Sustainable “green” energy, consumers and industrial real estate

February 04, 2013  |  Staff Writer  |  Print Article  |  Email this Article

Guest column By Terry Lynch, senior associate, Paine/Wetzel/TCN Worldwide

Terry Lynch

Where is the connection between the green energy movement and industrial real estate?  Next time you’re in a grocery store, investigate some of the consumer products in the “home care products” shelf.  It won’t take long to determine which labels highlight products that utilize green energy as part of their manufacturing process.  A couple of decades ago highlighting “No CFCs” was important because of ozone concerns. Now labels are highlighting products that are manufactured in facilities with renewable energy.

The reason this is so becoming popular at the point of purchase is that Americans want companies to “go green”. In a 2011 consumer survey titled “The Green Gauge,” commissioned by SC Johnson and GfK Roper Consulting, 74 percent of respondents agreed with the statement, “A manufacturer that reduces the environmental impact of its production process and products is making a smart business decision.”  In addition, 28 percent of those surveyed buy green products.

Consumer-product and other manufacturers understand going green can create a competitive advantage for their products.  But when a company is looking to capitalize on the green energy movement for its industry, where does it begin?

Renewable electricity can be purchased directly from the utility company in some regulated electricity markets.  Consumers can pay a small premium for electricity generated by green power resources that are transferred to the grid.  In Illinois, as more municipalities are electing to buy power from suppliers other than ComEd, renewable electricity developers are losing faith since Illinois’ largest utilities (and customer base) are losing both municipalities and households rapidly. This volatility creates an uncertain market for providers of green energy, and some have given up on Illinois altogether.

Renewable Energy Credits (RECs) are tradable instruments (certificates), that represent proof that one megawatt-hour (MWh) of electricity was generated from an eligible renewable energy source.  RECs have no geographic constraints, and therefore are not tied to the local utility.  RECs represent the environmental attribute of the power produced from renewable energy projects, which can be sold separately from the electricity, and the owner of the REC can claim to have purchased renewable energy.  Once an organization makes a claim, that REC cannot be re-sold.  A manufacturer can conveniently tap into renewable energy markets by purchasing RECs that represent credits., for example 1 MWh generated by a wind farm in Colorado for its factory in Illinois.  While this approach is convenient and requires no upfront capital, it does not hedge against energy price volatility nor provide a visible monument to reducing their impact on the environment.

On-site Renewable Energy Generation are systems installed at a facility to provide renewable energy.  The three main options are solar panels, wind turbines, and co-generation (co-gen) plants.  Solar panels and wind turbines are well known and self explanatory, however co-gen plants are a lesser known green-energy source that has been successfully utilized by local as well as national companies.  Co-Generation is the process by which a single fuel source, such as methane gas captured from a nearby landfill, is used to produce both electrical and thermal energy.

In South Carolina, BMW sources methane from a landfill 9.5 miles away, and pipes it into its co-gen plant to serve electrical and thermal needs of its manufacturing facility.  On-site renewable generation provides a hedge against energy price volatility and provides a visible demonstration to environmental concerns.  Some companies utilize this highly visible process to show their commitment to sustainability in their product marketing.  Johnson & Johnson and SC Johnson highlight their co-gen-powered facilities in a series of commercials, and reinforce it on their product packaging.  Some obstacles to co-gen systems are a tremendous capital commitment for implementation and operation, lengthy lead time for installation and geographical and real estate constraints (e.g., no land for wind turbines or not located near a landfill for methane).

What if a company wants to connect into the green energy movement and believes on-site renewable generation is the best approach for their organization but does not have the capital, time or real estate to utilize this approach?

Locally, the solution and connection between the green energy movement and industrial real estate is located in Grayslake, Ill  Paine/Wetzel Associates is marketing the Grayslake Business Park, which has 65 acres available for development, and features one of the largest independently operated co-generation plants in North America.  This scalable 8MW facility currently provides electricity to the grid and potentially future park tenants.  It could also provide heat for future park tenants, or steam if that is required in a future tenant’s manufacturing process.

The Grayslake Business Park can provide pad-ready sites for development with an on-site sustainable energy source, with no up-front capital or lead time.

Terry Lynch is a senior associate with Chicago-based Paine/Wetzel/TCN Worldwide. You can reach him at 773-714-2142.

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