America’s commercial real estate (CRE) portfolios are under a two-sided squeeze. On one side, electricity demand is exploding as data centers, reshored manufacturing, and fleets of EV chargers are plugged into buildings never designed for such loads. The Department of Energy expects nationwide consumption to jump 25-30% by 2030, and many local grids are already issuing capacity warnings.
On the other side, the solar-subsidy landscape that once underwrote rooftop projects has started to shift. While the Inflation Reduction Act (IRA) preserved the headline 30% Investment Tax Credit (ITC), the subsequent “One Big Beautiful Bill” has accelerated timelines and restricted access depending on equipment and financing choices. Under the new rules, projects seeking the tax credits must either commence construction by July 4, 2026, or, if they do not, be placed in service by December 31, 2027, with additional “foreign entity of concern” restrictions beginning in 2026 that can disqualify projects using ineligible components. For CRE portfolios, this creates a narrow, time-bound window to lock in credits and compliant supply chains, which is why owners should move quickly to advance solar in parallel with efficiency upgrades.
Solar paradox
Despite these challenges, the long-run case for on-site solar remains strong because wholesale energy prices will keep rising with demand. Nevertheless, CRE owners must bridge the gap while keeping their operating budget intact. Energy efficiency initiatives are the bridge. LED retrofits, advanced controls, and right-sized HVAC upgrades deliver day one cash-flow-positive savings while avoiding policy uncertainty.
Each kilowatt-hour saved is a dollar back into the company that can be used for other revenue-driving operations. Efficiency also multiplies savings in other areas: by cutting peak load, it frees electrical capacity for future electrification projects, extends the life of existing equipment, and buys runtime from backup generators and batteries when the grid blinks. In this context, efficiency is not just a green initiative — it decreases costs and provides infrastructure insurance.
Subsidies & regulations
As it becomes harder to implement solar due to the ITC restrictions, companies should now be asking how efficiency can offset rising rates and where upgraded controls can enable revenue. Decision makers increasingly screen capital requests through a three-part filter:
- Savings — immediate reduction in kWh and kW charges
- Resilience — ability to ride through outages or demand-response events
- Sustainability — contribution to emissions-reduction targets
Projects that score on at least two fronts move to the top of the queue, and efficiency nearly always clears the bar.
On the regulatory front, 10 states and more than 40 cities have adopted Building Performance Standards that set energy-use thresholds for large properties, with non-compliance penalties reaching $10 per square foot per year in Washington, D.C., and daily fines of $1,000 in Boston. Because most standards ratchet downward every five years, owners who bank early efficiency gains effectively front-load compliance and avoid paying twice: first in fines, later in rushed capital projects. Investors now view proactive upgrades as a hedge against policy risk rather than discretionary ESG spend.
In 38 states, Commercial Property Assessed Clean Energy (C-PACE) programs can fund 100% of hard and soft costs at fixed rates up to 30 years. State green banks in New York and Connecticut layer credit enhancements on top, while national energy-as-a-service providers wrap design, installation, and maintenance into a single monthly fee. In short, lack of capital is no longer a credible reason to defer upgrades.
A new path forward
From this, a practical roadmap is emerging for addressing changes to subsidies and regulations. First, benchmark every facility to flag the worst energy efficiency performers. Second, tackle “no-regrets” measures with two- to four-year paybacks such as networked lighting, VFDs on pumps and fans, demand-controlled ventilation, and occupancy-based controls. Third, bundle upgrades across multiple sites to unlock scale pricing and qualify for energy-as-a-service or operating-lease financing that keeps debt off the balance sheet. Finally, suppose you are unable to outrun the clock on the ITC regulations and their effect on solar projects. In that case, it may be worth waiting 18-24 months while monitoring the economics of upgrading or further changes to regulations.
Today’s advanced technologies are enabling smart building platforms to pull real-time data from submeters, occupancy sensors, and weather feeds, then use machine-learning models for fine-tuning setpoints minute by minute. A recent case study at 45 Broadway in Manhattan showed that AI controls cut HVAC energy use by 15.8% and saved $42,000 annually. Broader analyses suggest AI could trim building energy consumption by at least 8% across climate zones. For owners managing dispersed portfolios, cloud dashboards make it practical to benchmark, dispatch technicians, and verify savings without flying staff from site to site, closing the loop between strategy and measurable results.
Over time, portfolios will need both efficiency and distributed generation to meet decarbonization and resilience goals, efficiency to flatten the load curve, and solar plus storage to supply the remainder. Timing matters, though. Only efficiency delivers value today, making it the on-ramp to everything else.
The remainder of this decade will reward owners who move from subsidy chasing to load management. By treating efficiency as the prerequisite for resilient, low-carbon operations and by measuring success in freed-up capacity as well as kilowatt-hours saved, CRE leaders can protect profitability now while positioning their portfolios for a far more electrified and opportunity-rich future.
Arvin Vohra is the CEO of Redaptive Inc., which he co-founded in 2014. Previously Arvin was the Vice President of Project Finance at Enlighted where he created and ran its Lighting as a Service (GEO) platform, which spans across multiple Fortune 500 companies and millions of square feet installed.
Prior to joining Enlighted, Arvin spent five years at Barclays Capital on its Power and Utilities Team. He spearheaded Barclays’ role in the Property Assessed Clean Energy (PACE) program as well as project finance and public-private partnership initiatives to enable renewable energy. During his tenure, Arvin helped structure more than $3 billion of debt and tax equity.
Arvin received a B.A. from the University of California Berkeley in Statistics and Economics,
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
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