Energy Benchmarking

Overview

In recent years, sustainability has become a top priority for local governments. Many local governments view sustainability as a responsibility and a critical function of municipal government. In recent years, local governments across the nation have taken an interest in reducing energy and water consumption. Local governments view this goal as a way to promote sustainability while making their city or county more appealing to environmentally conscious residents or potential residents.

Background

In an effort to support sustainability efforts local governments have started to require large buildings to benchmark, or track, their energy and water usage. This policy trend is supported by an initiative commonly referred to as the City Energy Project (CEP), which was established in 2014. The CEP is a joint effort managed by the Institute for Market Transformation and the Natural Resources Defense Council. The project seeks to develop and implement solutions that will help municipalities participating in the program reduce pollution and become leaders in sustainability.[1]

The City of Orlando and Miami-Dade County are among the 20 participants in the CEP program. The program receives funding from Bloomberg Philanthropies, the Doris Duke Charitable Foundation, and The Kresge Foundation. Municipalities that participate in the CEP program typically enact local ordinances that implement a broad sustainability strategy, which often include benchmarking requirements. Benchmarking involves measuring energy and water usage and comparing building performance with the performance of similar buildings. In addition, some local ordinances related to energy benchmarking may require formal annual reporting of energy and water usage to a local municipality. This data is often used to score buildings based on their sustainability and to educate potential residents on expected utility costs for the property.

Problem

Multifamily properties have a vested interest in operating energy- and water-efficient properties. As such, many building owners and operators benchmark energy and water usage for the common areas on their properties as a way to manage or reduce costs. However, mandates that require building owners to benchmark or report energy and water usage data can pose unique challenges for multifamily properties.

Typically, a property owner must receive written consent from the tenant to have access to each individual apartment’s usage data, due to resident privacy concerns. The process of trying to obtain written consent from every tenant in a building can be challenging for the property owner and cause confusion among residents. In addition to the logistical challenges with getting access to the usage data, property owners who are forced to comply with mandatory utility benchmarking and reporting requirements must train staff on how to report energy and water usage to the municipality. The process of complying with the reporting requirements that are typically imposed by these ordinances cost building operators both time and money.

Benchmarking mandates often impose financial challenges when retrofits or other system upgrades are required for buildings that are underperforming by the municipality’s standard. These mandatory retrofits are often costly and difficult to finance. Lastly, but certainly not least, some energy benchmarking policies seek to score buildings based on their efficiency and publicize this data, which would be accessible by current or potential apartment residents.

Examples in Florida

Orlando

In December 2016, the Orlando City Council voted unanimously to pass the Building Energy & Water Efficiency Strategy ordinance. Under the ordinance, buildings larger than 50,000 square feet must benchmark energy use annually and report usage scores to the city using the ENERGY STAR Portfolio Manager Tool offered by the U.S. Department of Environmental Protection. In 2020 and beyond, underperforming buildings with an ENERGY STAR score below 50 may be required to conduct an energy audit or perform a retrofit once every five years.[2]

The City of Orlando also passed an ordinance in 2016 to make financing for energy efficient upgrades more accessible for business owners in conjunction with the BEWES ordinance. The Property Assessed Clean Energy (PACE) program provides low-interest financing to help businesses enhance the energy and water efficiency of their property. Under Orlando’s PACE Program, business owners can choose from four-state approved third-party administrators.[3] It is important to note that PACE programs are not unique to Orlando. These financing programs are becoming increasingly popular among municipalities seeking to drive or stimulate sustainability investments within their respective communities.

Miami-Dade

Although Miami-Dade is part of the CEP, the county has not enacted a benchmarking requirement for privately owned buildings as of July 2019.

