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What You Should Know About Energy Benchmarking & Disclosure Laws

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Fran Hereth

Yogurt containers have a label listing nutritional value, cars have a label listing miles per gallon, and refrigerators have a label listing their energy usage. Why not buildings? Fourteen cities have decided that they should by requiring commercial building owners to benchmark and disclose (B&D) their buildings’ energy usage. Benchmarking measures and compares energy efficiency between similar buildings using standardized metrics. Cities are banking that B&D will push the market toward increasingly efficient buildings by making a property’s utility data readily available to sellers, lessors, buyers, lenders and investors.

The fourteen B&D programs throughout the United States share many of the same requirements.  Building owners have to submit monthly electric and gas bills along with key building characteristics—square footage, operating hours, year built, etc. Some programs also require water usage data, in acknowledgment of the energy embedded in water resulting from pumping, treatment and heating. In some jurisdictions the utility data must be manually entered, while in others, the local utility company can upload the data through an automated process.

The benchmarking in all cities requires the use of the Environmental Protections Agency’s Portfolio Manager Tool. Portfolio Manager, a free online software program, uses a building’s utility data and key characteristics to calculate the building’s Energy Star score. The Energy Star score ranks a building’s energy performance relative to other comparable buildings adjusting for weather. An Energy Star score of 50 indicates that a building’s energy performance is at the median for all buildings of its type. A minimum score of 75 is required for Energy Star certification.

Square Footage Minimums Vary

The programs vary by building type, building size, disclosure requirements and enforcement mechanisms. In Austin, Texas, buildings of 10,000 square feet and greater are required to provide the mandated reporting, while the threshold size in Washington, D.C., Minneapolis, New York City and Philadelphia is 50,000 square feet. Programs can require that the data be shared with the City government, posted on a public website, divulged to participants in a lease, sale, refinance transaction or shared with current tenants. San Francisco’s program requires all four.

The scope of some programs extends beyond benchmarking to include audits and/or retrocommissioning. Audits are conducted by accredited professionals to assess a property’s current energy usage and the performance of the equipment and building envelope. The audit identifies cost-effective improvements that will cut energy usage. Audits range in complexity from ASHRAE Level 1 involving a site walk-though to identify improvements and associated costs, to ASHRAE Level 2 engaging in more detailed end-use breakdown, analysis and cost estimates, to ASHRAE Level 3 using energy modeling and assessment of more capital-intensive measures.

Retrocommissioning improves the existing building’s performance through no-cost, low-cost adjustments to equipment, control systems and operations/maintenance procedures.

Successes

B&D programs are betting that once building owners start measuring their energy consumption, owners will engage in management practices to reduce it. The U.S. EPA 2012 “Data Trends: Benchmarking and Energy Savings” report indicates that this bet can pay off. The 2012 EPA report documents the following results for 35,000 buildings that were benchmarked from 2008 through 2011, with 2008 as the baseline year:

•    2.4 percent annual energy use reduction;
•    3.5 percent average savings over three years for hotels and 7 percent for all building types; and
•    Buildings with the lowest scores improved the most.

The financial value of an annual savings of 2.4 percent for three consecutive years for a full service hotel with 100 properties is equivalent to:

•    A cumulative energy cost savings of $4.1 million; and
•    An increase in revenue per available room of $1.41.

Challenges

While this 2012 EPA report provides hard evidence that benchmarking and disclosure can motivate owners to make energy efficiency improvements, cities are finding it’s not a slam dunk.  B&D programs have had to tinker to find the right additional ingredients to blend with benchmarking to drive real market transformation. Data is just the starting point. The end goal is to drive higher investment in energy efficient buildings. While the utility data sharing through B&D programs is intended to send market signals that nudge the marketplace toward greater efficiency, programs have found that the marketplace needs some extra help.

Making Sense of the Data

A common challenge is presenting the data in a way that catalyzes owner action. Often the data is presented in spreadsheets. The Energy Star scoring of 1 to 100 used by all the programs compares properties to other similar properties around the country. Program administrators found that spreadsheets and scoring do not present enough context, personalization and story to really engage owners. Also owners want to be ranked against peer groups that are more local and relevant, rather than a national pool.

To address these issues, the Philadelphia Mayor’s Office of Sustainability engaged Azavea to develop a free online benchmarking visualization and mapping tool. The tool allows owners to customize the data by offering data field and peer group options.

The Seattle Office of Sustainability is working with the PR firm, Resource Media, to develop case studies that tell energy efficiency success stories. These case studies from industry peers provide real life examples to owners that are concrete and personal.

Taking Action on the Data

Compelling presentation of data can get an owner’s attention. The next step is to transform this awareness into action. Programs are working to identify the right tools to offer owners to motivate them.

The program in San Francisco requires ASHRAE Level 1 or 2 audits or retrocommissioning every five years. This combination package, kicked off with the benchmarking, worked well for the InterContinental Hotel in San Francisco. Armed with utility data, the hotel began to identify the hidden “write-offs” they weren’t aware of which led to investment in audits and improvements. The improvements, partially paid for with rebates from the San Francisco Environment and the utility, Pacific Gas & Electric, had a simple payback of less than 15 months and generated an annual savings of $198,000.

InterContinental San Francisco General Manager, Peter Koehler stated, “By benchmarking our hotel’s energy use and identifying inefficiencies through an audit, we were able to take a strategic approach to reducing energy use and maximize savings without sacrificing our customers’ experience.”

The B&D program in New York also includes audits and retrocommissioning and goes a step further by adding lighting upgrades and submetering to the mix. New York’s LL88 requires large non-residential buildings to upgrade lighting to meet NYC Energy Conservation Code requirements and to install electrical submeters for each large non-residential tenant space and provide monthly energy statements.

In the end, owners can always ignore the data and take a pass on available tools, but they may find that they are pressed to act by external economic forces.

The increased value of better performing buildings is being factored into the larger market. In late 2012 the National Association of Real Estate Investment Trust (NAREIT), the U.S. Green Building Council and FTSE Group, a U.K. provider of stock market indices, announced a new green property index. The Green Property Index analyzes the assets of each of the 172 REITs in the FTSE NAREIT U.S. Real Estate Index Series and gives a rating based on the proportional value of their holdings that have achieved LEED certification (which includes scoring on energy efficiency) or Energy Star labeling.

Fran Hereth, LEED AP, BPI-MFA, is a Founding Principal of Kango Development LLC based in Los Angeles. Kango is a woman-owned, licensed general contracting and consulting firm that provides one-stop green retrofits to hotels and multifamily properties to cut energy and water costs. Kango’s comprehensive design-build services include: audits, financial analysis, construction, Solar PV, Solar DHW, utility rebates/incentives and financing. Contact info: fran@kangodevelopment.com or (323) 627-8291. Learn more about Kango at www.kangodevelopment.com.

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