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Spencer Levy
Meeting sustainability objectives is a critical mission across the business spectrum these days. With commercial real estate playing a critical role, that mission is not merely a matter of do-good green investing. It's about fulfilling leases and contracts. It's about standards set by a board of directors. It's about adapting to new regulations, laws and public policies. It's about long term business strategy – and indeed, the bottom line. On this episode, we head to the CBRE office in New York City to sit down with two leaders behind a recent CBRE acquisition that will help clients advance their sustainability and resiliency missions.
Miro Sutton
You used to have a guy in a room who would just pay the bills and keep the lights on. But it's way more complicated than that, and almost every organization is waking up to that fact.
Spencer Levy
That's Miro Sutton, formerly the Head of Renewable Advisory for NRG Energy and now the freshly minted global head of renewables and energy for CBRE. At NRG, he advised Fortune 500 companies in all the nuances from power generation solutions like solar to tax credits, financing and more. Miro will now lead a strategic advisory serving Seabreeze client base across the globe.
Rob Bernard
The question that we have every day that we wake up, which is, how do we simplify complexity to accelerate sustainability for our clients? And how do we do that in a way that is fiscally responsible and can actually create competitive advantage for our clients globally?
Spencer Levy
And that's Rob Bernard, CBRE’s Chief Sustainability Officer. With over 20 years of experience at the intersection of sustainability, business and technology solutions, Rob not only advises clients on their global strategies, but oversees CBRE’s own operational sustainability work, which includes a goal to achieve net zero emissions by 2040. Coming up: insights and advice for sustainability and resilience, in a conversation with the leaders of a future-shaping practice. I'm Spencer Levy, and that's right now on The Weekly Take.
Spencer Levy
Welcome to The Weekly Take. And we are here on a great day in New York City, where CBRE just completed a terrific transaction with NRG’s renewable advisory team. And to talk about the deal, we have Miro Sutton, Global Head of Renewable Energy for CBRE. Congratulations, Miro. Welcome to the team.
Miro Sutton
Thank you, Spencer. Great to be here.
Spencer Levy
And then we have Rob Bernard, CBRE’s Chief Sustainability Officer who was knee deep in the deal, knee deep in everything sustainability for the company. I know how hard you worked on this deal.
Rob Bernard
Thank you, Spencer. It's well worth the effort. I'm excited about the road ahead.
Spencer Levy
Great. And so just very briefly, the elevator speech–tell us why we did the deal.
Rob Bernard
We have a very clear value proposition for our clients, which is we simplify complexity to accelerate sustainability. And we do it in three ways. We say, hey, we can do your end to end strategic blueprint on anything you need to do across occupier/investor. We can help you with that. That invariably leads to a number of projects you absolutely should do because they're good for the environment and they're in the money. So we go, okay, great, we've done all those things, but now we still have 70 or 80% of our sustainability carbon problem still left because resource optimization only gets you so far. And up until today, we’ve kind of been helping some clients on their renewable energy. But with this acquisition of Miro and his team, we can confidently say, look, we can handle everything holistically, end to end, from strategic blueprint to resource optimization and now accelerating decarbonization through energy and energy contracting.
Spencer Levy
Miro, congratulations, first of all.
Miro Sutton
Thank you.
Spencer Levy
And why don't you tell us a little bit about renewable advisory team. What do you do?
Miro Sutton
Yeah, so the renewable advisory team that we founded at NRG and now we're part of CBRE family here. That team is focused on helping major corporations, global customers, procure and get into the renewable space. We founded this business because it was really critical to make sure that we were able to innovate on the margins. And so what I mean by that is you take these structures, some of them do involve risk, right? These virtual power purchase agreements involve real risk and being able to mitigate some of that risk while still enabling that asset to go on to the grid is critical. And I don't want to go down this rabbit hole, Spencer, too much. I think it'll just… people's eyes will glaze over. But long story short is when done correctly, you can mitigate the first dollars of exposure on these virtual power purchase agreements. And this is done in such a way that the developers can still take this project and finance it. And it forces the developer and the customer to align better on their incentives because it's forcing the developer to pick up upside on the agreement and operate the project efficiently and correctly. So on an optimization level, that's one great example of how we're aligning the parties better, creating innovative structures, and pushing the market in a new direction. So you zoom out and you look at that 100 times over and many different things from the individual contracts that we set up and templatize for our customers to use with developers, to just the negotiating assistance we give them. Every little part of this is bespoke in these massive transactions. And having a partner alongside you that can innovate on the fly and create something that is new, unique, but de-risked is something that most of our competitors cannot do.
