On October 9th, 2020, our Executive Director, Richard Yancey, joined Janet Joseph (Senior Vice President for Strategy and Market Development, NYSERDA) alongside Michael Reed (Team Lead, Advanced Efficiency Solutions, NYSERDA) and Jared Rodriguez (Principal, Emergent Urban Concepts), for a conversation on the Empire Building Challenge, an ambitious State initiative announced by Governor Cuomo in his 2020 State of the State address, designed to decarbonize New York’s large existing buildings.
Introducing the Empire Building Challenge
Richard Yancey: Let’s talk about Empire Building Challenge. What is this new initiative and what are the highlights?
Janet Joseph: The Empire Building Challenge was launched to help New York State reach its ambitious climate goals. It is tackling one of the most challenging parts of our climate agenda: decarbonizing the many tall buildings that make up our skyline in New York City and other urban environments across the state. The program will be providing $50 million in public funding through NYSERDA, in partnership with the real estate industry. We view this as a significant public-private partnership.
We are looking for the real estate industry to come to the table with a few things. First, a commitment to carbon neutrality. We’re looking for industry partners to commit to making one or more [of their] buildings carbon neutral. We are looking for them to come to the table with their technical expertise. Most importantly, we’re looking for them to come forward with buildings that they are ready to invest in, to retrofit, and to improve upon. Our goal here is to show what is possible in terms of low-carbon retrofits.
“New York City has one of the largest retrofit markets in the country, perhaps globally.
New York City has one of the largest retrofit markets in the country, perhaps globally. One of the goals of this public-private partnership is to draw the attention of the world’s most innovative technology developers, manufacturers, and solution providers. By bringing the real estate industry to the table and identifying buildings that they are committed to making low carbon over time, we can draw in the world’s leading technology providers and vendors.
A[nother] really important feature of this program is replicability. We are not looking for snowflake projects here—we want to drive replicable solutions applied across a portfolio of buildings. That’s a really significant objective for us in this initiative.
Another element that makes the Empire Building Challenge particularly exciting is our $10-million technology prize. We know were going to encounter solution gaps as we work with the industry on commercial and large multifamily buildings. So, we will mobilize our resources to innovate and develop the solutions required here in New York State.
RCY: It sounds like you’re taking a little bit from the playbook of the DOE’s (Department of Energy) $10-million LED lighting prize from ten years ago, which really catalyzed the lighting industry in the way that we hadn’t seen before. We [BE-Ex] did a lot work around energy efficient lighting early on, and we witnessed first-hand the incredible market uptick spurred by that prize— so this is really exciting to hear.
Leveraging the Private Sector
RCY: With the emphasis on public-private partnership, I imagine that there’s an x multiplier on the 50-million-dollar public fund as the private sector brings money to the table.
JJ: Absolutely, but the most important thing that they are bringing to the table is their commitment and their buildings. In today’s market of uncertainty around the real estate community, given COVID and the required economic recovery, that’s a pretty significant contribution. We’ve had some really positive feedback from the partners that we’ve engaged to date. Both Jared And Michael have been meeting with potential partners and may have something to add in terms of feedback we’ve received from the market.
JR: Thanks, Janet. I would say that this is the first time that government has gone out to the market to see how much private participants are willing to commit to. We’ve seen a lot of policy discussion, legislation, and now, rulemaking happen at the City level for Local Law 97, but we haven’t really challenged the private sector to see how far they are willing to go and how fast. I think the [Challenge] applications that we will be receiving will be fascinating. We’ll have to pare down who we select— this is very competitive— but just seeing how far the market is willing to push on this will be really illuminating.
RCY: Janet, you brought up the fact that the Empire Building Challenge will continue to burnish New York’s role as a global leader. Given that many of the leading market actors in New York have already made deep carbon commitments, it seems like this is pouring fuel on the fire— in a good way— to forward these sorts of initiatives.
RCY: I wanted to ask you about the target participants because it looks like an interesting cross-section: both commercial and multifamily, with a significant emphasis on affordable housing. What interested me the most is the prioritizing of large tenants. Could you talk a little about that target participant?
JJ: Sure. We are targeting owners of commercial buildings of at least 15 stories, and multifamily buildings of at least 8 stories. We hope to engage some of the largest portfolio owners in New York to leverage the scale of their holdings through the replication of low-carbon retrofit projects.
