Why President Obama’s better buildings initiative doesn’t work for multifamily

Guest blog By Michael Miller

You might think by this headline that I’m about to rant about the news regarding energy efficiency policy that was circulating last week. President Obama outlined a plan called the Better Buildings Initiative to incentivize energy efficiency in commercial buildings during his visit to Penn State. Actually, I want to explain why multifamily energy management struggles with this type of policy.

While we certainly applaud the President’s plan to create tax incentives for building efficiency and increase financing for building retrofits, the plan does not go far enough to suit the specific needs of the multifamily industry. These needs will be increasingly important given the nation’s current and future housing concerns.

The President’s plan takes on the energy consumption of commercial buildings. It incentivizes the upgrade of the buildings used for offices, stores, schools, universities, hospitals, and other municipal or commercial organizations. The ultimate goal is to make these types of buildings 20 percent more energy efficient in the next 10 years. President Obama’s plan attempts to create these incentives through tax breaks and additional financing opportunities, building on the American Recovery and Reinvestment Act (ARRA).

The National Multi Housing Council commended the Better Buildings Initiative, and was quoted on the White House blog as a supporter of the tax initiatives, finances, and education for commercial buildings. While NMHC (and American Utility Management) are in general agreement, it’s important to remember that the devil is in the details.

Traditionally, multifamily properties have been lumped in with commercial buildings when it comes to these types of initiatives. There are a number of problems with the practice of categorizing multifamily property as commercial and corresponding challenges to implement larger energy management initiatives:

There is not enough information available surrounding the multifamily industry’s energy consumption to create a policy (such as the Better Buildings Initiative) that will help to reduce it. Sustainability strategies must be rooted in facts that we don’t have in the multifamily arena.

• Unlike commercial buildings, very few multifamily buildings are master metered. Almost all units nationwide are individually metered for electricity and natural gas — which means building owners have no information about energy use in individual units.
• To gather this information, local electric, gas, and water utilities would have to share unit-specific information, but state laws bar disclosure.

Facility infrastructure is old and varied. Would the incentives go far enough to justify the investment?

• More than 15 million of the almost 24.5 million units in multifamily housing buildings with two or more units are at least 30 years old. New building codes will do little if anything to bring about efficiency improvements.
• Buildings are of widely varying sizes, shapes, types, and locations, meaning the information collected must take specific multifamily factors into consideration for measurement.

Financial incentives for residents are difficult to establish due to resident/property dynamics.

• More than 60 percent of tenants stay in their units for a year or less, making it difficult to assess and improve multifamily energy efficiency.
• Property managers usually have an economic incentive to keep rents low (and occupancy high), but limited incentive to incur expenses to improve building energy efficiency.

Assessment and benchmarking tools are non-existent in multifamily. As multifamily property owners you’re told by numerous people that they can benchmark your utilities. Let me tell you why you’re wasting your money.

• There is no uniform tool for measuring or assessing the energy efficiency of multifamily housing buildings or improvements to them. This makes it virtually impossible for residents to shop for housing based on energy efficiency, and it limits economic incentives to make building efficiency improvements.
• Jurisdictions such as New York and Seattle are taking steps through legislation that specifically categorizes multifamily — and it’s a step in the right direction. But the only accepted measurement is EPA’s portfolio manager, geared to commercial/industrial applications. It does not take into account factors specific to multifamily mentioned above.

Without addressing each of these issues, there can’t be a comprehensive sustainability strategy for multifamily. And until that happens, we need to focus on what we do know –that reducing energy consumption will save property owners money — and educate the industry about why individual sustainability initiatives are important to their business.

This is not as sexy as the President’s press-savvy Better Buildings plan, but preventing multifamily energy dollars from being sucked into a black hole of additional expense is definitely attractive to multifamily business owners.

Without industry-wide standards for energy consumption, multifamily property owners need to take the initiative to operate more sustainably and cost-effectively. There are a number of simple ways to reduce energy and utility consumption.

Motion sensor faucets, which ensure not a drop of water is wasted, can reduce consumption by 10 to 15 percent at a single property. Installing occupancy sensors for lighting throughout the property can reduce electricity consumption by another 10 to 15 percent. Properties can also provide digital control systems to more accurately monitor boiler system temperature. These three tactics alone achieve a total cost reduction of 10 to 15 percent, a huge return on a comparatively minor investment.

