In January, Gov. Phil Murphy unveiled an Energy Master Plan for New Jersey that sets a goal of achieving 100 percent clean energy by 2050. Among other targets, the wide-ranging document takes aim at builders, which Murphy called one of “the greatest carbon emission-producing sectors in the state.” To find out the street-level impact on real estate development, NJBIZ spoke with some industry experts.

Murphy’s plan could mean some big changes for builders. It would involve “decarbonization and electrification of new and existing buildings, including the expansion of statewide net zero carbon homes incentive programs, the development of electric vehicle-ready and Demand Response-ready building codes, and the establishment of a long-term building decarbonization roadmap,” according to an announcement by the governor.

It would definitely increase costs, according to Michael McGuinness, chief executive officer of NAIOP-NJ, which represents the commercial real estate development industry. “We met with state officials recently and discussed the phase-in of the governor’s EMP, and our understanding is that they understand a No. 1 concern is to avoid burdening ratepayers and taxpayers,” he said. “But there are a lot of gray areas. For example, even if we get to the clean energy goal, prevailing winds will still blow pollution from ‘dirtier’ states here. We need federal action on this issue.”

One goal, “electrification of new and existing buildings,” would have to be part of a broader upgrade of the state’s power transmission systems “to be sure we have enough electricity available,” McGuinness said. “We could get there with more solar and wind [another component of Murphy’s master plan] but that’s a long-term goal that would require a great deal of infrastructure work.”

McGuinness praised the push for electric vehicles, but cautioned that technology “still has to catch up with this ambitious plan,” which aims to encourage at least 330,000 Zero Emission Vehicles in the state by 2025. “We hope to work with government agencies to phase in or incentivize these changes,” he said. “If more tenants drive electric vehicles, then they’ll vote with their feet and lease space in buildings with EV charging stations. But it has to be driven by market forces. EVs are still only a small part of the market at this time, so why mandate EV charging stations before the market demands it?”

Sea change

The EMP’s overall 2050 goal may represent a long horizon, but it still represents “the start of a sea-change in how NJ residents live, work and enjoy ourselves,” according to Mack-Cali Realty Corp. Senior Director of Corporate Energy Jeffrey Grant. “Keys to success will be anticipating the practical reality of the changes by identifying efficiency improvements and demand reduction opportunities and implementing ones that have an acceptable return.”

For commercial builders, said Grant, “this means conducting energy audits and creating facility utility master plans that at a minimum address upgrading lighting systems to LED and including daylighting and occupancy controls, retrofitting variable frequency drives on all motors serving variable loads, upgrading building automation systems to enable demand curtailment, and upgrading variable air volume boxes for full direct digital control functionality.”

Other efficiency issues include developing “thermal storage systems and battery banks for grid demand curtailment, installing high-output level 2 EV charging stations, and replacing fossil fueled boilers and electric resistance heating systems with more-efficient heat pumps.”

For new commercial construction, this will drive higher-cost, long-term changes, Grant noted. “It will mean increasing requirements to include EV charging infrastructure as part of the development spend to help speed conversion to an all-electric vehicle fleet,” he explained. “Additionally, accelerated efficiency code requirements are to be adopted by the state Department of Community Affairs based on assessments — from higher educational institutions — that aim to achieve seven year or less simple annual paybacks.”

Fortunately, he added, some efficiency improvements will likely come from relatively simple steps, like “improvements to each facility’s building automation system (BAS), or the automatic centralized control of a property’s heating, ventilation and air conditioning, lighting and other systems.”

Increased BAS capabilities “often easily extract efficiency improvements,” according to Grant. “Central plant efficiency improvements of about 10 percent are achievable through self-tuning control logic that continuously monitors all central plant electric loads and optimizes setpoints to deliver least-cost chilled or condenser water.”

The future is now

Mack-Cali already has three Jersey City buildings, including 101 Hudson St., scheduled for central plant BAS efficiency upgrades “that are partially financed by the New Jersey’s Clean Energy, Large Energy Users Program,” he added. “New multifamily homes will initially need to be net zero ready and eventually delivered ‘net zero’ that is capable of self-generating enough renewable energy — typically through solar photovoltaic panels — to equal energy consumed during the year.”

These homes will likely have high efficiency thermal “envelopes” — or outer walls, roof, foundation, windows and doors — along with “roof and/or ground mounted solar PV systems, electric appliances, heat pumps for space heating and domestic hot water, level 2 EV chargers and battery banks,” said Grant. “Because programs for commercial buildings and single-family homes are already generally accepted, the BPU is expected to establish minimum performance thresholds and targeted energy efficiency metrics for hard-to-reach customer bases such as multi-family homes, or apartments.”

Murphy’s plans will also likely drive broader changes, Grant observed. “Our transportation sector accounts for 42 percent of our greenhouse gas emissions, so municipalities will be encouraged to develop transit villages and walkable communities where residents have access to public transportation or can live, work and play without owning a vehicle.”

This dynamic ties in nicely with Mack-Cali’s strategy of focusing office and multifamily properties in select waterfront and transit-oriented markets throughout the Northeast. “Our concentration includes development in transit-type villages like Harborside at Jersey City,” Grant said, referring to multifamily properties like Jersey City Urby at Harborside, where 762 apartments take up fewer acres and consume about half the annual energy per family than single family homes. This and similar complexes feature cafes, fitness/yoga centers, outdoor pool and patio, lounges and top-end restaurants, he noted.

Combined with its commercial office portfolio of approximately 5 million square feet hosting retail and restaurant service enable “people living, working or shopping in Harborside, with ready access to train, light rail and ferry service, so cars are less of a necessity,” Grant added.
Given the “immense nature” of the EMP undertaking, “we encourage the BPU and other applicable government agencies to continuously monitor progress toward our 2050 goals along with all associated cost burdens including unintended consequences,” Grant said. “Meanwhile, New Jersey’s business community stands ready to assist with helping drive practical ideas to reality as we embark on this brave new world of a carbon-free society.”