DC Energy Act and Energy Star

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DC Energy Act and

ENERGY STAR

December 9, 2008

Cliff Majersik, LEED AP

Institute for Market Transformation (IMT)

202-328-5149
[email protected]

WASTE MANAGEMENT 7%

TRANSPORTATION 18%

BUILDINGS
75%

DC Greenhouse Gas Emissions


Source: DC GHG Inventory

Energy is the largest operating cost for DC Office Buildings

Average Shares of Total Operating Cost, Downtown Washington Office Building

security 8% road/grounds 2%
Source: 2005 BOMA Experience Exchange Report

admin. 20%

cleaning 18%

repair/maint. 21% utilities 32%

The Problem:
Market Failures Leading Underinvestment
in Efficiency & Renewables

Energy consumers dont pay the price for resulting pollution (negative externality) Inertia and fear of change (human nature) Those who control energy consumption dont pay for it (split incentives) Developers/designers/builders/subs Owners vs. tenants Lack of info (few know how efficient their building is or how cost-effectively they could reduce energy use) Financing (too hard to finance efficiency and too easy to finance old inefficient plans/buildings)

Building Certification in Washington, DC

Green Building Act of 2006 All new government-funded buildings must


Earn a ENERGY STAR Target finder score of 75+ Be ENERGY STAR benchmarked annually Be certified by US Green Building Council as LEED Silver or better (green building certification)

Private buildings

Building code greened in December 2008, including strengthened building-energy-efficiency requirements (ASHRAE 90.1 2007 and The 30% Solution) Commercial buildings over 50,000 sf built after 2011 must be LEED certified Expedited building permits for green buildings

The Clean and Affordable Energy Act of


2008 (the DC Energy Act)

Sponsored by Councilmember Mary Cheh and eight other council members Unanimously passed by City Council on July 15, 2008
Signed by Mayor Fenty on August 4, 2008 CM Cheh and her staff extensively consulted with
broad range of stakeholders in drafting the bill
IMT assisted in design of the Act including the benchmarking provision

DC Energy Acts Goals

Reduce per-capita energy consumption Increase renewable energy generating capacity


Reduce the growth in peak power demand (and the risk of blackouts) Improve the energy efficiency of low-income housing
Reduce demand growth for the Districts largest energy users Foster development of green-collar jobs
Low-income energy assistance Address market failures

DC Energy Bills Major


Provisions

Efficiency and renewable programs


Renewable energy portfolio standard (RPS) Mandates ENERGY STAR benchmarking
Permits sub metering of electricity in non-residential buildings

ENERGY STAR Benchmarking


Requirements

Benchmark annually starting as follows: 10/1/2009 government owned or operated buildings 10k+ square feet (sf) Private buildings: 12/31/2010 200k+ sf 12/31/2011 150k+ sf 12/31/2012 100k+ sf 12/31/2013 50k+ sf

ENERGY STAR Disclosure


Requirements

Energy Star statement of energy performance to a public online database starting by 12/1/2009 for public buildings and with the 2nd annual disclosure for private buildings (e.g. 1/1/2012 for buildings 200k+ sf)

50k+ sf project that has submitted the 1st permit after 1/1/2012, for new construction or substantial improvement shall, prior to construction, estimate its energy performance using the Energy Star Target Finder and benchmark annually public disclosure within 60 days of benchmarking

Requirements for New


Construction and Substantial
Improvement

Benchmarking Requirement Will


Create Green Jobs

Louis Berger commissioned in 2008 by DC government to create an economic model to measure current green jobs and predict future green job creation, including due to environmental policies Benchmarking requirement is a top driver of green job creation It will create more than 1,000 jobs as building owners invest in O&M and retrofits (74.8% of the new jobs are in construction, installation and O&M)

Efficiency and renewable programs

Reinvents from the ground up (design, delivery, implementation, oversight) Creates a Sustainable Energy Trust Fund (SETF) to increase funds for programs
0.11 cents per kilowatt-hour on electricity sales, increasing to 0.15 cents per kWh after 2011 An assessment of 0. of 0.11 cents per therm on natural gas sales, increasing to 0.14 cents per therm after 2011

Creates a Sustainable Energy Utility (SEU)

A 3rd party selected by RFP to a 5+ year contract Structured to focus on customers and results and be entrepreneurial and nimble with short and long-term goals A one-stop shop

Fast-track review of PEPCO programs

Typical Energy Uses in DC Office Buildings

25% 15%

5% 30%
Space Heating 15% Space Cooling 25% Lighting 30%

25%

User/Occupant Equipment 25% Water Heating 5%

Source: Transwestern Commercial Services

Even in existing buildings, typical ROIs


from efficiency are anything but typical

On average each $1 invested in


energy performance retrofits
increases asset value by $2 to $3

(Assumes a 10% cap rate)

Source: ENERGY STAR research

Owners Can Profit from Efficiency


Even With Triple-Net Leases

Triple net and modified gross leases make it more difficult for owners to realize NOI and property value increases from efficiency investments Smart tenants track total occupancy cost, not just rent Tenants often willing to use their energy cost savings to finance efficiency Tenant Cost Recovery lease terms can help

The Office Tenants Perspective

Tenants costs

Salaries Benefits Rent Utilities Electricity Cleaning Maintenance Planning Amenities Lighting

Employee Costs = 84% of Total

Source LightRight; BOMA

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