected to grow at the rate of 9% y-o-y the energy demand is expected to rise significantly to about 840 kWh by 2020. Such statistics clearly illustrate that India is keen to address its future energy strategy.

Coal is India’s primary energy source contributing more than 60% of the total power generated. This is followed by hydro electric power and then natural gas (Figure 1). As coal and natural gas resources are fast depleting, there is an urgent need for India to shift to other renewable energy sources such as solar, wind and biomass to meet both current and future demand.

India Power Generation Sources

Nuclear1.8%

Hydro13.7%

Renewables1.9%

Oil/Gas13.9%

Coal68.6%

Source: International Energy Agency, 2008



India has substantial potential for solar energy production. As noted in a survey by McKinsey & Company in May 2009, India has one of the world’s highest solar intensities with an annual solar energy yield of 1,700 to 1,900 kilowatt hours per kilowatt peak (kWh/kWp) of the installed capacity, and receives more solar energy than it consumes. The country also ranks fifth in the world in the production of wind power. Suzlon Energy Limited (SEL) in Maharashtra operates one of the world’s largest wind farms with capacity of 1000 MW. Renewables clearly have an important part to play in India’s future energy strategy.

The Public Sector Leads a Renewable Energy Drive Table 1:

Table 2:



Table 3:

The Government of India has been taking various steps to ease the energy crisis in the country by promoting renewable energy. In 1992, the Ministry of New and Renewable Energy (MNRE) (initially named as Ministry of Non-Conventional Energy Sources (MNES)), was created as a nodal agency for policy making, planning, promoting and all related matters on renewable energy. In addition to this, the Electricity Act 2003 (EA 2003) also promoted the development and generation of renewable energy by mandating State Electricity Regulatory Commissions (SERC) to promote the generation of renewable energy within their respective states. Similarly, to support growth in wind power production, the government will provide a 10 year income tax holiday for wind power generation projects. Additionally, MNRE announced a national Generation Based Incentive (GBI) scheme for grid-connected wind power projects of capacity more than 5 MW. As per this scheme MNRE will provide them with GBI of INR 0.50 per unit for a period of 10 years on top of the existing state government incentives.

Renewables in Real Estate – An Energetic Future?

The Government of India is also strongly promoting use of solar energy and renewable energy in real estate projects. In government promoted projects the use of solar and renewable energy sources has already begun (please see interactive tables above). Regarding Special Economic Zones (SEZ), the government has proposed that all projects should meet at least 25% of their lighting needs through solar energy. Furthermore, to assist the private sector, the Government of India has established the Indian Renewable Energy Development Agency (IREDA), a premier financial institution which provides loans for renewable energy projects. State governments in India are also promoting the development of renewable energy, with fifteen having already announced policies for grid connectivity of renewable energy projects. As real estate development accounts for almost 40% of total power consumption, encouraging the use of alternative energy is seen as important enough to attract government led incentives. For instance the State Government of Maharashtra announced that new suburban real estate projects with a minimum area of 100 acres can increase the Floor Space Index (FSI) by 0.5, if they generate power using renewable sources of energy for their own consumption. This will directly benefit projects within the suburban precincts of Mumbai and other cities in Maharashtra.



Its not Just about the Incentives

For the development industry the adoption of solar and alternative energy solutions is about satisfying buyers concerned about environmental issues, as well as about taking advantage of available government incentives. The eco-friendly aspects of real estate projects translate into unique selling propositions that help, for the moment at least, to differentiate projects.

Targeting Energy Security and Climate Change

India is planning to generate 15% of its power from renewable sources by 2020. The total energy generation potential as estimated by the MNES is about 151,500 MW (please see interactive table above). This is about 92% of the current total energy generation capacity of the nation which is about 164,835 MW, indicating just how immense the potential for production of renewable energy is in India. There are a host of other government led renewable initiatives which will be trying to draw on this potential, for example:

• The government has created a national fund to back renewable energy projects using a tax levied on usage of coal. • There are plans to exempt taxes and import duties from the production of solar equipment and heat pumps for

geothermal energy. • Renewable energy certificates (REC), an initiative by the Central Electricity Regulatory Commission (CERC) would

enable the cost effective purchase of renewable energy. New investments are also being planned in solar and alternate energy projects. The World Bank has allotted USD 4 billion in loans for India’s renewable energy projects. Going forward, India plans to invest USD 2.3 trillion over the next two decades on renewable energy projects. Such government support and investments illustrate how the Government of India is taking significant steps to achieve energy security and a renewable future.