It is very important to us that when we’re targeting multifamily, we’re not just focusing on high-rent apartment buildings. We need to show that this can be done for affordable housing as well. That is a critical target market for us— it’s central to our climate agenda, our climate justice agenda, everything that State climate legislation is steering towards. We want to bring a wide spectrum of multifamily buildings into this to ultimately serve all New Yorkers. The reality is that we have low- and moderate-income New Yorkers that need healthful, sustainable, and low-carbon dwellings, perhaps more, than other segments of our population.
““The reality is that we have low- and moderate-income New Yorkers that need healthful, sustainable, and low-carbon dwellings, perhaps more, than other segments of our population.”
JJ: We also need to bring tenants into this mix. As you know, Richard, this has been a controversial element of the Local Law 97 discussion. Building owners have said, “where are the tenants? They need to come to the table.” And many of these tenants are companies that have made their own corporate commitments to sustainability. So, to not have them at the table would be ignoring a potential lever that can really accelerate progress.
RCY: We are about to come out with a NYSERDA-supported 18-building [global] survey examining high-performance retrofits of large commercial buildings called Hi-Rise / Low-Carbon. One of the key opportunities identified in this report was tenant spaces. Some of these projects had 50% energy reductions— really dramatic— and no small portion of that came from major tenant turnover and renovation opportunities. So, bringing tenants to the table seems like a really strategic opportunity, and one that’s been the most elusive in so many ways.
On the affordable housing side, we’ve seen some of the leading developers doing amazing things with smaller affordable projects. It’s interesting, because lowering energy bills increases the amount of capital available for larger affordable projects. Bringing this to larger scale projects and taller buildings will be critical.
JJ: We’re seeing tremendous progress in low-carbon affordable housing through our Buildings of Excellence competition, which is another initiative we’re collaborating with BE-Ex on. There, we’re focusing on new construction multifamily. The majority—three quarters—of the low-carbon projects we’re supporting through Buildings of Excellence are in affordable housing. There really are some progressive developers showing that for new construction, these projects can come in at an equivalent capital cost to conventional technology, which is really good news. That’s on the new construction front, so we have to push on the retrofit side, which is what the Empire Building Challenge is about—and we know that’s harder. Many of these buildings we’re dealing with are occupied, so timing is essential. There’s no better time to go low carbon than when you’re constructing a building, but we have large existing building stock in New York State, and we have to address that.
RCY: And certainly, with this pandemic, it exacerbates the need to look at how we can improve our existing buildings, because these improvements not only reduce carbon, but provide numerous benefits in terms of occupant health, resiliency, and so on.
Economic Opportunities & Addressing Climate Injustice
RCY: You eluded to this but let’s talk about it for a couple of minutes— the CLCPA (Climate Leadership and Community Protection Act) that the governor announced last year reflects a bold commitment to climate action in a way that is sensitive to underserved communities. I’m wondering how you see the Empire Building Challenge fit into that overall framework.
JJ: In terms of the Empire Building Challenge, one of our key objectives is to show that you can retrofit multifamily buildings in way that’s affordable for both property owners and residents. If we can do that, we are advancing climate justice. If we can show that it can be done economically, then we are moving the ball forward in terms of delivering benefits to disadvantaged communities, which is a very significant element of the State’s climate legislation.
As we invest in these programs, we’re always thinking about the economic opportunities associated with clean energy. Urban Green [Council] estimates that there is a 20-billion-dollar retrofit market in New York City alone by 2030 if all buildings choose efficiency to meet their carbon goals. That’s a lot of construction jobs. So, the homerun to us is to find effective retrofit solutions while finding local opportunities for employment, and in particular, bringing in priority populations from disadvantaged communities.
JR: Another note on jobs—it’s critically important to note that the work created for retrofits—repairs, capital cycles— on existing buildings could become a much larger proportion of construction work because it might be a while before we see new construction pick up again, so there’s a heightened importance on retrofitting our buildings and creating jobs in that space in the near term.
RCY: When you read the headline of the challenge, you don’t necessarily see it as a workforce development initiative, but when you think of the construction jobs, that— let’s be clear, are local and cannot be outsourced—that’s really exciting.
Identifying Scalable Solutions
RCY: In terms of the scalability factor, it’s great to have some shiny projects on the leading edge, but it seems like your team has tried to design this initiative to be sure it’s more of a market catalyst with transferrable lessons.
JJ: I’ll touch on that and Jared and Michael can build on it. One of the criteria for project evaluation will be the replicability of the project. So, if a property owner comes forward with a building unlike any other in its portfolio, we’re going to be less interested. But if they can bring forward a building alongside 25 buildings of its type, and if we prove out the mechanical system and retrofit approach, we can easily translate this into the capital plans of our other buildings. That’s the model we’re driving here— we don’t want shiny one-off projects. Jared, is there anything you’d want to add from your lens and experience in the real estate industry?
