By now most of you have heard the expression “what you measure, you manage.” If we take away the measuring tool, how do we assess performance? This is the exact situation we are facing if the Energy Star Portfolio Manager tool is scrapped.
To put it in perspective, imagine if you were going to the car dealership to buy a new truck (for hauling) and there is no information about horsepower, safety, fuel efficiency, towing capacity or how it rates against other trucks; how do you make an informed decision?
Energy Star Portfolio Manager from the Environmental Protection Agency is the most widely used tool in the property management industry to assess energy performance of a wide variety of building types. The CliffsNotes version for those of you who are not familiar with the tool and how it works, Portfolio Manager needs a few details to get started – building type, occupied/vacant square footage, number of occupants and computers, operating hours, energy use for at least one full year and the building location. Now, the magic happens. Portfolio Manager takes the building details and weather-normalizes the data to compare similar building types across the country.
This results in a relative score from 1 to 100; a score of 50 would be right in the middle, or the performance of an average building. The average performance information comes from the Commercial Building Energy Consumption Survey data, which is the basis for the Energy Star energy performance scale (1-100 rating).
To further dial it down, let’s get technical for a moment on site energy use intensity, or EUI. Portfolio Manager first breaks EUI down by dividing 12 months of energy use by the building gross square footage. The EPA then is able to obtain the source EUI based on the power plant, which is determined by the building location. This number is the amount of energy “burned” at the power plant per square foot.
For example, Building A uses 10 million kBTU of energy per year, and is 100,000 square feet. This is a site EUI of 100 kBTU per sf. Typically, we generate almost three times as much power at the power plant to deliver that electricity to the building (that much electricity is lost over the power-grid distribution system). So, Xcel Energy is likely generating about 28 million kBTU at the power plant to deliver that electricity to the building. This translates to a source EUI of 280 kBTU per sf. So, I now know my source EUI is 280 kBTU per sf … but I don’t know if that is good, bad or average performance.
The last CBECS survey was completed in 2012 and included over 16 billion sf of office property data. The EPA is in the process of updating the Portfolio Manager tool to revise “average” building source EUI and set a new benchmark for relative performance, showing how today’s buildings are performing against peer buildings. However, the new administration has the entire Energy Star program on the chopping block in the 2018 proposed budget – along with more than 50 other programs, which would cut the EPA’s overall funding by 31 percent.
Why This Matters
In the information age, this is a definite step backward. Tenants will pay a premium in buildings with strong, measurable performance. A July 2014 study of the L.A. real estate market released by CoStar showed that average rent for 1,975 nongreen buildings was $2.16 per sf, while average rent for 296 Energy Star certified buildings was $2.69 per sf.
Owners profit off of strong performance in another way. The same report found the average sales price of nongreen buildings was $244 per sf, while Energy Star-certified buildings sold for $337 per sf. These are not whimsical expenditures, but investments by firms that understand demand for this premium office stock.
Additionally, this information is being used for mandatory benchmarking. With the same idea as providing consumers with a nutrition label, cities (and now entire states) are adopting mandatory energy disclosure. Cities/states that have implemented the mandatory energy disclosure have seen savings of 2 to 3 percent each year, according to the Energize Denver website, again giving credence to what we measure, we manage.
Energy Star’s Portfolio Manager tool is easy to understand and provides building occupants with information that many have never had. Subsequently, while larger, Class A buildings often have used Energy Star to understand performance, smaller buildings and many Class B buildings have never benchmarked. These buildings are “flying blind” when it comes to performance. Once the owners and managers see the energy performance scores of these buildings, perhaps decisions will be made to address energy efficiency, which can enhance profitability, save utility costs, reduce emissions and reduce demand on our power plants.
Next, Energy Star is a mandatory component of LEED certification. Any building applying for LEED v4 has to have an energy performance score of 75 or higher, a prerequisite to becoming LEED certified. Without Portfolio Manager, how are buildings going to apply for LEED?
There also are several easy-to-use features available for free in the program. Buildings can benchmark against past performance – again, because the tool factors occupancy into the score instead of just looking at usage, a building management team can analyze how they achieved a score of 84 in the past when they are now at a 78, or tout the fact that they had a score of 65 when they took over management eight years ago and now have improved performance to 86 (among the top 14 percent of similar building types in the country).
Portfolio Manager also provides carbon emissions information. For owners looking at calculating the carbon footprint of their portfolio, this is a free tool that can be used to gather that information.
Finally, occupants in buildings are using more and more energy as they provide staff with multiple monitors, set up more digital displays or TVs in conference and break rooms, and install multiple kitchens and break areas in their suites. Without a different aspect of Energy Star, which rates computers, monitors, printers, dishwashers, refrigerators, etc., tenants cannot make informed decisions about their purchases, which have a significant impact on the building plug load/energy use.
But what about that other important resource – water? Locally, there is a metrowide recognition program called Watts to Water. Watts to Water provides awards and PR opportunities for building management teams who are operating buildings efficiently and those who are achieving significant improvements. Because the Portfolio Manager tool figures occupancy, operating hours and weather normalization into the score, it’s the best available way to compare performance of similar building types. It’s also a tool that can be used to easily share this data for analysis.
For now, these cuts are only proposed. Until then, all eyes will be on Washington, D.C.