Miami Beach

In 2016, Miami Beach passed what is likely the most progressive sustainability ordinance in Florida. As of April 1, 2016, properties larger than 7,000 feet in Miami Beach must be at least LEED gold certified or the developer must pay the city a fee equivalent to five percent of the total construction project cost.[4] The funds collected via these fees are used for the city’s sustainability projects.

http://www.mbrisingabove.com/wp-content/uploads/2017/11/2016-3993-Ordinance.pdf

Alternative Solution

An alternative solution to energy benchmarking mandates or requirements to retrofit an existing property is a public-private partnership that provides a financial incentive for property owners to willingly participate in the program.

One example of this type of program is Boston’s Renew Boston Trust (RBT). This program is actually managed by the CEP through the Boston Department of Environment, Energy, and Open Space. Under the Boston program, financing is obtained from private investors for energy efficiency retrofits of city owned buildings. Building owners pay utility charges over a specified period that are then transferred to investors.[5] According to the city, these upgrades are self-funded based on projected energy savings over time.[6] 

Strategy 

There are a number of strategies the association can employ when presented with an energy or water benchmarking mandate at the local level, including the one outlined below. Please keep in mind, this option is merely intended to give you and your association the ability to brainstorm and assess the specific solution(s) that will work best in your local area. 

Potential strategy:

• Advocate for a voluntary based program that provides a financial incentive or makes it more cost-effective for property owners to perform costly retrofits and infrastructure upgrades.
• Partner with other business groups that could be impacted by a potential ordinance, such as the Hotel and Lodging Association or the Building Owner and Managers Association (BOMA).
• If the passage of a benchmarking mandate is inevitable, take steps to mitigate the policy’s impact on the apartment industry. For example:
  • Advocate for delayed implementation or a phase-in of the benchmarking requirements imposed under the ordinance. This will allow association members additional time to learn about the new requirements and prepare to comply.
  • Oppose the inclusion of any mandates that will require property owners to retrofit an existing property based on the building’s performance.
  • Request the local government to include resources in the budget to educate building owners and operators on the ordinance and the various compliance requirements.
  • Advocate for a minimum size threshold to protect a portion of the membership from the requirements under the ordinance. For example, the association could request an exemption for properties under 50,000 square feet similar to the exclusion included in the City of Orlando’s ordinance.
  • Request for the city to pass an ordinance allowing for PACE financing, similar to the Orlando example discussed above. This will give building owners access to low-interest financing options that make retrofits or energy conservation projects less cost-prohibitive.

Questions to consider:

• How likely is the ordinance to pass? In some cases where change is inevitable, it can be valuable to work with, rather than against, the municipality as it works on the ordinance. This is a policy decision the association will need to make case-by-case.
• Does the ordinance include any penalties for noncompliance? If so, how cumbersome are they?
• How will property owners be penalized for under-performing buildings?
• Does the ordinance require retrofits and, if so, what is the timeline and what financial resources are available to assist building owners?

Additional resources:

●       City Energy Project: https://www.cityenergyproject.org/

●       City of Orlando Green Works Program: http://www.cityoforlando.net/greenworks/

●       AAGO Blog Post: https://www.aago.org/news/its-electric--benchmarking-deadline-arrives-in-orlando

●       AAGO Blog Post: https://www.aago.org/news/sustainability-is-key-for-the-city-beautiful

[1] https://www.imt.org/how-we-drive-demand/building-policies-and-programs/cityenergyproject/
[2] https://library.municode.com/fl/orlando/codes/code_of_ordinances?nodeId=TITIICICO_CH15SU_PTIBUENBE
[3] http://www.cityoforlando.net/greenworks/building-energy-and-water-efficiency-strategy/
[4] https://www.miamiherald.com/news/local/community/miami-dade/miami-beach/article74643237.html
[5] https://www.naahq.org/system/files/issues/member-resources/energy_benchmarking_and_labeling_fact_sheet_.pdf
[6]https://static1.squarespace.com/static/570b03987c65e49ce6174883/t/59c418f52278e77eb860cf25/1506023673230/City+of+Boston+AEG+Sep+2017.pdf