Jared Rodriguez: A note on jobs— it’s important to note that we are in the middle of a significant economic transition. On the commercial side, building owners have to begin thinking about repositioning their assets as vacancy increases. The same thing is true on the residential side, even in affordable housing. We’re seeing vacancy increases across the board. Yes, it’s hitting the higher end of residential rentals particularly bad, but it’s hitting affordable as well. So, the idea that buildings have to be repositioned to be more competitive in a highly competitive market is really important. I believe the applicants have this in mind. This is especially important on the commercial side as letter grades are being released and building performance transparency is coming to the fore. I’ve seen label grades on very high-end commercial buildings, and a class A commercial building might have a C. That doesn’t look great on the lobby when you have a AAA tenant passing that sign everyday questioning, “well why am I in a C-performing building?”
In terms of replicability— I absolutely agree with Janet. We have to demonstrate how this is feasible over and over again. We’re in this multi-decade battle against climate change and we have to make sure the solutions that we are creating here are directly applicable to the most common building typologies, so we make a bigger impact.
RCY: The never let a crisis go to waste adage. There’s some upside to all of this.
Overcoming Technology Barriers
RCY: In the last couple of minutes— what are the solution providers’ role in this, and how might technology play a role in this?
JR: We’ve already begun to identify what barriers exist for building decarbonization in existing large buildings. We’ve engaged with Rocky Mountain Institute (RMI) to do an international global scan of existing technologies in the thermal storage and building energy distribution space. We’ve identified those areas as being key enablers of deep electrification and decarbonization in large buildings. Limits to building distribution, whether electrical or thermal, can prevent a building owner from doing deep electrification. We think thermal storage is probably one of the best ways to make a building more grid-dynamic and overcome this distribution barrier as well.
We wanted to focus in those areas, and RMI is wrapping up this research, which we are going to make available to our Empire Building Challenge partners once they’re on board. They found an extensive set of technologies across the technology readiness spectrum, from technology that is already commercialized and available today on the market, perhaps in Europe or Asia, to more nascent technologies at the university level that need a bit of focus to move over the hurdle towards commercialization.
MR: Similar to this conversation, which is the beginning of a dialogue with BE-Ex about the progress of Empire Building Challenge, I think that we’re really proud of this initiative, and that it’s going to be a collaborative effort. Extensive discussion with MEP firms and the real estate community on technology barriers informed this research. After we select our partners, we’re going to take a hard look at what problems they’re facing with the buildings they’ve put forward. Then we’re going to relay that information to the largest and most innovative companies developing low-carbon solutions. So, it is absolutely about technology, but it’s also about the business model or method for packaging those technologies, overcoming the barriers preventing deep decarbonization, and then proving out those models through project implementation. We’re at the beginning of engagement with our manufacturer and solution provider partners, and we see that as one of the biggest upsides to this initiative.
RCY: Right. We’ve certainly seen this in the Passive House market. Triple-glazed windows were impossible to get, and now they’re almost the same price as good double-glazed; ERVs for largescale buildings were impossible to find outside of Europe, and now their trickling into the US. So, getting some wind behind that sail is an exciting prospect.
JR: Socializing these concepts and new technology with MEP firms is equally important. Even with Passive House, there’s a niche group of MEP firms comfortable doing it— the vast majority aren’t. That dynamic is exacerbated in the large buildings world. They’re very comfortable with 19th century technology— not so much with full electrification of large multifamily buildings.
RCY: Right. Well, thank you all so much for taking the time to join me for what has been an illuminating conversation on this tremendous initiative. Before we leave, any final thoughts?
JJ: Thanks Richard. We very much appreciate BE-Ex’s work as a learning hub in this energy efficiency and clean energy arena. As Michael said, we’re at the beginning of this initiative, and we’ll have much more information to come, and look forward to working with you to broadcast those results to the broader community.
RCY: We’re thrilled to get some of these lessons learned, both the final ones, but importantly, along the way, in telling that story to other people— why people decided to participate, what they plan on doing, what the barriers are, how they overcome them, and how NYSERDA supported this process. We greatly look forward to that.
Thank you, Janet. Thanks, Michael and Jared.
For more information on the Empire Building Challenge, visit NYSERDA online.
Questions? Contact NYSERDA here.