New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

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ARCHIVE ARTICLE

Why Did My Building Get a ‘D’?

Many co-op and condo boards that have invested hundreds of thousands of dollars in energy-reducing projects were shocked last October when they received their first Energy Star letter grades. Stephen Doherty, board president of the Amherst at 401 E. 74th St., was one of them. “I was pissed,” he says.

The Amherst got a D, as did about half of New York City’s nearly 17,000 benchmarked residential buildings. But given everything that Doherty’s building has implemented, “pissed” seems like an understatement. Over the last decade, his building has installed LED lighting throughout the building, new elevators with regenerative drives, an advanced building management system for heat controls and real-time electricity monitoring. The board has also upgraded boiler controls and installed a 250-kilowatt cogen plant.

“It’s not like a letter grade that a restaurant gets, where the grade can go from bad to good if it just cleans up its act,” says the Amherst’s property manager, Ed Ermler of Midboro Management. “There is nothing you can actually do to move the score because you have such a small portion of the actual energy use that’s under the control of the building and the board. The idea is great – shame people into doing something – but how can I fix it if I really can’t fix it? That’s the problem.”

 

Attention Getting

Energy benchmarking began in New York City in 2009 with Local Law 84. Each year, annual energy and water usage of buildings has been documented, and the findings are submitted into the U.S. Environmental Protection Agency Energy Star Portfolio Manager. But it really has been the October 2020 requirement to publicly display a building’s score and attendant letter grade that cemented its importance – and offered a precursor of what’s to come.

It was Local Law 33/18 that enabled the city to give these scores letter grades. The scores range from 1 to 100, with the higher numbers indicating better scores. When the law first passed, the city divided the benchmarked pool into four letter grades - A, B, C and D, with buildings scoring 20 or higher earning at least a C. The grading scale was then tightened up, and today a building has to score at least a 55 to get a C. The result of this rejiggering is that in 2020, more than half of benchmarked buildings earned a D or lower.

The publicizing of the grades has caused quite a bit of controversy about their validity. Actual energy usage is determined not only by energy efficiency but also technical and socioeconomic factors, and the scoring doesn’t take this into account. Bottom line, though, boards have to make energy investment decisions, and the question is whether to invest for a better grade – if that’s even possible – or look down the road to the looming goals, and fines, of the Climate Mobilization Act.

 

Real Money

The Climate Mobilization Act (CMA) was passed in 2019. No longer just tracking a building’s energy usage, the goal of the CMA is to reduce buildings’ carbon emissions to prescribed caps, and failure to do so will incur stiff annual fines. While displaying a poor Energy Star grade in your building can be shaming, the annual fines associated with excess carbon emissions can empty your building’s wallet pretty fast. These two goals – getting a better energy grade and reducing carbon emissions – seem compatible, but in reality, they don’t necessarily go hand in hand.

“When you really sit down and dig into this whole thing,” says Ermler, the Amherst’s property manager, “the letter grade and the fines are two different things. You’re comparing apples and pomegranates. I couldn’t care less if I had a big fat F on my door if I didn’t have to pay a penalty in carbon fees.”

In 2024, when CMA fines begin, experts predict that 20% of buildings will have to pay one (see “Grades and Fines” on page 40). But as goals for reduced emissions grow more stringent in 2030, experts say that about 75% of affected buildings will pay fines unless they do something between now and then. The question is, what is that something?

 

Apples to Pomegranates

Understanding the difference between the two metrics is key to your decision-making. “They are based on different metrics,” says David Sachs, an engineer who is the director of existing buildings at Bright Power, a provider of energy and water management services. “Grades are based on square footage and space-use type. The carbon fine is adding up all of the carbon emissions from all the fuels your building consumes. They’re measuring different things, so it’s possible to have a good grade but still get fined.” Or vice versa.

Unlike the scale used for energy grading, carbon emission reduction is a straightforward calculation: if you improve your building by 1 BTU, you will have saved a little bit on your potential fine. “Part of the misconception that we’re finding,” says Darron Johnson, a senior account manager at Bright Power, “is that people think just because they changed the equipment they’ve done enough. Sometimes that isn’t enough. You have to deal with the equipment controls and the distribution of the energy.”

 

The Electric Wild Card

While addressing building equipment is within the purview of the board, reducing electrical consumption is not likely to be. In Doherty’s cond­op, 70% of the building’s electrical usage is by residents in their own apartments. “If residents want to come home and turn all their lights on and all their ACs on flat out, I can’t do anything about that,” he says, adding that the condop also has retail tenants, which compounds the problem. “Like I tried to explain to the board president,” recounts Ermler, the property manager, “your main drivers are not the part of the bills that you can control.”

As it stands today, the lack of building control over electric consumption will cause many buildings to receive some fines in 2024, and significant fines in 2030. The reason is that the use of electricity carries greater weight than gas or oil that is burned at a building. This is because most electricity is generated at a power plant that uses fossil fuels, and the algorithms used in energy scoring are deeply affected by this.