Spencer Levy
Rob, we hear the word sustainability. It means a lot of things. What does it mean for CBRE?
Rob Bernard
So when we take a step back and we think about what CBRE’s role in sustainability in the world. Let's just sort of set the table for the conversation really quickly, which is, we're touching about 7 billion square feet globally and the amount of energy and the big impacts that we can have across the entire ecosystem of commercial real estate is massive. And the question that we have every day that we wake up, which is, how do we simplify complexity to accelerate sustainability for our clients, and how do we do that in a way that is fiscally responsible and can actually create competitive advantage for our clients globally? The reason this deal is so exciting is we have a huge consulting division. But historically, CBRE has not been an incredibly active player in the renewable energy space. And with today's deal, that all changes.
Miro Sutton
So I want to back up a little bit and give you some of the story on why we founded this team, because I think it synergizes really well with the picture Rob just painted and how we fit in that last puzzle piece for CBRE. So I started with NRG over ten years ago. We were a developer back in the day. We had a lot of major corporate clients. Fortune 500 companies primarily. Did a whole bunch of utility scale deals, on site deals, community solar deals, where I worked on the financing, development side of the project. We had all that expertise in-house. And in 2018 NRG sold all of its assets, its infrastructure, its renewables to global infrastructure partners. And we said, what's missing? There is a type of advisor in the market that was not present. Someone who is more involved on the long term basis. So we set up this team within NRG, post development, to be able to service a huge client base that we had access to. Now we've done that extremely successfully. We've participated and advised customers on virtual power purchase agreements, on transferable tax credits, on community solar transactions, and on distributed generation portfolios and programs. And when the opportunity came about to take it to the next level, we had to find the right home and CBRE’s reach on a client basis, and just quite frankly, on what's being asked of CBRE from their clients, seemed like a really good opportunity.
Spencer Levy
So Rob, let's talk about two different categories of clients for just a moment. How do you see it with the split between owners and occupiers in this space?
Rob Bernard
I think if we were sitting in London, I might have a different answer than I'd have here in the U.S., because I'll just do a quick sort of commentary that in Europe and in the UK, I'd say that those two worlds are much more parallel than they are in the U.S. But I think where we are in the U.S. is, I don't know if I'd call it light years ahead. Maybe it's more like the speed of sound and it's not that far in the distant future where these things are going to be parallel. And here's why, which is regardless of what we think is going to happen at the federal level with federal regulation, we're seeing many states, cities, implementing laws that are forcing the market to address this issue. I mean, we're sitting here in New York today. There's local law 97, but there's rules in Denver, there's rules in Seattle and Boston and many cities around the United States. So what is going to happen is for our investor clients who aren't thinking about, what's my future going to look like if we're sitting at this table three years from now? I think they're going to find themselves scrambling because they're going to be looking at the challenge of stranded assets based on upcoming regulations.
Spencer Levy
I was distracted, by the way, by your description of the speed of light versus the speed of sound because I was a big Paul McCartney and Wings fan from the ‘70s. That was the title of one of their albums. Who knew? Maybe they're going to be at the forefront of this revolution, as well. But no, I love that answer. It really speaks to what I think is the heart of this, which is not only of your profitability, but of your resilience. Miro, what's your perspective?
