Energy Efficiency Takes Center Stage for Congressional Debate

It comes as no surprise that energy legislation has become a hot topic in Washington, D.C. and around the country as congressional leaders grapple with trying to find solutions to the global warming debate. On the heels of Al Gore’s Nobel Peace Prize Medal for “An Inconvenient Truth,” Congress took great measures to enact legislation in 2007 to curb the threat of carbon emissions that many experts believe are one of the leading causes of global warming. After successfully enforcing stricter fuel efficiency standards for cars and appliances, Congress adjourned and returned home to tout the success in their home districts. Before leaving, Congress conveyed one additional message – this was just the beginning.

While many see the energy bill that the president signed into law as a great victory, there are many more who feel that important work was left undone. Namely, to ensure that the bill had enough votes to pass, renewable energy mandates for utility companies and strict energy efficient building codes were stripped from the legislation during final negotiations. At the end of the day, all sides were taking credit for passing energy legislation. More quietly though, interest groups began working on their agenda and creating their message to gear up for what will likely be the second half of the debate.

What Does This Mean for Developers?
The expectation that buildings will become more energy-efficient in the coming years is definite, but to what extent required is still undecided.

A proposal from Chairman of the House Energy and Commerce Committee John Dingell (D-Mich.) that was originally included in the House’s passed energy bill, but taken out before passage, would have forced states to adopt strict energy efficient targets for building codes across the country. More specifically, the language called for state codes to become 30 percent more energy efficient by 2010, and 50 percent more energy efficient by 2020, using the American Society for Air Conditioning and Refrigerating Engineers (ASHRAE) 90.1, 2004 standard, as a baseline.

ASHRAE 90.1 is the energy standard for commercial buildings that is adopted in state building codes and is usually updated every three years, adjusting to incorporate new technology into the code making process. Under current law, the Department of Energy is required to review the updated standard and determine if it is more energy efficient that the previous version. If it passes the test and receives a positive determination, then states are required to adopt it into their building codes.

Most states have already adopted the 90.1 (1991) standard as required by law, and will be required to update their codes to the 90.1 (2004) standard as soon as the federal government grants it a positive determination. This is likely to happen sometime in 2008. The 2004 standard is projected to achieve between 18 and 20 percent energy-efficient savings over the previously used standard. Under the proposal issued by the Energy and Commerce Committee, states will have to adopt not only the new 2004 standard, but will also be required in 2010 to become 30 percent more energy efficient over that standard, and 50 percent more by 2020.

Currently, there is little information to ascertain the actual return on investment associated with meeting these energy-efficient targets. This is particularly problematic for speculative developers who may hold a building for a relatively short period of time. Additionally, the proposed standards do not differentiate between product types or take into consideration the difference between speculative and build-to-suit projects. In a speculative development, the end-user is often unwilling to pay for energy-efficient technologies, while a build-to-suit is specifically developed for a tenant with incentive and interest in the building’s overall efficiency.

Energy Efficiency and Global Warming
In order to understand the relationship between buildings and global warming, it is important to recognize why building codes became such a big part of the debate. Residential and commercial buildings account for nearly 40 percent of global greenhouse gas emissions, primarily because of their energy consumption.

It is important to note that though the built environment is a large user of energy, owners have little or no control over how the energy needed is produced – principally in whether a utility uses fossil fuels to generate the power that buildings and homes use daily.

NAIOP recognizes that the commercial real estate development industry can and should do more to conserve energy and reduce greenhouse gas emissions, employing new technologies and methods while evaluating the economic realities of implementation.

NAIOP is encouraged that many of our members are already reaching beyond what is required in the building codes for energy efficiency, and has recently endorsed a sustainable development policy that calls on members to utilize every usable, cost-effective sustainable strategy available.

In an effort to create sensible solutions, NAIOP will continue to work with its members and those calling for mandated energy reductions, to evaluate proposed energy standards and better determine their impact on new development. NAIOP will also strive to work with Congress to advance the development of more energy-efficient buildings while protecting the prosperity of the industry.

By John Bryant, senior director for federal affairs, NAIOP.