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

A long time ago in a first term far away, there was the American Recovery and Reinvestment Act (ARRA), a.k.a the Stimulus. 

As explained by the DOE, The ARRA section on State Energy Program funding included a statutory provision (Section 410) linking SEP funding to building energy code adoption and enforcement. As a condition of accepting the ARRA funding, the states provided assurances through governor’s letters indicating their state would comply with the terms of Section 410.

All 50 states took ARRA SEP money, and all 50 governors provided commitment letters commiting to do three things relating to building energy codes:

Adopt a building energy code for residential buildings that meets or exceeds the 2009 International Energy Conservation Code (IECC),

Adopt a building energy code for commercial buildings and high rise residential that meets or exceeds the ANSI/ASHRAE/IESNA Standard 90.1-2007, and;

 Develop and implement a plan, including active training and enforcement provisions, to achieve 90% compliance with the target codes by 2017, including measuring current compliance each year. 

In the four years since ARRA, eighteen states still have no energy code at all or have residential codes that do meet the ARRA requirements, and fifteen states still have no energy code at all or have commercial codes that do not meet the ARRA requirements. A map of the status of every state's energy codes is available here.

I have not been able to find state annual compliance reports or a report by the DOE Office of the Inspector General on the building code commitment aspect of the ARRA funding.   So, there is little, if any, data on when or whether states will comply with their ARRA commitments. [NOTE: I would welcome being proven wrong in this area.  If you have data, please send me a link and put it in the comment section].

Given the vast research that building energy codes are an inexpensive way to acheive energy efficiency, it was a really good idea to tie the ARRA finding to energy code adoption.  Unfortunately, lack of enforcement of ARRA commitments appears to be a missed opportunity to move the country forward in this area.

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As the last days of the year wind down, Congress scurries around to finish its unfinished business, almost always with "surprises" for the regulated community. 

The House appropriations committee issued a final version of the 2012 Omnibus spending bill last night.  It has, of course, significant implications for energy and environment spending, particularly spending related to climate change.

The omnibus bill cuts spending on climate change programs, prohibits the appointment of a Federal "Climate Change Czar" and cuts spending on climate change research.

Most stunning, of course, are changes to EPA funding.  The summary of the omnibus bill issued by the House appropriations committee states that EPA funding has been reduced by almost 19% in 2011:

The conference agreement funds EPA at $8.4 billion, which is a $233 million reduction below the FY 2011 enacted level and $524 million below the President’s request. Overall, funding for EPA has been reduced by $1.8 billion (-18.4%) in calendar year 2011.

The conference agreement cuts $14 million (-6%) in clean air and climate research programs; $12 million (-9.5%) in EPA’s regulatory development office; and $14 million (-5%) to air regulatory programs. In addition, the bill includes:

• A 33% reduction to the EPA Administrator’s immediate office;
• A $101 million reduction for the Clean Water and Drinking Water State Revolving Funds, which received $6 billion in “stimulus” funding;
•  A $78 million reduction for EPA operations/administration, which includes $41 million
• (-5%) in cuts to EPA’s regulatory programs;
• A $14 million (-6.2%) reduction for uncoordinated climate and other air research; and
•  An elimination of $4 million in funding that EPA has used to delay the processing of Appalachian mining permits.

These are some other provisions in the omnibus bill that impact the green building community:

1. Funding for CBECS may be restored--Funding for the Commercial Building Energy which was defunded this year may be restored, paving the way for updating the baseline building energy data at the heart of Energy Star. Division B, Title III on page 44 provides $105,000,000 for the Energy Information Administration. 
2. New energy efficient lighting standards won't go into effect-- The omnibus bill includes a rider which would prevent the new energy efficient lighting standards from going into effect on January 1st, and actually rolls back standards in effect since 2008 for floodlights. 
3. Innovative Technology Loan Guarantee Program has $0.00 appropriated for 2012.  The loan guarantees are for eligible clean energy projects (i.e., agreeing to repay the borrower’s debt obligation in the event of a default), and by providing direct loans to eligible manufacturers of advanced technology vehicles and components. 
4. Appointment of Administration “Czars” for climate change and urban affairs prohibited.

A full version of the final bill is available here, a summary from the appropriations committee is here.

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As we all learned in kindergarten, every snowflake is unique.  Now, studies have shown that is not entirely true (see here if you are marginally interested in the science of snowflakes), but close enough. 

Uniqueness may be good for snowflakes, but lousy for financial transactions. At least part of the problem in harnessing private capital to fund energy efficiency projects is the lack of standardization across projects.   Major financial institutions need big pipelines of medium- to large- deals to make the sector worthwhile.  If each transaction is significantly different, it means that underwriting standards, loan documents, due diligence and so forth have to be created from scratch for each transaction.

The solution to the snowflake problem is to standardize the transactions.  It is very tricky with energy efficiency, because each building has different features--age, system types, use, occupants, etc.  Therefore, the technology needed to create the efficiencies also differ. 

To break through the logjam, someone needs to develop one or more reliable algorithms that can be used to evaluate projects quickly, while still respecting the unique features of different projects.  Transactions could be structured around the standardized model, and then tweaked for the particulars of the transaction.  Without a reliable and replicable structure for financing energy efficiency deals, financing will always be limited and expensive.   

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My loyal readers may have been surprised (or relieved) by my hiatus from publishing.  I was not idle, however.  I led a study on Energy Efficiency Policy in New Jersey and Pennsylvania on behalf of the Department of Energy-funded Greater Philadelphia Innovation Cluster for Energy Efficient Buildings.  I completed the work last week, and it will be released soon. 

I have also been advising New Jersey Governor Chris Christie on developing the 2011 Energy Master Plan for New Jersey.  The draft plan is available here.  The findings of the eight-person work group on clean energy will be made public shortly, and public hearing is being held on October 21 from 9:30-12:30 at the Rutgers Eco-Complex.  Details are available here. 

My public sector work has given me some new insights into green building and energy efficiency policy, which will be developed in further posts over the next few months. 

Among the most interesting findings is the difficulty in crafting public policy initiatives to break through the “efficiency gap”—the gap between a customer’s actual investments in energy efficiency and those that appear to be in the consumer’s best interest.

Most policy efforts are aimed at eliminating the "first cost" barrier to energy efficiency.  In other words, providing grants or loans to minimize the upfront investment required for energy efficient systems.  

Making these programs work to achieve scale and realize significant energy savings has proven devilishly difficult.    With the influx of ARRA funds, state and local jurisdictions have invested $650 million in loan programs for energy efficiency projects, with loans generally provided to customers at low- or zero- interest rates. 

