The utility grid is facing unprecedented increases in demand for electricity, thanks to the spike in energy demand from data centers with increasing needs for AI computing power, the shift to more electric vehicles charging up, and the conversion of buildings to be all-electric as the industry moves away from fossil fuel combustion toward a net zero future. What happens when the utility supply cannot meet the customer demand?
One solution to curb this demand is on the building side: A new breed of buildings is emerging that are not only energy efficient but can actually interact with the power grid in real-time. These grid-interactive efficient buildings represent the cutting edge of sustainable real estate, promising reduced energy costs, improved resilience, and a smaller carbon footprint. Buildings are acting as “good grid citizens” to help curb peak demand stresses on the grid while reducing their own utility charges at the same time.
The real estate industry is at an important juncture, facing challenges from both energy demands and subsequent rising greenhouse gas emissions plus the growing threat of climate hazards. The World Green Building Council, reports that buildings currently account for 39 percent of global emissions annually, while trillions of dollars’ worth of real estate assets are at risk due to climate-related disasters. At the same time, utility providers are struggling to scale infrastructure to meet growing electricity demands spurred by economic growth and development and unprecedented temperature extremes resulting in higher than usual utility charges and devastating outages. Now more than ever, the industry’s progress toward net zero emissions and resilience is critical. From grid-interactive appliances and controls to community microgrids, owners, developers, and even utility providers stand to benefit from the steady integration of buildings into larger utility grid systems. In 2017, market research organization IHS Markit estimated that the number of Internet of Things (IoT) devices worldwide would reach a staggering 125 billion by the year 2030. Remarkably, even in 2017, there were already an estimated 822 million IoT devices deployed in homes across the globe. These connected devices are being utilized to enhance the comfort, adaptability, and efficiency of buildings. They enable automation and intelligent control of various building systems, such as heating, ventilation, air conditioning, lighting, and security, leading to improved occupant experiences and resource management.
There are multiple ways a building can interact with the energy grid. “Shape” is the demand response that reshapes customer load profiles through time of use (TOU) prices and incentives, energy efficiency programs, and behavioral campaigns. “Shed” is a traditional demand response where certain loads are curtailed to provide peak capacity and support the system in emergency or contingency events. “Shift” is encouraging moving energy consumption from high-demand times to those when there is a surplus of renewable generation via behavioral changes. “Shimmy” is most applicable for demand loads that can adjust within minutes or seconds to react to short-term needs like battery storage.
In addition to the integration of connected devices into building systems, there has been a steady growth and adoption of onsite/distributed energy resource generation and community-scale microgrids. According to Wood Mackenzie, in the third quarter of 2022, microgrids produced more than 10 gigawatts of power originating from industrial and commercial operations.
ULI recognizes grid-interactivity as a part of real estate’s journey to zero, and as such released Get Smart, a report focused on identifying measures for grid-interactivity and energy efficiency in buildings and making the business case for implementation across real estate portfolios. By constructing and retrofitting buildings to be resilient, responsive, and energy-efficient, both real estate sector stakeholders and utility providers reap benefits ranging from carbon and utility cost reductions, to enhanced business continuity, resilience, occupant comfort, and asset viability. With NOAA forecasting a particularly hot summer with strong hurricane activity, stakeholders are experiencing renewed concern for utility costs, carbon emissions, and business continuity.
“The utility sector is undergoing a remarkable transformation as power companies look to decarbonize their existing grid while building the equivalent of one to two more [facilities] to account for electrification and industrial growth. As a result of this gauntlet, utilities are increasingly willing to partner with the real estate sector to manage the demands of electrification.” Jake Elder, vice president, Energy Impact Partners
The drivers behind grid-interactive, efficient buildings are multifold. New smart building technologies have enabled levels of energy optimization unimaginable just a decade ago through intelligent HVAC controls, lighting automation, and energy dashboards with portfolio-wide visibility. At the same time, intensifying climate policies and environmental regulations are pushing the real estate industry to slash carbon emissions and future-proof assets against sustainability risks.
“The ability to program a building’s energy use to maximize the use of zero-carbon emissions source generated electricity lowers our carbon emissions from electricity consumption (Scope 2) and helps us drive toward achieving our net zero carbon goal.” Tim Hewer, director, energy and sustainability, Brookfield Properties
On the utility side, grid-interactive efficient buildings offer an appealing solution to the growing strain on the grid from electrification trends like EV charging and building conversions away from fossil fuels. By enabling automated demand response where buildings temporarily reduce non-critical loads during peak periods, grid-interactive efficient buildings ease bottlenecks while unlocking significant cost savings.
A recent study from the U.S. Department of Energy estimated that nationwide adoption of grid-interactive efficient building capabilities could save $8-18 billion annually in avoided energy infrastructure spending by 2030.
Leading examples of grid-interactive efficient buildings
While still an emerging category, several high-profile real estate projects are showcasing the potential of grid-interactive buildings:
Rockefeller Center (New York City): After undergoing an extensive energy retrofit, the iconic Tishman Speyer complex in Manhattan now boasts 8 megawatt-hours of battery storage and 5.6 million gallons of chilled water storage tanks. This hybrid thermal/battery system enables automated peak load shedding while providing backup power to maintain operations during grid outages, enhancing both cost savings and resilience.
1 Manhattan West (New York City): As part of a $500+ million construction tech pilot program, Brookfield Properties embedded smart sensors and intelligent controls throughout this 2.1M square foot mixed-use development. The advanced building analytics platform utilizes digital twins—real-time virtual replicas—to optimize operations while seamlessly integrating distributed energy resources like rooftop solar and battery storage.
Waterfront Plaza (San Francisco): Global real estate investment and management firm Jamestown owns and manages this office complex that employs an automated scheduling system that leverages building system performance and occupancy data alongside weather predictions to optimize building operations and energy efficiency while prioritizing tenant comfort. This project, which includes buildings constructed in the 1970s, demonstrates that both new and existing buildings can be primed for grid interactivity.
Looking Ahead
As the world increasingly electrifies and the effects of climate change intensify, the adoption of grid-interactive efficient buildings is poised to accelerate rapidly according to industry analysts. In addition to the compelling economic benefits, policies like the Inflation Reduction Act are expected to provide strong financial incentives for these types of sustainable building investments.
Grid-interactive efficient buildings are a critical piece of decarbonization because they enable flexible demand, improve our use of clean renewable energy, and reduce utility bills while providing high-performance, comfortable, and resilient commercial and residential environments. They can save hundreds of billions of dollars in power system costs, reduce carbon emissions, and relieve stress on the grid by 2030.” Mary Ann Piette, Associate Lab Director, Energy Technologies Area, Lawrence Berkeley National Laboratory
