Boston becomes latest city to order building energy benchmarking

Boston becomes latest city to order building energy benchmarking

Boston image by SeanPavonePhoto via Shutterstock.

Last week, the Boston City Council approved an ordinance requiring larger commercial and residential buildings to report annual energy and water usage to the city, which in turn will make this information available to the public.

As the VERGE conference begins today in Boston, it joins seven U.S. cities, including New York, Washington, D.C., and San Francisco, as well as two states -- California and Washington -- in enacting energy reporting requirements aimed at reducing carbon emissions by cutting energy consumption.

This ordinance has its origins in recommendations made in 2010 by Boston Mayor Tom Menino's Climate Action Leadership Committee. It is reflective of a growing trend nationwide to increase transparency in building performance through the sector's convergence with IT, as described in the GreenBiz report, "VERGE and the Built Environment," released during last year's VERGE conference in San Francisco.

Energy benchmarking programs in the U.S.


Boston image by SeanPavonePhoto via Shutterstock.

The Boston ordinance requires only the reporting of data, as well as energy audits for less-efficient buildings, although owners are not required to act on the audit results. It is hoped, however, that creating transparency around energy use will result in market forces driving a reduction of greenhouse gasses as owners take steps to improve efficiencies and remain competitive among tenants focused on operating costs and sustainable workplaces. Improvements may take the form of more efficient operating standards and improvements in building systems and design.

Although energy reporting requirements are seen by detractors as both intrusive and costly, leading real estate firms in New York City by and large have embraced the PlanNYC requirements [subscription required], with one developer noting, "We can make our buildings operate more efficiently, and that can create profitability." The requirements also raise the transparency bar in the local real estate market, which can allow for more informed decision-making by both owners and tenants.

Ordinances like Boston's have emphasized benchmarking and reporting rather than mandating specific solutions; the reporting requirement allows competitive forces to improve product quality, as is the case in any free market dynamic. One study of 35,000 buildings found that simply recording their energy use in the Energy Star Portfolio Manager reduced energy use by nearly 2.5 percent. Smart energy efficiency measures also have a positive impact on net operating income and asset value from both a cost and revenue perspective, as was illustrated by the recent global study by the World Green Building Council. 

Clearly, emphasizing the sound economics of improved building efficiency will be key to continuing to unlock the massive resource everyone knows is out there, but seems to remain stubbornly out of reach. It is fairly safe to say that a lighting upgrade has a reasonable payback over a reasonable period. But beyond that, how far do we go? How do we gauge the recommendations from professionals in the field? How can businesses evaluate a building energy investment against other demands for scarce capital and responsibly protect their stakeholders?

As in any other industry, the successful real estate firm seeks the fine balance between quality of product and cost, all in the context of the competitive market sector. The capital budget is used to maintain and strategically refine this equilibrium throughout the building or portfolio life cycle. It is very difficult to maintain this critical balance when capital investments do not support long-term revenue growth and cost containment.

Investments in energy efficiency are no different. While these projects go a very long way toward supporting cost and revenue goals, they are not easily measured by the standards we use to evaluate more traditional investments. Knowing that a new chiller will operate more efficiently is not the same as knowing how the equipment will interact with other building systems, whether the chiller generates the highest return on energy investment dollars or, most important, how this investment compares with other capital needs as measures by traditional investment metrics.

Transparency is here to stay and it undoubtedly will lead to improvements in energy performance and increased building values. What's needed to meaningfully increase the flow of capital in this direction is the means to finally evaluate energy investments by traditional investment measures.