Miro Sutton
Yeah, I think you guys hit it on the head. Generally speaking, when we work with clients, the number one thing is how am I going to get this approved by the sea level? How am I going to get this approved, potentially, by the board? Because some of these transactions are massive. You're talking about a virtual power purchase agreement. It could be hundreds of million dollars, hundreds of millions of dollars of commitments over a 15 year period. That's a long time and a lot of money for one contract. And they’ve got to do multiple of these. So making sure that we have the right approach and the right model and the right outlook is critical to success. Because when we go up and we get those questions, you get one shot at taking it up the ladder. And if you don't get it right, the deal will not get done and they will not hit their renewable goals. So on the micro level, when I think about the individual transactions, we've done so much work structuring for clients specifically around their rules, their regulations, and what the market can do. So we try to mind that balance all the time because, like you said, Spencer, at the end of the day, we’ve got to be economic here.
Spencer Levy
Now, one of the things, Miro, that you suggested is a little different than not all, but many of the divisions here at CBRE. Many of our divisions are transactional. Deal done, brokerage commission. Projects done, projects paid. But this is a different type of business. How do you see this business fitting into the mothership of CBRE’s other businesses?
Rob Bernard
For me, this is about leveraging those businesses and sort of creating a synergistic relationship, which is if I'm an occupier or an investor and I want to hit my publicly facing sustainability goals, I have to address my commercial real estate assets, and I've got to do that in a holistic fashion. If I just do my project work and my HVAC and my lighting, I don't really succeed. If I just do my supply chain and my contracts, I don't succeed. If I don't think about green leases and what I'm doing for the next 20 years in my portfolio, I don't succeed. And finally, as it relates to the deal that we just did with Miro and his team, if I don't actually have a renewable energy strategy, I don't succeed. So to me, this really takes the best of everything that CBRE does, and allows us to really light it up for sustainability and our clients on this important journey for them.
Miro Sutton
The renewable industry is on a hypergrowth trajectory. It has been for a little while. It is continuing. It is unabated by any political considerations. There's all kinds of different drivers for it. But the one thing that is most interesting for me and which I absolutely love, especially being in the middle of transactions, is it's always changing. I mean, six months ago, my focus was different than it is today. And I'm sure in six months it will be even more radical and different. We try to do this thing where we maintain a baseline of what's working and then innovate on the margins and kind of bring that into the mainstream. And so I'll give you a great example. For the last six years, we have been working on virtual power purchase agreements. We've been working on community solar. The IRA passed in 2022, and the Inflation Reduction Act brought with it a new mechanism for monetization of tax credits, right? That's transferability. It made it a lot more simple and easier so that most corporations and not just the big banks can participate and purchase tax credits at guaranteed savings. And some of my customers, for example, are even picking up rec strips with it (renewable energy credit strips). So they're getting sustainability credit for it. And yet now we're working on something else that's new, right? So every single iteration in this market continues to amaze me. So now we're working on utility scale storage. Most of my big customers did virtual power purchase agreements back in the day, which are these massive transactions we were talking about earlier… these customers are now looking at batteries for a totally different reason. They're looking at their positions in the market. They're as produced energy on these renewable assets. And they have to live with whenever the energy is produced, that's the price you get. But the batteries are the opposite. You control where the economics get created and you control where the revenue is produced. So, for example, if you have a really low hour in Texas where it's negative pricing and you can purchase your energy for the battery then and then you could sell it when the energy spikes, and this creates a really wonderful hedge against their existing positions. It adds to their sustainability story because they are preparing the market to accept even more renewables in the future, right? By balancing that grid need between the peaks and troughs. And in the end of the day, the economics make sense. So when we think about how this market has evolved, right, we started with few companies back in the day doing onsite solar, to now working with utility scale projects to buy wholesale power, to innovative structures like community solar, to transferable tax credits, and now to the battery side of the equation. We have so many different iterations and products within the renewable space that our major corporate customers are taking advantage of.
