Use a simplified lease program for renewable energy

Cathay Life has pledged to achieve net-zero carbon by 2050 and has committed to three main climate action strategies: green energy, green operation, and green real estate. The company’s green energy strategy to transition to 100% renewable energy by 2030 is also tied to its RE100 (Renewable energy usage 100%) declaration. Cathay Life currently stands at RE 5.8 (Renewable energy usage 5.8%) of its 2022 objective. As one of the largest commercial real estate landlords in Taiwan, the company has initiated a project to align with its tenants to reduce their energy carbon footprint by providing green energy services, making it the industry’s leading advocate in renewable transition.

When Cathay Life began looking into the process of procuring renewable energy, it identified several deficiencies in the market. The company believed the solutions to these issues could be applied to the larger office building market and industry. Most tenants in Taiwan do not own any rights to the building’s electric meter and renewable energy in the country is dominated by the private sector. The market is opaque, and the supply scale is friendlier to industrial companies due to the supply of energy they require. This creates a mismatch between green energy suppliers and non-industrial sectors. Using renewable energy is a voluntary act, hence, the negotiating process is complicated. An agreement between a building’s unit electric meter owner, the tenant, and the energy supplier must be made and approved.

The green energy contract, along with its application, is reviewed by different government agencies. If a tenant purchases five different renewable energy sources, they will need at least five different applications for regulation review. This takes roughly six to twelve months to process, and can take even longer, depending on the complexity of each application. Providing renewable energy is only half of the process; approving the green certification is the other complicated half.

Cathay Life believes an efficient market system is integral to assisting Taiwan in achieving Net Zero by 2050. If every building tenant applied to use renewable energy, it would impede the application process while slowing the market’s green energy transition. Cathay Life has thus suggested an alternative to reduce the number of applications and contracts between different parties while supplying the same amount of energy to buildings. To do this, building owners, or electric meter owners, should assume responsibility for initiating renewable energy procurement. Since each purchase requires numerous contracts between different parties, Cathay Life’s solution is to have only one contract and application between a building’s electric meter owner, the energy supplier, and government regulators (see illustration below).

The process also reduces the number of applications and contracts required for a single commercial building. Moreover, the process becomes even more efficient when a building’s electric meter is owned by a single owner. In addition, it benefits energy suppliers to easily match a single large demand instead of managing small, stratified procurement. This practice is commonly referred to as a “Green Lease Contract” in Taiwan.

This is an efficient process for office tenants to declare their use of renewable energy. With a green lease contract, tenants request the annual amount of green electricity for the building owner to meet demand. The tenant will then only have to confirm whether renewable energy is being properly supplied and pay their electricity bill, while the landlord or the electric meter owner will manage the certification process.

Climate impact

Targeted emissions sources

• Cathay Life’s Scope 1 and 2 emissions

• Cathay Life’s Scope 3, Category 13, downstream leased assets

Decarbonization impact

• Sourcing from CPPAs directly contributed to Cathay life’s 5.8% renewable electricity goal, which reduces Cathay Life’s Scope 1 and 2 emissions by 6.6%, equivalent to 1,806 tons in 2022

• Clients can use renewable energy from the company’s green lease program

Business impact

Benefits

• Clients have access to renewable energy while saving the time required to identify a supplier, negotiate a contract, and go through the government application process

• Switching to renewable energy early reduces unpredictable rising energy costs

• Establishes a transparent foundation for both the tenant and the building owner to achieve net-zero operations

• Opens future opportunities to collaborate on other energy efficient practices or programs

Costs

Implementation of the green lease program requires communication and management costs. This type of management structure is new to the market and requires new personnel training.

Stakeholders involved

Internal stakeholder

Landlord / electric meter owner: Cathay Life Insurance

External stakeholder

In Taiwan, the energy infrastructure is nationalized. Hence, the regulator, and grid infrastructure are owned by different government agencies. A privatized energy market may look different.

• Government regulator

• Grid owner / entity: = In Taiwan, the grid is owned by a national enterprise called Taipower.

• Energy Company that develops and owns the energy farm.

Implementation and operations tips

It is important to understand a building’s energy consumption over time. Time-matching regulations vary across countries and Taiwan’s time-matching interval is 15 minutes, while dividing the day into several sections. The regulation does not permit time-matching across different sections. This can either enhance or decrease the amount of renewable energy matching with the exact usage. Therefore, the actual matching result might be different than expected. This reinforces the importance of communication between the building owner and the tenant on consumption patterns and energy matching.

Although energy procurement processes and regulations vary among governments and countries, one of the benefits of a building owner leading the procurement process is that it saves time and resources. This was the main benefit Cathay Life sought to achieve in amending Taiwan’s procurement process. From the company’s experience, stakeholders have a common desire for a smooth transition to green energy. Conveying this benefit can help form consensus among different parties and stakeholders.

Before a nation’s grid is fully decarbonized, it is subject to constant policy and regulation change. Being flexible and agile to adopt regulation changes is an integral part of fulfilling customer demands. This should be addressed in the green lease contract between the building owner and the tenant, as well as with the energy supplier.

Next steps

• Provide access to renewable energy for 100 companies among 50 commercial assets by 2025.

• Cathay Life will continue to host climate change and climate action forums within its building assets, providing facts, data, and insights into how regulations are evolving in the context of Taiwan’s Net Zero policy and 2050 targets.

• The company will target large urban centers populated with office users. In the meantime, the it will also engage with clients representing multinational corporations or energy intensive businesses within its office assets.