In response to growing concerns about America’s energy consumption, an increasing number of Benchmarking and Energy Disclosure laws are being implemented in states across the country. Benchmarking is the process of measuring, comparing, and tracking an existing property’s energy and water consumption.  It is a critical step to understanding and reducing a building’s energy consumption and carbon footprint.  Energy efficient buildings will yield better returns and have increased value because of reduced operational costs. Before there was benchmarking there were state energy codes that set design standards for energy performance in new construction and alterations.  As they were created state by state, the new commercial real estate came on line with increased efficiencies.

Federal Regulations

The US government owns nearly 500,000 buildings covering 3.1 billion square feet, which account for 0.4 percent of the nation’s energy usage and emit about 2 percent of all U.S. building-related greenhouse gases.  It also leases through the General Services Administration 57,000 buildings comprising an additional 374 million square feet.  While the image of the federal building may be the Pentagon, the average size of a federal office building is 6,700 square feet.

Despite what the public’s perception might be, the Federal Government has very few regulations affecting the commercial real estate energy profile.  Air and water quality are typically enforced at the state and local level, although the Clean Air Act and the Clean Water Act set federal standards for contamination.  Permitting of carbon emissions is directed at power plants and large industrial operations.

State and Local Energy Codes

Forty-four states have building energy codes that mandate specific building and systems design for new construction. For example, LEED (Leadership in Energy and Environmental Design) is a performance standard developed by the US Green Building Council that looks at many of the building systems for energy conservation, including HVAC systems, water systems, exterior facades and roofing.  ASHRAE, the American Society of Heating Refrigeration and Air Conditioning Engineers has its own criteria for HVAC design.  The ENERGY STAR Management Program is a federal one where the basis is using ENERGY STAR materials and appliances in the building design.

As a measure of the national interest in energy, the Center for the New Energy Economy (CNEE) and the Advanced Energy Economy (AEE) have developed the Advanced Energy Legislation (AEL) tracker to map the volume of energy related legislation per year for a number of categories, including Emissions, and Enacted Financing and Financial Incentives.  All told, there were 3,236 energy-related bills introduced across the 50 states and the District of Columbia in 2013.

The International Code Council (ICC), which has created the International Building Code (IBC) adopted by a number of states, has also created the International Energy Conservation Code (ECC) that states can select as their state energy code. For example, this is the case for Virginia.

Benchmarking and Energy Disclosure Laws

Over time, state energy codes have been amended or separate legislation introduced to benchmark energy performance in existing buildings. Benchmarking measures energy consumption matched against the previously mentioned design standards or as established by legislation. 

Michigan became one of the first states to require energy performance assessment and benchmarking by Executive Order of the Governor (rather than through the Legislature) in 2005 for state buildings. The Ohio governor followed later that year. Benchmarking laws for commercial properties have since been adopted in one form or another in several states and is under consideration in many other states and cities.  The total square footage of commercial real estate currently covered by building energy rating and disclosure requirements is approximately 5.8 billion square feet.

The real estate subject to benchmarking laws varies by jurisdiction.  While some require only certain public buildings to be benchmarked, others also include all other “commercial real estate” such as office buildings and retail facilities. The disclosure requirements vary as well (for a quick overview of some of the different requirements, see the US Commercial Building Policy Comparison Matrix via the link on this Building Rating page.)

Incentive Programs

To help owners and buyers meet the energy benchmarking and disclosure requirements, there are a number of local, state and federal programs offering incentives for energy improvements. A very comprehensive listing of the various incentives and policies can be found on the DSIRE Database of State Incentives for Renewables and Efficiency, which maps all relevant financial incentives, regulations policies and initiatives by state, and provides links to the respective program websites, state energy codes if in place and other statutory information. You’ll see, by the way, that the US Territories has moved and is now next to Hawaii.

One financing program that has a very broad reach in the country is the Property Assessed Clean Energy program (known as PACE) which provides financing for energy efficiency upgrades or renewable energy installations. Examples of upgrades range from adding more attic insulation, to HVAC upgrades or installing rooftop solar panels.

In areas with PACE legislation in place, municipal governments offer a specific bond to investors, and then loan the money to consumers and businesses for both commercial and residential projects to put towards energy retro-commissioning studies.  The loans are repaid over an extended period of 20 to 30 years.  The loans can be issued by municipal financial districts and financial institutions.  One of the unusual aspects of the program is that the loan is tied to the property and not the individual.

In summary, with more and more energy benchmarking and disclosure regulations appearing across the country, there is increasing activity in the reduction of building energy consumption being supported by a very active financial market. Services like Energy Audits, Energy Modeling and Benchmarking measure the energy consumption of a building, while Commissioning and Retro-Commissioning can help to improve its overall energy efficiency.  To ensure compliance at minimal cost, it is important to be aware of exactly what regulations you must comply with and what incentive programs may be available to offset the cost of meeting these requirements. The DSIRE and other similar databases or a qualified energy consultant can help point you to applicable regulations and any financial incentives that you may be eligible for.