Rob Bernard
The world is getting more complex. It's way more nuanced about, how do I think about energy versus I used to get a utility bill, I pay a certain amount per kilowatt hour, and some procurement person would just make sure the check was cut. That's all I thought about for energy. Now we're talking about a world where data centers are coming down the pipe. They're going to actually cause some problems. We talked about risk a little bit, but think about the risk of a brownout. Now, what am I going to go do? Do I need batteries? Do I not need battery? How do I think about time of day pricing? How do I think about things not just batteries, but things like pre-cooling my water with thermal storage. It's like the world is exploding in complexity. And our job with people like Miro, and you just heard him sort of talk about it, it's like, okay, we need to understand what your philosophy is as a customer and then we will design… It's like stock trading. We're going to create the right portfolio for you, and it's going to be different state by state because every rule that you play in is going to be different. So that's where it gets super... you can tell I'm so excited about this because it's like, oh my goodness, energy is now core strategic in the world of sustainability and commercial real estate.
Spencer Levy
And I'll take it one step further. And I just start this by saying, Mom, I love you, but I stayed your apartment the other day and we went in there and my wife and I kept turning the thermostat down to make it a little cooler. And my mom, who grew up middle class or below in Brooklyn, kept turning up because she was worried about all the energy it was going to use. And I would say that people listening to this show right now aren't all real estate developers. They’re not all occupiers. They're folks like my mom who are very energy-conscious. What does this mean for them?
Rob Bernard
Well, I think the real win is when we get to a world where we have proliferation of renewables at scale. Because, hey, if you want to optimize for whatever thing you want to optimize, that's great. But the infrastructure you rely on has to actually operate in a way that we decarbonize our economy. So at the end of the day, if you are efficient or if you're inefficient, you'll pay more to be inefficient, so economically, it's not great, but actually environmentally, it shouldn't really matter.
Miro Sutton
We are entering a new phase in the U.S. power market. I think there's enough regulations out there that the lights will stay on. But to Rob's point, it's going to get a lot more complex for the utility companies who have this aging infrastructure. And they're going to struggle to keep up with demand, especially with GenAI. GenAI is… these massive tech companies are looking to get behind the power plants directly, and that's going to cause some downstream effects, right? I do think power prices could fluctuate and go up. I think some of the individual hours in certain markets will become way more expensive. And when customers see this… Now, a lot of the residential customers, luckily, will be protected from this, Spencer. So your mom's okay. But some of the corporate customers, they have to think very carefully around what is the right strategy. And that's a combination of operations. It's also a combination of third party contracts with how they participate in the market. And so to Rob's point, you used to have a guy in a room who would just pay the bills and keep the lights on. But it's way more complicated than that. And almost every organization is waking up to that fact. I'll tell you this. I have one customer who did a lot of work with us on the community solar stuff. Did a lot of work with us on the virtual power purchase agreement side. And they have their C-level asking them, what are you guys doing to prepare for potential brownouts and service outages for us? And they're like, well, we're doing some of this renewable stuff, which is really cool, so we'll get some price value, but maybe we should do even more redundancy and look at stuff on site. And so the conversation continues like that and is now not only a bottom-up conversation, but it's a top-down conversation.
Rob Bernard
And I want to get back to what you were talking about before about investors, which is, let's say you and I own a portfolio of buildings, right? And it's only going to take 1 or 2 brownouts to make national news before people kind of panic. And I do think we're not going to run out of energy because energy is not a static commodity. We can create more of it. But in this world where we can offer our tenants a portfolio that says, look, we're hardened against brownouts because we've optimized for thinking about batteries and storage and so we can be, in effect, islanded from the grid for long periods of time. That creates competitive advantage. And by the way, you want to be a tenant in my building? I'll give you green power because the occupier does care. And if I’m the occupier, I want to bring in a building where my carbon footprint for my energy is zero. Like, if I can offer that as your landlord, I have competitive advantage. What does that mean? It means my rent rolls higher. It means even at the same cap rates, if we don't think there's differences in cap rate, I’m going to demand more for my building than my neighbor across the street who has brown power.
Miro Sutton
I also want to go a little bit into how it works on the utilities side of the equation here. So when you think about all that… let's actually back up one step further than that. The increase in power in the U.S., the demand for power in the U.S. that's projected right now is something we have never seen before. To give you an example, power has been pretty flat over the last ten years. We've had no load growth essentially in the U.S. for over ten years. So that dynamic has permeated into a lot of the utilities and the way they think about the grid. Over the next five years to ten years, we're looking at easily 25% increase in power consumption.