The author of a May 2010 nationwide study of state, utility and municipal loan programs by the National Renewable Energy Laboratory concluded:

Despite the advantages of state, utility and municipal loan programs, participation to date has been modest, and they appear to be incapable of driving a large scale transition to a clean energy future by themselves.

A study just released in September, 2011 by the ACEEE which reviewed 24 financing programs nationwide concluded that participation rates were generally low across programs, and do not generally track energy savings.  The report concluded:

While several programs have many years of experience and have issued thousands of loans, this market has yet to come to scale. 

So, it is clear that transforming the energy efficiency environment will require more than providing low cost capital from government sources for at least two reasons.  First, because government capital and capital deployment mechanisms are not robust enough to create scale, and second, because the barriers to energy efficiency are not merely financial.  Psychological barriers, cultural barriers, resource barriers and technical barriers also play important roles.  [This report nicely summarizes the various barriers to energy efficiency investment by sector.]

From my research, policymakers must focus on better stimulating private capital deployment and integrating financing with tools to address other barriers to energy efficiency. Understanding consumer motivation, providing resources to address the less concrete barriers to energy efficiency, and partnering with private capital sources to bring financing to scale  should be the goals of energy efficiency policies going forward.

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Yesterday, Judge Sands dismissed Henry Gifford's suit against the USGBC.  A copy of the Order is available here.  In a major win for the USGBC, Judge Sands dismissed Gifford, et al's Federal claims with prejudice, which means they cannot be brought again, Because the Federal claims were dismissed, the Judge also dismissed Gifford, et al's state claims for lack of jurisdiction. 

Particularly gratifying for me is that Judge Sands dismissed the case for exactly the reason I anticipated in my prior posts on the case that the plaintiff in this case lacked standing to bring the case.  The posts are available here and here.

In summary:

To the best of my research, Mr. Gifford is not a LEED AP, and indeed, from his website and publications, he has outspokenly denounced the USGBC and LEED.  Mr. Gifford does not appear to own any property certified LEED.  In short--the USGBC's actions have not harmed him or his career, if anything, has been enhanced by the USGBC's position.

Similarly Judge Sands held:

With the exception of Gifford,  each Plaintiff designs and consults on specific elements of individual buildings, including heating and cooling systems, moisture and mold remediation, and architectural design. Plaintiffs do not allege that LEED certified buildings do not require such services or that those services must be provided by a LEED-accredited professional in order to attain certification. Because there is no requirement that a builder hire LEED-accredited professionals at any level, let alone every level, to attain LEED certification, it is not plausible that each customer who opts for LEED certification is a customer lost to Plaintiffs.

With respect to Gifford's Lanham Act "False Advertising" claim, I wrote:

In alleging a violation of the Lanham Act, the Federal act prohibiting false advertising, the Amended Complaint states: USGBC's misrepresentations have an will continue to deceive consumers, voters, taxpayers, developers, municipalities and legislators at the local, state and federal levels. However, fraud requires "reasonable reliance" on the false statements. The difficulty here is that, although more plaintiffs have been added, they are still not plaintiffs that were "duped" by the USGBC's representations. Judge Sands concluded that the USGBC and Gifford, et al are not competitors:

 Judge Sands similarly held that Gifford, et al cannot prove reliance:

Even if Plaintiffs were to amend the [First Amended Complaint]  to include the proffered allegation that a single developer, Steve Bluestone, chose a LEED certified consultant rather than Gifford, Plaintiffs would not establish the required causal nexus: that Bluestone did so in reliance on the alleged false statement contained in a 2008 press release.

This order may not be the end of the Gifford v. USGBC story.  Gifford may appeal, and he retains the opportunity to file his state claims in New York state court.  Moreover, since the Judge did not resolve the merits of the claims, the debate over whether LEED buildings save energy is likely to rage on.

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Recently, there has been some momentum behind energy efficiency legislation, both in the House and the Senate.  There is the Shaheen-Portman ESICA bill, an energy efficiency only bill; Conrad's FUEL Act, a broader energy bill; Lugar is prepping an energy bill that incorporates strong energy efficiency language; and now a bill reviving PACE is being prepped in the House.

PACE, Property Assessed Clean Energy, allows the upfront costs of property owners’ clean energy and energy efficiency projects to be financed by local governments, and paid back by homeowners as an increase in  their property taxes. 

The concept behind the PACE program is that the energy savings from energy efficiency and clean energy projects would outstrip the costs over time, but that the upfront costs were a barrier to many people in implementing the badly needed changes. 

Several municipalities and states had implemented these programs, and it sounded like such a good idea that $150 million in the ARRA was dedicated to support them.  Unfortunately, in mid-2010 the Federal Housing Finance Agency, which regulates government sponsored mortgage buyers Fannie Mae and Freddie Mac, and the Office of the Comptroller of the Currency, which regulates national banks stopped the PACE programs in their tracks by refusing to issue mortgages that had a PACE loan in first priority. Go here for the full story. 

Now, there is draft legislation being sponsored by Representatives Hayworth (R-NY19), Thompson (D-CA1) and Lungren (R-CA3) to restructure PACE and allow it to move forward.  According to supporters of the Bill, it is due to be dropped in the House next week before the summer recess.  A draft of the proposed bill and more information is available here.

The PACE bill requires Fannie, Freddie and the other banking regulators not to "greenline" PACE properties by restricting lending or requiring higher underwriting standards.

To assuage the concerns of the banking regulators, the PACE bill:

• Requires homeowners to have at least 15% equity in the home
• Puts a cap of 10% of the value of the home on the PACE assessment
• Requires the homeowner to have a solid history of tax payment
• Requires an energy audit to ensure cost effective energy efficiency projects are undertaken
• Requires that there be no liens, bankruptcy, defaults, etc.
• Prohibits the PACE loan from being accelerated at foreclosure

Notably, the Bill does not take away the first lien priority of the PACE, but only requires payment of the delinquent PACE payments upon foreclosure, not the entire debt.

Notably, the Shaheen-Portman ESICA Act also incorporates PACE-enabling language at Section 202, although it is in the context of credit support for PACE bonds, which does not necessarily solve the PACE lien problem. 

Fannie and Freddie have gotten so far out ahead of this issue, the agencies probably could not dial back their objections if they wanted to at this point.  Only legislation will override their "veto" of residential PACE at this point.   

