Kilroy Realty Corporation (KRC) is a leading real estate investment trust (REIT) focused on owning, developing, acquiring and managing premium office and mixed-use properties on the West Coast. The company was founded in 1947 and is headquartered in Los Angeles, California. With over 16 million square feet across 120 stabilized properties spanning five major coastal markets - Greater Los Angeles, San Diego County, the San Francisco Bay Area, Greater Seattle and Austin - KRC has established itself as a premier developer and operator known for sustainability, innovation in design, and delivering dynamic work environments.
A key aspect of KRC's sustainability strategy is procuring 100% renewable electricity to power its properties and achieve carbon neutral operations. As John Kilroy Jr., the company's former CEO and current Chairman of the Board, announced in 2018, KRC set a goal to reach carbon neutral operations across their portfolio by the end of 2020.
To reach this target, KRC focused on several key strategies:
Energy efficiency, reducing energy use by approximately 18% from 2010 levels
Onsite renewables, installing solar PV on 15 of its properties
Offsite renewables, entering into an agreement for a large offsite solar array that will fully address the electricity consumption of its properties and procuring 100% Green-e certified power from several energy providers
RECs, purchasing RECs to convert to 100% renewable electricity across all properties
Carbon offsets, using verified emission reduction credits to offset the remainder of the company’s greenhouse gas emissions
In conjunction with this announcement Kilroy Jr. emphasized the purpose of offsite renewables in the companies 2018 Sustainability Report saying that company “chose to enter an offsite power purchase agreement to ensure that our offsite renewables are “additional.” Additional renewable power is renewable power that would not have been added to the grid in the absence of our intervention. We believe that ensuring additionality in our offsite renewables is the best way to drive the most positive environmental impact. That project is a Power Purchase Agreement (PPA) named Myrtle Solar Farm, and it went live in 2023. Thirty percent of the project’s capacity and the associated RECs is committed to KRC under a 15 year agreement. By implementing these above-stated measures, KRC achieved carbon neutral operations in 2020 - two years ahead of their original commitment.
In 2022, KRC's portfolio consumed 196,466 megawatt-hours (MWh) of electricity. To address these scope 2 emissions and power their properties with clean energy, KRC procured:
This roughly amounts to 100% of total electricity consumption being matched with renewable electricity. What’s unclear, given that KRC’s Myrtle Solar Project just started operating in late 2023, is how much of that capacity will be considered “additional,” offsetting their consumed electricity with new renewable energy being added to the grid.
This is especially important given that KRC also maintains a commitment to growing their renewable energy procurement as their portfolio expands. The company added over 1 million square feet of new development starts in 2022, which will increase electricity demand. So while overall consumption will continue to rise with new properties, KRC pledges to continually add renewable electricity generation to meet 100% of usage. This was confirmed in a 2022 statement from Sarah King, KRC’s Senior Vice President of Sustainability where she stated that other methods like “installing onsite solar is a critical tool for Kilroy as we work to decarbonize the built environment, allowing us to generate clean energy onsite, deliver long-term value to Kilroy, our tenants and our shareholders, as well as provide a visible demonstration of our commitment to sustainability.”
The Impact of RECs with Additionality
While KRC Realty has set an ambitious benchmark for renewable electricity procurement in the real estate industry, they could amplify their impact even further by incorporating RECs with additionality into their renewable energy purchasing strategy.
RECs with additionality refer to renewable energy credits that directly fund new renewable energy projects. This contrasts with more standard "compliance" RECs, which support existing renewables already on the grid rather than adding new clean electricity generation.
By shifting some REC purchases to ones with additionality, KRC could continue to accelerate the renewable energy transition in local grids where their properties operate. This directly enables more clean power coming online rather than just matching current usage.
Over time, higher grid penetration of renewables will also mitigate the risk of long-term REC price increases that can occur with rising renewable procurement mandates. So prioritizing additionality now can reduce costs later as KRC continues scaling renewable electricity to cover their growing portfolio.
Additionally, using RECs with additionality instead of conventional RECs strengthens the credibility of KRC's 100% renewable electricity claim from a marketing perspective. Promoting direct investments in new renewable projects resonates better with tenants and investors compared to purchasing generic RECs.
Lastly, with KRC's electricity consumption projected to rise with its real estate development pipeline, RECs with additionality better equip the company to match this increasing demand. Driving new clean energy investments facilitates adding sufficient renewable electricity generation in local grids to supply KRC's expanding portfolio.
So while KRC Realty has established itself as an industry leader in renewable electricity procurement, further optimizing its strategy to prioritize additionality would magnify its sustainability impact and maintain its competitive edge. As KRC continues raising the bar to reach ambitious climate goals across the real estate sector, ensuring its renewable energy purchases directly accelerate the clean energy transition will only amplify its progress.