Green Building Law Blog : Green Building Lawyer & Attorney : Shari Shapiro: Calliope Communications, LLC

 I was at a presentation by the Department of Energy on Wednesday (hosted by the Northeast Energy Efficiency Partnerships) where they reviewed the status of their Home Energy Score program.  Like the fuel economy stickers on cars, these systems aim to create easy to understand energy ratings for buildings. 

The idea is grounded in basic human behavior--if people know how much energy a building uses and how much money they can save, they will purchase more energy efficient homes and/or invest in energy efficient retrofits.  Several cities have begun to harness the power of energy transparency for commercial buildings through benchmarking laws.  The Institute for Market Transformation has a map of jurisdictions with these laws here. 

However, while long called for, this type of program has not really gotten off the ground for small commercial or residential buildings.  The resistance has been strongest from the National Association of Realtors, who believe that such information would prejudice buyers against certain houses. The National Association of Realtors' position on energy efficiency and disclosure is available here.

There are really only two ways to overcome this resistance--make the disclosures mandatory as part of the owner's disclosures or to make them so common that purchasers demand them. 

Interestingly, some states, like Connecticut and Vermont, are considering incorporating these ratings into their utility energy efficiency programs.  Perhaps this is a way to get a sufficient number of houses benchmarked that it becomes a commonplace part of residential transactions.  

It would be even more interesting if states made residential benchmarking part of their programs under the new Clean Power Plan (the existing power plant carbon emissions rule).  That would help to reach the "tipping point" for residential energy use disclosure. 

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For several years, property owners have become increasingly aware of the potential for energy efficient buildings to decrease operating costs, improve occupancy, and demand higher rental prices.

Theoretically, all of the benefits of energy efficient buildings should yield a higher property values for green buildings and lower values for non-energy efficient buildings.  However, real estate appraisers often fail to properly value the energy efficiency features, meaning that the building will be appraised for the same value as another building without the investment in energy efficient systems, features, etc.   

 If energy efficient properties are appraised below their actual value, it can lead to a reduced resale value, lower rents, and poorer financing options than the owner would realize if the appraisal took into account the value of the property’s green attributes.

On August 8, 2011, the Department of Energy issued a "Request for Information" seeking input from stakeholders on a "Commercial Building Asset Rating Program"--let's call it "Highrise Star."  The goal of Highrise Star is to create an Energy Star-like system for commercial buildings.  The program would establish common inputs for calculating energy efficiency, select a modeling tool to evaluate the inputs for individual buildings and output a rating with which to compare the energy efficiency of different buildings.

The goal of the new program is primarily to address the issue of valuing energy efficiency (it does not address other green features like water usage, etc.) discussed above by providing a common metric for comparing the energy efficiency of commercial properties, and providing a reliable and common system for evaluating commercial building energy efficiency. 

The devil is in the details, of course.  The RFI proposes several different models for valuing energy, evaluating energy efficiency, and conveying the information.  If the DOE program is created, the commerical real estate community could soon be using a 100 point scale, like LEED, or a star system like the Energy Guide labels on appliances.  The robustness of the inputs and the energy model is critical to accurately evaluating building energy use, the simplicity of the input system will determine whether commercial building owners will use it to rate their facilities, and the representation of the "score" will determine whether users will actually understand and act on the information.

Many will ask "Where does this leave LEED?"  The proposed commercial building program is much less ambitious than LEED, in that it focuses exclusively on energy use. However, if every building has a "[High]rise Star," commercial building owners may be less likely to seek LEED to verify the green-ness of the facility.  Since Highrise Star will be free, the incentive to invest in LEED may be significantly reduced.  The ultimate test will be one of reliability--if Highrise Star is seen as robust, reliable and easy to use, LEED will have its work cut out for it to compete.  If it is viewed as too "easy" to achieve high marks for energy efficiency or if the interface is too cumbersome, then LEED will not be so directly effected.   

In any event, since government programs are often VERY slow to be developed, it may be a while before [High]rise Star comes on line.

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