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One of the bitter complaints about energy management and energy efficiency has been the lack of standardization in energy benchmarking, management, measurement and verificiation.  Policymakers don't like it because it is difficult to verify compliance, consumers can't trust the information they receive and financiers don't like it because they cannot forecast the risk associated with investment.  This lack of standardization has been cited over and over again.  According to a World Economic Forum analysis for accelerating energy efficiency:

Despite differing views of the market, all stakeholder groups acknowledge the gap between opportunity and implementation, recognizing that a standardized method of measurement, verification and enforcement would help create market transparency, a more stable environment and an upscaling of investments. This should be considered of high priority going forward.

A new tool for industry and regulators alike was issued last week.  The International Standards Organization launched ISO Standard 50001 for energy management.  Unlike LEED or Energy Stat, the ISO standard does not set energy targets or how to comply, but rather provides a standardized framework for planning, measuring, verifying and improving energy performance. 

Pilots of the ISO 50001standard demonstrated  cost and energy savings in large and small businesses:

 One of them was a plant owned by a major company, Dow Chemicals. The plant reduced its use of energy by 17.9 % over two years. At the same time, ISO 50001 principles are also successfully implemented by small businesses as shown by the experience of the other plant, CCP, of Houston, Texas, employing 36 people. In two years, it achieved energy savings of 14.9 %, worth USD 250 000 a year with zero capital investment.

Why does it matter?  According to the ISO, Up to the end of December 2009, at least 223,149 ISO 14001:2004 (environmental management standard) certificates had been issued in 159 countries and economies.  ISO 50001 is designed to work with the other ISO management system standards, including ISO 9001 (quality management) and ISO 14001 (environmental management).  In addition, in at least several studies, ISO 14001 has been statistically correlated with significant positive market reaction, increasing the value of the companies that implement it. 

In theory, new regulations could be based on energy performance measured and verified using the ISO 50001 standard.  Financial institutions could have greater security if energy savings, verification and management were based on  the ISO 50001 procedures.  If you can't measure it, you can't manage it...and you can't regulate it and you can't finance it!

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Today, Senator Kent Conrad (D-N.D.) introduced a "comprehensive energy bill" entitled the "Fulfilling U.S. Energy Leadership Act" or "FUEL."  The bill is available for download here. 

According to his press release:

Senator Kent Conrad today introduced comprehensive energy legislation intended to lessen America's dependence on foreign oil, reduce gas prices, and strengthen the national economy.  [The FUEL Act] is a blueprint for a national energy policy that would support domestic oil and gas production, including an environmentally responsible expansion of offshore activity, while also investing in the development of renewable fuels. The bill also promotes more alternative fuels and clean sources of electricity, including clean coal, and nuclear energy.

Regardless of the other positive things the FUEL Act may contain to achieve all of these ends, the bill has almost no provisions that address building energy efficiency, and mostly they simply extend the incentives already in place until 2016.  The only provisions for building energy efficiency in the FUEL Act are Section 601 and 611-614:

Section 601--Authorizing $4.9 billion for the Rural Utilities Service to provide interest-free loans to rural electric cooperatives to provide low interest loans to qualified consumers to implement energy efficiency measures.

Section 611--Increasing to $3.00 and extending through 2016 179(d), the commercial energy efficient property tax credit;

Sections 612-614--Extending through 2016 the existing tax credits for energy-efficient homes and appliances;

According to a McKinsey report, energy efficiency is one of the most cost-effective ways to minimize the dependence of the United States on foreign oil and reduce greenhouse gas emissions. Increasing building energy efficiency in the United States by 23% by 2020 would :

• Reduce end-use energy consumption by 9.1 quadrillion BTUs, roughly 23% of projected energy demand;
• Eliminate more than $1.2 trillion in waste—well beyond the $520 billion upfront investment (not including program costs) that would be required;
• Result in the abatement of 1.1 gigatons of greenhouse-gas emissions annually—the equivalent of taking the entire US fleet of passenger vehicles and light trucks off the roads.

Despite these facts, it appears that energy efficiency is still the red-headed step-child of energy policy.  It is true, appliance standards, building codes, loan guarantees for energy efficient buildings and other solid energy efficiency proposals are not as sexy as electric vehicles or as viscerally connected to what people pay at the pump.  On the other hand, a cost-effective and achievable 23% reduction in fossil fuel usage should be at the forefront of national energy policy.  

I hope there is a larger strategy at play.  To the extent that Conrad's bill may get bogged down in politics about fossil fuels, subsidies, domestic drilling and so forth, it may be an advantage that many of the energy efficiency policy proposals contained in ESICA, the energy efficiency bill introduced last month by Senators Shaheen and Portman (described in further detail here) were not rolled into the FUEL Act.  If the FUEL Act does become the leading energy policy, I recommend incorporating the programs in ESICA to make the FUEL Act a more complete energy package.   

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     Contributions to this post were made by Eli Wolfe, 2011 Cozen O'Connor Summer Associate.

     On May 12, 2011 the Energy Savings & Industrial Competitiveness Act (ESICA) of 2011 was introduced by Sens. Jeanne Shaheen (D. N.H.) and Rob Portman (R. OH). The Act creates a national strategy to increase use of energy efficiency technologies through a national model energy code, enhanced appliance standards, DOE loan guarantees for energy efficiency projects and a variety of other initiatives.  A summary of the bill is available here, and the bill itself is downloadable here.

    As I predicted here, ESICA resurrects the concept of a national model energy code which was first intorduced as part of Waxman-Markey (cap-and-trade).  Pursuant to ESICA, the DOE would essentially establish and regularly update national model building energy codes for residential and commercial buildings from baselines of the 2009 International Energy Conservation Code (IECC) and ASHRAE Standard 90.1-2010. The DOE would establish goals of zero-net-energy for new residential and commercial buildings by 2030. Energy savings targets would be set at the maximum level of energy efficiency that is technologically feasible and life-cycle cost effective, taking into account economic considerations.

   Within one year of any revisions to the IECC or ASHRAE Standard 90.1, the DOE would be directed to determine whether the revisions improve energy efficiency and meet the targets. If so, then the revisions would be established as the national model building energy code. If not, the DOE would recommend changes to improve the codes to meet the target, and IECC or ASHRAE would have 180 days to incorporate changes to meet the targets. If the revision still did not meet the target, then the DOE would establish a modified national model building code that does, based on the latest edition of the IECC or ASHRAE Standard 90.1.

     Within 2 years of the establishment of a national model building energy code, states would be required to certify whether they have updated their codes. Within 3 years of certification, the state would certify whether or not they either:

1. Achieved compliance: at least 90% of building space covered by the code substantially meets code requirements, or excess energy use for non-compliant buildings is not greater than 5% of energy use of all covered buildings; or
2. Made significant progress: the state has developed and is implementing a plan for achieving compliance within 8-years of enactment, and is meeting compliance targets under the plan.

