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May 25, 2010

Mayor’s Task Force Report On Existing Commercial Buildings – Part 2

Posted by Steve Sacks under Building Operations, Energy, Government, Green Economy, Incentives and Rebates, Law, Legislation, and Policy, Lease, Research, Sustainable Community | Tags: , , , , , , , , , , , , , |
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In Part One of our analysis of the report from the Mayor’s Task Force on Existing Commercial Buildings, we discussed the task force’s four themed approach to improving the energy efficiency of existing commercial buildings: 1) “maximize transparency,” 2) partner with the private sector, 3) attract game-changing capital, and 4) lead by example.  We now turn to theme two, “partner with the private sector.”

As discussed in Part One of this post, the transparency mandates suggested by the task force, and/or mandated under AB 1103 will force private industry to report energy use.  These reporting requirements will generate market forces that push buildings to higher energy efficiency.  But, will developers, owners, and tenants really compete in a race to the top of efficiency based on AB 1103 alone? The answer is “probably not,” or maybe I should say, “probably not quickly enough.”

Sure, required energy reporting will occur, but the desired reduction in energy use will not manifest rapidly.   Without government mandate and assistance for developers, owners, and tenants, the measures suggested by the task force, including mandatory energy audits, will create resentment and real hardship for businesses.  Also, the local taxpayers might not be happy with the incentives and rebates suggested to assist in deferring the cost (though some of the underwriting will come from state and federal grants).

The task force suggests two low-cost “tools” to rapidly generate efficiency results and ease the private burden of implementing energy efficiency.  The first suggestion is a “no-brainer,” but the second might not be as simple.

The first tool is the “Green Tenant Toolkit” (“GTT”).  Rather than simply mandating energy efficiency, the GTT proposes a “toolkit” with suggestions for developers, owners, and tenants regarding “best practice recommendations, a model green lease, [and] a standardized checklist to identify green features of spaces for lease.”  Also, as a part of the “partner with the private sector” theme, the task force suggests a public/private (dare I say) task force to come up with the language and suggestions for the GTT.  The proposed GTT is a quick and easy resource, and one that will ease the burden of implementing energy efficiency measures.

The second tool suggested by the task force is “unilateral submetering.”  This strategy proposes allowing tenants or landlords to implement submetering at the requester’s expense.  This is risky, and not completely thought out. First, this option likely already exists for a majority of tenants and landlords, and second the suggestion ignores the issues that arise from such a policy.

For example, unlike other tenant-level capital improvements, submetering affects the operating costs of other tenants.  Generally, a building’s utility costs are averaged, and then allocated to tenants based on square feet.  If a large tenant has a significant amount of space that is below the average energy use in a building, and that space is removed from the building energy calculation, the average cost will rise for other tenants.  Conversely, a landlord, at the bequest of other tenants, may submeter a power-sucking data center.  This action will lower rent for a majority of other tenants, but send operating costs for the data center through the proverbial roof.  It’s not quite that simple, but the example above is closer to the reality than the task force lets on.

To achieve the equity the task force seeks, unilateral submetering will need further analysis, or testing before city-wide implementation.  Perhaps if a tenant submeters, a landlord could be forced for one year to keep the submetered tenant in as part of the calculation for the building’s energy use averages until other tenants can take action to either lower energy costs or also submeter?  Or perhaps the city will limit the amount a landlord can raise an energy charge thus encouraging energy efficiency?  Perhaps other tenants will just have to “get with the program,” submeter, and increase their efficiency to realize ROI.  There are no easy solutions to this question, but submetering is an effective tool to reducing energy use, and is required for any effective energy efficiency policy.

The task force’s next suggestions – including the suggestion of a government fund to cover expenses for implementation of energy efficient technologies – will be covered in part three of our analysis.  Stay tuned…

 

May 4, 2010

Mayor’s Task Force Report On Existing Commercial Buildings – Part 1

Posted by Steve Sacks under Energy, Government, Law, Legislation, and Policy, Lease, Sustainable Community | Tags: , , , , , , , , , |
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In December, 2009, a task force convened by San Francisco Mayor, Gavin Newsom, issued a report on the steps necessary to make existing commercial buildings more efficient.  (Click here for the full report) It’s not as comprehensive or technical as reports one expects from the specialists and experts that comprise the task force, but it is a good policy report. Why am I slightly “cool” on the report?  It’s no fault of the task force.

The reason is because it’s a policy report, and until the policies are enacted, the report is just hot air blowing in December. (Cue sly grin for “hot air” pun).  The reason this post is coming up now, however, is not only the fact that I’m finally getting around to it, but also the fact that Mayor Newsom seems to be as well…(getting around to the report, that is).

