Building upgrades will soon become more attractive as investments for NYC property owners, since the city government will start assigning building energy grades in 2020. Assume a company is looking for commercial space to rent, and two buildings have similar monthly rates but different energy grades. Since energy expenses represent a large portion of business costs in NYC, the client company is likely to rent commercial space in the building with the highest energy grade.
This approach has already been deployed in the European Union, but the proposed grading system for NYC has an advantage. While the EU system is based on theoretical building performance and design conditions, the NYC grading system will use actual measurements of energy consumption for each building. In case you’re wondering where the data comes from, remember that all NYC buildings above certain size thresholds are being benchmarked according to Local Law 84 of the Greener, Greater Buildings Plan.
How Will NYC Building Energy Grades Work?
Energy grades in NYC buildings will build upon a tool that is already used according to the Benchmarking Law (LL84), the ENERGY STAR Portfolio Manager. This tool calculates an ENERGY STAR score for the building, based on how it performs compared with similar buildings nationwide. The score can take values from 1-100 and is based on percentiles; for example, a building with a score of 80 outperforms 80% of similar buildings across the USA.
Improve your building performance and ENERGY STAR score
Building energy grades in NYC will use letters from A to F, just like school grades, since it is a scale that is already well-known and understood by the general public. This grading system provides an advantage over concepts such as the Energy Use Intensity (EUI) or Emissions Intensity, which use specialized measurement units and are little known outside of technical professional fields. Basically, the building grade is assigned based on the ENERGY STAR score, as indicated below:
ENERGY STAR SCORE
90 or higher 50 or higher, below 90 20 or higher, below 50 Below 20 No information submitted
A B C D F
Note that a building can only get a failing grade by not submitting the required benchmarking data, but as a property owner it is in your best interest to get an A grade, or at least B which indicates you are above median performance. Keep in mind that not all buildings are subject to the Benchmarking Law, and some building categories are not covered by the ENERGY STAR program; there is a special “N” grade for these properties.
The NYC Administrative Code will require all buildings to display their energy grade at public entrances, except for properties not covered by the rule and having the special “N” grade. Once a building is assigned a grade, it must be posted within 30 days along with the energy efficiency score. This provides fair competition between buildings with the same grade but different energy performance; for example, a building with a “B” grade and a score of 85 outperforms another with the same “B” grade but a score of 50.
Consider that NYC has some of the highest electricity prices in the USA, where lighting and air conditioning are among the top electrical loads. In addition, even though space heating systems normally depend on natural gas or heating oil, they have the highest energy consumption among all building systems in NYC. For these reasons, a building with an energy grade of “A” will be highly attractive for tenants, where some clients may even be willing to pay a premium in exchange for reduced energy expenses.
The fact that energy grades must be publicly disclosed also means that buildings with poor energy performance may lose a lot of potential clients. Even if a building is fully owned and used by a single company and does not have space for rent, a high energy grade can boost public perception and corporate image. Also, don’t forget that energy efficiency is a great investment by itself, even in the absence of energy grades - they simply provide additional benefits for building upgrades that are already cost-effective.
There is a wide range of building upgrades you can consider to improve energy performance, but the cost of attempting them all at once can be prohibitive. Therefore, the best approach is to prioritize those that can yield the highest energy savings per dollar spent upfront, which are also the ones that can boost your ENERGY STAR score more easily.
An energy audit provides the best way to get a snapshot of your energy consumption, identifying the best energy-saving opportunities and the building upgrades that can yield the highest return on investment.
If your building is covered by Local Law 26 of 2004, a full sprinkler system installation is mandatory before July 1, 2019. Consider that this type of installation normally involves disassembling portions of the ceiling, so you can use this opportunity to upgrade your lighting fixtures to LED. That way you avoid having to dismount your ceiling twice.