   If a state does not meet the requirements, it must submit a report to the DOE explaining the status of the state’s efforts to reach compliance and a plan to do so. In states out of conformance, localities would be allowed to meet the certification requirements themselves. Conformance to this section may be required by the DOE as a prerequisite for grants or other support for code adoption/compliance activities. The DOE would provide technical assistance and incentive funding to states on building energy codes, and additional funding would be provided by the DOE to states or local governments in conformance to improve compliance. Up to $750,000 per state could be used to train state and local building code officials.
 

   The ESICA concept builds on the American Reinvestment and Recovery Act model which tied funding to updating building codes, and the 2005 energy bill requirements that DOE evaluate model energy codes, and that states demonstrate that the provisions of its commercial building code regarding energy efficiency meet or exceed the DOE approved standard.

   The question I am pondering is whether a national model code tied to net-zero construction has a hope of seeing the light of day, or are the barriers too great?

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There is a corner of the Federal government that, unless you are as data obsessed as I am, you never knew existed.  For the part 25 years, the Energy Information Administration (EIA) has collected  baseline data on commercial building energy usage, known as CBECS.  CBECS is the only government source of statistical data for energy consumption and related characteristics of commercial buildings.   The data EIA has collected forms the underlying data for programs like Energy Star and LEED, and laws like Energy Independence and Security Act of 2007 (EISA 2007).

Two pieces of bad news were released today.  First, the EIA tried to cut costs by contracting out its building energy information gathering.  Unfortunately, the data gathered by its contractor was so shoddy that the EIA is refusing to release the data. 

According to a press release from the EIA:

EIA regrets to report that the 2007 Commercial Buildings Energy Consumption Survey (CBECS) has not yielded valid statistical estimates of building counts, energy characteristics, consumption, and expenditures. Because the data do not meet EIA standards for quality, credible energy information, neither data tables nor a public use file will be released.

Worse still, according to the EIA, the budget cuts made in this year's budget negotiations have reduced the EIA budget so severely that it will suspend collection of 2011 data.  In other words, the best building data we have to work with at this point is almost 10 years old, and no further data is being collected. 

Because approximately 30% of all energy is used by buildings, without a good baseline assessment of current building energy use, it will be difficult to:

1. Accurately benchmark current building performance; and
2. Accurately model building energy efficiency efforts. 

If energy models are based on bad or old or unreliable data, the results in practice may not live up to the predictions, and it will be easier to dismiss efforts to comprehensively transform building energy usage.  In other words, garbage in, garbage out.   

To address this situation, there are two choices. 

 A relatively unbiased private organization, like ASHRAE or the International Code Council, could collect the data.  Although the standard setting organizations will have their own internal and external customers to serve, and questions will inevitably arise as to the bias and validity of the data, they possess the relevant expertise and are currently relied upon to provide input into laws (like building codes).  The other option is for the Department of Energy or other government agency to recognize data gathering as a priority, and reallocate funds for the purpose of building energy efficiency data collection. 

In any event, a reliable party must step up to fill the data void, or future efforts to actualize the most cost effective method of reducing energy use and greenhouse gases will be squandered.  We will pay now through unnecessarily high energy costs and the price tag for participating in conflicts in the Middle East, and future generations will pay for damage to the environment.  Garbage in, garbage out. 

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According to an AIA study, between 2006 and 2009, municipalities with green building programs increased by 50%.  Many programs sponsored by municipalities, states, utilities and the federal government are designed to promote energy efficiency and green construction. 

Although green building has increased exponentially, only a small segment of companies have done energy efficient upgrades to their facilities. Why isn't every business looking to take advantage of incentive programs and the low cost of labor generated by the depression in the construction industry to green their facilities and implement energy efficiency measures?

My answer is that energy to businesses is like dry cleaning to lawyers.  Every lawyer needs clean suits, so the dry cleaning bill is part of the household budget.  Most people who use dry cleaners do not really know what happens at the dry cleaner  to get their clothes clean, or what the cost of the actual dry cleaning process is.  It is very difficult to get comparative prices for dry cleaning, so it takes research to find out whether you are paying your dry cleaner too much or could get a better deal elsewhere.  Switching from the dry cleaner you've always gone to requires figuring out which new dry cleaner to go to, new hours, etc., all with little guarantee that the cost and service will be as good or better than the dry cleaner they currently use.  And, at the end of the day, the potential savings from switching dry cleaners relative to the entire household burget is marginal.  In the presence of all of the transaction costs and with no particular event to motivate change, most people conclude that it is simply not worth the effort.  

Energy is very similar.  All businesses use energy and pay energy bills.  Few really understand where energy comes from and how it is priced.  Switching to more energy efficient systems, net meters, etc. requires commmitting corporate resources to figuring out which ones to invest in and believing that the energy efficiency measures will have a positive impact on energy usage.  And, at the end of the day, the potential savings from more energy efficient facilities relative to the entire corporate budget is, in most cases, marginal.  In the presence of all of the transaction costs and with no particular event to motivate change, most companies conclude that it is simply not worth the effort.

To each actor, the savings are small, but in the aggregate, incremental saving in building energy usage would have a significant impact on greenhouse gas emissions and fossil fuel use.  The dry cleaning example starkly highlights the disconnect between the individual benefit and the group benefit.  According to the ABA, there are 46,276 active lawyers in Pennsylvania.  Let's say each lawyer dry cleans one suit per week on average. 

Most households are not going to bother with the high transaction costs of switching dry cleaners for a total savings of $52.00 per year, which in the scope of the whole household budget is a rounding error, but $2.5 million in annual savings for lawyers overall is real money. 

Likewise, potential aggregate building energy efficiency savings in 2030 has been estimated at nearly $170 billion. But for an average business, the cost savings are negligable as a percentage of overall corporate spending.  For example, according to a Washington State study, the average annual small business energy costs attributable to buildings was about $5000. Even a 10% reduction in building energy costs would only result in a $500 annual savings. Another study puts the potential savings somewhat higher, at $2800.00, but most small businesses would still conclude that energy efficient upgrades are not worth the institutional investment.       

So how do you change the individual corporate decision making process with respect to energy efficiency? 

The ultimate answer is to internalize the environmental and health costs of energy into energy prices, so the cost to the individual corporation and the percent of their overall budget attributable to energy is higher.  In other words, raise the price of energy.   

In the absence of energy price changes, which is not a politically palatable solution right now, there are still things that can be done to incentivize energy efficient construction:

• Reduce transaction costs
• Increase price transparency
• Provide uniform metrics for quantifying savings
• Construct motivating events 
• Incentivize aggregators

I will address these five interim solutions in later posts, but I would love to hear feedback from the GBLB community on other ideas for motivating energy efficient construction.