San Francisco has arguably the best green building track record of any city in the United States, so if anyone can enact the recommendations, San Francisco can. As you will read below, Mayor Newsom is reportedly going to propose enacting one of the recommendations into law.  Before addressing the proposed law, let’s look at how the task force recommends we fix the existing commercial buildings.

Rather than reinvent the wheel, the task force recommends following the California Long Term Energy Efficiency Strategic Plan (CEESP).  CEESP sets a goal of zero net energy for new (and some existing) residential buildings by 2020 and commercial buildings by 2030. Regarding existing buildings in San Francisco, the task force believes the CEESP goal could be achieved with a 50% reduction in all existing building energy use by 2030.  That amounts to a 2.5 % reduction in energy use every year . . . daunting, but doable.

The task force report uses four general “themes” to suggest meeting and exceeding CEESP:  1) maximize transparency, 2) partner with the private sector, 3) attract game-changing capital, 4) lead by example.  I will address each of these in turn, but don’t worry, I only address number 1 in this post. The rest will wait for Part 2.

1) Maximize Transparency:  The task force recommends the disclosure of energy performance for all existing commercial buildings.  Sounds pretty good, right?  Well, the requirement to disclose energy efficiency in commercial buildings has been law for some time now.  AB 1103, enacted in 2007, with requirements set to trigger in 2009 (delayed until July 2010), requires “electric and gas utilities . . . to maintain records of the energy consumption data of all nonresidential buildings to which they provide service.”  And the utilities must provide those records to property buyers, tenants, or investors.

According to the San Francisco Examiner, the mayor will propose a similar requirement shortly, but with the added bonus that the energy consumption data would be available to the general public.

This idea sets off a slew of potential legal issues, and here’s one: From a transaction side, a lease now has new potential incentives and benchmarks.  If a tenant reduces energy consumption over a series of years, that could be worth a bonus from the landlord because it makes the property more valuable from a public relations standpoint and also from a re-sale re-lease perspective.  On the contrary, a landlord may simply require that a tenant improve energy efficiency every year, and set penalties if they fail to meet the benchmarks.  A successful business relationship will find a middle ground, but these are certainly new bargaining chips.  Just think we haven’t even entered the world of cap and trade…

Lets also remember there is no current penalty for failing to increase efficiency.  The rest of the task force recommendations rely on private help and public leadership.  Is that enough? I’m not so sure…

Stay tuned for Part 2….

(Editor’s Note: check out the Institute for Market Transformation – a great resource I found in researching some of this post.)

 

July 9, 2009

Residential Solar Leases

Posted by kevinjeong under Building and Design, Energy, Finance, Green Economy, Lease | Tags: , , , |
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Solar power is on everyone’s mind these days.  We still remember the exorbitant oil prices of the summer of 2008, when oil reached it’s peak of over $150 a barrel.  However, for many, solar energy, much like hybrid cars, are a cost-prohibitive luxury.

SolarCity, a California solar provider, hopes to change all of that.

Instead of having consumers front the cost of the equipment and installation of solar systems, which can range anywhere from $50 – $75,000,  SolarCity , with financing from U.S. Bancorp,  will front the cost, and the consumer pays a set monthly lease.  In a way, this is similar to a power purchase agreement used by energy companies and local governments.

On average, a consumer is estimated to save about 10 – 15% of their current monthly energy bill.

Read the complete article here.

 

May 8, 2009

Green Leases Part 1

Posted by Steve Sacks under Building Operations, Lease | Tags: , , , |
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One argument for green construction is that reduced energy and maintenance costs for landlords allow them to offer lower rent/square foot with the same amount of profit/square foot.  That is likely true, and shows green buildings can quickly pay dividends.  But without a lease that requires tenants follow strict guidelines, any savings will float away like heat through an uninsulated roof.  

Whether you’re a landlord or a tenant, you should think about asking for green clauses in your lease.  This will help everyone maximize savings.  For example, you may want a clause that requires testing of the HVAC systems on a periodic basis (perhaps recommended by the manufacturer) to ensure they operate at maximum efficiency.  Many green office buildings have separate metering per floor, or even per tenant, but tenants may want to ask how often the HVAC is tested in common areas.  Putting something in writing is always a good idea to reassure both sides that a common goal is reached.

Traditional leases won’t do if you own or rent green space.  Stay tuned for other thoughts on green leases.  You can always click the “Lease” Category or “Green Lease” Tag on the right column.  (And yes, for those of you keeping track at home this is our first post without a link.)