Spencer Levy
Let's just pause there and back up for just a second. Let's assume we ran the machine more efficiently. Don't add another power plant. Don't generate any more power. How much can we just pick up by running a better machine?
Miro Sutton
Some of that would be, for example, EV adoption. EV adoption would be great for utilities. They'd love that, right? It's a lot of nighttime load, which is not stressing their peak capacities, so that would be great for the grid. And there is some of that that's going to be in that 25 to 30%, we’ll even call it, load growth in the U.S. So even capacity. But the bulk of this is going to be GenAI.
Rob Bernard
It's 10 to 20x. Exactly. It's 10 to 20x the amount of energy when you go do a Google Gemini search versus if you just do a regular Google search. Now, if we want to go global, I mean, the numbers are astronomical in some countries. But this is going to drive, to Miro’s point, massive load growth.
Miro Sutton
But I like to remind people that as good as that example is, it doesn't take into account some of the medical and scientific research that GenAI is going to be used for, which is just orders of magnitude over anything search will do. You're going to have your user demand for search for GenAI, but then there's going to be a whole separate subset of GenAI that's used to solve the biggest problems humanity has. And that's great for society. But we need to have the raw infrastructure, the raw energy, there for it to use. And that's the biggest single challenge we have today. And it's really concerning because utilities are not ready for this. This is a fact. If we look at the interconnection queue, the ability to get on to the grid, if you're a new generating asset, there is no lack of projects in that queue. You know what there is? There's a lack of people to process it and to do the actual work on the engineering to upgrade it. So what we've seen is, previously, I'd say even as little as three years ago, the interconnection queue could be as short as 12 months. Today, it's upward of four years.
Rob Bernard
Wait, so for those people listening, do you want to explain what an interconnection queue is?
Miro Sutton
Yeah, sorry. So if your project, looking to go online and produce electricity in a deregulated market, so that would be some of your major markets like Texas. You want to build a power plant in Texas, you have to connect to the grid. And so the utility has to enable that connection to the grid, and they have to run studies and see how your power plan will impact the grid at the location where it's interconnecting to the grid. How they're going to pick it up, distribute that power, right? So all these components are important in understanding if a power plant can be interconnected to the grid, how much it will cost, if so, and how long it will take. So usually or historically, the utility took a year to process that and they'd get the new power plants through that process pretty efficiently and quickly. And those plants could be operational within a few years of the development. Now that process is up to four years. In Europe, where it's even worse, it's as long as eight years to interconnect. And so to think about the supply-demand side of the equation here, if it's going to take utilities that much longer and it's a compounding problem, right? Like as more and more projects come on, the lead times go longer. Some of the best spots have been cherry picked. So as that continues, it's going to get more complicated to balance the grid, especially when demand for electricity is going up at such a rapid and unprecedented clip.
Spencer Levy
So we had as a guest on this show maybe a year ago the CEO of Baltimore Gas and Electric. And what he said on the show is while we certainly need more power generation capacity, it pales in comparison to transmission. So is it a power generation problem? Is it a transmission problem? Where do you see the problem?
Miro Sutton
It is fully a transmission problem. The interconnection piece, if you want to think of it in that way–
Rob Bernard
I don't know if I think it's fully a transmission problem, because here's why. Like let's take a parallel world that I think actually applies here, which is compute. Which is, do I need more servers or do I need more handheld phone compute power and edge compute? The answer is yes. So you need more transmission. You need more distributed energy generation. You need more compute at the edge on these energy systems so that they can optimize and have bidirectional, not just energy flow, but information flow. This is why this is so exciting, but it is a total transformation of how we think about energy. So while I agree that transmission is massively important, it is not the thing, it's a thing.
Miro Sutton
So here's where we do disagree a little bit, and I'll tell you my position. I agree with everything you said, but I think the bottleneck is transmission and interconnection. So I think if you can solve for transmission-interconnection, the generation will come. I think there is enough in the queue and the economics will support it such that it will get built. Kind of a field of dreams, right? So if you build the transmission interconnection, the rest will follow.