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A lot of attention has been paid to creating a greener building stock by incorporating green building practices into building codes.  The development of the International Green Construction Code is just one example.

However, there are two primary components to every regulation--policy and process.  Both components are critical to acheiving regulatory goals. Good laws that are not implemented and enforced might as well not exist, and bad laws which are well implemented create a different, but equally bad, outcome. 

The process for approving building codes is arcane at best and impenetrable at worst. To those interested in sustainability, code process may seem like the ultimate "inside baseball" information, like knowing what the Lou Brock's 1967 out statistic was--simply not vital to understanding baseball as a whole.  HB 377, a law signed by Pennsylvania Governor Tom Corbett this week demonstrates how how process changes can impact green building and energy efficiency policy. 

 Generally, the process for adopting building codes is as follows:

1.  The local or state government enacts enabling legislation requiring a building code, often incorporating the International Code Council's model code.  

2.  The International Code Council updates their model building codes on a regular basis, once every three years.

3.  The state or local government has some mechanism, either automatic or through an approval process, for updating its building code to the new version. 

Depending on what level of authority is provided to local governments with respect to their building codes, local governments may adopt additional or different changes to the building code requirements.

Pennsylvania has a state wide building code which, until this week, was an "opt-out" model.  Updates to the International Construction Code were automatically incorporated into the Pennsylvania code unless provisions were specifically rejected by a Governnor-appointed council comprised of builders, architects, code officials and so on. 

The bill enacted this week switches the code adoption to an "opt-in" model.  Any changes to the construction code must be approved by a super-majority vote by the council, otherwise the prior code remains in effect.  In addition, the law adds an additional seat to the 19 member council for:

A GENERAL CONTRACTOR FROM AN ASSOCIATION REPRESENTING THE NONRESIDENTIAL CONSTRUCTION INDUSTRY WHO HAS RECOGNIZED ABILITY AND EXPERIENCE IN THE CONSTRUCTION OF NONRESIDENTIAL BUILDINGS

Policy watchers, like Penn Future , the Delaware Valley Green Building Council, and the Northeast Energy Efficiency Partnerships , anticipate that the super-majority vote of the council will make enacting updates of the ICC very difficult, and that the extra seat for the general contractor will bias the council against upgrading the stringency of the building code. This, of course, includes code changes for greater energy efficiency requirements and incorporating green building practices.

HB 377 said nothing about energy efficiency or green building.  Nonetheless, the changes to the building code adoption process creates a potentially significant barrier to a greener building stock in Pennsylvania.  On a 20 person board, It would require 13 votes to put a code change into effect, and each change must be lobbied for separately.  

Do you know what the code adoption process is in your state or municipality?  Are there any proposed changes?  Let GBLB know what you find out.  It might surprise you.    

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NOTE: The opinions expressed in this post are entirely those of the author, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.

Yesterday, I discussed the fact that Henry Gifford filed an Amended Complaint in his suit against the USGBC for fraudulently claiming that LEED buildings save energy.  The post, as well as the Amended Complaint are available here. I also noted that Mr. Gifford and the other plaintiffs probably do not have standing to bring the suit because they were not harmed by the allegedly fraudulent advertising of the LEED system. 

Mr. Gifford alleges that the people and entities that have been and will be harmed include:

USGBC's misrepresentations have and will continue to deceive consumers and voters, taxpayers, developers, municipalities, and legislators at the local, state and federal levels.

Amended Complaint at Paragraph 57.

This brings up critical questions about the legitimacy of Mr. Gifford's claims:

If developers were really experiencing energy performance vastly out of proportion to their expectations, wouldn't there be suits by developers against their design professionals and/or the USGBC? 

If the Federal government, with one of the largest portfolios of LEED buildings, were really disappointed by their performance, wouldn't they stop using the system? 

If design professionals were spending money to obtain worthless credentials, then wouldn't architects (whose profession is down something like 50%) be lining up to demand their money back? 

If the problems that Gifford alleges are so fundamental, why is it that Henry Gifford and a few other plaintiffs who have rejected the LEED paradigm seem to be the only ones suing? 

The concept of abstract “rightness” does not play a very large role in the American judicial system.  With few exceptions, only a person harmed can bring suit to right the wrong done to him or her. So, even if you or I see something terribly “wrong” happening, if we are not harmed by it, we have no standing to bring suit. 

For example, a man stops by a street hustler and plays a shell game.  You are standing on the corner.  You see the street hustler take his money and bilk him.  The man sees it too, but shrugs his shoulders and walks away.  You cannot sue to get the guy’s money back—only he can (or press charges, etc). 

If there are no victims of the USGBC's "fraud", then Mr. Gifford's is really just a gadfly who is calling attention to himself by suing the USGBC.  If there is fraud, then we should see a rash of suits by plaintiffs who have actually been harmed--consumers and voters, taxpayers, developers, municipalities, and legislators at the local, state and federal levels.

NOTE: The opinions expressed in this post are entirely those of the author, and do not represent the position of the USGBC or the Delaware Valley Green Building Council.

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In last week's State of the Union address, Obama challenged America to embrace a "Sputnik Moment":

So tonight, I challenge you to join me in setting a new goal: by 2035, 80% of America's electricity will come from clean energy sources. Some folks want wind and solar. Others want nuclear, clean coal, and natural gas. To meet this goal, we will need them all – and I urge Democrats and Republicans to work together to make it happen.  

Today, speaking in State College, PA, Barack Obama is scheduled to make a speech on committing to new programs for energy efficient buildings.

According to Reuters:

As part of that program, Obama will announce a plan to improve energy efficiency in U.S. commercial buildings by offering businesses incentives to help pay for clean energy upgrades of offices, stores and other buildings.

According to the White House, the "Better Buildings Initiative" will: 

achieve a 20 percent improvement in energy efficiency by 2020, reduce companies' and business owners' energy bills by about $40 billion per year and save energy.

Most significantly, the Obama administration announced that the cost of the program would be "paid for by ending tax subsidies for oil, natural gas and other fossil fuels."

Obama faces many challenges in the process.  At a recent American Council On Renewable Energy event on the new political climate in Washington, all of the speakers expressed skepticism that real energy policy moves could be made in 2010. The Republican party does not want to be perceived to approve of any discretionary spending.  The fossil fuel lobby is very strong and the breaks and incentives for fossil fuels very well entrenched.  Finally, states with nonrenewable resources like coal, natural gas and petroleum are loathe to threaten these high value industries, particularly in lean economic times. 

