PennEnvironment Releases Energy Efficiency Study Just When Pennsylvania Needs It Most

PennEnvironment released the "Building A Better America" study today quantifying the benefits of strong building codes and other policies promoting energy efficiency.  A press release summarizing the findings is available here, and the study can be downloaded here

The median home in the United States is forty years old, and in Pennsylvania, even older. Because buildings last so long, the Building a Better America study notes that strong building and energy codes are critical to realizing the benefits of a more energy efficient building stock, like reduced energy use and bringing cost savings to companies and families. Enacting strong building and energy codes locks in energy savings for decades to come.

Likewise, weak or outdated codes create a legacy of inefficient and potentially unsafe buildings long into the future. This is the situation that Pennsylvania now faces.

In 2012, the International Code Council, the body that develops the model building and energy codes, issued updates to the building and energy codes that will make new buildings 15% more energy efficient than ones built to the current codes, and 30% more efficient than buildings built to the 2006 codes.

Until 2011, Pennsylvania's building and energy codes were some of the most up-to-date in the nation. Last year, however, the Pennsylvania legislature made a series of changes to the way building and energy codes are adopted. As a result, in January, the committee that updates the codes voted to reject the 2012 updates to Pennsylvania’s codes. The committee also recommended that the Pennsylvania codes be updated every six years, instead of every three years as they are now.

If the committee’s recommendations are adopted, Pennsylvania will still be using the 2009 codes until at least 2018, and perhaps longer. As a result, the reductions in energy use and energy costs highlighted in the Building a Better America study will not be realized in Pennsylvania.

To make this real, look back. If Pennsylvania still used the 2006 codes, buildings built today would be 30% less energy efficient than ones built to the 2012 codes. As the study says, building energy efficiency is only increasing. If we are still building to 2009 codes in 2018, imagine the missed opportunity for energy and cost savings.

In addition to strong building and energy codes, the study also notes the importance of incentives to advance building efficiency. In 2008, the Pennsylvania legislature enacted Act 129, which, among other things, requires electric utilities to provide energy efficiency and conservation programs sufficient to achieve a 3% decrease in electricity use by 2013.

Most of the energy efficiency incentives in Pennsylvania are Act 129 programs offered by the utilities. However, after 2013, there are no additional set goals for energy reduction in Act 129. Rather, Act 129 requires that the Public Utility Commission set new goals, but only if the benefits exceed the costs. Right now, the Commission is in the process of evaluating the cost-effectiveness of the utilities’ energy efficiency programs, and determining whether to set new goals for energy reduction. The utilities are likely to meet the 3% target, so if no new goals are set, the utilities have no obligation to continue their energy efficiency programs after 2013.

The Building A Better America study proves that good policies, including strong building codes and incentive programs are critical for improving building energy efficiency and saving money.
Because of the imminent changes to Pennsylvania’s energy efficiency policies, to ensure that Pennsylvania realizes the financial and environmental benefits highlighted in the study, businesses, organizations and individuals need to speak out now to ensure that Pennsylvania’s policies stay strong, and provide support to Federal, state and local policymakers that advocate for energy efficient policies.

Energy Efficiency Policy Report Published

As I mentioned in a previous post, I led a study this summer analyzing the legal policy and process factors impacting commercial building energy efficiency in Pennsylvania and New Jersey.  The study was commissioned by the Department of Energy-led Greater Philadelphia Innovation Cluster for Energy Efficient Buildings (GPIC). The results of the study and a presentation I gave on the findings are now available through the GPIC site

The purpose of the study was to identify the most significant policy and legal-related process factors effecting energy efficiency (“EE”) in commercial buildings in the Greater Philadelphia area. The research focused on policy areas such as the structure of government, specific laws and regulations, government funded or mandated incentives and other financing mechanisms. Processes included legal-related factors impacting EE transactions, such as contracts, leases, public bidding requirements, and accounting standards.

The study revealed that between Pennsylvania and New Jersey, the state and local governments have implemented almost all of the policy levers that advocates have called for to increase EE. For example, both Pennsylvania and New Jersey have up-to-date building and energy codes. The states have invested hundreds of millions of dollars collected from utility ratepayers in EE incentive programs. New Jersey has experimented with alternative rate structures for utilities. Therefore, the primary recommendation of this study is to conduct further legal and market research to compare the effectiveness of the New Jersey and Pennsylvania regulatory initiatives designed to address the efficiency gap, including the incentive and ratemaking efforts.

Although many policies are in place to promote EE, direct and indirect barriers still exist. For example, until August 2011, New Jersey did not allow sub-metering of multi-family residential buildings, creating a direct barrier to energy management. The indirect barriers are numerous, and include even the structure of government itself. For example, the multitude of governing bodies and the often inconsistent policy goals of each result in a fragmented and sometimes contradictory set of policies regarding EE.

Finally, the study found that market processes necessary for smooth transactions and full valuation of EE construction are immature, increasing transaction costs and making EE investments less valuable. For example, appraisers of EE buildings frequently ignore or undervalue EE upgrades. As a result, owners may not recoup their investment at the sale of the property, or their cost to borrow against their assets may be compromised.


 I welcome feedback from the GBLB community on the findings. 

Valuing Green--CBRE Makes The Financial Case For Building Green

CB Richard Ellis, the worldwide behemoth of real estate services, issued a report which addresses "the economics of sustainable buildings." Their conclusion? Basic level of certification adds between 2-3% to the cost, higher levels of accredidation add 5-7% of construction costs.  This is fairly in line with other cost estimates which have been issued.  However, there were some other interesting conclusions from the report:

  • Although developers will reap some rewards in terms of higher rents and enjoy higher rates of rental growth,the rates of rent additionality is about the same as the excess development costs (2-6%), so the additional rental value is essentially a wash.
  • Improvements in energy savings can be between 10-50%, a major number. 
  • Residential customers will pay some premium for green, but not necessarily the actual cost of the green improvements
  • Extra value will need to accrue from the investment markets for the lower risks and higher valuations of green buildings.

How should this study effect decisions making at the policy and business level?

  • The potential market benefits from greening buildings have not solidified--this means that incentives can still be powerful tools to motivate green projects.  The incentive may be the tipping point.
  • Energy savings, and measurement of the realization of energy savings, is an important factor in "pencilling out" green improvements.  From a policy perspective, this puts even more value on reporting and disclosure of building performance measures.
  • Policy measures need to be different for commercial and residential sectors to motivate green.  There may need to be different levels of incentives applied to motivate different segments.

Marsh Report On Assessing The Risks of Green Building

Marsh issued a report today on finding from a survey of 55 construction industry participants in different geographical locations on the risks associated with green building.  The survey can be downloaded here

Some interesting findings:

1. Financial risks and standard of care/legal risks ranked highest in terms of threats to green building projects. p. 7

2. The insurance industry continues a "wait and see" approach to covering green risk. p. 15

3. Firms involved in one or more aspects of green building shouold seek the services of an attornet with experience in green risks. p. 15