Remote work has shaken up energy costs for office landlords and employees. Here's how one provider is working with corporates to offset workers' higher electricity bills.
Alex Nicoll Oct 5, 2020

Office real estate has seen energy usage fall as some spaces remain unused and more workers work remotely. Shutterstock

Energy costs have fallen for commercial offices, but raised for workers at home.
Still, most office buildings can only shut down so much. At most, office buildings are using 25% less energy than usual. 

With energy costs shifting from landlords and employers to employees, one energy company is launching a program to allow employers to pay the difference.

The shift to remote work has brought office workers to their couches, desks, and kitchen tables, potentially upending office real estate markets and the boundaries between personal life and work.

It's also changed energy costs for office buildings and for employees who now spend 9-to-5 workdays in their new makeshift home offices.

Office real estate has seen energy usage fall, with building operations data company Hatch Data reporting office energy usage down 24% from pre-pandemic levels in May. It now hovers 10% down from pre-pandemic levels.

Lee Dunfee, managing director for engineering operations at Cushman & Wakefield, told Business Insider that commercial offices have seen roughly 15-25% reductions in energy use year over year.

Simultaneously, residential energy use has risen by 10-15% since the start of the pandemic, according to David Klatt, VP of operations and finance for a smart-building software company, Logical Buildings.

At the same time, business leaders are continuing to signal a more flexible future of work, which almost certainly will mean more office workers will remain at home.

Read more: 20 major companies that have announced employees can work remotely long-term

This could trigger a permanent shift in costs paid by employers versus those paid by employees.

One energy company, Arcadia Energy, has pioneered a new workplace benefit for remote work, allowing companies to offset their employees increased energy costs at home. As companies struggle to find benefits that can replace location-bound benefits like in-office lunches, Arcadia's subsidies could be a way for employers to eat up some of the costs of remote work.

We spoke to real estate and energy experts about whether these energy trends could continue and why do mostly empty office buildings still require so much energy.
An unprecedented dip

Almost all office space saw a huge dip in energy usage at the start of the pandemic. With fewer people coming into the office amidst lockdowns and shelter-in-place orders, lights were turned off for days at a time and small appliances were unplugged and went unused.

HVAC systems had to work substantially less hard to cool air in the absence of the heat of people's bodies and computers, especially during the summer months.

What they didn't do was shut down completely, even when the only building occupants were office managers checking mail.

"It's important to note that commercial office buildings for the most part didn't shut down and turn off," Dunfee said.

Lease agreements usually require landlords to make space accessible, and comfortable, for office tenants for an agreed-upon period of time, whether all day or during typical work hours. Without receiving consent from all tenants, landlords couldn't actually reduce operating hours or lower the working load on the HVAC by increasing the temperature or humidity level in an office.

Read more: The venture arm of a massive Canadian pension plan takes us inside its search for its first construction tech investment. Here's its playbook.

This means that single-tenant buildings were likely able to reduce their energy usage more than multiple-tenant buildings, because of the ease of negotiation between landlord and tenant, and that owner-occupied office space likely saw the lowest reduction.

"For a company like Amazon, that owns the building and has its employees work there, it can tell employees to work from home and shut down the building," Eric Tilden, director of sustainability at Cushman said. "Commercial office buildings simply can't do that."

With roughly 25% of workers back in the office in major markets, according to Kastle's Back to Work Barometer, and the energy load switching from cooling to heating, energy levels may get closer to typical levels this winter.
Bringing the costs home

Reports have shown that overall energy consumption has waned during the pandemic, but office workers still brought their need for climate conditioning and well-charged appliances home.

And, with higher usage, comes higher bills, and now employees foot the bill to stay comfortable during work hours.

"That cost burden has been shifted from employers to employees," Owen Quinlan, VP of analytics and data science at Arcadia, told Business Insider. "I think we need to think, as a society, how to manage that cost shift."

Arcadia is a clean energy company that integrates with public utilities and is the largest residential energy broker in the country. Arcadia's data shows that bills have risen roughly $10 to $30 a month for employees working at home, Quinlan said.

As a result of this bump, Arcadia has created a partnership program that has attracted some large corporates such as McDonald's. Companies can partner with Arcadia, and then have their employees choose to switch their utility bills to Arcadia.

Read more: Arcadia has raised $70 million on the promise it can take on 'a massive old monopoly industry' and slash your power bill

After employees switch their bills, the employer can decide to subsidize their increased costs or to buy carbon offsets to replace their increased emissions while working remotely (McDonald's has chosen the second option).

By choosing to subsidize remote energy costs, employers can introduce a benefit that fits the challenges and increased costs of remote work. Even in a world where employees spend some days back in the office, increased energy costs will remain an issue.

An Arcadia spokesperson said that renewable energy companies SkySpecs and CustomerFirst Renewables have also signed up for the program. The spokesperson also said that the company is in negotiations with banks, pharmaceutical, e-commerce and tech companies about offering the service.


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