How Energy Benchmarking Ordinances Can Help Facility Managers Save Money
Energy benchmarking may be a requirement in your city soon, if it isn't already. And for most facility managers, energy benchmarking ordinances should be good news, because they can help save money.
Buildings account for about 40 percent of energy use in the United States. In dense urban areas, building energy consumption can be a much higher percentage — as much as 75 percent. With the vast majority of energy for heating, cooling, and electricity coming from fossil fuels, part of the good news is that reducing energy consumption is the least expensive way to reduce greenhouse gas emissions.
Because of the significant impact of building energy use on air quality and climate change, 13 jurisdictions (to date) have decided to implement energy benchmarking requirements as a means to encourage reduced energy consumption. Even if your building is in a city that has not yet created an energy benchmarking ordinance, you may wish to prepare as these ordinances are slowly being implemented throughout the United States. They are already ubiquitous in Europe.
These ordinances specifically, but benchmarking in general, can help facility managers save money because they force them to know how much energy is being used. Once facility managers know that, identifying savings opportunities becomes easier. Reducing operating costs allows buildings to become more valuable to their owners while potentially providing a good marketing opportunity to attract tenants. For instance, a 100,000-square-foot building that reduces its energy costs by 10 percent, say from $2.00 per square foot to $1.80 per square foot, increases its net operating income by $20,000 and building value at an 8 percent cap rate by $250,000.
Other benefits of energy benchmarking include creating local jobs (supporting the local energy efficiency industry) and protecting health (by reducing harmful pollutants).
Of course, the scary part of energy benchmarking can be the requirement of disclosure, which is common among most of the ordinances. Disclosure means that your energy consumption, perhaps the building's Energy Utilization Index (EUI), will be available on the local jurisdiction's website, and comparisons will be made.
"Public disclosure of energy use provides an important metric that has not been readily available to real estate professionals and will assist in helping clients optimize the value of their real estate holdings," says Gail Sturm, executive vice president of ProTen Realty Group, a Chicago-based real estate brokerage company.
What is Energy Benchmarking?
Energy benchmarking, according to the Institute for Market Transformation, is the "practice of measuring how much energy a building consumes and comparing that against other buildings." It can also include comparing against previous years' energy consumption for the same building. Facility managers who know how much energy their building uses and who benchmark find ways to reduce their energy consumption on a year-over-year basis.
For Rachel Scheu, research director, Elevate Energy, a building's best benchmark is its own energy use over time. That's because energy use fluctuates year to year due to changes in occupancy, weather, equipment, and other factors. Therefore, benchmarking a facility against itself can help facility managers assess whether more energy use is a result of, say, staff increases, or other factors.
But that's not to say facility managers should not compare their buildings with other buildings as well. "Benchmarking also helps place building performance in context with other similar buildings," she says. "As more municipalities enact benchmarking ordinances, the pool of similar and local buildings increases, which helps building owners place their own buildings into context. Benchmarking data also provides a basis for a plan for action, both at an individual building level, and at an energy efficiency program level as well."