Implementing these types of cost savers is the first step in establishing the effectiveness of efficiency upgrades in supporting larger sustainability campaigns, and protecting the bottom line.

This was a long-winded explanation of why President Obama’s Better Buildings Initiative needs to go further to work for multifamily. But it’s important to understand that if our industry blindly follows the agenda this plan is pushing, there’s significant potential for consumer confusion, incomplete and inadequate data-gathering, and waste of resources.

Michael Miller is President and CEO of American Utility Management (AUM).www.aum-inc.com. For the full blog go to http://blog.aum-inc.com/2011/02/16/why-president-obamas-better-buildings-initiative-doesnt-work-for-multifamily/

Obama, better buildings and the innovators

By Elisa Wood

February 9, 2011

When Obama unveiled his “Better Building Initiative” last week, it wasn’t just the usual architects, builders, and energy efficiency service companies that perked up with interest. A whole new segment of energy efficiency companies saw opportunity: the innovators.

Emissaries from the high tech world, the innovators are a growing force in energy efficiency. They bring web and wireless to what was once a field more about windows and weatherization.

Obama’s plan would create new business for the innovators by providing incentives to reduce building energy use. Buildings represent a large market for the US energy efficiency industry because they eat up 20% of the nation’s energy. Obama has proposed tax deductions, financing, competitive grants and other incentives as part of his budget.

Where do the innovators fit into this? Daintree Networks offers one example. The Silicon Valley company provides open platform, wireless technology for lighting controls. Lighting is a big deal in buildings; it is responsible for about 40% of a building’s energy bill. http://old.aceee.org/ogeece/ch2_index.htm. Lighting controls increase efficiency by automatically shutting off or dimming unneeded lights. The controls are often used in conjunction with occupancy sensors. The sensor detects when people empty a room and signal to the control system to turn off the lights.

“Anyone who is considering lighting upgrades now is asking about controls. It is no longer just about replacing light bulbs and fixtures, but about the control implementation,” said Danny Yu, Daintree Networks CEO.

With controls in only about 7% of commercial buildings, the market potential is large for innovators like Daintree Networks. So Yu has his eye not only on federal energy policy, but also activity by the states.

“We are very keen on seeing what policies are coming down the line, exploiting them with innovation, and then educating the market. We have focused on California and the Northeast,” Yu said, adding that prime areas for lighting controls have the “magic combination” of high electric rates and strong efficiency incentives.

But he especially likes the Obama plan because of its national scope. Incentives that vary from state to state tend to discourage energy efficiency efforts that scale across geographic boundaries.

“The Obama Better Buildings Initiative is an important first step in establishing national policy to drive energy efficiency in the commercial building sector. Energy efficiency within existing buildings should be considered a massive and mostly untapped resource. Adding greater incentives, financing options and a more consolidated approach to strong building regulations helps to solve many of the challenges currently standing in the way of greener facilities,” Yu said.

Will the Obama’s initiative win Congressional support? Yu is optimistic. “Energy efficiency is often the low-hanging fruit. The government has realized this,” he said. “Among the innovation companies, there is a very clear sector rotation into energy efficiency. The government seems to be following the venture capital community. We are very worthy in this category. I’m very excited to see the validation of the business model.”

Details about the Obama Better Building Initiative are here.http://www.whitehouse.gov/the-press-office/2011/02/03/president-obama-s-plan-win-future-making-american-businesses-more-energy

Visit Elisa Wood at www.realenergywriters.com and pick up her free weekly newsletter and podcast.

Obama, energy efficiency & accountability

By Elisa Wood

January 28, 2010

Not once, but twice President Obama mentioned the importance of energy efficiency in his state of the union address January 27. His support for the resource is no surprise; his administration has channeled $20 billion toward energy savings programs. Obama made clear that going into his second year his support will not waver.

“I know that there are those who disagree with the overwhelming scientific evidence on climate change. But here’s the thing — even if you doubt the evidence, providing incentives for energy-efficiency and clean energy are the right thing to do for our future -– because the nation that leads the clean energy economy will be the nation that leads the global economy. And America must be that nation,” he said.

