Trends and geographies of ordinances, regulations, and requirements affecting commercial real estate buildings.
Last month we hosted a webinar for our customers in San Francisco to brief them on the 100% renewable energy ordinance taking effect in 2024. The webinar’s narrow geographic focus enabled us to dive deep into the ordinance but many customers followed up with us after wondering where else their portfolios might be affected by similar ordinances, regulations, and requirements. Below are a few of the trends and geographies we are seeing in the regulatory environment as it relates to buildings and energy.
Benchmarking, Ratings, & Transparency
In the past, energy data reporting and benchmarking was mainly voluntary through programs and certifications like Energy Star and LEED. Over the past few years, many cities have begun making
benchmarking mandatory for buildings. New York City, Seattle, Washington, D.C., Boston, and San Francisco are a few of the cities that have instituted these requirements for buildings. Not only is benchmarking mandatory but the process is becoming transparent. In the state of California, buildings that are energy hogs are on full display on the California Energy Commission’s website:
Either being out of compliance with your benchmarking requirements or owning a building that uses significantly more energy than its peers can leave you exposed to environmental activist pressures and bad PR. That’s not to mention if you’re building is not Energy Star certified it’s unlikely to secure a lease with one of the “FAANG” technology companies.
Emission Limits & Required Efficiency Improvements
New York City’s Local Law 97 made the biggest headlines in the built environment’s regulatory world this year. It limits the carbon intensity (kgCO2e/sf) of buildings and has fines of $268 for each metric ton of emissions above the limit and fines for not submitting or falsifying an intensity report. The law will affect 57,000 buildings in NYC over 25,000 square feet with the first compliance period beginning in 2024.
NYC made the biggest headlines but other cities have also stepped up their codes and requirements for building energy management. Boulder passed a law requiring existing building owners to upgrade lighting to more efficient systems under building energy codes and implement all cost effective retrocommissioning measures. Seattle now requires buildings to undergo ‘tune ups’ every five years and perform all operational and maintenance improvements to achieve energy and water efficiency. For more information on other cities energy policies, goals, and requirements check out ACEEE’s City Clean Energy Scorecards.
Electrification
Electrification is the process of switching appliances powered by fossil fuels to electricity. The most common end uses powered by fossil fuels are space heating, water heating, and cooking. Buildings account for roughly 40% of total U.S. greenhouse gas emissions and policy makers see building electrification as an effective method to achieve their environmental goals. As a result, 22 Californian cities and counties have adopted gas bans or electrification building codes.
Electrification is technically feasible; the biggest hurdle is the economics. Converting existing buildings to 100% electric will be expensive. That boiler in your basement might become a liability!
What to do about it? Reduce your liabilities and exposure!
- Data Management: Start reporting your energy data to Energy Star Portfolio Manager or local agencies with benchmarking requirements (and we can help).
- Understand your buildings energy use intensity and equipment: What is your building’s energy use intensity and equipment efficiency and will either trigger required improvements or penalties? Does your building use natural gas and what would it take to electrify your building?
- Rethink retrofits and projects that use gas: Think twice about investing in fuel cells or cogen plants. The useful life of the equipment assumed in your financial model might be cut short by policy changes and ruin your ROI.
- Use less energy and invest in energy efficiency: Doing this will both increase your building’s NOI and reduce its regulatory risk by decreasing its energy use intensity and carbon emissions. Gridium’s best in class energy analytics and Zero CapEx energy projects can help get the most out of what your building currently has and help it upgrade to more efficient equipment.
