Friday, September 30, 2011

BOMA Responds to DOE's Planned Asset Rating Program for Commercial Buildings

On August 8, 2011, DOE published in the Federal Register (Vol. 76, No. 152, 48152-48158) its plan to develop a National Asset Rating Program for Commercial Buildings. As envisioned by DOE, the Rating Program would evaluate energy efficiency from a building's "as-built" characteristics and identify potential energy savings opportunities. Thus far, measured energy performance based upon utility bill history has been the dominant way to rate building energy performance. DOE believes their initiative would fill a hole created when utility bill history is missing or incomplete. DOE also believes there is a need to be able to distinguish whether energy use differences between similar buildings are associated with installed ("as-built") building systems or with operational choices. The Rating Program would enable building owners and others to directly compare the "as-built" energy performance of building systems among similar buildings, regardless of occupant behavior and building operation.

The Rating Program would have three components: (1) an asset rating system to compute building energy efficiency taking into account building characteristics including its design, envelope elements, HVAC system, lighting system, and service hot water system; (2) a web application (which would be included as a free on-line software tool) that would provide an energy rating to facilitate benchmarking; and (3) a tool in the software to assist building owners in identifying and analyzing potential energy savings opportunities.

DOE believes their Asset Rating initiative would be complementary to EPA's Energy Star Portfolio Manager, which provides only an operational rating. They expect to launch a pilot program beginning in 2012.

The DOE announcement specifically asked for industry input on their plan. On September 22, 2011, BOMA responded with a number of comments and recommendations. One of these, and one that I consider most relevant, was BOMA's questioning the real need for DOE's Asset Rating Program. In my view, this is the most salient point made by BOMA. We already have Massachussetts developing a program that includes an asset rating ("MPG Rating for Commercial Buildings: Establishing a Building Energy Asset Labeling Program in Massachussets"), along with California (under AB 758, for development of a "Building Energy Asset Rating System"). In addition, we have ASHRAE's BuildingEQ program that includes an asset rating. How many asset rating programs does the industry need? BOMA believes and I concur that the private sector voluntary marketplace is already meeting the commercial real estate industry's need for diagnostic tools to evaluate building energy efficiency and that serve as a market driver for identifying and implementing retrofitting opportunities. In these times of limited financial resources and the Solyndra fiasco, does DOE really believe this Asset Rating Program to be of critical importance to the industry? If DOE still insists on spending money, then I suggest they seriously consider spending it on bringing back the Commercial Buildings Energy Consumption Survey (CBECS) and expanding it to include many more buildings. This would be of much greater value to the commercial real estate industry and the many existing building energy performance rating systems that rely on CBECS data!

Tuesday, September 27, 2011

Return of CBECS Funding Urgently Needed

There is a real need in the commercial real estate industry for the return of the Commercial Buildings Energy Consumption Survey (CBECS) funding. If you recall, on April 28, 2011, DOE announced that due to budget cuts work on the 2011 CBECS was suspended. They also announced that they would not be releasing the 2007 CBECS results. This means that the industry had and continues to have no choice but to rely on the last published survey in 2003, an information baseline that is almost ten years old. There is no question that much has happened with building energy use since the 2003 survey. To use data this old in benchmarking can only call into question any conclusions drawn. The industry not only needs CBECS, but needs it to be expanded to include many more buildings.

Benchmarking in EPA's Energy Star Portfolio Manager, for example, relies in large part on CBECS data. By any statistically supportable measure, the number of buildings relied upon by EPA in their benchmarking is wholefully inadequate. For example, Energy Star Portfolio Manager relies on only 498 office buildings (bank/financial/courthouse) located throughout the country to establish the office baseline for benchmarking; only 182 retail buildings (other than malls); only 83 grocery/ supermarkets (of which 49 were from the 1999 CBECS); only 142 hotels; and 277 warehouse/storage buildings. It is not difficult to see why building owners with these property types who understand this significant limitation can call into question benchmarking results they receive, particularly if their buildings are located in areas where there are building energy performance disclosure regulations. Too much is at stake in this highly competitive marketplace to rely on anything but absolutely unassailable data. We as an industry need CBECS to continue and need it to be expanded to include many more properties in each commercial real estate property type category. Action is needed to restore CBECS funding, and needed now!

Wednesday, September 21, 2011

Innovative Financing Strategies for Energy Efficiency Improvements

If you are not a building owner able to easily handle the capital cost associated with the installation of energy efficiency improvements, there are a number of innovative financing strategies that might be able to help. The goal is to be able to pay the cost of these improvements over time, with the cost being offset by the energy cost savings.

On the government side, one program worth investigating, if it is available or soon will be available in your area, is the PACE (Property Assessed Clean Energy laws) program. PACE programs allow for long term (15-20 years) borrowing at low interest rates (typical of municipal bond funding). PACE laws have already been enacted in 27 states to-date.

On the private side, a number of new companies have jumped on this bandwagon, including Metrus Energy, Skyline Innovations and Transcend Equity Development Corporation. Metrus Energy, established in 2009 and headquartered in San Francisco, uses its innovative Efficiency Services Agreement (ESA), whereby customer repayment is based on a cost per avoided unit of energy savings. Metrus, typically working with Energy Service Companies (ESCOs), pays for all the upfront and on-going project costs, providing facilities with the immediate operational benefits of large-scale energy efficiency measures without the capital expense. Metrus says it can finance projects as low as $100,000 to projects in excess of $1 million. Skyline Innovations, founded in 2009 and headquartered in Washington, D.C., also has a model that delivers guaranteed energy savings to customers without the capital outlay. Skyline typically finances, installs and maintains the energy saving systems (largely concentrating on solar), and gets paid out of energy cost savings. Transcend Equity, founded in 2001 and located in Dallas, TX, uses its Managed Energy Services Agreement (MESA) and typically will pay the utility bills for a building in exchange for a fee that is less than what the owner would ordinarily pay for energy. At the end of the eight- to ten-year agreement, title to the improvements then passes to the building owner.

Essentially, these companies are selling energy efficiency as a service! You may want to check them out if you are interested in alternative ways to finance energy savings improvements in your building.

Monday, September 19, 2011

Pension Asset Managers Push for Disclosure of Energy Performance Data

I was astounded to read recently that a global consortium of pension asset managers, including USS in the UK and APG and PGGM in the Netherlands, have convinced some of the world's largest property managers to disclose detailed data on the environmental and energy performance (sustainability) of their funds. More than 340 property funds and companies responded to the call for action by the Global Real Estate Sustainability Benchmark Foundation (GRESB) to disclose information on environmental management and energy performance. GRESB is backed by $1.7 trillion in institutional capital. APG and PGGM were founding partners in the GRESB Foundation. APG also indicated that the information disclosed is being used in its investment decision-making.

This is just another piece in a growing body of evidence that building energy performance disclosure is a train that has left the station. It is only a matter of time before a build's energy use and relative performance will become just another building attribute, no different than a building's floor area or date of construction.