For many years, efficiency was the poor sister of the energy world. So continued support from the highest office comes as extraordinarily good news to the range of businesses that provide energy savings services and products – from appliance manufacturers to energy efficiency service companies to the new entrants — smart grid and information technology companies.

But when an industry receives this much incentive money, it inevitably comes under increased scrutiny. Is the taxpayer and the ratepayer getting bang for the buck?

Fortunately, a lot of work is underway to bring to buildings the kind of miles per gallon measure we now have in the auto industry. How many people know how well or poorly their homes and businesses use energy?

To find out, innovations are being developed in use of data loggers and other devices that measure actual energy output of equipment and other parameters. Another interesting approach is use of benchmarking and disclosure mandates to determine building performance.

The goal of such programs is give consumers and businesses information about building performance to trigger “market-based competition to own, operate, lease, finance, design and build the most energy-efficient buildings,” says the Institute for Market Transformation.

The Washington, D.C.-based efficiency group describes on its website several cities and states already using benchmarking and disclosure:

• The New York City Council requires building energy rating and disclosure, periodic energy audits and retro-commissioning. It also mandates building-wide lighting upgrades and the installation of submeters and compliance with a new city energy code.
• Washington, D.C. mandates annual energy performance rating and disclosure for commercial buildings. The district publishes building energy performance data on a public online database.
• Utilities in California must provide data for use in ENERGY STAR benchmarking. Commercial building owners must disclose ENERGY STAR benchmark data to prospective tenants, buyers and lenders.
• Austin, Texas requires commercial building energy rating and disclosure, mandatory energy audits for homes and mandatory audits plus retrofits (in some cases) for apartment buildings.
• Washington state has a building energy rating and disclosure mandate similar to California’s. The city of Seattle has its own benchmarking requirement.
• On the federal level, the House and Senate climate bills would create a national building label. In addition, the Department of Energy has a new National Building Rating Program to create a label for homes.

Stay tuned for increased city, state and federal activity in measuring and monitoring energy efficiency as activity expands. More details are available at:http://www.imt.org/

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.

Obama, poker and what 2010 holds for energy efficiency

By Elisa Wood

December 10, 2009

Jon Stewart said it best: Obama is a lousy poker payer. Lucky thing, too, for the energy efficiency industry as it heads into 2010.

Stewart’s December 8 “The Daily Show” aired a clip of Obama recently telling business leaders: “I don’t want to tip our hand too much, but one of the things I would be surprised if we don’t end up moving forward on is an aggressive agenda for energy efficiency and weatherization.”

Tip his hand? In fact, as Stewart pointed out, Obama has shown that hand broadly to the world for the last year. Starting with his January 2009 inaugural speech, Obama buoyed the clean energy industry by advancing renewable energy, a first for a US president in that forum. But that turned out to be just the start. In talk after talk this year, he pushed efficiency. If US voters didn’t know the term ‘weatherization’ before, they know it now. What could be better publicity for a product than having it endorsed by the leader of the free world?

To say 2009 was a banner year for the energy efficiency industry is an understatement. Under Obama’s watch, the federal government has channeled $20 billion in stimulus dollars to energy efficiency and now promises more from bailout funds returned by banks.

While the money – and Obama’s support – was the big story for 2009 and continues to be going into 2010, it is important to remember that electric energy is ultimately a local industry in the United States. What happens before state public utility commissions and regional regulatory bodies often has greatest influence.

To that end here a few local trends of 2009 that may grow in 2010.

*Efficiency as a first fuel. Environment Northeast has been successful in convincing several New England states to consider efficiency to be the first fuel in portfolio planning. That means when utilities plan resources, they must secure all cost effective energy efficiency before pursuing power plant development or power purchases. http://www.env-ne.org/

*Decoupling. Utilities have little incentive to encourage energy savings if they earn their profits from selling power. Decoupling changes utility accounting and cost recovery by delinking profits from sales. California and Massachusetts are examples of states with full decoupling and their utilities have among the most aggressive efficiency programs in the country. Several other states partially use the approach; others are considering adopting it.

*Energy efficiency portfolio standards. Similar to renewable portfolio standards, EEPS require that utilities, and in some cases competitive retail suppliers, achieve certain energy savings goals. Federal proposals are under consideration for a national EEPS. That may or may not happen. But 19 states now have the standards; look for more to pursue the approach.