Rob Bernard
But do you think we'll be able to build enough transmission-interconnect in time to meet the tidal wave, potential tidal wave?
Miro Sutton
Absolutely not. I think it’s a huge problem
Rob Bernard
Yeah. No, I think in the short term, we've got to return to your question before, about is the transition painful? Maybe. Maybe. But this is where capital flows are moving really quickly, innovation’s happening, and so we are going to invent our way to this new future.
Spencer Levy
Speaking of moving, we're sitting here in Manhattan, maybe the densest, highest end, greatest energy user. Probably the top end of just about every scale you're looking at. But one of the things I understand about AI is that the data centers that actually do AI don't have to be in Manhattan, but where is the energy coming from? Why’d they go there? Why not here? So, do you think that because energy may be the limiting factor, whether it's transmission or it's generation, it's going to move where we work, live, and play?
Rob Bernard
And manufacture. Yes. Yeah, it has to, because if it becomes a scarce enough resource, it's like, where are you going to go to do agriculture? You're going to go to where there's agricultural land and water infrastructure. So it will happen. The hard part is, of course, predicting where. And one of the things I'm excited about around this acquisition and partnership that we now have, it's like, we need to sit with our clients and have that conversation, which is, hey, where do you think your power is going over the next ten years? And now let's talk strategically about which markets are highest risk, right? Which have the best advantage, and let us help you design your, literally your strategy coming from energy as a core ingredient, which historically it has not been.
Spencer Levy
What percentage of this is forward thinking of being clean? What percentage of this is protecting you from future change?
Rob Bernard
So I'll let Miro talk about the energy side. But one of the things, it's an excellent question, is how do you think about climate risk and climate modeling? So we've actually spent the better part of the last year with a team of people throughout CBRE evaluating all the climate risk models that we can get a hold of around the world. And we ended up partnering with one of those companies so we could sit with our clients and say, hey, based on the most sophisticated modeling, here's your physical risk. We'll talk about energy, and like I said, Miro can jump in there. But like, there are multiple degrees of risk and you certainly hit on one, which is a big part of how we think about this for our clients.
Miro Sutton
I think there is a completely different angle I'm going to take from the energy side, which is, the answer on some of this stuff that we're doing is not on a site by site basis. It's not going to directly impact your personal resilience in most cases, right? Because if you have on-site solar, it could be through a multitude of different programs. Some of them will be behind the meter, in front of the meter. But either way, if the grid’s down, your solar site’s down, too. But here's the difference. On a macro level, when you're entering into these utility scale power purchase agreements, I'm going to use Texas as a great example because Texas is arguably one of the best deregulated free market economies for electricity. And Texas happens to be the number one place where new renewables is going in, as well. And so what's happened is, if you think about a couple of things at the same time, you start to realize that the collective action of all the different clients leads to a more resilient grid. And so, number one, we have to understand how power plants were funded previously. Usually you'd have low entry cost and then ongoing fuel costs. So you're able to optimize your power plant, your coal plant, your natural gas plant around fuel costs, and pricing in the market would vary based on that. For a renewable facility, all the cost is upfront. And the biggest challenge on having all of your costs upfront is who's going to finance that. And so without these offtake agreements that these corporates are stepping in to give these utility scale power producers, the renewable power producers, these projects do not get built. And so when all the different customers together, they get together and they all purchase gigawatts and gigawatts of power in Texas. Texas just was the recipient of massive quantities of new load on the grid that otherwise may have been a real challenge for people to bring in, right? Like you only have so many railways or pipelines that can bring coal or natural gas into the state. There is a limit to how much the traditional energy structures could have accommodated under the traditional wires. These renewables, they site themselves, they're embedded inside the grid in different locations and they don't need any fuel. And so being able to have that collective action and then, like I told you earlier, now batteries coming in as the economic decision in this free market to stabilize some of those ebbs and flows, and when renewables are producing or not producing. That is the free market at work there that is also creating a significantly more resilient market in Texas, which is now going to be, for Texas, really great. Because they're going to be the center point of a lot of the AI growth, a lot of the energy infrastructure growth, manufacturing growth, residential growth, all kinds of different… It's going to be the place to probably be in many different sectors because of that.
