Fossil fuels have powered human progress for centuries, but their unimpeded use has left us with a ‘substantial possibility’ of the global temperature rise breaching the 2° Celsius threshold by mid-century, despite significant efforts to counter global warming. Notably, the Global North accounted for about 75% of the cumulative global emissions until the last century. But as the Global South – which includes India – moves along a similar growth curve, it is crucial to remember that it does not have the luxury of having vast reserves of fossil fuels at its disposal. Besides, India’s aspirations for a renewable energy-driven future face a challenging path. Despite significant progress, with around 43% of installed power capacity being renewable, coal-based thermal power still contributes to roughly 75% of India’s power generation due to the intermittent nature of solar and wind energy. India must balance decarbonization with industrialization to fuel economic growth and employment opportunities.

Further, to achieve the goal of 50% non-fossil-fuel-based installed capacity, it is imperative for India to increase its share of renewable power through various modes. India has set an enhanced target of generating 500 GW of non-fossil-fuel-based energy by 2030. This is the world’s largest expansion plan in renewable energy. In this context, understanding the linkages between energy and real estate has become imperative amidst sustainable power becoming an overriding theme in real estate. To address the scenario, the real estate industry leaders are taking steps to mitigate climate change by increasing their decarbonization efforts. Taking climate action to the next level, a select group of marquee developers are also setting the gold standard by adhering to global benchmarks.

Realizing the criticality of the climate crisis, real estate stakeholders are pivoting away from traditional reliance on fossil fuels and embracing a transformative shift towards renewable energy sources. The sun is the architect of a sustainable future as the Indian realty sector aims to significantly reduce its carbon footprint by deploying solar energy solutions. This isn’t just about constructing buildings; it is about making a legacy—a green revolution that goes beyond bricks and mortar. It is about creating eco-friendly structures that stand as a testament to the commitment to safeguarding the planet for future generations.

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India’s economic landscape is supporting this shift. Real estate investors and occupiers are now willing to pay a premium for assets equipped with renewable energy generation and intelligent energy monitoring systems. This trend reflects a growing concern among stakeholders for building resilience towards climate change. Green buildings are becoming a sought-after real estate preference in India. Green-compliant office buildings stock in India increased by over 36% since 2019 to 342 mn. sq. ft. Flight-to-quality and compliance with environmental, social, and governance (ESG)-related requirements are likely the primary reasons for occupiers opting for green leases. The key potential advantages of a green lease for developers include higher property value, increased rental income, quality tenant profile, compliance with current and future regulations, and alignment with corporate ESG goals. For occupiers, lower operating costs, positive brand image, talent attraction and retention, access to new-age green amenities, and alignment with corporate ESG goals could be the major advantages of adopting green leases. Indians are increasingly becoming aware of the long-term impact of sustainable solutions and are willing to invest in green buildings, even if it means incurring incremental costs. Despite higher upfront expenses, green buildings offer significant cost optimization in the mid to long run.

The industry isn’t restricting itself to merely constructing green buildings; it is also embracing cutting-edge technologies to enhance energy efficiency. From energy-efficient HVAC systems to advanced glass technologies, lightning harvesting, and AI-driven smart systems, the real estate sector is incorporating multiple elements to optimize building operations.

The Solar shift: Renewable energy in commercial real estate

In the quest for net-zero standards, commercial real estate is finding a bright solution in the form of solar energy. For many corporations, the real breakthrough in carbon reduction comes when renewable energy is generated close to where it is consumed. Solar has emerged as the most preferred source of green energy in the real estate domain. There are few reasons to this change. Firstly, solar energy is more cost-effective than wind and hydel power. Moreover, the significantly decreased cost of solar panels in recent years has made them a more affordable option for commercial real estate developers. Additionally, the on-site generation of solar energy eliminates the need to transmit it over long distances, further reducing costs.

In terms of reliability, solar energy is more reliable than wind and hydel power. Meanwhile, wind and hydel power are not always available because they are intermittent sources of energy. Solar energy, on the other hand, is available during the day when most commercial buildings are in use. Solar energy can also be stored in batteries to ensure a reliable electricity supply even during night-time.

One of the other main advantages of Solar energy is its scalability. Commercial real estate developers can find solar panels as a flexible option because they can be installed on rooftops or in large ground-mounted arrays. On the other hand, wind and hydel power require large tracts of land, which can be challenging to find in urban areas.

Recognizing solar significance, many top developers in India are turning to it as their primary renewable source, outpacing wind and hydel power. Setting clear net-zero targets, these developers aim for 100% of their energy consumption from renewables within a specified timeframe. They’re taking a systematic approach, gradually increasing their renewable energy share to align with net-zero goals. Projections indicate leading developers may achieve 50-65% of their renewable energy target by the end of FY 2023, with potential growth to 60-75% by FY 2025. This strategic shift places them on an efficient path to achieve net-zero aspirations.

While India faces challenges in adopting renewable power, strong government support, thriving private sector initiatives, and an increasingly aware population are collaboratively aligning to overcome these challenges. Despite being the world’s most populous country, India achieved a remarkable 24% reduction in the emission intensity of its GDP between 2005 and 2016. This success is attributed to the rapid integration of renewable energy and robust policies. Initiatives such as the ‘Ujjwala’ and ‘Ujala’ schemes have improved access to clean and affordable energy, showcasing India’s potential for sustainable development. As per government estimates, within the renewable power sector, solar energy leads with an installed capacity of 72 GW and is expected to witness upcoming capacity reaching 62.8 GW. Hydroelectric power follows with an installed capacity of 51.8 GW, anticipating a forthcoming capacity increase to 14.7 GW. Wind energy holds an installed capacity of 44.3 GW, with a projected upcoming capacity of 11.8 GW.

For commercial real estate investors, solar appeal lies in its financial and environmental benefits, falling costs, diverse funding options, and shorter payback periods. It’s a win-win scenario for the ESG goals and asset management, as solar paves the way for a greener and economically sound future. The intricate connection between energy and real estate has become indispensable in pursuing sustainable power. It’s not just about constructing eco-friendly structures but ensuring that the energy powering them is equally sustainable.

(By Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE. Views are personal)