Energy Disclosure Legislation

Energy Disclosure Legislation

Burden or Opportunity?

Sustainable Solutions Corporation 155 Railroad Plaza, Suite 203

Royersford, PA 19468

Jeremy Kuhre, LEED AP BD+C

Over the past few decades, major industries such

as finance, manufacturing and retail have built

vast information system networks which enable

decision makers to extract millions of dollars of

profit via improved efficiency of their processes.

Unfortunately, the real estate industry has largely

lagged behind, leaving a significant amount of po-

tential profit on the table. Supporters of energy

disclosure legislation anticipate that increased

awareness of building energy consumption will

drive the market to modernization and increased

efficiency.

With the expansion in energy disclosure legislation

world-wide, there is growing confusion around the

subject. To date, the United States has not passed

nationwide requirements for energy disclosure in

buildings, and legislation at the state and local

level is fragmented. In order to understand energy

disclosure, and the ultimate impact of such

programs, building owners and managers need to

stay informed on the subject.

First, what is energy disclosure? At its most basic,

energy disclosure requires that building energy

metrics be made public so that stakeholders can

make valid comparisons among different

buildings – much in the same way that published

vehicle mileage allows consumers to make edu-

cated decisions about car purchases. There are

two different models for energy disclosure: asset

ratings and operational benchmarks.

Asset Ratings

Asset ratings are similar to EPA mpg ratings in

that both measure typical or as-built operating

behaviors and conditions. For buildings, this is

typically accomplished through a low-grade

energy model that uses inputs such as building

vintage, envelope design, lighting design, and

heating/cooling system design to provide some

kind of score. Actual utility data does not affect

asset ratings. Asset ratings ease building owner

concerns that unpredictable or wasteful tenant

behavior will reflect poorly on building energy

use as a whole. Examples of asset ratings in-

clude Energy Performance Certificates (UK) and

the forthcoming Department of Energy’s Com-

mercial Building Energy Asset Score (U.S.).

Operational Benchmarks

The EPA mileage label warns that actual results will vary. A lead-footed driver who does not maintain his

vehicle can certainly attest to this fact. Similarly, actual energy consumption in buildings varies widely

depending on occupancy, building hours and occupant behaviors. An operational benchmark uses actual

utility data over a specific performance period (typically 12 months) to deliver a standard metric for

comparison with similar buildings. The most popular tool for use with operational benchmarks is EPA’s

Portfolio Manager. Portfolio Manager uses utility data combined with other basic building occupancy data to

develop an Energy Use Index (EUI) and ENERGY STAR rating. The EUI is a normalized value reported in

kBTU/gross square foot of building space. The ENERGY STAR rating is a number from 0 to 100 that indi-

cates how the building performs compared to peer buildings in the Commercial Building Energy Consump-

tion Survey (CBECS, a national survey of building data conducted by the Department of Energy’s Energy In-

formation Administration).

Operational benchmarks provide an accurate representation of actual operational performance and can

identify inefficiencies that were not anticipated by an asset rating alone. This fact, combined with the

popularity of the Portfolio Manager tool, has pushed operational benchmarks as the preferred method of

energy disclosure for legislative bodies across the United States. Regardless of the approach, energy

disclosure legislation is intended to increase transparency and promote energy efficiency improvements

through market competition.

Trends in Energy Benchmarking Legislation

Rising energy costs and environmental concerns have put pressure on municipalities to reduce energy

consumption across the board. The commercial building sector is one of the largest consumers of electric-

ity in the nation and has become a primary area of focus for reduction. Some of the country’s largest cities

have enacted energy disclosure legislation to address these growing concerns.

Although each city and state has a different program in place, several similarities are apparent across most

programs. Each law designates the building type and size that will be required to benchmark and disclose

their ratings. Government, commercial, manufacturing, and multi-family facilities are typically required to

disclose energy use. Furthermore, the minimum building size required to disclose ranges from 5,000 to

50,000 gross square feet. The method of disclosure also varies among these programs. For example, some

municipalities require disclosure be made available only during building transactions; more commonly, they

will publish energy disclosure information annually via a publicly accessible database. For more

information regarding specific energy disclosure laws, refer to: buildingrating.org

The Value Behind Energy Disclosure

Building Owners and Managers

Disclosure allows building owners to promote their energy efficiency successes and

distinguish themselves from the competition. Studies have shown that buildings that

make sustainability and energy performance priorities have higher tenant retention

rates and higher rental premiums in some cases¹. The process also provides owners

and property managers the tools and insight necessary to significantly reduce operating

expenses and realize bottom line savings through improvements in energy performance.

Tenants and Lessees

Making energy efficiency data public provides another point of consideration for compa-

nies when looking for commercial real estate. Prospective tenants have the ability to as-

sess properties not only by price and amenities, but also by environmental

performance, allowing them to minimize utility costs by selecting the most energy

efficient buildings. Many organizations, such as the General Services Administration

(GSA)², have begun to set minimum energy performance requirements for potential

leases.

Governments and the Local Community

Efficiency disclosure leads to greener buildings, which have several benefits.

Sustainable buildings provide a cleaner, healthier environment and make regions and

communities more competitive in the real estate market. Progressive businesses are

increasingly looking for sustainable commercial spaces, so legislating energy disclosure

is an early step in growing the local economy. Disclosure legislation generates demand

for green jobs for the municipality as building owners perform energy upgrades. New

York City’s program alone has projected the creation of 10,000 new jobs³. Additionally,

the competition that stems from energy disclosure will drive innovation and overall en-

ergy efficiency improvements.

¹ http://www.costar.com/News/Article/CoStar-Study-Finds-Energy-Star-

LEED-Bldgs-Outperform-Peers/99818

² http://www.gsa.gov/portal/content/103656

³ http://www.buildingrating.org/content/policy-brief-new-york-city

Sustainable Solutions Corporation

155 Railroad Plaza, Suite 203

Royersford, PA 19468

Jeremy Kuhre, LEED AP BD+C

The Future of Energy Disclosure Legislation

Energy disclosure legislation is quickly proliferating across major

municipalities and progressive states. Some municipalities have even taken it one step

further, by requiring periodic energy audits. The Greener, Greater Buildings Plan in New

York City is one such example where additional legislation (Local Law 87) requires periodic

energy audits. The intent of this program is to identify equipment retrofits to foster in-

creased energy efficiency. The energy efficiency legislation in NYC is leading the way to

more vigorous programs elsewhere as municipalities feel a greater urgency to

address environmental issues. Although there are questions surrounding the role of energy

disclosure in the American City, one thing is certain – transparency in building

energy use is here to stay.

Copyright 2013 by Sustainable Solutions Corporation