by Joshua Kace, Director of Energy Practice, CodeGreen Solutions
With the passage of Local Law 97 (LL97) in May of this year, New York City launched what is considered the most ambitious performance-based climate legislation ever enacted for buildings. Under this legislation, large buildings will be subject to major financial penalties if carbon intensity targets are not met starting in 2024, with more aggressive targets starting in 2029. While most buildings will not be exposed to potential penalties until 2029, owners and operators need to move quickly to mitigate potential exposure to LL97’s penalties. Commercial buildings face additional challenges, not least of which being that energy consumption by tenants is often outside the direct control of building management. This post hopes to bring to light some of the more nuanced considerations for commercial buildings to help navigate early preparation for your property.
How exposed is your building to potential financial penalties?
The most immediate question to answer is whether your building is projected to experience penalties in 2024 and 2029. Many firms offer free preliminary reports based on your previous reported Local Law 84 submission and can give you an initial idea of what annual fines might look like.
While this preliminary analysis can give you an estimate of potential fines, factors such as weather and occupancy rates should be taken into account when finalizing your numbers. If your building has significant vacancy, try utilizing energy use over a 12-month time period when the building was mostly or fully occupied. If such a period does not exist, you need to visit the vacant spaces and answer a few questions before you can project building performance. How long has the space been vacant? Are there any plug loads in the vacant space? Is the vacant space currently being heated and cooled? These questions are crucial inputs to accurately project the energy consumption of a fully occupied building.
How do my tenants contribute to my building’s carbon intensity?
For commercial building owners and operators, it will come as no surprise that tenant type and occupant behavior will drive your building’s overall carbon intensity. Tenant direct loads (plug loads and lights) account for roughly 30-50% of an average NYC office building’s footprint. Tenants are also typically the ultimate end consumer of virtually all of the energy consumption of a tenant-occupied building. In multi-tenant buildings, understanding exactly how tenants contribute to your building’s performance is a complicated question and varies from building to building.
Submetering – installing electric meters associated with floors, zones, or tenants, as opposed to relying on a single master meter – can paint a better picture of how each tenant affects overall electricity usage. Take, as an example, a building with two major tenants, each occupying about half of the rentable square footage. Tenant A is a technology company with on-site data center space. Tenant B is a law firm that works long hours. Tenant A’s data center will directly and significantly contribute to the carbon footprint of the building. Tenant B often operates on weekends. How would you determine the magnitude of each contribution to carbon intensity?
Submetering and operations tracking can tackle these situations, particularly when data collection is centralized and easily interoperable. Submeters could isolate Tenant A’s data center and supplemental cooling system and Tenant B’s additional hours, allowing both owner and tenant to understand the various contributions to whole building energy use.
Capital Improvement Considerations
For some buildings, major capital investment will be necessary to mitigate potential penalties. While in the short- and medium-term, drastic gut renovation work may not be required, a mass conversion of gas-fueled building systems to electric ones is likely to be required in the long term. This process of transitioning to building systems powered by grid electricity is known as “electrification.” Coupled with New York State’s recently passed Climate Leadership and Community Protection Act, mandating that 70% of grid electricity to come from renewable sources by 2030, electrification offers a viable path towards the city’s ambitious 2050 carbon reduction goals.
For buildings considering capital improvements, a carbon intensity impact analysis should be performed to understand potential emissions implications. For instance, a small decrease in energy costs might correspond to a much larger decrease in associated emissions, depending on technology type or seasonal considerations. In fact, in certain scenarios, energy costs can increase while the carbon footprint decreases. For example – a building served by district steam with steam-driven chillers is considering upgrading to either electric centrifugal or double-effect absorption chillers. When low summer steam rates and high electric demand rates are considered, the double-effect absorption option would have approximately 30-50% lower annual energy costs. In terms of the carbon intensity, however, the high efficiency of modern centrifugal chillers yields a much smaller carbon footprint, one that will only shrink as renewable sources are added to the grid.
Commercial buildings undergoing gut renovations must consider distribution systems for heating and cooling, ensuring that they meet current needs while also preparing buildings for long-term reduction goals and eventual electrification. While cooling is typically straightforward, electrifying heating systems in NYC’s climate zone is a much more complicated problem. Many potential solutions exist – cold-climate air-source heat pumps, geothermal heat pumps, water-source heat pumps with a supplemental electric boiler, cold-climate VRF – but there is not widespread adoption of any particular solution. Most buildings with internal steam distribution should carefully consider an electrification pathway as it is impossible to generate (even low-pressure) steam efficiently with electricity. In any case, determining the right tech option requires careful engineering and financial planning with aid from technical consultants and a nuanced understanding of your buildings needs and challenges.
Building owners and operators should immediately put tenant engagement at the forefront of efforts to minimize their building’s carbon intensity. Pragmatic action can be taken today to help set the stage for realistic, long-term impact, even in light of reluctant or uninterested tenants. Green leases, for instance, provide building owners and operators with the ability to more effectively regulate tenant behavior by setting transparent requirements around energy use.
As an early step, buildings should calculate a carbon intensity guideline for their tenant’s energy consumption within their space. This will vary building by building, depending on whether a tenant has their own mechanical equipment or is served by central systems. If your building lacks submetering of tenant energy use, you can calculate this by subtracting your total common area energy consumption – converted to tons of CO2e – from your building’s cap values and dividing the result by your rentable area. The result is the amount of carbon emissions per square foot your tenants should consume within their space to avoid fines related to LL97. This guidepost can be used to craft future lease language reflecting emissions expectations, incentivizing tenants to reduce consumption.
Longer term, it is critical for buildings to set high standards for commercial fit-outs, both in terms of design and system commissioning. Beyond standard spec language for high-efficiency equipment, special consideration should be taken for controls integration with landlord-controlled systems, as problems such as simultaneous heating and cooling are still significant drivers of inefficiency in multi-tenant buildings. Robust submetering requirements are also highly recommended. The NYSERDA Commercial Tenant Program, available to customers paying the SBC charge on their utility bill, provides free energy efficiency consultations for both existing spaces and for new energy efficient designs.
Local Law 97, while extraordinarily ambitious, is in many ways, a straight-forward policy, setting firm limits on emissions for buildings over a certain size. Given the wide variety of building typologies, tenant types and occupancy rates, building owners and operators will have significant leeway in determining the least resistant pathway to compliance. In the short- and medium-term, this means having a detailed understanding of how your building uses energy on a tenant-by-tenant basis and applying this data to inform capital improvement decisions. In the long-term, meeting the requirements of LL 97 will require a comprehensive reassessment of your buildings energy-using systems, including careful coordination with tenants who must also focus on deep reductions in energy use.
For more information, visit our Climate Mobilization Act Series portal.