What else does the EE industry have to look forward to in 2010? Please post what you see in your crystal ball.

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.

What does the US/China agreement mean for efficiency?

By Elisa Wood

November 19, 2009

The energy efficiency market has a gawky quality. It is not exactly one market but a conglomeration of various industries as diverse as appliance manufacturers, energy auditors, smart meter software designers and cogeneration developers. They are unified only in their ability to save energy.

All arms and legs as it may appear, the efficiency market seems ready to shoot to a new level of maturity. If that wasn’t apparent before, it became so this week with an announcement out of Obama’s visit to Beijing that the US and China will collaborate to curb their combined $1.5 trillion annual energy appetite.

How will this change the efficiency industry?

Given that the two nations consume 40% of the world’s energy, the collaboration could bring new economies of scale to efficiency. The agreement calls for:

• Greening buildings with better building codes and labels, advanced energy rating systems, and more emphasis on training building inspectors.

• Reducing energy waste in industry through benchmarking, on-site energy audits and tools and training programs to support these activities.

• Improving energy efficient consumer products by harmonizing test procedures and performance metrics. The two countries will exchange best practices for labeling systems and promote awareness of the benefits of energy efficient products.

• Working together to demonstrate energy efficient technologies and design practices, building on the research and development of the new U.S.-China Clean Energy Research Center.

• Engaging the private sector in promoting energy efficiency and expanding bilateral trade and investment.

With this new scale, energy services companies (ESCos) may follow a growth pattern similar to that of US solar firms. Just a few years ago, solar installation companies tended to of the two-guys-and-a-truck variety. The operations were small and local, just as many ESCos are now. Then companies like SunEdison came along and began acquiring the smaller ventures. Soon solar had a national footprint, and not long after, an international footprint as European and Chinese companies began buying American firms.

Solar seemed to mature into an international market overnight. Efficiency may now have the same opportunity.

See details on the US/Chinese collaboration here: http://www.energy.gov/news2009/documents2009/US-China_Fact_Sheet_Efficiency_Action_Plan.pdf

Visit Elisa Wood at http://www.realenergywriters.com/ and pick up her free Energy Efficiency Markets podcast and newsletter.

Even rebels like efficiency

By Elisa Wood

April 23, 2009

Clean energy advocates favor a federal requirement that a certain amount of our electricity come from green sources, a concept known as a portfolio standard. No year in history has offered more promise for the policy. President Obama is pushing for at least 10% of our electricity to come from renewable sources by 2012, and 25% by 2025. Congressional Democrats have obliged by putting several proposals on the table.

But one corner of the nation has never liked the idea of national renewable energy requirements: the Southeast. Cheap nuclear and coal-fired generation dominates the region’s power supply, and its officials fear that renewable energy will drive up electricity prices and drive away manufacturers. (See my upcoming article in the May/June issue of Renewable Energy World magazine.)

Enter energy efficiency, an idea that seems palatable to the Southeast, and could serve as a negotiating point to bring southern utilities and lawmakers around to the idea of a national standard. If enough of the standard can be met through efficiency, the Southeast is more likely to accept it, since efficiency is seen as a way to cut energy costs, rather than raise them.

Indeed, the leading portfolio standard on the table contains an efficiency component. Authored by Rep. Henry Waxman, a California Democrat, and Ed Markey, a Massachusetts Democrat, the bill calls for utilities to reduce electricity demand 15% and natural gas demand 10% by 2020. The proposal creates tremendous energy savings — more than the entire current energy use of the state of California — according to the American Council for an Energy-Efficient Economy. http://www.aceee.org/press/0904analysis.htm

The push for such legislation comes as electricity prices fall, not typically a good time to convince the American public of efficiency’s merits. But watch out. Prices may not stay low for long, according to Calvert Investments. In a briefing last week, the investment firm said it sees an economic recovery beginning in 2010 that brings with it higher prices and an improved position for clean energy technologies. Greater use of efficiency may look like a better and better option for those–like the southeastern states–struggling to keep electricity prices low.

Visit Elisa Wood at www.realenergywriters.com and pick up her free Energy Efficiency Markets podcast and newsletter.