Onshore and offshore wind farms – the future in the UK The legislative and planning context for UK renewables In January 2008 the European Commission published a ‘20 20 by 2020’ package. This included proposals for:

• reducing the EU’s greenhouse gas emissions by 20% • increasing the proportion of final energy consumption from renewable sources to 20%.

Both targets are to be achieved by 2020, as set out in the Renewable Energy Directive in 2009, and different EU member states have been set differential targets.

For the UK, the legally binding target is 15% of electricity from renewables by 2020. This compares to 6.6% approximately in 2009 so we are looking at a serious step-change in generating capacity. The UK’s framework to get there is set out in the The UK Renewable Energy Strategy (UKRES) 2009 developed by the UK’s previous Labour administration, which expected the majority of new renewable generating capacity to come from wind power, both on and offshore.

The key policy levers that were set in motion included changes to the planning system, extensions and enhancements to the Renewable Obligation (RO) and a focus on facilitating investment in the UK renewables industry. Of these policy levers, the Renewables Obligation is key as it requires licensed electricity suppliers to source a specified and annually increasing proportion of their electricity sales from renewable sources, or pay a penalty.

Much of this framework holds true since the arrival of the UK’s new Coalition Government in May 2010, although the planning system is yet again subject to reform. However, the Committee on Climate Change has recently flagged to the Secretary of State for Energy that meeting the 2020 renewable energy target will require a step change in the rate of


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progress and investment, including in wind power: “A ramping-up in the pace of investment is required as (around 1 GW of wind generation was added to the system in 2009, compared to over 3 GW required annually by the end of the decade”

It is Jones Lang LaSalle’s opinion that to achieve this step-change will require a significant reappraisal of the balancing exercise undertaken by decision-makers, between local impacts and the wider benefits of renewable energy schemes. Much of this will, and is already happening, during the planning process.

Why is wind power one of the UK’s technologies of choice?

For onshore wind, it’s cost effective and a proven technology. It’s also quick and easy to deploy, and relatively easy to decommission. It brings income to rural areas and has a relatively small footprint compared to some other types of renewable installations.

For offshore wind, partly it’s geography – we are an island surrounded by ample sites to establish large wind farms; and partly it’s because the UK, and particularly Scotland, already leads the world in offshore wind. The Department for Energy and Climate Change has calculated that offshore wind has the potential to provide the UK with an estimated up to 70,000 new jobs and £8bn in annual revenues.

Overall, for both types of windpower, the sector has the potential to deliver real UK economic benefits from both domestic deployment and exports of technology and energy. Wind farms are coming online around the UK and its coastline but a large proportion of the proposed new developments are for on-shore wind-powered generation in Scotland. In fact the Scottish Government has recently announced that Scotland’s electricity target for 2020 would be raised to 80% (see note).

So it is clear that at the highest level of policy making, the UK and particularly Scotland, has taken an unambiguously positive approach to the setting of ambitious renewable energy targets and stringent carbon budgets. There has been a steady and continuing momentum that has built up over the last few years in support of measures designed to combat climate change. If anything, that momentum is increasing. For investors, this may be your opportunity to consider wind power in a portfolio of investments.

Notes:

1. Directive 2009/28/EC of the European Parliament and of the Council on the promotion of use of Energy from Renewable Sources, Commission of the European Communities.

2. The UK Renewable Energy Strategy (UKRES) issued by the Department of Energy and Climate Change (DECC) in July 2009.

3. New Energy Focus, Policy News, ‘Scotland’s Renewables Target Lifted to 80%’, 23rd September 2010.

Case Studies

Everett, Massachusetts BNY Mellon BNY Mellon’s goal was to reduce carbon emissions and explore solar power opportunities. Jones Lang LaSalle proposed a system capable of an annual output of over 100,000 kilowatt hours (kWh) for a 385,000-square-foot office complex. We identified rebates and tax incentives that covered over three-fourths of the project’s $900,000 cost. After twelve months of operation, the system provided 107,000 kWh—about 3 percent of the Everett facility’s power requirements—with solar energy. It also saved $17,000 in energy expenses during its first year, with a direct reduction of 50 tons of carbon dioxide and 425 pounds of sulfur dioxide emissions each year. Additionally, the Everett facility is expecting reduced utility costs by over 20 percent annually. Download case study


http://www.joneslanglasalle.com/MediaResources/Global/GSP/JLL_GSP_BNYM_solar_case_study.pdf

http://www.joneslanglasalle.com/MediaResources/Global/GSP/JLL_GSP_BNYM_solar_case_study.pdf


