Energy efficiency: Plenty of data, many confused landlordsNovember 21, 2011: 11:03 AM ET
City governments and clean energy investors want to get the ball rolling on bringing energy efficiency to buildings across the country, but there's confusion over how to start.
For landlords working at the dawn of carbon emissions regulation, that seems increasingly likely to be the case as more cities require building owners to disclose how much energy they use.
In several office markets, landlords now must measure and report their energy use, in a process called benchmarking. New York City and Washington, D.C. city agencies have been collecting data and promise to sift through it to come up with energy policies for property owners. The same goes for Austin, Texas, Los Angeles, San Francisco, Seattle- and more jurisdictions are mulling the idea.
Rules vary by location. In New York, owners of buildings greater than 50,000 square feet must tally energy bills for the government, which has set up an office to dissect them. In cities like Seattle, sellers of smaller buildings must share the data. And in Austin, if you want to sell a house, you must disclose the property's energy costs to interested buyers.
While many cities are measuring energy use in order to reduce fossil fuel and lower the risk of overtaxing aged energy grids, the scalable changes to building management -- and the real business edge -- may come from the harder work of measuring carbon emissions.
Energy info in search of a purpose?
Cities want landlords to both push less carbon into the air and put less strain on aging electricity grids. But many building owners are not always certain what they can do with the information that's being collected -- or who can best help them decide.
Landlords can use free software from the federal Environmental Protection Agency called Portfolio Manager to enter information about their fuel use, heating, and electricity. But it's not clear that software like Portfolio Manager will lead quickly to the adoption of practices that can help landlords smoothly shed energy costs.
David Bragdon, who is the head of New York City's Office of Long-Term Planning and Sustainability, argues that the city's policy will serve as a catalyst for the launch of innovative energy-analysis companies that could give landlords a helping hand. Once Bragdon's office digests the "mountain of raw data" it's been collecting since August, with help from NYU and the University of Pennsylvania, he expects to see patterns of energy waste -- from overnight use of office lights, say, or aged radiators -- that landlords will be able to address. New York has also created an independent nonprofit, the New York City Energy Efficiency Corporation, that will provide credit boosts for retrofit deals. But without the proven financial benefit of such measures, lenders and landlords may be groping in the dark.
True, landlords who pay lower utility bills have more money available to make their buildings more energy efficient, but coming up with the money to make fixes to existing buildings is a contortionist act. A building owner can't take out a loan for a big fix without a mortgagor's approval, and landlords and tenants often argue over who should pay for energy fixes.
Measuring the shoe size of a carbon footprint
To tackle these uncertainties, a few groups of major property owners have begun to collect data to analyze how buildings emit carbon. Prominent among these is the Greenprint Foundation, which has created a "performance index" using voluntarily submitted energy data from 21 major investors.
Greenprint goes a bit deeper than their government counterparts, breaking an individual building down by its floors so that a user can discern different energy use patterns in an apartment building's common room, a trading floor, or a company's offices.
Greenprint data specialist Adam Slakman and his boss, Chuck Leitner, say that they are collecting examples that will support the funding of carbon-reduction projects. They and their investors wager that enough case studies will give landlords and investors a clear picture of projects that reduce carbon while improving return on investment. Peer into the data and you will see fledgling arguments for things that will transform real estate- things like smart-grids, ultra-efficient boilers, and loans to retrofit buildings.
But determining what actually causes a carbon emission can be elusive. If you want to reduce the carbon your employees burn on road trips, for example, you'd have to link your plane miles to a reporting system. (Slakman says Greenprint member Deutsche Bank (DB) does this with an automatic feed from its travel agency to its reporting system.) And the recommendations can seem rather dry: they're all digital thermostats and hallway dimmers, desk sizes and floor-plans.
The payoff will come when investment banks figure out how to finance savings from energy efficiency. This will require huge changes in how owners maintain their buildings, though.
Greenprint and the city governments are looking to prove that energy fixes will increase property values. So far, cities are getting somewhat sparser data than the investors in the private projects. Cities are measuring energy, Bragdon reminds us, while carbon is a more complicated thing to calculate.
Because more than 75% of cities' carbon emissions come from buildings, though, some proponents say the the sheer number of interested parties will make it more likely that cities' energy data will also produce valuable carbon-saving techniques- just perhaps not as fast.
Since every landlord will have to curtail carbon use sharply in the coming decades, players of all sizes can push each other toward a common goal. "There may be a whole universe of databases in 10 years," says Uwe Brandes, a scholar at the Urban Land Institute.
For Greenprint chief Leitner, hope resides in partnerships between city governments and nonprofit organizations. The Better Buildings Partnership in London, which has an alliance with Greenprint, offers policy guidance on things like building leasing and maintenance. Leitner points out that investors who own property in more than one American city may be able to learn more from such working groups than from disparate landlords in a single city.
Anything that strengthens the link between building management and carbon management, says Bragdon, stands to help everyone. The only question is whether the data will emerge clearly and fast enough to help landlords, lenders, and cities see eye-to-eye.