[With Video] New city regulations are driving building retrofits
January 10, 2023
Laws are nudging building owners toward low-carbon upgrades
A version of this blog first appeared as ¡°What¡¯s driving building retrofits? Risk¡± in the Design Quarterly, Issue 16.
Buildings account for a large portion of greenhouse gas emissions in North America. For years, researchers have argued that making buildings more efficient is the most affordable way to reduce overall emissions. What does it take to move the needle? We¡¯ve identified three trends nudging organizations and businesses to invest in retrofits (and highly efficient new buildings).
Firstly, cities such as New York and Toronto have passed new laws to encourage property owners to make their buildings more energy efficient. If they don¡¯t, they risk penalties. Secondly, many corporations and large organizations now conduct ESG (environmental, social, and governance) reporting. The ¡°e¡± means they track and share information on various aspects of their carbon footprint. Unsustainable practices are considered risks by many investors. Thirdly, federal government regulations in Canada increasingly ask for risk assessments for climate change. The government wants to ensure that it is getting buildings that are prepared to adapt to more extreme weather.
Here, we¡¯ll look at how city regulations in places like New York and Toronto are nudging building owners to commit to carbon retrofits and what they need to do to get started. For a deeper look at all three trends, read Design Quarterly, Issue 16 | Climate Risk.
Buildings account for approximately 66% of all greenhouse gas emissions in New York City. The city passed Local Law 97 (LL97) in 2019, requiring buildings to meet new energy efficiency and greenhouse gas emissions, starting in 2024. Stricter limits are coming in 2030 and again in 2035. With this new legislation, New York is targeting 40% reduction in aggregate greenhouse gas emissions from buildings by 2030 and an 80% reduction in citywide emissions by 2050.
Energy targets
New York established its greenhouse gas emission limits on a square-foot basis by type of building occupancy. There are penalties for building owners if their buildings don¡¯t meet emissions goals. Those penalties are modest beginning in 2024, with more stringent penalties thereafter.
Energy grades
New York¡¯s existing local laws were a prelude to new mandates. Local Law 33, an amendment to Local Law 84 (which established benchmarking for buildings over 50,000 square feet), mandates all buildings over 25,000 SF (and city buildings over 10,000 SF) must submit annual energy usage, which is graded and displayed in the lobby window. Scores range from A to F, with A being the most efficient and D being the least efficient. An F grade is given to any building that refuses to comply with the mandate.
Right now, when walking around the city we are seeing a lot of poor grades, as many owners haven¡¯t done much to reduce their buildings¡¯ energy loads. The intent of the energy scores is to inform the public about the building¡¯s energy performance.
Lighting law
New York City also passed Local Law 88. This law requires that property owners for all buildings over 50,000 SF upgrade their lighting systems and install submeters to comply with the 2010 NYC Energy Conservation Code. Since lighting loads in nonresidential buildings account for 18% of carbon emissions in NYC, compliance with this law will help buildings meet LL97¡¯s goals.
Many of New York¡¯s building owners do not know about LL97 yet or how it may impact them, so we focus on educating them.
Education needed, then retrofitting
Many of New York¡¯s building owners do not know about LL97 yet or how it may impact them, so we focus on educating them. Our first recommendation, as advisors and engineers for low-carbon buildings, is to perform an LL97 assessment for the property. This study focuses on today¡¯s energy consumption and emissions.
Once we understand the building¡¯s current emissions, we can produce a year-by-year upgrade plan to reduce emissions. Getting an early jump on this is so important. The first Annual Building GHG Emission report is due by May 1, 2025, with reporting based on 2024¡¯s operating data. While some building owners may be interested in reducing their carbon imprint (to reduce energy bills or position themselves in the market), these government deadlines will drive existing building retrofits.
Big ticket items
Many building owners are overwhelmed with where to start. Our advice is to look at lighting first. A large percentage of NYC¡¯s multifamily buildings and office buildings are still illuminated by incandescent or first-generation fluorescent lamps. These inefficient lights also burden cooling systems with their high heat output. Upgrading the lighting systems to comply with LL88 will help building owners reduce electric use, bring the electricity coefficient down in the emissions equation, and comply with LL97.
Steam is another big item that building owners can target. Many properties have already begun phasing out these systems, which is helping reduce carbon emissions. And then there are just old, inefficient systems that are coming due for replacement. Replacing or retrofitting outdated systems to meet the new emissions laws will help property owners with LL97 compliance, while also saving money.
Penalties, alternatives
There are several penalties for noncompliance. Failure to file with the city will result in a monthly penalty that is calculated based on the building¡¯s covered square footage, multiplied by $0.50. Failure to meet the emissions limits is calculated based on the difference between the building¡¯s annual emissions limit and its actual emissions, multiplied by $268. Penalties are expected to grow in the coming years. Building owners can purchase renewable energy credits, greenhouse gas offsets, and energy storage.
Win-win
Although property owners are frustrated with the growing number of new local laws, they should see mandates such as those in New York City as a potential win-win. They will get a more efficient building that costs less to operate, even when energy prices are volatile.
Additionally, commercial building owners are going to come away with a building that has a low carbon story to tell. They can talk about the steps they¡¯re taking to reduce emissions and use their high-scoring building grade as a selling point for potential tenants.