Energy Star’s Higher Bar

By Jeffrey Steele

On Aug. 27^th, tens of thousands of U.S. office buildings experienced a change in their Energy Star scores, those crucial metrics that benchmark energy performance. The new scores resulted from the U.S. Environmental Protection Agency’s updated energy metrics based on latest marketplace data. The upshot: a higher bar for performance considerably that has produced both  lower scores and frustrated owners.

The  reset introduces serious issues to a well-established, familiar process. Energy Star scores and the Energy Star label signal high performance and have become proxies for well-managed, sustainable properties, observed David Pogue, vice president of sustainability for CBRE. The label attracts highly desirable tenants seeking to demonstrate their commitment to sustainability. Losing the designation from declining scores could affect lease agreements, he added.

“Additionally, investors are now frequently using energy performance and these type designations.as a factor in financing decisions,” he added. ”And finally, with a growing number of cities now requiring the public disclosure of Energy Star scores, a building’s energy performance is now more visible and is part of their public profile.”

Decreases across portfolios      

There are downsides and upsides for owners Inc., reported Elena Ashkinazy, director of sustainability for Time Equities. Seeing the score for one of the firm’s best-performing buildings drop overnight from 84 to 64 was a major  disappointment, as were portfolio-wide decreases of 10 to 20 points, she reported.

“This makes many buildings ineligible for Energy Star certification this year,” Ashkinazy added. “At the same time, the new score presents a great opportunity to set new energy efficiency goals. It’s especially important for New York City buildings, since the new Local Law 33 will require buildings to display their energy grades starting in 2020.”

One of the impacts of the Energy Star score change will be to exacerbate an existing trend toward newly-developed space and away from older office space, according to Alex Snyder, senior analyst at CenterSquare Investment Management. What he termed “moving the goal posts” on certification will only make it more difficult for landlords of older assets to recruit and retain tenants, he asserted.

How readily owners with diminished scores will invest in new green measures has yet to be determined, said Lois Vitt Sale, chief sustainability officer with  Wight & Company, a Darien, Ill.-based architectural, engineering and construction firm .

Owners that have earned Energy Star plaques tend to be both environmentally motivated and fiscally responsible. “This is the class of owners and class of buildings—owners of Energy Star-labelled buildings— most likely to continue to make the investment,” she said. “And I really hope they do, because it’s important for our future.”

Star-Catching Strategies

Owners of properties that have fallen below the minimum score for 75 required for Energy Star and LEED certification are best advised to evaluate energy efficiency projects that can help reduce energy and money, said Beau Garrett, programs specialist at Chicago, Ill.-based Delta Institute.

Energy auditing and building systems commissioning can be undertaken by third parties. Garrett also noted that the U.S. Green Building Council rolled out LEED version 4.1 in March 2018. Drawing on separate reference sets from those used by the U.S. Energy Information Administration’s Commercial Buildings Energy Consumption Survey, USGBC’s latest iteration computes an energy performance score out of 33 possible points. That relaxes the previous requirement to have an ENERGY STAR score of 75 or above.

For those who have experienced declining scores, applying a pragmatic, incremental approach is the best strategy, Pogue advises. CBRE urges a full review of operating practices before making capital expenditures. “Over time, some bad habits can significantly influence energy use,” he said. Such factors as hours of operation, temperature set points and after hours-time clock management should be addressed. Because lighting is energy-intensive and undergoing swift change, it calls for scrutiny, as well. 

Owners can also work with utilities which offer rebates, Pogue noted. The list of eligible upgrades “might include retro-commissioning, which is performed to bring a building back to its original design specifications,” he added.

Ashkinazy recommends an energy audit and financial analysis to identify the most impactful measures. Adjusting schedules and set points represent low-hanging fruit that come with little or no cost. LED conversion, HVAC upgrades or BMS system optimization require nominal expense. But when combined with low-cost measures, they can bring a combined payback of four to five years and savings of 20 to 30 percent, she said.