The specter of these fines is alarming. Ermler has projected that if no other improvements are implemented at the Amherst, it will pay about $24,000 in fines in 2024. His own co-op, where he is the board president, will owe $185,000 in 2030. For buildings that have invested so much in energy improvements, these numbers are sobering.

 

Green Remedies

Solar is on the horizon at both Ermler’s and Doherty’s buildings, which should help lower their carbon emissions. In the meantime, Ermler, who uses an Energy Service Company, or ESCO, to purchase his building’s electricity, has switched to “green” electricity. He’s paying a bit more for this, he says, because it is generated by solar or wind rather than fossil fuels, but using it will be money well spent. Doing so, says Ermler, will minimize, if not eliminate, his 2024 carbon fine and reduce what he is slated to pay in 2030.

There are lots of buildings that have invested significant dollars in energy conservation projects, whether replacing equipment or making sure it runs more efficiently. At the same time, there are many who have struggled even to get LED lighting in their common areas. Having energy grades publicly displayed could begin to move those who need a push. But once boards grasp the severity and ongoing nature of the carbon fines, those letter grades will begin to seem like so much window dressing.

 

 

 

Sidebar: Grades and Fines

 

Buildings, like humans, come with bones. And in the case of energy efficiency, some will be naturally efficient because of the year they were built, their size or the common areas within. Others will have to work to overcome the inefficiencies they were born with.

Below are four co-ops that have invested to overcome these inefficiencies. You can see what their current Energy Star grade and score are and the energy investments they have made to date. If these buildings do nothing else, you’ll see what their fines will be under the Climate Mobilization Act in 2024 and in 2030.

Habitat is grateful to the En-Power Group, an integrated energy engineering firm, who provided these examples so that the correlation between grades, energy investments and potential fines can be better understood.

 

Queens Co-op

426 units, built in 1965

Grade: D

Energy score: 18

Before energy investment, this co-op had an energy score of 1, which was raised to 18 after investing $2.5 million (which includes over a $1 million in various grants). This investment resulted in energy savings of $500,000 annually. If it does nothing else, it will not pay any fines In 2024, but will begin to pay annual fines of $275,000 in 2030.

 

Energy Projects to Date:

•          Rooftop solar

•          Cogeneration (CHP) system

•          Separate domestic water heaters

•          New chiller

•          High-efficiency pumps and motors

•          Variable frequency drives (VFDs)

•          Oil-to-gas conversation of the heating plant

•          Buildingwide lighting upgrade

 

Manhattan Co-op

356 units, built in 1977

Grade: D

Energy score: 49

This co-op has a lot of amenities, including a swimming pool. Energy investments totaled $541,100 (including rebates of $220,000), and resulted in annual energy savings of $280,000. If it does nothing else, the co-op will not pay any fines in 2024 but will begin to pay annual fines of $95,000 in 2030.

 

Energy Projects to Date:

•          Oil-to-gas conversion of heating plant

•          New heating control system

•          Upgraded pool heating system

•          High-efficiency pumps and motors

•          New domestic hot water system

•          Low-flow fixtures in the apartments

•          Buildingwide lighting upgrades

 

Manhattan Co-op

324 units, built in 1962

Grade: B

Energy score: 74

This co-op has central cooling, which is energy intensive and will drive down its energy score. Energy investments totaled $848,800 (with several hundred thousand dollars in rebates) and resulted in annual energy savings of $140,000. If it does nothing else, the co-op will not pay any fines in 2024, but will begin to pay annual fines of $50,000 in 2030.

 

Energy Projects to Date:

•          Building-wide lighting and ventilation upgrades

•          High-efficiency pumps and motors

•          Variable frequency drives (VFDs)

•          New chiller

 

Manhattan Condo

165 units, built in 1923

Grade: B

Energy score: 80

This prewar condominium has a supermarket as a commercial tenant. The building’s energy investments totaled around $500,000. If it does nothing else, the condo will not pay any fines in 2024, but will begin to pay annual fines of $45,000 in 2030.

Energy Projects to Date:

•          Oil-to-gas conversation of the heating plant

•          Burner upgrade

•          Buildingwide lighting upgrades

•          Steam-distribution upgrades

 

 

 

Sidebar: Apples to Pomegranates

 

Two buildings that have invested heavily in energy efficiency projects are Manhattan’s 401 E. 74th St. and 35-50 85th St. in Queens. While both have significantly lowered their energy usage, their Energy Star grades are still poor to middling.

 

Amherst

401 E. 74th St., Manhattan

Board President: Stephen Doherty

Grade: D

 

Energy Projects to Date:

1.         250 kilowatt cogen plant

2.         Upgraded boiler controls

3.         Advanced building management system for heat controls

4.         New elevators with regenerative drives

5.         LED lighting throughout the building

6.         Real-time electricity monitoring system

 

Roosevelt Terrace

35-50 85th St., Jackson Heights

Board President: Ed Ermler

Grade: C

 

Energy Projects to Date:

1.         300 kilowatt cogen plant

2.         Upgraded boiler controls

3.         Advanced building management system for heat controls

4.         LED lighting throughout the building

5.         Variable speed constant pressure pumps

6.         Bi-Level lighting in three garages

7.         Bi-Level lighting in fire stairs

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