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Planning for energy retrofits amid a changing landscape.
AUTHORMarc Zuluaga, Chief Revenue Officer, Cadence OneFive
Meeting the goals of the Climate Mobilization Act has probably become the No. 1 worry for boards today, with the majority of buildings facing fines in 2030 if they do nothing to lower their carbon emissions. What are the steps boards should be taking?
Before you can figure out what steps to take, you have to figure out where your carbon footprint stands relative to the fines, and where you’re trying to go in terms of other goals and capital project plans for your building. There are three primary buckets of information you need to assemble. The first is the age of your building systems and how much life they have left on them, as well as information on the latest pricing for particular retrofit technologies in terms of potential rebates and financing. The second bucket is the city regulations, how they are changing and how much that might impact your building. Local Law 97 has passed many rules, but we’re still also waiting on some additional ones. The third is making sure that meeting these regulatory requirements enhances and complements what you would have been trying to do anyway with your building.
For many boards, that list is pretty overwhelming. Your company has created a platform that aggregates a lot of this information. How does it work?
Buildings are paying consultants and others every year to file paperwork with the Department of Buildings, the Department of Environmental Protection and other agencies. Our platform scrapes all that data, brings it together and uses that to generate an initial preliminary capital plan that outlines what your local Law 97 fine exposure is today, what actions you can take to reduce that — there is not just one option but multiple pathways that should be evaluated — and the different rebates and financing opportunities so you can see how to pay for this kind of work. A traditional energy audit is kind of like a car that you drive off the lot and instantly degrades in value. If you don’t use that audit for a couple of years, the market prices, rebate landscape and the regulatory landscape are going to change. Our data updates over time, so you can plan out the next couple of years, and if, say, there is new Inflation Reduction Act money, you can adjust your plan and take advantage of those.
Does it make sense for a board to have the goal of paying no fines as opposed to just reducing them?
A wise real estate guy once told me there is no such thing as a good decision or a bad decision as much as an informed versus an uninformed choice. It could be that for a particular building the fines are so steep in 2030 that the most prudent business decision is to reduce them by 80%, but not invest in the additional capital expenses to go 100%. It could be that there’s an easy pathway by taking advantage of local rebates like Con Edison and potential federal rebates to go deeper than what would be required by 2030.
There is no one right answer. Some managers and boards are going to be more proactive and get their work done quickly when there are a ton of rebates available. Others are going to wait a little too long, when there may be a surge in demand and buildings are going to pay more out of pocket as a result of having fewer rebates available. So whatever the path is, being somewhat proactive at an earlier stage is a critical thing to do in the next six to 12 months for basically all buildings.
What about buildings that aren’t facing fines? Why should boards make the investment in energy projects if there are no consequences for not doing so?
Because there are many non-energy, non-operating cost benefits. Three out of the four buildings in the city are steam-heated, and there is a lot of room for improvement in comfort and quality of life in making those systems more efficient. If windows and roofs last 30 years, that means between now and 2030, some 20% of them will be replaced. There is a way to do smarter and better replacements. For example, you are not going to get energy savings unless your boiler is smart enough to know that the windows and roof have been changed, and to do that you would need sensors to tell the boiler that less heat needs to be sent up to the building. So there are things that can be done both on more of a discretionary basis to get the most out of capital projects that you are going to do anyway and that just make good business sense.