Obama and the Democrats have a few unique elements which could turn into a "perfect storm" for renewable energy policy:  

• Public interest studies have demonstrated that Americans currently have a positive image of solar and other renewables. 
• The Gulf Oil Spill is still relatively fresh in the public's mind.
• The turmoil in the Middle East is increasing by the day.
• There were record weather patterns again this winter.
• The ARRA demonstrated the capacity of public investment to grow green jobs.

If these components can be honed into a clear, coherent connection to the value of investment in renewable energy, then it may be possible to achieve a major step forward in energy policy. 

One small step for Obama, one giant step for mankind.

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Because of the enormous popularity of last week's post on green project finance--Let's Make A Deal--Top 10 Rules Of Green Project Finance--I have decided to do a series on the various aspects of green project finance. 

Today we will discuss alternative financing mechanisms for green projects.  Over the next few weeks, I will do posts on incentives available for green projects, an update on the PACE controversy, and the basics of renewable energy finance.  If you have suggestions for other posts you would like to see as part of this series, feel free to email me. 

Please note, I am not a finance professional, and the goal of these posts is simply to give a high-level overview of potential financing mechanisms.  As with all financial decisions, please consult your financial professional and attorney for advice specific to your project.  And now, without further adieu, a primer on alternative green financing mechanisms.

Basically, there are only a few mechanisms for financing projects.  Self-finance (your bank account); equity finance (someone else's bank account); debt finance (the bank); government finance (Uncle Sam's bank account); and grant finance (your parents' third party bank accounts). 

These basic mechanisms are no different for green projects.  However, there are some interesting variants that have developed for financing green projects of various types. Many of the financing concepts are not mutually exclusive.  To the extent that one of the models, like energy efficient mortgages, is applicable mostly to a specific sector, it can be used as a model for a specific project's financing arrangement with a particular financier. 

Leases

For commercial scale (and even residential) green and renewable energy projects, variants on leases have become an interesting project financing model. Essentially, a provider leases the equipment (typically  to the owner of a facility through a long term lease), which reduces the up front costs.

There are a wide variety of leases available, and the decision among which lease is the best solution is largely based on tax and payment considerations.  Most leases radically reduce or eliminate up front costs.  Some leases allow the lessee to take advantage of the tax incentives, renewable energy credits and depreciation on the green equipment, others do not. 

For a great overview of lease variants for renewable energy projects, see here.

Performance Contracting

Performance contracting is essentially a loan from the provider of the green/renewable equipment (known as an Energy Services Company, or ESCO) that is paid for out of the savings or benefits of the green project.  For example, suppose you want to install energy efficient improvements on a facility which will cost $1000 and will save $100 per year.  Typically, the ESCO arranges the financing, and you pay the ESCO through reduced energy bills, sharing the energy cost savings over a predetermined length of time, after which all of the energy savings revert to you.  The ESCO often guarantees the energy savings from the project. This mechanism is used for both energy efficiency and renewable energy projects, and can be used with projects of almost any scale. The DOE has a handbook on performance contracting available here.

Grants In Lieu

 As part of the Stimulus bill, the Department of Treasury made available "1603 grants" which are grants in lieu of tax credits which reimburse up to 30% of the cost of installing certain renewable energy projects. Environmental Leader summarizes the 1603 grant program here:

The grant is 30 percent of the full cost of the intended solar system. Without the grant, system owners could still claim the 30 percent as a tax credit, but some businesses weren’t profitable enough to make use of the full tax credit. This grant now keeps all businesses eligible for the 30 percent incentive, not just those with enough profits (or those with financing partners with enough profits).

The full description of the program is available from the Department of Treasury.

 Energy-Efficient Mortgages And Energy Improvement Mortgages

A form of debt financing, energy efficient mortgages (and their friend, Energy Improvement Mortgages) work on the premise that implementing energy efficiencies on a property will free up cash which can pay down a debt.  The Department of Energy has a great handbook and other resources available here. HUD has qualifications guidelines, approved lenders, etc. available here.

Mortgageloan.com has a nice overview here:

Green, or “Energy efficient” mortgages, let you borrow extra money to pay for energy efficient upgrades to your current home or a new or old home that you plan to buy. The result is a more environmentally friendly living space that uses fewer resources for heating and cooling and has dramatically lower utility costs...At this time, Energy Efficient Mortgages aren’t second mortgages. Though they are created separately from your primary mortgage, they are ultimately rolled into your primary mortgage—so you only make only one payment per month.

Technically, energy efficient mortgages:

give borrowers the opportunity to finance cost-effective, energy-saving measures as part of a single mortgage and stretch debt-to-income qualifying ratios on loans thereby allowing borrowers to qualify for a larger loan amount and a better, more energy-efficient home.
 

And energy improvement mortgages:

are used for existing homes and allow borrowers to include the cost of energy-efficiency improvements in the mortgage without increasing the down payment.
 

The problem with energy efficient mortgages is that they are pretty small scale. For example, the FHA program only backs EEMs for one to four units.

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I am speaking today and the Woodrow Wilson Center in Washington, DC at a forum on green jobs for women.  Although policymakers assert that government investments in green initiatives can produce 20% more jobs than traditional economic stimulus measures, women are not finding as much employment in the green sector as men.  I wrote about this issue for the first time last year, my original post is here.

The issue that I am presenting on today is the low representation of women in white-collar green jobs.  When polticians talk aboout green jobs, the focus is most often on blue-collar work--workers insulating homes or installing solar panels.  There is no doubt that women are historically underrepresented in manual labor contruction work--women account for just 3% of building trade workers.  This gender disparity is no different when electricians turn from hooking up HVAC units to hooking up solar arrays. 

But what about white collar green jobs? There are no practical barriers to entry for women to become construction or energy lawyers, to finance green projects or to create businesses that develop or market innovative green products.  Gender equity is only one of the issues here--it is new efforts in these areas which will create demand for blue-collar and white-collar workers alike, and create new revenue to reinvigorate the American economy. 

And yet women are underrepesented in these areas as well.  Women make up just 16% of the leadership of the ABA Construction Law Committee, and a lower percentage of scientists, researchers, engineers and financiers.

What to do? 

• Qualify white collar green jobs for economic incentives--this will benefit the green economy as a whole.  If there are no new businesses creating demand for people to caulk houses or build solar arrays, all the green job training in the world will be wasted. This will benefit men and women alike.
• Create targeted green training (and RE-training) programs for women in law, business, engineering and finance. Alumni groups from higher education institutions could take on this effort, and make the training available not only for their alumni, but to professionals within their geographical area.
• Create set-asides in green purchasing programs for women-owned green buisnesses, particularly in government programs and large companies going green,.
• Take on the issue--USGBC and other high profile green organizations and government entities need to make women's participation in the green economy a priority.