Piscataway, New Jersey Deutsche Bank Deutsche Bank leadership and our ESS experts assisted the Bank to explore solar options. Deutsche Bank opted for the self-ownership of a solar array atop an 83,000-square-foot facility. Jones Lang LaSalle assessed the rooftop site, developed an initial design, identified and recommended a large-scale solar equipment supplier and managed installation of a solar array capable of generating 270,000 kilowatt hours of electricity a year. The system has exceeded projected solar generation in five of its first six months of operation and has offset nearly 12 percent of the facility’s carbon-based grid consumption, saving Deutsche Bank $51,000 a year in utility costs. Download case study

Promoting sustainability across Asia Pacific Deutsche Bank In 2008 Deutsche Bank established an ambitious global target to become carbon neutral by 2013. The bank set out to improve the efficiency of how it does business by rolling out various global initiatives that focus on areas such as energy, water, paper, and procurement. In 2009, Deutsche Bank launched the “50-5 Program” that aimed to save 50 million kWh of energy consumption and EUR 5 million in energy costs. Asia Pacific, the region with the smallest footprint of 82 buildings, contributed about 4 million kwhr of those savings. Download case study


http://www.joneslanglasalle.com/MediaResources/Global/GSP/JLL_GSP_Deutsche_Bank_ESS_Case_Study_sample.pdf

http://www.joneslanglasalle.com/MediaResources/Global/GSP/JLL_GSP_Deutsche_Bank_ESS_Case_Study_sample.pdf

http://www.joneslanglasalle.com/MediaResources/Global/GSP/JLL_GSP_Deutsche_Bank_Asia_Pacific.pdf

http://www.joneslanglasalle.com/MediaResources/Global/GSP/JLL_GSP_Deutsche_Bank_Asia_Pacific.pdf



Green Room In this section: • Our Greenblog • In Conversation With… Welcome to Jones Lang LaSalle's Green Room where we want to share with you news, thoughts and ideas about sustainability and the world's real estate markets. We will be posting a variety of material here and would welcome your feedback and views. Please visit our Greenblog where we continue to provide regular comment and analysis on the latest developments in the area of Sustainable Real Estate. In conversation with... The time to act is now Interview with Climate Change Capital's James Cameron, Vice Chairman and Tim Mockett, Partner, Climate Change Property Fund

Sustainability is no longer a side issue, say Climate Change Capital’s James Cameron and Tim Mockett. Mr Cameron, who attended an international pension fund meeting and the UN Investor Summit on Climate Risk in New York earlier this year, reports that pension funds are increasingly attracted by the opportunity property offers in the context of sustainability and climate change risk. He explained this is because they are looking for real assets that offer clear cash flow, easy efficiency gains and where legislation is offering certainty about future direction.

The time to act is now, says Mr Mockett; “If you’ve got an existing building, with a lease expiry in the next two to five years, you have got to future proof it around what’s coming. If you don’t, then you simply won’t get building regulation approval and you won’t be able to attract the right sort of tenants.”

Following the full investment of their first fund, Climate Change Capital is launching a new vehicle and they are looking to invest in larger properties with a particular focus on London. “London is where the rental growth is going to be and where the rents are to justify the capital expenditure to upgrade from brown to green. That is where the policy makers sit, where the big occupiers sit and where big investors want to invest, so we will focus on that core market”, Mr Cameron said.

Mr Mockett believes London offers a unique opportunity: “There are plenty of energy inefficient buildings in London and plenty of lease expiries coming up. A lot of buildings were let in the late 80’s or early 90’s and it is now 20 years on.”

Their message is that the existing stock has to be tackled: “Most of the buildings we look at today are going to be around in 30, 40 or 50 years. The most sustainable thing we can do to a building is not knock it down and start again, but recycle what we have.” Mr Mockett added that energy efficiency offers big and easy wins: “The World Green Building Council said recently that most buildings in developed countries are 30% inefficient. The first step is most definitely operation and management including: maintenance, replacing inefficient lighting, heating and cooling.”

On the question of whether sustainability is impacting value, Climate Change Capital believe legislation, tenants and investors are driving things in only one direction. Mr Mockett was clear: “If you don’t address sustainability then your


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buildings are naturally going to be discounted and by definition we will have a premium value relative to those discounted assets. It is going to be reflected in the yield, not the rent.”

