U.S. Environmental Protection Agency (EPA) awarded its first ENERGY STAR certification to 17 apartment buildings in the fourth quarter of 2014.
From New York to Seattle, pioneering owners and their buildings were recognized for the superior energy efficiency of their sites, thereby increasing affordability, protecting public health and tempering climate change. The number of ENERGY STAR-certified multifamily communities is now 36 and growing.
With widespread adoption EPA estimates that multifamily properties could potentially become 30 percent more efficient by 2020 through simple methods of conservation while unlocking as much as $9 billion in energy savings across the U.S.
It has long been suspected that conservation is fiscally viable inside the multifamily space, but lack of data and subsequent benchmarking has, until now, made both the proof of concept, and ensuing business model, a risky challenge. But now, owners and operators have begun to cross the threshold of cost-benefit analysis as tangible results are documented and shared, national consensus on conservation builds, and key industry leaders join the effort with their support.
It didn’t happen by accident and EPA’s ENERGY STAR program has been a strong driver in the shift. As early as 2012, the widespread lack of apartment energy use data was becoming more evident and problematic. State, local and federal policymakers, residents, utilities, lenders, even the asset owners themselves, had little data and few measurements on the energy performance of their buildings or communities. This made it impossible to quantify energy efficiency, much less chart progress as improvements were made in communities.
Still, there were significant barriers to collecting data and benchmarking the utility use of apartments across the country. Yet the walls were closing in on owners as they were required to comply with more and greater regulations to report their communities’ utility use. On the government side, the demand for benchmarking and disclosure was intended to drive market competition for energy-efficient buildings. Compiling and benchmarking energy use had already been a policy strategy in Europe, China and Australia for over a decade and a half, and showed marked success in bolstering conservation and reducing energy use across populations.
Recent shifts in the U.S. economy have also bolstered the benefits of conservation in a more tangible way. The intersection of rising utility costs and advancing technology means that projected paybacks on conservation continue to shorten and become viable in the business world. This equates to savings on the bottom line inside a community’s operations and helps fuel the business of apartments through cost recovery, cash flow, and even asset value. The business model is becoming clear as benchmarking provides a spotlight on profit-driven results that more and more apartment owners and operators are starting to endorse.
The ENERGY STAR alliance
In addition to driving the practice of benchmarking with initiatives like ENERGY STAR certifications and its National Building Competition, EPA has bolstered the commercial environment of conservation by connecting major industry leaders to the program, creating direct and fiscal benefits to benchmarking and curbing energy waste. Since the launch of the ENERGY STAR certification for existing multifamily buildings, EPA has formed alliances with many of the major industry players including the NAA (National Apartment Association), NMHC (National Multifamily Housing Council), Urban Land Institute, and lenders, Fannie Mae and Freddie Mac.
While the benefits of energy efficiency typically present in a property’s operational spreadsheet delivering better cash flow and servicing terms, green certifications now have an even more immediate line of sight to payoffs. In fact, Fannie Mae, the largest multifamily lender in the country, awards a 10 basis point reduction in interest rates for apartment communities with a green certification such as ENERGY STAR.
ENERGY STAR is also cooperating with private certification organizations such as the U.S. Green Building Council. USGBC’s LEED certification, a broad-spectrum award that specifically identifies green buildings with low environmental impact, has also leveraged the offerings of the ENERGY STAR program.
USGBC is a private organization that certifies buildings based on their impact on human health and the planet. LEED certification recognizes buildings with low to no environmental impact, and extends to the human behavior of those occupying those buildings (e.g., commuting, recycling, using paper cups versus ceramic). A LEED-certified building can also receive an ENERGY STAR certification in addition to its LEED certification. Such a linkage makes ENERGY STAR a value add for those pursuing LEED certification, and verifies that the building is both sustainable (LEED) and will operate within the highest standards of energy efficiency (ENERGY STAR).