Spencer Levy
Very often our investors are tactical, very tactical. They're like, if I put this solar array on my roof, it reduces my flexibility to put a new chiller up there. So I think there's still room to grow in terms of the flexibility of the industry, even if the community solar benefits are obvious. Any point of view on that?
Miro Sutton
Yeah, no, I think that's where we work with a lot of our clients to say, well, what kind of reserve do you need on the roof space? Should we limit the size of the deployment? Maybe we look at this site and not that site for other strategic reasons. A lot of times maybe we give up a parking space or two to do something like a battery, right? That's not a lot of real estate to dedicate to something that could A) generate revenue and B) create some resiliency on a macro level on the grid.
Spencer Levy
I want to add an important nuance here. To quote Jerry Maguire, you had me at hello in the office sector where every occupier, if you want a top shelf occupier, is going to want it green. We're not seeing that level of adoption in industrial. We're not seeing that level of adoption in multifamily. Interestingly, probably the biggest laggard is multifamily. How do we change that?
Miro Sutton
Industrials are actually some of our largest customers right now. They have a ton of real estate around the country. Let's say they have a mine and they're mining something. They usually own all the adjacent lots around the mine and they're unused, completely unused. And they have 40, 50 year time horizons on whether or not they're going to use these. So we work closely with their internal stakeholders to figure out which parcels work, which do not, how long we can put something there. And then we take that to the market, and these developers are very interested in these parcels, right? They are close to load, because the industrials consume a lot of power themselves, so there is load in the area. And they tend to be in pretty good markets to begin with. So we have been doing a lot of work with these industrials behind the scenes. Multifamily residential units… I think community solar programs are being enacted right now with low to moderate income qualifiers. So if you want to get the best value in your community solar asset, you have to subscribe the low to moderate income residential customers to a portion of your project. This is a requirement in many programs right now, and these developers are just hungry, desperate to find these residential customers. So enabling that is definitely going to bring value to those residential customers and potentially to the owner of that asset.
Spencer Levy
So the bottom line is from the, putting aside all of the other good reasons to put in green power, it cuts the electrical cost for the end user, for the individual consumer.
Miro Sutton
In these markets where we are able to subscribe these customers to community solar, absolutely.
Spencer Levy
So much focus of sustainability is on emissions, not on embedded carbon. It takes, is it now 30 years to get back the carbon you create when you build a new building versus an adaptive reuse of an older building? Well, I think cities need to look at that, too. Maybe give some credit to this embedded carbon thing, because that will actually make us greener indefinitely, even if it makes you sacrifice some of these other goals. Any point of view on that?
Rob Bernard
Absolutely. We will see, I think, a change over time. And to your point earlier, I think this is starting in the occupier space more than in the investor space, which is, many of our largest clients are now saying, hey, look, we want to partner with you to build a new facility. Let's talk data centers. How do I do that with zero carbon concrete, zero carbon steel? And what's good is, and we're actually now in discussions with and partnering with Breakthrough Energy, Bill Gates's projects, because they've invested in a lot of companies who can deliver those solutions to clients. So there is a leading wave, I'll call it sort of leading edge set of clients who are starting to think about this embodied or embedded carbon issue. And it is a real issue. I would love to see legislation which rewards companies that have done that. I think that will come with time.
Miro Sutton
Here's what I'll add. The market needs to be accessible, understandable, and easy for corporations to actually participate in it. So we are in the process of simplifying complexity for customers. But if the rules and regulations and the things we're targeting are too complicated, even for, let’s call it for 95% of the corporations out there, they're never going to get done. And I have a great example. There is a push to 24/7 match your renewables right now. I think that's wildly ambitious. It's great if you can do it. So the tech companies out there actually pushing for this. I think that's great, if they can manage that. 95% of the companies out there, it's going to be cost prohibitive, no matter how you slice it, right? Like, we're not going to get to a point where you're going to get your average manufacturing company to increase their electricity costs by 50% to be 24/7 matched with renewables.
