Strategically Green - Sustainable Cities, One Block at a Time

Winter 2011
The historic Chester S. Morey Mercantile building, erected in 1896 at a cost of $75,000, was restored in the mid-1990s by a group of new owners, including Joyce Meskis of the Tattered Cover Book Store. Photo courtesy of Dennis Schroeder, National Renewable Energy Laboratory.

By 2050, 84 percent of the world’s population will likely live in cities, according to the United Nations Foundation. As cities expand, the pressure to make them healthy, livable and sustainable also grows.

An innovative non-profit organization, Living City Block (LCB), is pursuing a vision of “regenerative and resilient cities that are culturally thriving, en­ergy and resource hyper-efficient and economically sustainable.” LCB is developing a framework to realize that vision one block at a time, starting in Denver’s lower downtown neigh­borhood and Brooklyn’s Gowanus neighborhood.

In fall of 2010, the U.S. Depart­ment of Energy (DOE) selected LCB’s Denver project to be a Commercial Building Partnerships (CBP) Partner. As a Partner, LCB can tap the exper­tise of DOE’s National Renewable Energy Laboratory and private sector technical experts to design district energy systems and implement build­ing energy efficiency measures.  

All in the Family

LCB Denver comprises 17 existing buildings, 16 of which are designated historic, with more than 40 differ­ent property owners. The mixed-use neighborhood consists of about 750,000 square feet of office, resi­dential, restaurant and retail spaces, as well as underground parking.

A key to LCB’s framework is aggre­gating otherwise unrelated building, residence and business owners into a single organization. Two Denver law firms — Brownstein, Hyatt, Farber, Schreck LLP and Moye White LLP — are creating a governance structure initially dubbed a “building owners association (BOA).” This structure functions like a homeowners associa­tion, creating a single point of contact for LCB, vendors and service providers.  

Living City Block Denver project

Living City Block’s Denver project is located in the oldest part of Denver, and the historic nature of most of the buildings limits changes to facades. Photo courtesy of Dennis Schroeder, National Renewable Energy Laboratory.

The document creating the BOA, like a typical homeowner’s association, will likely be in the form of a declara­tion of covenants. Once the BOA is formed, the BOA will enter into an agreement with LCB that is similar in some respects to the energy service performance contracts the fed­eral government has used with great success. The agreement and BOA structure are both works in progress, and LCB is currently presenting a conceptual outline to property owners for feedback.

The agreement will provide that, in consultation with its technical partners, LCB identifies cost-effective energy efficiency measures, estimates the energy savings from these mea­sures and aggregates the measures into a single package with a fixed payback period. Owners assign their contract with the local utility to LCB and agree to pay a fixed monthly amount based on past utility bills for the payback term. LCB uses the dollar savings resulting from reduced energy use to repay debt and inves­tors and cover the costs of managing the process.

After the payback period, the dollar savings flow to the BOA and the indi­vidual building owners. To ensure that the buildings continue to operate as designed, the agreement would also provide that the BOA will contract with LCB to measure and verify per­formance as well as provide ongoing training and education for owners and occupants.

Tips for Overcoming Other Challenges

Financing energy efficiency is a chal­lenge on any scale, but it is particu­larly difficult in small- to medium-sized buildings. Most companies, for example, require energy efficiency improvement paybacks of about three years. Deep energy retrofits can in­volve payback terms of up to 10 to 15 years, depending on local energy costs and available rebates and incentives.

According to the 2010 Energy Ef­ficiency Indicator, the larger an orga­nization’s building portfolio, the more likely it is to invest in energy efficien­cy. Results ranged from 25 percent for groups with portfolios of less than 50,000 square feet to 79 percent for those with portfolios of more than 500,000 square feet. By combining a number of smaller buildings, LCB achieves some of the critical mass of larger building owners.

energy use by property type graph

Local utility rates can dramatically affect the balance sheet of an energy efficiency project. In an area with low energy costs such as Denver, making an economic case for deep energy ret­rofits is far more difficult than in areas like Brooklyn with higher energy costs. In addition, LCB has found that com­munity organizing skills are at least as important as technical skills in this process. Local cultures and politics as well as funds, rebates and incen­tives available locally for neighborhood upgrades must be considered.

Education of all stakeholders is also essential. Many people have difficulty conceptualizing an opportunity that requires investment in consuming less rather than more. Fortunately, compel­ling case studies of successful deep energy retrofits are becoming more common, thanks in part to DOE’s Commercial Building Partnerships.