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Despite the promise of $200 million Smart Grid stimulus grant to BG&E in 2009 from the Department of Energy, according to BuildingGreen.com:

The Public Service Commission of Maryland rejected implementation of “smart grid” metering proposed by Baltimore Gas & Electric (BGE) in June 2010. The commission based the rejection on fears of rate increases and tiered pricing that would increase costs for consumers.

Other people have sued utilities in California and Texas over perceived issues with Smart Metering, notably the objectors said that they were being overcharged for their electrical usage.

Others suspect a more nefarious purpose for the smart meters.  The MasterResource Blog, which bills itself as a "A free-market energy blog" had this objection to the proposed Maryland smart meters:

And last but not least, smart meters are intrusive. Big Environmental Brother lurks behind each smart meter to tell you what to do and when to do it. Civil libertarians take note of this government-dependent machine.

 Are the concerns over smart metering legitimate? Another argument can be made that smart meters are no different than the current electrical system.  With standard meters, electricity is measured by electrical meters, and the electrical utility reads the meters, albeit in the form of a "meter maid". 

 Critics are especially concerned about smart meters' capacity to regulate usage depending on demand--higher prices when demand is high, lower prices when demand is lower, and to regulate the flow of electricity when demand exceeds supply.  But, it can be argued that the utilities do this already, albeit in a cruder form.  For example, when demand exceeds supply, there are brown- and black-outs.  This is simply restricting the flow of electricity on a broader scale. 

As for pricing, if demand exceeds supply, utilities raise electricity prices for everyone.  Rate caps prevent utilities from raising prices in some places, but can this legitimately be considered the "free market" regulating electricity prices? I think not.  It is the government regulating electricity prices.

It strikes me that smart metering is as close as you can get to free market allocation of electricity.  When demand is high, prices increase, when demand is low, prices decrease.  Individuals have the capacity to decrease their bills by using less of the constrained resource. 

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Today I am going to highlight a bunch of interesting articles that have come out lately which interest me. Some of these will become future posts, but I want to highlight them as they come out to keep my readers up to date, and give you something to read in your spare time.

1. The USGBC issued a short white paper on Greening the Codes and the compatibility of LEED with green codes.  It is very good, and makes the point that LEED and green codes work together to encourage green building. 

2. The United States Council Of Mayors passed resolutions to promote green building in cities, including encouraging the passing of a clean energy bill by Congress and the adoption of green construction codes.

3. The DOE announced $76 million in green building and energy efficiency technology grants.

So now I want to know...What are YOU reading? 

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In a bold new risk publication out today from Lloyd's of London, entitled Sustainable Energy Security: Strategic Risks and Opportunities for Business,  the insurance heavyweight states in no uncertain terms that businesses that fail to prepare for short and long term energy crises face potentially catastrophic risks:

Energy security and climate change concerns are unleashing a wave of policy initiatives and investments around the world that will fundamentally alter the way that we manage and use energy. Companies which are able to plan for and take advantage of this new energy reality will increase both their resilience and competitiveness. Failure to do so could lead to expensive and potentially catastrophic consequences.

Lloyds notes the importance of government regulation in managing the energy crisis.

Without an international agreement on the way forward on climate change mitigation, energy transitions will take place at different rates in different regions. Those who succeed in implementing the most efficient, low-carbon, cost-effective energy systems are likely to influence others and export their skills and technology. However, the lack of binding policy commitments inhibits investor confidence. Governments will play a crucial role in setting policy and incentives that will create the right investment conditions, and businesses can encourage and work with governments to do this.

The insurance industry makes it costly--through raising the price of insurance--to do business in risky ways.  If Lloyds prices insurance for carbon dependent businesses much higher, it could force businesses to reevaluate their stance with respect to greenhouse gas regulation.  Where the insurance industry leads, businesses will likely follow.

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I posted last week that the Deepwater Horizon Spill might be a "Love Canal" moment spurring federal environmental legislation.  I am not the only one who thinks so. According to EE News (subscription required):

About two-thirds of respondents believed that Congress needs to take action that will be "more than a Band-Aid" and to "pass real reforms to hold polluters accountable and invest in clean American energy," according to the poll, which was conducted by Benenson Strategy Group and released by the League of Conservation Voters and the Clean Energy Works campaign, a coalition that includes environmentalists, labor unions and a number of other interest groups.

Public outrage + environmental disaster = regulation.  Stay tuned.

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Comprehensive federal environmental regulation does not come easily.  First, there is the difficulty of crafting scientific regulations.  Then there are the entrenched interests to be combated, both in the private sector, and with the states and local governments who may have had authority prior to federal regulation. Compounding these issues is the high cost of regulation and enforcement itself.  Criticisms abound from the right--too much regulation--and the left--too little.  Even after regulations are passed, the government can expect years of litigation over the implementation of regulations.  What congressman needs that kind of headache?  

It takes a galvanizing catastrophe to catapault environmental regulation to the front of the federal stage.  In 1978, Niagara Falls, New York became the subject of national and international attention, controversy, and eventual environmental notoriety following the discovery of 21,000 tons of toxic waste that had been buried beneath the neighborhood by Hooker Chemical. Residents were found to have numerous health problems, including cancer and mental retardation.  After the dump was discovered and 800 families relocated, Congress was motivated to pass the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), or Superfund Act, which requires polluters to remediate toxic sites. 

Deepwater Horizon needs to be this generation's Love Canal moment.  Congress has an unparallelled opportunity to capitalize on the anger, the shock and the awareness of the fragility of the environment currently in the zeitgeist  to pass comprehensive energy legislation.  Thank god, Love Canal moments do not come along often.  It would be a pity to waste it.  

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The New York Times had an interesting Op-Ed today on how municipalities can supplement LEED by requiring follow-up energy tracking. 

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Last week, Senators John Kerry and Joseph Lieberman debuted the American Power Act, their Senate compromise energy bill which was supposed to be nominally bipartisan, until Lindsey Graham decided to back out at the last minute. Among the compromises that Kerry, Lieberman and Graham appear to have made is to gut energy efficiency provisions from the Act.

