These days, I’ve been thinking about what our chairman and CEO, Jean-Pascal Tricoire, often says: “When it comes to climate change, I’m neither an optimist nor a pessimist: I’m an activist.”
I think the same attitude applies to a COVID-changed world: It’s time to act. It’s time to prepare our buildings — where we spend 87 percent of our lives— for today’s pandemic and tomorrow’s climate crisis.
How do we do this? As a former engineer, I’ve always been drawn to concrete solutions as opposed to abstract ideas. In this blog post, I’ll share specific ideas for transforming our buildings. I’ll then provide one answer for the million-dollar question: how to pay for it.
Upgrading to healthier, smarter buildings
Perhaps the most immediate question is how to prepare buildings for the pandemic era. Safer buildings start with digitally connected buildings. At Schneider Electric™, we manufacture digitally connected building solutions for better air quality, physical distancing, and operational efficiency.
- Air quality: We’re supplying our customers with building management solutions that enhance ventilation, economizer use, and environmental monitoring. With digital control over HVAC equipment, facilities can keep a more vigilant watch over filtration status, air changes per hour, and other key metrics.
- Physical distancing: Our space management sensors deliver real-time status updates on occupancy. Instead of manually counting each person in an area, our solutions automate this labor-intensive process and deliver alerts as needed. Management tools also help with re-designing optimal room layouts for safer spacing.
- Operational efficiency: We’re offering strategies to get more from your facilities and staff without increasing costs. One key strategy is to improve energy and resource management for changing occupancy levels. Another is harnessing remote monitoring tools that allow facilities teams to deliver “telemedicine” for buildings from anywhere.
With these three solutions, buildings can elevate an occupant’s well-being, engagement, and safety, even long after the pandemic passes.
Fighting the climate crisis through sustainability and resiliency
Beyond the short-term challenge posed by pandemic readiness, our long-term vision is to take on future challenges like the climate crisis through deeper sustainability and resiliency.
As wildfires and severe storms intensify due to climate change, there’s a growing need to build more sustainable and resilient energy infrastructure. There are dozens of ways to do that, so I want to just focus on one that combines both pursuits within a single innovative system: the microgrid.
Microgrids transform the way we use energy. Instead of centralized power plants and distributed grids, microgrids co-locate electricity generation and consumption, creating the possibility of a truly decentralized, decarbonized, and digitized energy future.
- Sustainability: With on-site solar panels and battery storage, microgrids allow organizations to run facilities without diesel generators or coal-powered grid electricity. The prices for solar and batteries continues to decline, making it even more cost-effective to switch to zero-carbon microgrid systems.
- Resiliency: Microgrids spring to life when the main grid goes down, delivering back-up power for an indefinite period. Hospitals, military bases, and critical facilities have been early adopters, but the technology is spreading to data centers, EV fleets, and beyond.
New financial incentives are making microgrids far more financially attractive. The energy as a service (EaaS) model eliminates capital expenses and locks in a fixed rate for zero-carbon energy. Companies like AlphaStruxure, a joint venture between Schneider Electric and the Carlyle Group, make EaaS microgrids accessible to large facilities with constrained capital or limited in-house expertise. Small- and medium-sized organizations can also benefit from EaaS through another one of our joint ventures, launching later in 2020.
New tax incentives offer substantial savings
Fortunately, it’s not just microgrids that have a special financial incentive. In fact, much of the technology I’ve discussed in this article will likely qualify for major U.S. tax incentives.
The 2020 Coronavirus Aid, Recovery, and Economic Stability (CARES) Act amended Section 168 of the tax code. This deduction, along with the existing Section 179 tax deduction, allows organizations to write off 100 percent of the costs of non-residential, non-structural improvement projects to existing facilities — otherwise known as qualified improvement properties (QIPs).
In the past, these upgrades could be written off across a 39-year-period. Now, they can be written off entirely in year one of the project — a bonus depreciation that creates substantial savings.
The table here shows you a fictional example. Let’s say a hospital spends $1,000,000 on extensive HVAC system upgrades. The tax savings in year one rise from $5,385 before the incentive, to $210,000 — a massive difference.
What upgrades qualify for the incentive?
These tax incentives will catalyze much-needed upgrades to our country’s buildings.
Buildings are a key to the climate puzzle; they account for 39 percent of energy-related carbon dioxide emissions, and in the U.S., 30 percent of commercial building energy use is wasted.
Here are the types of building solutions discussed in this blog that likely qualify for the incentives:
- Building management software tools
- HVAC equipment such as sensors, valves, air handling, and building automation
- Power distribution equipment such as switchgear, inverters, automatic transfer switches, distribution panels, and charge controllers
- Software tools that intelligently control power distribution, microgrids, and IT infrastructure
A vision for sustainable, resilient, pandemic-era buildings
I am proud to work for Schneider-Electric, a company with people working hard every day to help our customers meet their energy, sustainability, and resiliency goals. And I welcome our federal government finding ways to help the U.S. build safer, more digitized buildings that can be energized by zero-carbon microgrids. With the right incentives and solutions, the U.S. private sector can accelerate toward a better future.
To learn how you can apply these tax incentives to your own facility, visit our website where we cover key highlights of the Section 168 and Section 179 incentives.
By the way, it’s not just the federal government that can help. We at Schneider provide advisory services that help you meet your energy, sustainability, and resiliency goals.