Monday, January 19, 2009

Building Energy Consumption Disclosure on the Way

I am sure you are all aware that the nation’s first green building code was adopted last summer by California, a move that I believe sets an important precedent for similar codes being considered elsewhere. It will require a 15% cut in energy consumption in all new construction and a 20% improvement in water efficiency when it becomes mandatory in 2010. If you are breathing a sigh of relief that this does not impact your existing building, California has also done something else that will impact you.

It happened in California on January 1, 2009. A law that passed in 2007, AB 1103, became effective. This law is specifically directed at energy use in existing commercial buildings. It promotes energy conservation by requiring electric and gas utilities to maintain records of the energy consumption data of all non-residential buildings in the state to which they provide service, in a format compatible for uploading to U.S. EPA's Energy Star Portfolio Manager. This will allow commercial building owners to see how they stack up against their peers in terms of energy consumption. I believe this definitely is a harbor of things to come elsewhere in the country.
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But the real impact on existing property owners will come in 2010. As of January 1, 2010, the law also requires building owners or operators to disclose the building's Energy Star energy performance rating for the most recent 12-month period to a prospective purchaser, lender or leasee. This means that a year from now, anyone looking to buy, finance or lease a building in California will be entitled to obtain the building’s energy performance data and compare it to other similar buildings. There is no question in my mind that this will eventually result in a rental discount and a loss of competitiveness in the marketplace for less efficient buildings. So if you have a building in California, you have a year to prepare for this new reality!
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Interestingly, this has already happened in the UK where existing commercial properties (down to approximately 26,000 square feet) must have energy performance certificates prepared when a building is being built, sold or rented. These energy performance certificates indicate the energy efficiency rating of the building and provide potential buyers and tenants with a way to compare buildings they may wish to purchase or rent. Sound familiar!
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A prudent property owner or manager, no matter where your property is located, should prepare for this new reality now.

Wednesday, January 7, 2009

DOE's Latest Building Energy Savings Contracts

The federal government, with upwards of half a million buildings owned or leased, is the largest single user of energy in the country. Less than three weeks ago, the Department of Energy (DOE) announced the award of 16 Indefinite Delivery Indefinite Quantity (IDIQ) energy savings performance contracts (ESPCs), each worth up to $5 billion! The contracts were awarded to the following energy service companies (ESCOs):

- Ameresco, Inc. (Framingham, MA)
- Chevron Energy Solutions (Eagan, MN)
- Clark Realty Builders (Arlington, VA)
- Consolidated Edison Solutions (White Plains, NY)
- Constellation Energy Projects & Services Group (Baltimore, MD)
- FPL Energy Service (North Palm Beach, FL)
- Honeywell International (Golden Valley, MN)
- Johnson Controls Government Sysytems (Milwaukee, WI)
- Lockheed Martin Services (Cherry Hill, NJ)
- McKinstry Essention (Seattle, WA)
- NORESCO (Westborough, MA)
- Pepco Energy Services (Arlington, VA)
- Siemens Government Services (Reston, VA)
- TAC Energy Solutions (Seattle, WA)
- The Benham Companies (Oklahoma City, OK)
- Trane U.S. (McEwen, TN)

Federal agencies are able to access these contracts and use them for energy savings projects at facilities both nationally and internationally. Congress authorized ESPCs to encourage federal agencies to become more energy-efficient and reduce their energy costs. The program's attraction is that projects can be accomplished without upfront capital costs and without special Congressional appropriations to pay for the improvements. The agreement is between a federal agency and an ESCO. Projects can be initiated by the ESCO or the federal agency. Every project requires a detailed energy survey. The ESCO then is responsible for designing and constructing the project, and arranging for its financing (typically from a third party). The ESCO purchases and installs the necessary equipment, such as new energy-efficient windows, automated controls, energy-efficient lighting, and updated heating, ventilation, and air conditioning equipment. In exchange for not having to pay for the equipment, the federal agency promises to pay the company a share of the savings resulting from the energy efficiency improvements until the project is paid for. Contract terms up to 25 years are allowed. After the contract ends, all additional cost savings accrue to the federal agency.

If you can provide energy auditing services or have equipment or systems that can save energy or use renewable energy sources, business sense dictates that you make the ESCOs aware of your products and services. The opportunity is significant.

If you are a building owner or manager or consultant, it would be prudent to keep abreast of ESCO projects. Numerous case studies already exist and have been summarized on DOE's web site: www1.eere.energy.gov/femp/financing/superespcs_casestudies.html. More detailed information on each project can be obtained from DOE.