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Disclosure: A Powerful Motivational Tool

By: Adam Hinge

October 01, 2010

In December 2009, the New York City Council passed four bills aimed at cutting energy use and reducing carbon emissions in large existing buildings. This package is the most comprehensive legislation for improving existing buildings energy efficiency in the US, and is one of the most ambitious efforts in the world.

Of the four, the most important is the Benchmarking law. By combining annual benchmarking of building energy use with mandatory public disclosure, stakeholders will be made aware of how their properties perform in comparison to similar portfolios and the law will "shine the light" of transparency where performance might be less than expected. Here's how it will work.

Benchmarking compares the performance of one operation against others. Benchmarking energy performance in buildings is a key strategy for understanding, tracking and minimizing energy costs and can be an excellent tool for characterizing the energy intensity (often measured as energy consumed per unit of floor area) of buildings. It can also be used to track an individual building's performance over time and help monitor or identify opportunities to improve operation and maintenance (O&M) practices. Managers who oversee a number of buildings can use benchmarking results to rank buildings from those that need some immediate attention to those that perform efficiently.

Language in the bill that requires annual disclosure of both the "Energy Utilization Index" and, where available "a rating that compares the energy and water use of the building to that of similar buildings" is critical: having annual energy per floor area reports allows comparison between buildings, as well as changes over time. Requiring both the EUI and performance rating also cuts down on potential "gaming" of the performance rating tool.

Why Benchmarking and Disclosure are Important
Supreme Court Justice Louis Brandeis famously observed, "Sunlight is the best disinfectant", and now, public disclosure of energy and water use provides the potential for exposing poor performance. Today, we simply don't know enough about which buildings, whether new or old, are performing well; there will likely be some surprises.

With the implementation over the last few years of the European "Energy Performance of Buildings Directive" which requires "Energy Performance Certificates" in public buildings, this is already playing out. In the UK, The Guardian ran a story in October 2008, entitled "Halls of shame: biggest CO2 offenders unveiled" which found:

New buildings also fared badly, raising questions about the validity of sustainability claims made by architects and developers. London's City Hall scored E despite opening in 2002 and being described by its architect Foster & Partners as a 'virtually nonpolluting' public building.

Do we know how our recent crop of "green" buildings, many certified through the US Green Building Council's LEED rating scheme, are really performing from a measured energy and water perspective? What are the real impacts of NYC Local Law 86 that requires all City owned or financed buildings to meet certain standards? The benchmarking and disclosure law will provide great insight starting in the next few years.

Potential Challenges in Implementing the Benchmarking Bill
Conceptually, measuring and comparing building energy intensity should be simple: collect all energy bills, and divide by the floor area. Unfortunately, getting access to all energy consumption history can be challenging, and it can be tough to get consistent floor area measurements in NYC buildings.

City agencies, including the Department of Buildings, Finance and the Mayor's Office of Long Term Planning and Sustainability are now hard at work developing the rules and guidance to implement the new laws. Making certain that the benchmarking law along with the others, are implemented with both sufficient clarity in the regulations, and adequate resources to meaningfully enforce the regulations, is critical. Without these, the enthusiasm around passage of the bills may be misplaced.

Enforcement and compliance are known to be the Achilles heel of many energy efficiency policies (see presentations from an International Energy Agency Energy Efficiency Compliance workshop). Past experience suggests that New York's well-intentioned and well-designed legislation may disappoint supporters' great expectations, when agencies are underfunded and thus unable to have adequate staff for interpretation and enforcement. Realistically, the Greener, Greater Buildings laws are essentially "self-policing" — getting the rules right will increase the odds for truly changing the markets toward greater energy efficiency.

The first few years of disclosed benchmark data are likely to be spotty. It will be hard to really compare performance data until all respondents become conversant with reporting requirements, particularly for multi-family residential buildings where it will be a challenge to make sure all tenant meters are being counted. To its credit, the legislation recognizes the possibility that owners may not get full cooperation from all tenants.

Moving toward automated downloads of all consumption data from Con Edison could be a major step to overcoming that hurdle. In California, where AB 1103 has required disclosure to prospective parties to the transaction, (though not public disclosure), of energy performance to parties in a real estate transaction this automated utility download system is working quite well. More information on California's requirements, as well as other jurisdictions requiring benchmarking and disclosure, have been compiled by the Institute for Market Transformation.

Another challenge for New York's benchmarking law is found in dealing with large data centers and other significant process loads. Some buildings have legitimate high energy consumption because these types of loads generate high economic value here, particularly compared to the energy cost. Having adequate guidance and flexibility to deal with these realities is important, yet technically challenging to be done in a fair and replicable way.

Clear rules and guidance are needed to make sure that all parties report energy use and floor areas consistently. Using the common NYC building areas of "rentable floor area" generally inflates the actual size of the building, while artificially reducing the energy utilization intensity.

A boldly impressive part of PlaNYC is the City government's committed leadership, with its own deadlines for achieving performance improvements well in advance of privately held buildings. With these early deadlines, it will be very important to make City government building performance information available public as soon as possible. Prompt release of all City government buildings performance data starting in 2011 and quick publication and easy availability of data when private buildings disclose data (following some sort of quality review) will be critical to ensuring the credibility and impact of the benchmarking law.

The benchmarking law has the potential to create the most comprehensive database of large building energy performance in the world. Such information will contribute to market transparency and more efficient decision-making, and also provide a wealth of information about building energy performance improvement. In turn, this mass of information will provide a glimpse into how realistic it will be to attain the major energy use reductions envisioned through PlaNYC. There will be opportunities to learn critical information in the near term, but stakeholders will need to stay vigilant to push for data that are reliable, and made public as soon as responsibly possible.

Adam Hinge manages Sustainable Energy Partnerships, a small consulting firm specializing in energy efficiency program and policy issues. He is involved with a variety of efforts working toward improving building energy performance around the U.S. and globally.

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