A revised version of the Energy Performance Building Directive (EPBD III or EPBD) recently came into effect. The European-wide Directive requires its member states to implement policies that enhance the energy efficiency of buildings. The Dutch government has acted accordingly and instigated a new set of policies on March 20th, 2020. Amongst others, it sets requirements for the provision of charging infrastructure for electric vehicles, both in existing and future assets. As such, it is of immediate importance to the real estate sector. While this is yet another regulation, it also offers new opportunities of value creation. In this article, we provide an overview of the revised EPBD requirements and what it entails for owners, developers, investors and asset managers in terms of risks and opportunities. Furthermore, we discuss how Longevity Partners supports the real estate industry to capture future business opportunities.
Electric vehicle (EV) use in the Netherlands is on the rise. In 2019, the share of new passenger EVs sold amounted to 13.9% of total sales, compared to 5.4% in 2018. This makes the Netherlands one of the frontrunners in Europe. Only Norway had a higher share of new EV registrations, with 41%. This impressive share is likely caused by the country’s favourable tax regimes and its predominant dependence on hydropower, making a switch to EVs relatively more affordable compared to fossil fuel-based nations. The coverage of the Dutch charging infrastructure, however, is unmatched in Europe. In 2017, approximately 0.26 charging stations were available for every Dutch EV, compared to the top three European countries in terms of fleet size, Norway (0.05), Germany (0.15) and the United Kingdom (0.10). Overall, it appears that the Netherlands is well on track to meet its commitment for zero-emission mobility by 2050.
The Dutch National Climate Agreement (NCA) outlines what will be done by the transport and traffic sector to achieve this commitment. By 2030, all new passenger vehicles sold will be zero-emission, primarily EVs, and 1,8 million charging stations will be made available. So far, the Dutch government has adopted various policies in favour of EVs, e.g. subsidy schemes, emission-free zones and the ‘Green Deal Electric Transportation’. Still, there remains considerable room for improvement, particularly concerning the number of available charging stations. Despite the Dutch charging infrastructure’s density, there were only 137,000 stations available in 2018. That equates to 0.08% of the envisioned 1,8 million as stipulated in the NCA. This can prove problematic as consumers rank insufficient access to charging stations as the third most pressing barrier to purchase an EV, after high prices and short driving ranges. The government thus needs to significantly increase the rollout to spur the transition.
The revised EPBD may prove to be a driver for EV future use, already affecting the real estate industry today
With the revised EPBD, the government has a new means to do so. The Directive dictates, among others, requirements for charging stations made available at properties. For projects that are in the permit application phase, it is an additional requirement to comply with. Similar to the requirement of a valid energy label for buildings, non-compliance at existing properties may very well lead to financial penalties. The table below summarises the Directive per case:
This new Directive not only requires compliance; it also demonstrates the crucial role that the real estate industry has in the transition towards zero- emission mobility. After all, the transition not only poses mobility related questions, it also presents spatial challenges pertaining to the integration of charging infrastructure in the urban fabric. Moreover, insufficient charging infrastructure can potentially decrease an asset’s value and market attractiveness. Similar to having an internet connection, charging stations and other electric vehicle service equipment will become indispensable features for any property in order to attract tenants, employees or customers. Those who fail to meet their new demands are at risk of losing their competitive advantage.
Revised EPBD provides new opportunities for value creation in housing, commercial, and governmental properties
Those who succeed in rethinking their asset’s value proposition can potentially capture significant value. The prevalence of charging stations helps to attract and retain tenants and can positively affect a property’s value. This is illustrated by an analysis of the top 20 American housing markets, showing that listings in an EV-friendly neighbourhood sell at a premium. Meanwhile, retailers experience increased revenues from customers spending more time inside shopping, whilst their car charges. There is also significant potential for those catering to corporates and governments alike. Their push for sustainable operations will lead to increased electrification of their fleets. Considering their buying power and fleet size, charging stations at their premises become a significant source of revenue.