The ENERGY STAR effect
Since 2000, EPA has accrued building data through its ENERGY STAR Portfolio Manager® tool for hundreds of thousands of buildings across sectors. And the data is fascinating. A study of 35,000 buildings revealed that those that benchmark their energy data consistently decreased their energy use by 7 percent (2.4 percent annually) and increased their ENERGY STAR score by a margin of 6 points over a 3-year period. Those properties or buildings that start the process as some of the least efficient or begin at a baseline below the industry average, are typically the sites that achieve the greatest savings. Such buildings go on to save twice as much as other buildings in their industry who began the process at above average levels of energy performance.
The ENERGY STAR Portfolio Manager is a 2-pronged platform offering both performance tracking and metrics. Once implemented by the building owner or manager, it allows for tracking changes in energy, water, greenhouse gases and their costs over time. Using the same basic data on energy use, and physical and operational characteristics of the building, Portfolio Manager also provides owners and operators with key performance analytics. These metrics include source and site energy consumption, un-normalized and normalized (for weather and operational characteristics) energy use intensity, and many more.
In addition, many types of buildings, including multifamily assets, can receive a 1-100 ENERGY STAR score. This score provides a comparison of the building’s performance against its peers from across the country, where the national median is a score of 50. A score of 75 or above is considered superior performance and makes the building eligible for ENERGY STAR certification.
The 1-100 ENERGY STAR score for multifamily properties is based on a calculation that considers gross square footage, number of units and property type (low-rise, mid-rise or high-rise) and total number of bedrooms. Property owners must include 12 full calendar months of energy data for all fuels and for the entire property (including common areas and resident units). Finally, the property’s zip code is needed to retrieve data and adjust for local climate and weather.
EPA recognizes that most managers don’t have access to whole property energy data, and getting this data will be quite a challenge. So in these cases, EPA recommends benchmarking and tracking whatever is available, which may be only common areas and submeters controlled by the property. While it doesn’t qualify for ENERGY STAR certification, making whole-property estimates is possible by using USGBC guidance and new guidelines that are set to soon be available from the U.S. Department of Housing and Urban Development (HUD).
Michael Zatz, manager of ENERGY STAR Commercial Buildings at EPA presented an update on the program at the recent NWP Energy Summit 2015 in Washington, D.C. in March. He suggests that asset managers also ask local utilities to consider providing aggregate whole property data for their properties, as some utilities are already doing in places like Chicago, Washington, D.C., and New York City, just to name a few. Quick start guides, short “Express Videos,” and live webinars offer free training on Portfolio Manager and are available at the ENERGY STAR website.
The ENERGY STAR cache’
EPA’s ENERGY STAR certification is reserved for the top 25 percent of the nation’s buildings. Such buildings use 35 percent less energy and emit 35 percent less CO2 than other buildings, on average. The ENERGY STAR certification is already found on over 4.8 billion products, 25,000 commercial buildings, and 1.5 million single-family homes.
The value proposition of ENERGY STAR has made its way to the spreadsheets of the nation’s owners and operators. Apartment REITs and private companies across the country that have already earned the ENERGY STAR designation include the nation’s largest apartment manager, Charleston, S.C., headquartered Greystar Real Estate Partners, LLC. with 393,079 units under management; AvalonBay Communities, Inc. headquartered in Arlington, Virginia, with 71,734 units; and ForestCity Residential Group, Inc. headquartered in Cleveland, Ohio, with 35,779 units under management.
Whether appliances or apartments, the ENERGY STAR brand communicates credibility and transparency to residents, and reaches over 1.5 billion people every month. “We’re here to help you reduce your energy use,” says Zatz. “We have no other agenda.”
Zatz encourages those property owners and operators interested in giving their properties the ENERGY STAR advantage to check out the library of training videos, step-by-step documents and webinars at energystar.gov/buildingshelp. In addition to benchmarking with Portfolio Manager and pursuing ENERGY STAR certification, there are other ENERGY STAR activities that can greatly benefit apartment owners and managers. One of note is the program’s National Building Competition, an annual national competition to see which buildings can eliminate the most energy use over the course of a single year. In four years the event has grown to over 5,500 buildings and 112 teams participating in 2014 and promises to be even bigger in 2015. Learn more and register at www.energystar.gov/buildingcontest.