Technically, provision for energy efficiency, and the building code, it is still nominally there, in Section 1603 of the draft bill, on page 199 for those of you following along at home. However, it looks nothing like the versions in Waxman-Markey and prior senate versions. In the Kerry-Lieberman version, states are allocated between 2.5% and 1% of all green house gas emission allowances. Of that allocation, .5% must go to Indian Tribes. With the remainder, the states may use for a variety of programs, including energy efficiency, renewable energy and transportation. Specifically:

1) Energy efficiency purposes, including implementation of programs related to—
(A) building codes that improve energy efficiency;
(B) energy-efficient manufactured homes;
(C) building energy performance labeling;
(D) low-income community energy efficiency improvements; and
(E) energy efficiency retrofits of existing buildings.

(2) Renewable energy purposes, including—
(A) deployment of technologies to generate electricity from renewable energy sources; and
(B) deployment of facilities or equipment, such as solar panels, to generate electricity or thermal energy from renewable energy resources in and on buildings in an urban environment.

(3) Cost-effective energy efficiency programs for end-use consumers of electricity, natural gas, home heating oil, or propane, including, if appropriate, programs or mechanisms administered by local governments and entities other than the State.

(4) Enabling the development of a Smart Grid (as described in section 1301 of the Energy Independence and Security Act of 2007 (42 U.S.C.14 17381)) for State, local government, and other public buildings and facilities, including integration of renewable energy resources and distributed generation, demand response, demand-side management,and systems analysis.

(5) Providing the non-Federal share of support for surface transportation capital projects under—
(A) sections 5307, 5308, 5309, 5310, 5311 and 5319 of title 49, United States Code; and
(B) sections 142, 146, and 149 of title 23, United States Code; except that not more than percent of allowances distributed to each State pursuant to this section shall be used for the purposes described in this paragraph.

The distribution among the states will be based on a complex formula:

(A) 1⁄3 of the allowances shall be divided equally among the States.
(B) 1⁄3 of the allowances shall be distributed ratably among the States based on the
population of each State, as contained in the most recent reliable census data available from the Bureau of the Census of the Department of Commerce, for all States at the time the Administrator calculates the formula for distribution.
(C) 1⁄3 of the allowances shall be distributed ratably among the States on the basis of
the energy consumption of each State, as contained in the most recent State Energy Data
Report available from the Energy Information Administration (or such alternative reliable
source as the Administrator may designate).

Essentially, Kerry Lieberman took the best, easiest and cheapest means of reducing greenhouse gas emissions—through energy efficiency—and gave them the very short end of the stick, meanwhile allocating the vast majority of federal resources to cap and trade. Is this a good compromise?
 

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Fans of Green Law will recall that the Heating and Air Conditioning industry associations (AHRI, et al) sued the City of Albuquerque to enjoin Albuquerque's green building regulations in 2008.

These industry groups relied upon an argument that the regulations adopted by Albuquerque exceeded the energy efficiency requirements for air conditioners, furnaces, heat pumps and water heaters established at the federal level by the Department of Energy.   

Now, two years later, the Department of Energy is holding a public meeting to discuss updating those standards.  The meeting will be held on May 5, 2010 from 9 a.m. to 5 p.m. in Washington DC at the US Department of Energy, Forrestal Building, Room GE-086, 1000 Independence Avenue SW, Washington, DC 20585. Written comments are also accepted by email to Brenda.Edwards@ee.doe.gov (include EERE-2008-BT-STD-0006 in the subject line).

In advance of the meeting, the DOE has issued the results of the preliminary analysis and potential energy conservation standard levels the DOE "could consider" for the regulated products, and a preliminary technical support document outlining its efforts. 

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Although many green building experts have been discussing the issue of whether green buildings are performing up to their claims for some time, the mighty grey lady spoke on the issue this week and set the blogosphere humming. The New York Times article comes in the wake of the USGBC's announcement that it would begin to track the performance of LEED buildings after they have been certified, and potentially to revoke the certification of those buildings which failed to perform, which also kicked up a lot of discussion. On top of all this, ACE announced that it would begin to guarantee the certification of green buildings it was involved with.

These events have an important nexus--risk of liability.  If the USGBC tracks building performance, failure to perform up to the requirements now brings with it the threat of decertification.  In the past, no one was really tracking the claims and there was no consequence for failure, except PR embarassment. Now that design professionals guarantee achievement of certification, failure to do so brings enhanced contractual liability as well (although ACE seeks to limit its liability to a refund of its LEED administration fee, it remains to be seen if this limitation would hold, especially if the failure to acheive certification were due to the professional negligence of ACE).

To protect against the risk of liability, professionals turn to insurance.  As I reported here on Monday, Argo Insurance Brokers and Lloyd's of London are looking to fill this niche by bringing to market the first green professional liability policy for architects and engineers.  Among other things, the policy includes technical consulting, site selection, water efficiency, and other sustainable services as "covered services" under the policy. In addition, it "specifically includes coverage for guarantees and warranties of achievement of green certification."  Thus, through the Argo policy, architects and engineers can now manage their risk. 

On the whole I think the Argo policy is progressive and a great tool for design professionals looking to go green.  If I were an owner, I would want the professionals I engage to have this coverage.  However, I would like to see more explicit language in the policy regarding the "coverage for guarantees and warranties of achievement of green certification," particularly as it relates to performance after certificate of occupancy.  The Argo/Lloyd's policy is probably just the first of its kind in this area, and it will be interesting to see the policy language develop over time.

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On Earth Day, Mayor Bloomberg announced sweeping new green building regulations for New York City.  The proposed regulations would: 

• mandate energy audits in buildings larger than 50,000 square feet once every decade and require retrofits that are deemed cost effective, which is defined as a five-year payback period
• require property owners to benchmark the energy usage of their buildings
• mandate commercial lighting upgrades by 2022
• require compliance with a new energy code after completing a building renovation of any size

On May 12, the Massachusetts Board of Building Regulations and Standards (BBRS) approved Appendix 120AA as an optional appendix to the 7th edition Massachusetts Building Code 780 CMR. According to the BBRS,

the stretch code would be incorporated into the Massachusetts building code as an optional appendix. Towns and cities in Massachusetts would then be able to choose between remaining on the base energy code or adopting the stretch energy code as their mandatory energy code requirement.

Opponents argue

The “stretch code”...will end decades of statewide uniformity under the existing building code and will be in direct conflict with the goals of the statewide code — to provide uniformity, predictability and clarity.

These sweeping regulations are interesting from a couple of different perspectives.  First, they indicate a political willingness to impose stricter--and potentially costlier--regulations on developers, despite the down real estate market.  Second, they indicate a shift in policy making from independent green regulatins to adaptations of the building and energy codes.  It will be interesting to see how these schemes are implemented, and what effect they have on development in these localities. 

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Everyone will be watching the inauguration today.  In honor of our new president here is the link to Obama's energy and environment plan now on Whitehouse.gov.

Happy inauguration day!

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