Schneider Electric Country President for Malaysia Eugene Quah
Buildings account for 37% of global CO2 emissions. The sector is by far the largest emitter of greenhouse gases, according to the UN Environment Programme.
To meet the target of keeping global warming below 1.5°C by 2050, operational emissions caused by building energy consumption must be reduced by 5% annually between now and 2050. About 72% of the total CO2 emissions from buildings come from “operational carbon” — produced by the building in use, including from lighting, cooling, and energy.
Considering this, the Energy Efficiency and Conservation Act (EECA) stands as an important first step toward decarbonising Malaysia’s buildings. Mandatory energy audits for energy consumers are beneficial to detect inefficient systems and areas of energy waste, enabling targeted improvements to reduce consumption.
It is encouraged that office buildings, particularly those with an area of 8,000 sq m or more, are not exempt from EECA. The average vacancy rate for green-certified buildings fell by five percentage points during the third quarter of 2023 (3Q23) and 4Q23, according to JLL, highlighting strong market demand and tenant preference for sustainable properties.
However, a significant financial risk looms over 90% of existing buildings, as their inability to decarbonise could lead to a decrease in value of up to 30%, making them less appealing to potential investors and tenants.
It is a priority to retrofit existing buildings to lower carbon emissions associated with energy demand. Retrofitting can cut life-cycle carbon emissions by as much as 83%. Typically, a building’s carbon emissions are split between embodied carbon, which accounts for around 28%, and operational carbon, which accounts for about 72%. It is important to focus on reducing operational carbon emissions without increasing embodied carbon emissions.
However, the substantial initial investments required for retrofitting, compliance costs for energy audits and ongoing expenses (such as certification fees for the Green Building Index [GBI]) can hinder building owners in their sustainability efforts.
This is especially concerning as the action to combat climate change needs to be accelerated while also addressing market demands.
Here’s the breakdown:
- The most basic initial investment for “Light Interventions” in retrofitting — aimed at compliance and implementing metering, monitoring and active building management for efficiency — ranges between RM350 to RM940 per sq m. For office buildings of 8,000 sq m or more, this translates to an investment of RM2.8 million to RM7.5 million. The return on investment is expected within one to three years, with the potential for up to a 45% annual reduction in CO2e emissions.
- The average compliance cost for an EECA energy audit — which includes appointing a registered energy manager, implementing energy management strategies and conducting energy audits — amounted to RM120,000 per year for affected industrial users and RM100,000 per year for commercial users over a five-year cycle
- For GBI registration fees, existing buildings ranging from 4,000m² to 10,000m² incur a fee of RM9,000. The first renewal fee is RM2,500, with subsequent renewals costing RM1,000 each.
This estimate does not account for the costs associated with updating ageing building management systems, which are essential for effective retrofitting and system upgrades. Additionally, buildings will require comprehensive envelope retrofits or deep renovations to achieve net-zero status.
We recognise that EECA has the potential to inspire action among energy consumers and the higher tariff further facilitates this shift. However, to reach Malaysia’s goal of carbon neutrality by 2050, it is important to lower barriers for building owners and facilitate faster adoption of energy efficiency practices.
As such, Schneider Electric hopes the government will provide incentives or rebates to assist owners of office buildings sized 8,000 sq m and above with their green certification fees. Alternatively, it is recommended that the Energy Audit Conditional Grant for 2021-2025 to be extended to include these buildings as well.
While this journey must ultimately include broader decarbonisation efforts, it has to start somewhere. By taking these initial steps, the groundwork for a more sustainable future for Malaysia will be laid.