Climate Change Capital launched their first property fund in 2008, with a closing value of £69m. Their gross asset value is now around £150m, having invested in city centre locations across the UK. Mr Cameron was adamant about the success of the Fund to date: “I’m not in the least bit embarrassed that Climate Change Capital was smart enough to hire people who bought at the right time and made money”, he said. And Climate Change Capital has been quick to implement sustainability initiatives at their properties. They spent £750k on a recent retrofit of one property, have introduced green leases across the portfolio and are sharing data with occupiers: “It’s a great example of landlord and tenant collaboration”, commented Mr Mockett, who has also held sustainability training days for occupiers and building managers.

Anyone visiting a Climate Change Capital property soon will notice an LED display in the entrance reporting the building’s energy, water and waste consumption. Climate Change Capital is putting in screens at all their properties to raise awareness about sustainability issues and to communicate performance with occupiers.

And on the CRC Energy Efficiency Scheme which has hit the headlines recently, Mr Mockett who recently attended the ExpoReal Conference as a panellist noted “Europeans are really interested in what we are doing”. Mr Mockett said the typical comment he received at the conference from Dutch, Germans and Scandinavians, who have traditionally been seen as sustainability leaders in Europe, was that the UK is “getting ahead of the game” – small comfort then for the landlords and tenants who have lost their CRC recycling payments following the UK Government’s Spending Review.

ProLogis: Green Roofs redefined Interview with Jack Rizzo, Chief Sustainability Officer and Head of Global Construction, October 2010 ProLogis, the World’s largest distribution facilities real estate company, founded its Renewable Energy group in 2009. It has solar projects installed or under construction on 41 buildings world-wide, totaling 50MW of electricity generating capacity. This corresponds to some 10% of total photovoltaic power capacity installed in the United States in 2009.

After signing its latest roof top photovoltaic installation with California’s largest electric utility early October, ProLogis has entered what Jack Rizzo, the company’s Chief Sustainability Officer and Head of Global Construction, calls its « utility scale approach ».

ProLogis’ Renewables business all started some five years ago as a result of the conjunction of two factors: The very advantageous European feed-in tariffs, basically a Government sponsored guaranteed purchase price for electricity from renewable energy sources, and the large amount of roof space owned by ProLogis across their distribution properties. The company’s quest for value creation and its drive for sustainable buildings started its interest for roof top generated solar energy.

With the advantage of a development and construction experience housed under the same roof it was quick to study the technical feasibility of installing photovoltaic equipment on the roofs of their warehouses and other facilities. Load capacity and wind resistance are the key structural characteristics of a roof concerning its capacity to carry solar power installations.

ProLogis rapidly understood that producing electricity for use in the distribution facilities was only a limited play due to the small average energy consumption for the buildings’ operations. Adding the financing issue it understood that the most successful approach to the business was on an utility scale. The way to go was maximizing roof


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installations and finding business partners to finance their large projects. At the same time solar power from photovoltaics is today still only financially viable if public rebate programs, tax incentives or feed-in tariffs are provided.

After a couple of years fine tuning their new large scale approach ProLogis put in place its first big project in Spain with a 4.7MW installation. At the end of this year, the company will start its second utility scale phase by targeting to grow from 50MW to 100 MW installed solar power production capacity which it wants to reach within two years, according to Jack Rizzo.

Based on their new renewables business and building on over 15 years of design construction and operating experience ProLogis is now paying more attention to the structural characteristics of their distribution facilities’ roofs. Jack Rizzo says that he sees virtually no impact on cost when building roof tops that can house solar installations. Only minor modifications to their structure are necessary to make them solar PV ready. Integrating the right design into the construction right from the start helps keep costs down that would have been necessary if roofs were to be adapted later to withstand solar power installations’ requirements.

With renewable power generation equipment costs regularly coming down and energy prices continuing their upward trend, ProLogis Chief Sustainability Officer and Global Head of Construction is convinced that going forward all buildings, where the location allows, will have solar power generation equipment just as part of the envelope.

While the Renewable Energy group is creating additional revenue for ProLogis, Jack Rizzo also sees better retention of tenants and the additional benefit for their clients’ sustainability agenda when using space with green energy roofs. Another proof of success for ProLogis’ solar power roof business lies in third party companies now approaching ProLogis to help them build their own solar power installations and projects, profiting from their accumulated experience. And last but not least such facilities provide product and service differentiation in a very competitive market.

Global Sustainability Perspective - latinamerica.jll.com · Jones Lang LaSalle’s CEO Colin Dyer...

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Transcript of Global Sustainability Perspective - latinamerica.jll.com · Jones Lang LaSalle’s CEO Colin Dyer...