Furthermore, there will be a need for a comprehensive and robust (semi-) public infrastructure. Currently, 73% of the Dutch charging stations are installed on private lots, with the remaining 27% in (semi-)public spaces. On a global level, more than 90% is situated on private property. This is set to change due to the nature of the next generation of EV adopters. This generation represents middle- and lower-income households that primarily live in dense urban areas and often in multi-family buildings. As such they rely on shared parking spaces with limited options for private home-charging solutions. Consequently, it is estimated that in Europe at least 60% of charging will take place in (semi-) public places. Offering public charging to this group of new EV owners, provides real estate actors with an additional opportunity for value creation. These stations are specifically a valuable amenity for owners of rental properties. Electric vehicle owners who rent a property still have a need for charging but are unlikely to invest in the property they rent. Public charging stations can even be considered a separate asset group to get involved in. In urban areas with structural limitations, commercial parking garages might prove to be interesting platforms for public infrastructure. The possibility of connecting properties to emerging e-mobility networks also offers the potential to develop new partnerships and customer bases.
Meanwhile, public scrutiny over sustainability increases and businesses are increasingly more required to reduce their energy consumption and CO2 emissions. Deploying charging infrastructure is an additional avenue for businesses to explore in their sustainability strategy. Stimulating EV use amongst employees by providing charging stations will positively affect a business’ scope 3 emissions. Moreover, electric vehicle service equipment allows for a broader integrated management of a property’s energy usage. It may be integrated in bundled solutions for distributed energy generation and storage, e.g. photovoltaic (PV) systems, consequently reducing a company’s scope 1 emissions. These achievements in turn reflect significant value in global sustainability benchmarks for real estate, e.g. GRESB. The case is thus made for the real estate industry to develop an EV strategy that considers the value EVs and charging stations have to offer.
Longevity Partners develops EV strategies that help organisations understand how and where they can capture EV-value
The development of an EV strategy can be a daunting challenge for organisations. First, there is a broad range of charging technologies to choose from while different assets have different charging capacities and needs. Furthermore, connecting electric vehicle service equipment with existing energy infrastructure may pose technological and legislative challenges. This is further complicated if it is integrated with distributed energy and storage solutions. With regards to financial considerations, varying costs and subsidies apply while there are also different business models with different results. It is also important to forecast how and where charging will take place. This means that different regional variations and geographical characteristics have to be considered to ensure that stations will generate the desired revenue and emission cuts.
Longevity Partners has a proven track record when it comes to advising its clients on EV strategies. We support real estate investors in implementing their e-mobility solutions through a range of asset-level and strategic services. At the portfolio level, we conduct regional prioritisation analyses, and high-level CapEx and scenario analyses to help clients understand their best-fit EV service strategy and key action areas. At the asset level, we conduct a planning phase assessment of properties wishing to understand their capacity for charger installations, after which we develop a best-fit estimate that integrates preliminary objectives. Next, we provide asset-level guidance on optimising charging scenarios to develop specific packages for installation, and ongoing support throughout the installation process. We are also experienced in integrating energy management in buildings, and can offer bundled analyses of EV, PV and storage at asset level. Finally, Longevity Partners helps its clients communicate their commitment to sustainability, by means of e.g. BREEAM certification and GRESB assessment. These global methodologies take the adopted measures into account and provide transparency about an organisation’s sustainability performance.
Figure 1: Longevity Partners’ EV strategy development
How comprehensive an EV strategy should be is an interesting point for discussion. Amidst the COVID-19 crisis that currently holds the world in its grip, there are countless voices across the globe that argue we should seize this moment as an opportunity to rethink our entire way of life. And as the need for a more sustainable society grows, so will the amount of more stringent environmental policies. It is therefore unlikely that the recently revised EPBD is the last piece of legislation to affect the real estate industry’s relationship with EVs. For instance, the Dutch Supreme Court ruled in 2019 that its government must accelerate emission cuts, while the European Commission recently proposed its own climate law which proposes a mechanism to set short-term binding reduction targets at its own discretion. In both cases, it will require the transport and traffic sector to increase its efforts to cut emissions. Consequently, organisations that comply with the EPBD today, may find themselves noncompliant tomorrow. Longevity Partners will help you in that journey to ensure you stay ahead of the curve.