This blog post also appears on The Huffington Post.
Each Spring, our environment transforms as bare tree branches sprout new buds that blossom into a refreshing palette of color to replace the muted tones of winter. While this year’s peak bloom has come and gone in many cities, a different blossoming occurred this past week that befits business owners, building operators, and city leaders across the country.
Transformation is underway in our built environment—and last week there were three developments of note.
First, last Monday, Atlanta became the first major Southeast city to adopt an energy efficiency policy that focuses on tackling building energy use and waste through measures such as benchmarking, transparency, and energy audits.
Second, the unanimous City Council approval of Atlanta’s Commercial Buildings Energy Efficiency Ordinance was followed by Portland, Oregon’s City Council unanimously approving an Energy Performance Reporting Policy for buildings over 20,000 square feet.
This is not a situation where two events are just a coincidence. What we are seeing is energy efficiency blooming across the country. The passage of Atlanta and Portland’s policies make them the 12th and 13th city, respectively, to adopt benchmarking as a way to drive energy efficiency investment and improvements, joining the ranks of leading U.S. cities such as Austin, Boston, Chicago, New York, Philadelphia, and Washington, D.C., in passing this type of legislation.
If you still need convincing that there is a market shift underway, look to the U.S. Congress, which on Tuesday passed the Energy Efficiency Improvement Act of 2015, a targeted energy efficiency bill that, among other provisions, addresses energy use benchmarking in federal leased buildings. It’s the first energy bill passed by Congress since 2007, and makes three notable building energy policies passed in three days. (In full disclosure, my organization, the Institute for Market Transformation, advised city leaders in both Atlanta and Portland on the development of their policies, and provided input to Congressional staff as they drafted the Energy Efficiency Improvement Act of 2015.)
Savvy building owners and city leaders are already aware of the benefits that these types of practical policies offer—energy savings and financial savings (such as 2.4 percent energy use reductions annually or 7 percent over three years), but also job creation and market competitiveness. Atlanta’s policy alone is expected to generate more than 1,000 local jobs, and local businesses in other markets with existing benchmarking and transparency laws have reported significant new demand for energy efficiency services, and are hiring new employees after the adoption of a benchmarking ordinance in response to demand driven by increased awareness of building energy efficiency opportunities. As for market competitiveness, studies have shown that nationally, energy efficient properties have occupancy levels up to 10 percent higher, rental premiums over 10 percent higher, and sale prices up to 25 percent higher than less-efficient properties.
Consumers benefit from efficient buildings, too. In 2009, CBRE and the University of San Diego surveyed managers of companies who had moved from standard buildings into more-efficient buildings (as qualified by an ENERGY STAR label or LEED certification). Of the respondents, 42.5 percent reported that employees were more productive after the move, and 45 percent agreed that employees were taking fewer sick days. In addition, 15 to 25 percent of respondents perceived higher employee morale, less turnover, and greater ease of recruitment in the energy efficient buildings.
The Federal government is aware of the opportunity here. In an Executive Order issued on March 19 titled Planning for Federal Sustainability in the Next Decade, President Obama specifically identified building energy efficiency as a main step in meeting sustainability and greenhouse gas reduction targets, and directed Federal agencies to conform, “when feasible, to city energy performance benchmarking and reporting requirements.”
Across the country, improving building energy use should be top of mind for all building owners and city leaders. After its citizens, buildings are typically a city’s most valuable assets, and property costs have a direct impact on building owners’ bottom lines. In many cases, however, it’s shocking how little is known about these structures.
The building sector is the single largest user of energy in the United States, accounting for roughly 40 percent of total energy consumption. Each year, we spend $450 billion on energy for our buildings, with a good chunk of that money being wasted on inefficient systems and structures—the poorest performing buildings consume three to seven times the energy of the highest performing buildings for the exact same use. The widespread lack of knowledge about how our buildings are performing translates to a massive missed opportunity.
Building energy use policies begin to address this critical knowledge gap. Atlanta’s new ordinance, for example, combines three powerful tools that together can provide unparalleled insight into these valuable assets. Benchmarking—the process of measuring a building’s energy use over time—establishes a baseline as to how a building is currently performing and allows for comparison to past performance as well as peers. In conjunction with this information, energy audits (which examine potential opportunities for improvement through new or upgraded building systems) empower owners to focus on the most cost-effective options for their building and their business. In a national survey by Building Operating Management magazine, more than 70 percent of facility managers surveyed used benchmarking information guide energy efficiency upgrade plans, and 67 percent used it to help justify energy efficiency improvements. Providing building performance to the public through transparency policies better informs leasing and purchasing decisions; it enables the market to function properly and reward efficient buildings with higher occupancy and faster lease-up, creating a virtuous cycle of competition to operate buildings efficiently.
Last week’s developments show that the transformation to a future where every building is an efficient building is underway, as a growing number of public and private sector leaders step forward to make their buildings more efficient and healthier and, by doing so, make their cities and businesses more prosperous and resilient. Will your city or business be next?