Updated to address proposed elimination of Energy Star on March 21, 2017:
The Trump Administration’s views on energy policy are coming to light with the release of the draft federal budget. Among the proposed changes that are raising eyebrows is a complete de-funding of the EPA’s Energy Star program and a 31% cut to EPA overall operating budget.
Anyone who’s managed a budget knows that a 31% haircut has real impact. And this cut seems to hit the President’s friends in the real estate development community unexpectedly hard.
Energy Star is widely used in the commercial real estate industry as a benchmarking tool and a signal of quality, and cutting it means that owners are at risk of losing $millions. According to the Real Estate Round Table association, approximately half of all US commercial real estate markets use Energy Star and its tools to track water and energy use, saving businesses billions of dollars annually. Building operators also use the Energy Star certification as a market differentiator.
Energy Star currently provides a free method for property teams and owners to measure and manage energy and water usage. For large portfolio owners and single owner buildings, losing Energy Star means losing visibility into where they spend their dollars, and more importantly, how to save them! In many cases, cutting Energy Star will limit an owners’ ability to quickly identify buildings that need improvement, which adds up to more wasted money and potentially greater reliance on fossil fuels.
Energy Star is the scale for buildings, and without it we’ll likely have more undetected cases of energy obesity and water gluttony – adding up to bigger water and energy bills for real estate developers, which is bad for business.
This is an important issue. Read more about it at the Washington Post and Bisnow.
What we want real estate developers to know:
Buildings account for about one-third of the energy consumed in the United States. Heating and cooling systems use 60 percent of this energy, while light and appliances use another 40% (source).
As Trump and his team tackle their first energy policy priority, which is deregulation, their approach to tax policy and renewable energy incentives is unclear.
It’s still the early days with Trump and his team, and we expect more details of their energy policy to be revealed over time. The America First Energy Plan on whitehouse.gov emphasizes deregulation and embraces carbon-based resources like shale oil and gas while deprioritizing renewables and clean energy.
It’s also unclear how Energy Secretary, Rick Perry will incentivize renewable energy. Perry oversaw significant expansion of renewables during his time as Texas governor, and renewable energy is popular among the republican congress and consumers alike.
An energy policy with fewer incentive programs may put a greater burden on building owners to implement projects like lighting retrofits, HVAC updates, and new control systems. Current incentives are often designed to reduce load on the energy grid, while also making a building more sustainable. So building operators who skip the retrofits and upgrades because of reduced first-cost incentives will likely find themselves with higher energy costs in the long-run.
Energy policies have far-reaching impact on the full lifecycle of a commercial real estate project. Commercial real estate developers are excellent at managing risk, and will make conservative choices or may hold off on a project if questions about energy policies become concerns.
The good news is that building owners have the authority to decide how they will design or invest in their building regardless of the energy policy. There will be an increased focus on ROI, which will be based on real savings rather than incentive programs. Owners should review their investment plans carefully and align decisions with their business goals – understanding that energy policies are a factor. Missing the alignment with business values is costly under all circumstances. In addition to purchasing renewable energy or producing energy onsite, buildings that simply require less energy are also more resilient and have lower costs over time.
Here are a few projects that deployed energy-reducing strategies and provide long-term value far greater than any single incentive:
The Tower at PNC Plaza in Pittsburgh, PA
- Abundant daylighting
- Passive solar design
- Optimized building orientation and window location
- Space design uses external temperatures to increase thermal comfort
- High indoor air quality
- Used local, durable materials for building construction
- Quality insulation and tight construction with high-performance windows and doors
Hertz Headquarters in Estero, FL
- Onsite solar with more than 2300 solar panels
- Solar water heaters
- Abundant daylighting
- Highly efficient mechanical design that reduces peak energy demand
- Optimal indoor air quality
- High efficiency HVAC systems
Las Vegas Springs Preserve Visitor Center in Las Vegas, NV
- Passive heating and cooling
- Quality insulation and tight construction with high performance windows and doors
- Landscaping that help with heating and cooling the building
- Selective space conditioning and use of natural ventilation
Pearl Harbor Visitor Center at the WWII Valor in the Pacific National Monument in Honolulu, HI
- Regionally thoughtful building exteriors and building shell materials
- Landscaping that help with heating and cooling the building
- Natural ventilation
- Abundant daylighting
- Passive heating and cooling
Paladino and Company Headquarters in Seattle, WA
- Abundant daylighting
- Space design uses external temperatures to increase thermal comfort
- Natural ventilation
- Near public transportation and bikeable location
- Advanced lighting, fans, and server ventilation
Pricing for green building products like solar panels may be harder to predict in the short-term as demand rises and incentives drop. Therefore the focus should continue to be on the long-term benefit and ROI for the design strategies. Luckily sustainable buildings have greater endurance, lower maintenance costs, and higher market demand, which will offset these new concerns.