Is commercial property ready to embrace wind?

Canary Wharf Group recently signed a power purchase agreement with Brookfield to use wind power in its own operations. We consider how the wind and commercial property sectors could work more closely together.

  • Canary Wharf Group signed a debut wind PPA with Brookfield in June
  • This could pave the way for more wind across the London business district
  • The wind and commercial property sectors can partner on green issues

“You can’t connect the dots looking forward. You can only connect them looking backward. So you have to trust that the dots will somehow connect in your future.”

In almost ten years at Tamarindo writing 'A Word About Wind', I have avoided quoting the late Apple founder Steve Jobs. Partly because his quotes used to be so ubiquitous on LinkedIn, and partly because they haven’t fitted the article. But today is the day, as a story emerged recently that gave me a dots-connecting moment.

In June, banking giant HSBC announced it is set to leave its 45-storey headquarters in London office district Canary Wharf in 2027. It plans to move to a smaller building in central London that will enable it to better cater for the higher proportion of staff that are working flexibly since the Covid-19 pandemic. The move will also help it to reduce its energy use as, like other firms, it is striving to move towards net zero.

This will also put pressure on landlord Canary Wharf Group to work out its plans for 8 Canada Square post-HSBC. Sustainability is likely to be one of its priorities, given that Canary Wharf revealed on 9th May that it has signed a 15-year power purchase agreement with Brookfield to use electricity from a 60MW wind farm in Scotland, for around 70% of its electricity needs. This deal is to supply electricity used by Canary Wharf Group in its own operations, not across the whole 150-acre office, retail and  leisure estate, but it may lead to the increased use of green power in the area.

Now, about those dots. Before ‘A Word About Wind’, I spent five years writing for the commercial real estate magazine Property Week, including three focused on areas including sustainability. It has been interesting to see a well-known commercial landlord embracing wind, and consider how this evolves in the years ahead.

However, it also raises questions I have grappled with over the years. Why has the commercial property sector been so slow to embrace wind and other renewables in their estates? And how can wind companies tap into such a huge potential source of power demand? The United Nations says 40% of carbon emissions worldwide are from the real estate industry, and wind must have a role in helping to reduce that.

In-built conservatism

One reason I believe that commercial property owners have been slow to embrace wind power is that renewable energy simply hasn’t been a priority for most of them.

Energy is a small fraction of the overall cost of developing, building and running a commercial building, whether that is an office, shopping centre or leisure complex. That may have changed a little given recent power price rises but, for many years, there simply hasn’t been much interest in where the power for buildings has come from as long as the lights were on, or in moving to ‘green’ electricity sources.

When commercial landlords have sought to become ‘greener’, their focus has been on improving the building fabric to boost efficiency and reduce carbon emissions. It is a good step. The greenest power of all is the power that isn’t used, and it makes sense to improve buildings because most will be in operation for decades to come.

Let’s consider the Empire State Building in New York. In 2021, the building’s owner announced that the famous skyscraper was now 100% powered by wind, but it was a move that came at the end of a decade-long programme to improve the physical fabric of the building. This feels symbolic of the approach of the industry as a whole. Buying green energy has been less of a priority than improving energy efficiency.

But this may now be changing. Over the last five years, we have seen some of the biggest companies in the world signing power purchase agreements to use wind or solar power in their own offices and operations. If tenants start demanding that they want to use renewable energy in the buildings they occupy – and refuse to occupy buildings where this cannot be guaranteed – then landlords will have to provide it.

One of the key benefits when landlords and tenants sign a PPA directly with the owner of a wind or solar farm is that they are clear where the power is coming from. 

Canary Wharf Group said its PPA is attractive because it can show it is supporting the addition of new renewables capacity to the UK power mix: the 60MW wind farm in Scotland is due to be commissioned in 2026. This provides a PR benefit because Canary Wharf can show that it is taking action on important climate issues.

Finally, I believe the lack of PPAs with commercial property companies is due to the fact that PPAs are a relatively new mechanism. Those of us in the wind sector may get excited about how much PPAs have expanded, but commercial property is still a relatively conservative sector with well-established asset management processes. It takes time for new approaches to emerge and they can be slow to proliferate.

This is why Canary Wharf’s PPA is exciting. It is a well-known name committing to use wind power and other renewables for its own operations, and in the portfolio it operates. Wind power attracts broader support across the UK political spectrum in 2023 than it did even ten years ago, and this will be reflected in business culture.

Shobi Khan, chief executive of Canary Wharf Group, explained that this would help it to achieve its commercial goals: “To be truly sustainable, companies need to help those up and down their value chain to lower their environmental impact as well as addressing their own emissions,” he said.

The space in 8 Canada Square may soon be vacant, but the opportunities for wind farm owners with commercial property landlords are only growing.

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