Energy Star for commercial buildings was designed to recognize the top 25% of commercial buildings by efficiency. Much like college grades, Energy Star has suffered from a Lake Wobegon Effect, where “all the children are above average.” Today, 61% of San Francisco buildings that report Energy Star scores list ratings above 75.
Certification has clearly shifted – being Energy Star rated is now simply table stakes for any sustainability claim, not a medal for a top performance. With owners craving ways to prove their sustainability bona fides, the EPA has been exploring how to improve the program.
Last week, the EPA held a webinar announcing the Energy Star NextGen program for buildings, news that might portend a new performance race. The proposal is still open for comments (due March 2, submit them here) but moving fast. The EPA plans to make NextGen certification available to U.S. commercial buildings as soon as late 2023.
It’s no secret that the current leasing market is characterized by a flight to quality, and sustainability is one axis of how buildings compete in a post-COVID world. As tenants seek to meet their own net-zero goals, the goal posts have shifted from pure efficiency to measuring building performance and carbon emissions.
As an example, let’s look at San Francisco-based real estate investor operator (and Gridium client) The Swig Company. When Gensler started looking for space in San Francisco, they had their pick of buildings; they selected the historic and high-performance Mills building, where they could build an all electric, net-zero floor. It’s just one example of how sustainability advances rapidly when leasing reads that press release.
There is clearly change afoot. So what are the proposed steps for Energy Star NextGen certification?
First, the basics. You can’t earn the NextGen certification unless you qualify for Energy Star certification. This seems like a no-brainer, but other decarbonization efforts (like gas bans) ignore efficiency, so this is good news for those of us focused on overall carbon reduction.
Second, you have to buy 30% of the building’s energy (from all sources) from renewable energy, on top of what the utility already provides. There is wide flexibility on how this is accomplished. Importantly unbundled national RECs are permitted, meaning the compliance costs will be very low (~$0.01/square foot) and available without restrictions on what your local utility green power program requires.
Third, the hardest and most meaningful part – the building must reach a direct emissions target defined by a simple greenhouse gas emissions intensity (GHGi) target. The table below lists the proposed factors by building type, you can see a range across building types.
The EPA’s proposed direct emissions limits for certification under NextGen
Is this an effective ban on gas to meet the NextGen criteria? Explicitly, no. It is possible to reach NextGen certification with a gas boiler but it will be tight, and most buildings with gas boilers are going to fail Energy Star NextGen. That’s by design, as it’s difficult to square net-zero with continued natural gas in the built environment.
If you read our recent article about the future of gas in commercial buildings, this is just one more data point that should lead you to be more skeptical of that boiler in the basement.
The limits are tight but show that many efficient gas buildings could still qualify. Take below some Gridium analysis for key US cities served by gas. Here we’ve taken five year average degree days and calculated limits of direct pounds of CO2 and therm limits.
NextGen per square foot criteria for office buildings
Gridium clients can investigate either dimension. The snapshot from the Gridium carbon dashboard below shows a mix of all electric and mixed fuel client buildings with direct GHG emissions per foot – this client’s Verona building easily qualifies with about 15% less than the limit for Los Angeles.
Gridium carbon dashboards easily highlight direct building CO2 per square foot
What if your building is on steam? Well, as we’re fond of saying, if you are on steam you won the carbon lottery. Direct emissions are your steam provider’s problem, not yours, and Energy Star NextGen is no exception. You still have to qualify for certification, but if you do, buy your RECs and tada! – you are NextGen certified.
Who else wins the lottery here? Electric heat markets! The map below tracks residential heating technology and shows that wide swaths of the country are traditionally electric heated. For those markets, unless your building is on gas, you have a smooth path to be recognized by Energy Star as NextGen.
Efficient electric heat buildings have a smooth path to NextGen certification
For everyone else, expect some navel gazing and questions about this program to affect your buildings planning cycles. For buildings that don’t qualify because of high gas usage, remediation is not typically easy. Electrification capital estimates are upwards of $20 per square foot.
If you are close, you may find that boiler maintenance and gas focused retro-commissioning will get you there – contact the Gridium team if you need help scoping out gas efficiency.
What are your thoughts? Does your building qualify? Do you think the EnergyStar NextGen certification would help you communicate sustainability progress to your current and future tenants?