Rob Bernard
Oh yeah. But I'm going to say I agree and disagree with you because I remember vividly… I've been doing sustainability since 2007. One of the first events I went to was in 2008, and I sat around a table with the CEOs of many of the power companies across the country and the solar company. And the argument was solar will “never be viable”. Now, granted, we're now sixteen years out from that event. But the point is, what you say today is true. But if we were looking at a horizon of 10 or 15 years when advanced companies and Google sort of at the forefront of this, if they can be the leading edge of this thing and they push the agenda, and then we use things like AI to help democratize this stuff, I think those price point differentials definitely come down over time. So I'd like that statement you made to be proven wrong over time.
Miro Sutton
Well, so I don't think we disagree. I'm going to tell you why. I think 10 to 15 year horizon, it could get there. But the regulation being discussed today, right? So if they make the changes to the greenhouse gas emissions on how we account for them and they force 24/7 matching today, it'll just mean that fewer companies participate in renewables, period. They're going to look at it and say the bar is too high. I'm never going to get there. It's too expensive. Not worth it. So for me, it's a function of how do we do good regulation today to incentivize the right things?
Spencer Levy
Miro, what would you like to see accomplished in the next couple of years?
Miro Sutton
I want to be able to target all of the CBRE portfolio and optimize around what makes the most sense. So, when I'm sitting here today and we've deployed gigawatts, saved our customers hundreds of millions of dollars already, now that we are internally inside CBRE, I would like to have a magnitude greater of that for our customers. I think the amount of change that we can influence in this vehicle is just enormous. And Rob's framing that he's hammered home a few times in this conversation I think is exactly spot on. You’ve got to know what you're doing first, how to do it, why you're doing it, what you're accomplishing. You've got to take the low hanging fruit of efficiency off the table and then solve for the rest. So I think that's the right framing. And I think with that, we can do some really awesome things.
Spencer Levy
Rob, what do you see as the next couple of years? What would you like to accomplish?
Rob Bernard
I think I'd like to accomplish what we've been talking about today, which is, we're very excited about all the nuances and the complexity and where all these markets are going to go, but at a very fundamental level, we should be able to sit with any client anywhere in the world and go like, look, we understand your goals. Let us help you get there. Let us simplify that journey so you can focus on the core things that you want to do with your businesses and go achieve success and not see sustainability as this train coming down the tracks at your company, but rather something that you just deal with in the regular course of business.
Spencer Levy
To, and I guess is probably the wrong word, but it's a word that I would use, make it normalized. Make it just another way of doing business, just part of your every day to day business, rather than being what it is today, which is kind of this new thing that's a little scary.
Miro Sutton
I think a lot of people wake up in the morning, they have to buy electricity, they have to do certain tasks to keep their business running. What I think the world is transitioning to and we can help with that is they're going to wake up and buy renewable electricity, right? So that is where the world is moving. And we want to make sure that that process is possible for them, digestible, and they can parse all the different opportunities out there. Again, going back to the first thing we said, through that economic lens that also covers your sustainability lens.
Spencer Levy
Well on behalf of The Weekly Take, what a great discussion. And Miro Sutton, Global Head of Renewable Energy for CBRE. We're just thrilled to have you here.
Miro Sutton
Thank you.
Spencer Levy
And our old friend Rob Bernard, the Chief Sustainability Officer, CBRE. Thank you, Rob.
Rob Bernard
Thank you, Spencer.
Spencer Levy
For more practical insights and advice, please check out our episode archives on the podcast platform of your choice, or visit our website. That's CBRE.com/TheWeeklyTake. We also hope you'll subscribe, rate, and review the show wherever you listen. We'll be back next week to take stock of the investing climate in today's market with a firm that's taking a unique approach to decision-making. We'll also sit down with the head of a privately owned firm that's been building since 1950 to talk about more than real estate, but also art, philanthropy, and more. We hope you'll join us for those enlightening conversations and others that we have in the pipeline. Thanks for joining us. I'm Spencer Levy. Be smart. Be safe. Be well.
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