Written by: Laura Turner & Carly Burke
As we enter the second quarter of 2021, commercial real estate owners and property managers are beginning to prepare to submit their annual energy usage data in compliance with benchmarking ordinances. These ordinances, whether voluntary or mandatory, are typically implemented by state or local agencies to improve the energy performance of commercial buildings.
Benchmarking offers a relative understanding of energy consumption, making it easier to identify opportunities for energy reductions.
High-performance buildings optimize for energy savings, tenant productivity, cost-benefit, and operations.
These optimizations lower utility costs for tenants, increase the building’s asset value, and enhance operational reliability.
Why does it matter? Without understanding a building’s energy performance, decision-makers lack the financial business case needed to decide on energy efficiency investments. This knowledge gap leads to missed opportunities that increase building asset values, decrease operational costs, and undervalue appraisals.
What’s the big picture? Ideally, an understanding of whole building baselines will cultivate an appreciation for grid-interactive efficient buildings (GEBs), allowing the market to see buildings as systems that can contribute to the grid versus isolated energy consumers (Utility Dive, 2020).
Fireside Chat with the Dave Hodgins, executive director for the Los Angeles Better Buildings Challenge (LABBC)
Requirements for benchmarking ordinances range depending on the state or local municipality. Like New York’s ordinance, the Los Angeles Existing Buildings Energy and Water Efficiency (EBEWE) Program requires annual benchmarking and performance requirements for water and energy. We spoke to Dave Hodgins of the Los Angeles Better Buildings Challenge to learn more about benchmarking, COVID’s impact on building performance, and the path forward. Here’s what he had to say:
Q: Los Angeles’ ordinances have stronger requirements than most. What’s working and what’s not?
A: Los Angeles does have a comprehensive set of policies aimed at moving toward its longer-term sustainability policies and buildings are a big component of that. I think what’s working really well is where we have been able to simplify and internalize the complexity and create simple public-facing documents like the benchmarking guide. What I think is challenging is getting everybody pointing toward those resources once they do exist. That’s the work now, making sure everyone is aware of the consistent process.
Q: What role does the LABBC play in helping Los Angeles meet its energy and carbon reduction goals?
A: LABBC has one foot in commercial real estate, one foot in policy, and is funded by the utilities. We work at that intersection, bridging the different groups. So we work with the city to develop and implement policy to help move the market; we work with the market to help shape and develop that policy so that it’s a level playing field and market leaders are getting appropriate recognition; and we work with the utilities to try to bring their incentive programs and processes and timing in sync with real estate and policy drivers.
Q: What do you think will become the standard or norm as cities continue to implement and revise existing ordinances?
A: Benchmarking and disclosure is a really important starting point, but it is not sufficient in and of itself to really move things as quickly as we need to. Time is what we do not have in ample supply. What I think is going to be necessary—and hopefully the norm—is a building performance standard like in New York, Washington, D.C., and St. Louis. It’s effectively a building-level budget for greenhouse gas emissions and a schedule by which to get below that. And if you don’t get there, there are significant monetary and other consequences.
I think the other trend we’re going to see is the adoption of science-based targets. So, registered emissions targets with credible third-party oversight so we don’t have greenwashing happening. There’s even more incentive for that now that there’s a market, economic, and moral imperative.
Q: What sustaining barriers to compliance do you see most often? Any new barriers?
A: The point of all this is not benchmarking. It’s action. More and more, policy is going to require action. Right now, we’re still in that stage where policy is formulating and there’s an opportunity to really lead in a voluntary way, to lead before it becomes required. There are lots of pressures still hanging over from COVID, which is far from over and still very real in most peoples’ lives, so there’s a tendency to want to just get back to basics and think of sustainability as somehow extra or more complicated. But it is that sort of mindset—that sustainability is somehow a “nice to have” or a separate thing than whatever it is I normally do—that is the barrier. I think that’s on us as an industry to help everybody understand how we all have a role to play, and that we need to pay attention to this and use sustainability—like equity—as a lens that we apply to everything we do.
Q: How is COVID impacting building performance overall, with most people working from home?
A: Not to state the obvious, but the data are all out of whack now. It was interesting to see how far energy did or didn’t dip for certain buildings and understand the reasons for that. There was already a trend toward automation of controls and optimization, more floor-by-floor or zone-by-zone, “custom” control of all aspects of the work experience in a building. Then COVID brought competition between meeting sustainability targets and running your HVAC harder to clean the air. So how do you interpret those rules in a sensible way, how do you do some additional indoor environmental quality enhancements but not cannibalize your sustainability targets in the process? We need to have flexibility—the ability for remote control and automation in our buildings—so this sort of herky-jerky occupancy isn’t throwing things too far out of whack from an operational perspective.
Now is the time to pivot hard and step strongly in the direction of decarbonization. The news coming out of the White House has been super encouraging: talks of a national green bank, calls on the private sector for ideas on how to partner and find a path forward. That is really the purpose of LABBC, to find a platform for these types of discussions to happen. I’m excited and inspired coming off our recent Innovation Awards and launching our Low Carbon Leaders program, a joint initiative with U.S. Department of Energy. Heading into the Better Buildings Summit next week, what I really look forward to seeing are discussions on where the rubber meets the road and how do we do this now. It’s not a future conversation anymore. It’s time to start making those concrete plans that are paying dividends ten years from now.
COVID is certainly not in the rearview mirror, but the story is changing. As more people in the United States get vaccinated and return-to-work plans are implemented, we can anticipate a lot more data that will offer a better picture of the impact COVID has had on benchmarking and energy usage overall.
As we move forward, we can expect a continued focus on health and safety in the world of real estate and that energy efficiency and cost savings will still play a role in helping the operational costs associated with wellness. Across the country, we are seeing utility and commercial real estate partners expressing optimism in developing return-to-work plans.
Thank you to Dave Hodgins and the LABBC for sharing their perspective on benchmarking. For more information about the LABBC, you can visit their website here. For more information about benchmarking ordinances in other regions, please contact email@example.com.