The most energy efficient properties command higher lease rates as well as higher sales values, Phil Hulse, principal of Green Street Properties, told a recent gathering of CREW (Commercial Real Estate Women) St. Louis Energy certification.
Now, stating that a building is more efficient is one thing. Proving it is quite another. The demand for proof has instigated a frenzy of activity by professional organizations to certify individuals as trained in evaluating building energy performance.
For example: the Association of Energy Engineers recently introduced a new certification in building energy and sustainability to complement its existing certifications for building energy professional, energy auditor, energy manager, measurement and verification manager, sustainable development professional, green building engineer, and high performance building professional.
And on February 2, 2011, ASHRAE (the American Society of Heating, Refrigeration and Air-conditioning Engineers) introduced a certification program for building energy assessment professional in cooperation with the Illuminating Engineering Society of North America, the National Institute of Building Sciences, SMACNA (the Sheet Metal and Air-conditioning Contractors National Association), and TABB (the Testing, Adjusting and Balancing Bureau).
In St. Louis, a new center is expected to open in July that will offer training and certification of the technicians who test mechanical systems in buildings to verify how energy efficient they are. That center will be run by Sheet Metal Workers Local 36’s apprenticeship program.
“We’ll have one of only five of these in the country,” said Dan Andrews, apprenticeship coordinator for Local 36. “Our first three-week class for certified TABB (Testing, Adjusting and Balancing Bureau) technician is scheduled in July,” he said.
Despite all the different professional certifications available, the concept of measuring the energy efficiency of a building is pretty simple, said Marc Lopata, chief operating officer of Microgrid Energy.
“In an existing building, we have utility bills to see how much energy a building is using and we benchmark it against other buildings to see how efficient it is,” he said.
The most popular benchmarking tool is the U.S. Environmental Protection Agency’s Energy Star Portfolio Manager. The online software allows comparison of the energy performance of a building on a scale of 1-100 with similar buildings nationwide. The program factors in weather variations and key physical and operating characteristics of each building. A score of 50 means a building is more energy efficient than 50 percent of all similar buildings nationwide; a score of 80 means it is more energy efficient than 80 percent of all such buildings.
“There is a cost to the owner,” said Timothy Michels, president of Energy Solutions, Inc. “The owner has to hire a third-party engineering group – and it has to be done by an engineer – to verify energy consumption and building plans and space allocation – so that you’re not including space that has been mothballed – and put that data in the EPA software and run it; and that takes staff time,” he said.
“But it is just like paying someone to do your marketing. In a tight market, it might be the edge someone needs,” he said. Michels said it used to be only institutions – government agencies, universities, and museums – that were interested in energy audits and Energy Star ratings.
“But in the last six months, we’ve started to get inquiries from the industrial sector and more recently from managers of high-rise office buildings,” he said. While the Energy Star program is the most popular program for rating the energy efficiency of existing buildings, there are other options. The U.S. Green Building Council has a LEED (Leadership in Energy and Environmental Design) program that can apply: LEED for existing building operations and maintenance (EBO&M).
“I think it is a more stringent program for certifying that a building is really performing as designed,” said Punit Jain, vice president, Cannon Design. And last year ASHRAE introduced its Building EQ (Energy Quotient) program designed both to benchmark individual buildings against a net-zero energy goal and identify discrepancies between the estimated energy use of a building’s design and the actual performance of the building in operation.
A Building EQ is a single letter grade (A+ to F, where A+ designates a net-zero energy building) for the designed energy use and a single letter grade for actual energy use when the building is in operation. The letter grade is intended to give buyers, sellers, and tenants a way to compare the energy efficiency of one building with another in much the same way as the EPA’s miles per gallon standard lets car buyers compare the fuel efficiency of one car with another.
All of the above programs require a record of energy use before they can issue ratings.
For new buildings, there is pretty much just one rating system: LEED.
“The people who review LEED submissions look at the design and say, ‘yes, you’ve done energy models and based on what you say, you are saving that much energy.’ If it is designed to save more energy than specified in ASHRAE 90.1, then the building will get certain points,” Jain said. ASHRAE 90.1 is an energy standard for buildings. Energy efficiency points account for 40 percent of possible points in LEED 3.0, the latest version of LEED.
But the actual energy use will depend on how the energy model is done, Lopata said. “I’ve seen a lot of models that were not done accurately, and I have seen energy models that worked out very accurately. The model depends on what you feed it,” he said.
Lopata cautioned against anyone relying on the energy model after a building has been put into operation.
“We do commercial grade modeling for Ameren. It is a really, really complicated model,” he said. “Unless you put metering in to measure energy use and periodically monitor the building to see how it is performing, modeling is just hearsay…. We’ve done three whole building models in the last three months. The smallest building was 80,000 square feet, the largest was 1.8 million square feet, and we can’t get them to calibrate exactly with performance. Models never reflect every nuance of operations,” he said.
The way building systems are operated is a key part of a building’s energy efficiency.
“There is an optimum way and every other way,” Lopata said. A gap could grow between operations and intent because systems weren’t commissioned properly or because someone in the chain of operations – owner, manager, tenant, employee – doesn’t know what he or she should be doing or doesn’t care, or a disgruntled employee could maliciously break or reset something.
“Most of the time, it is because people don’t know what they should be doing, but once you tell them, they do it. That is why education is a key part of the picture,” Lopata said.
Building energy ratings have the potential to encourage owners of existing buildings to make their buildings more energy efficient.
Even though utility rates in the St. Louis area are very low, renewable energy and energy efficiency still make great sense. “They can deliver returns that are better than a building’s underlying business model,” Lopata said.
“The owner gets a massive payback,” Michels said. “We had a case study where the owner put $50,000 down and financed $200,000 of a $250,000 project. We saved them $90,000 the first year and $100,000 the second year.”
“Cap rates then were eight percent, so anything you add to the bottom line you could multiply by 12 to the value of the property,” he said. The $100,000 savings became an addition to the profit, which added $1.2 million to the value of the building. “So that $200,000 he finance netted him a million dollars. Cap rates are around 10 percent now, so you multiply by 10, but the principle is the same. An investment in energy efficiency pays for itself, because not only do you get immediate savings, but you add to the net asset value of the property,” said Michels.
The owner’s benefit is not so much when the owner has a tenant in a triple net lease. In such a case, the tenant is paying the utility bills, so it is the tenant who reaps the benefit of lowering utility costs by investing in energy efficiency.
Michels, however, said PACE (Property Assessed Clean Energy), which is now legal in Missouri, could change that. PACE lets municipalities float bonds to loan money to private property owners to make their properties more energy efficient. Owners would pay back the loans over 20 years as part of their property assessment. The loan obligation stays with the property, rather than the original owner, in the event the property changes hands.
Since the tenant in a triple net lease is the one paying the property tax, PACE establishes a system where the one reaping the benefit of energy efficiency is the same one paying the cost of achieving that energy efficiency. If handled properly, the tenant will win because the savings a tenant realizes on his or her energy bills will be greater than the increase on the property tax; and the owner will win because the investment in energy efficiency will increase the value of property.
Adapted from a post at stlouiscnr.com