SUBA Manufacturing Inc has demonstrated its environmental leadership by working with Carbon Lighthouse to profitably eliminate the carbon footprint of its laminate counter-top manufacturing space in Benicia, CA.

After electing to take part in Benicia’s Business Resource Incentive Program (BRIP), SUBA enlisted the help of Carbon Lighthouse to conduct a thorough energy and environmental analysis of their operations.  Carbon Lighthouse then implemented a package of lighting retrofits, creating utility savings and emission reductions. The remainder of the building’s carbon footprint will be offset through the retirement of carbon allowances through the Carbon Lighthouse Association.

“This project was a winner,” said Jack Bell, President of SUBA.  “The City of Benicia with the BRIP concept made it possible to achieve a total relighting of our 25,000 sq ft manufacturing area at no cost to SUBA.  Working with the professionals at Carbon Lighthouse made the project move to completion without a hitch.  All the details were taken care of by them so we just waited to turn on the lights and enjoy the savings.”

The City of Benicia awarded SUBA a $9100 grant to cover the costs of the project. “We are excited to be part of a partnership that advocates environmental projects that make financial sense,” said Brenden Millstein, CEO.

As a building owner or manager it is tempting to believe that your building is operating as well as it could be – or even if it isn’t that you don’t have the time or money to do anything about it.

If that is the case, you might be tempted to find the cheapest audit you can and just throw away the results as you focus on other things that matter more to you day to day, like occupancy and tenant comfort. While this approach is common, it may not be the best way to stay competitive in the ultra-competitive San Francisco real estate market.

Here are a few reasons why:

Let’s explore a little further…

Source: Energy Information Administration

The demand for green commercial office space is going up. This is probably not news to you if you own a building in San Francisco, but the data only gets clearer every year. The Urban Land Institute’s 2013 Emerging Trends in Real Estate emphasizes yet again how important green features are for attracting companies. Here is what they have to say: “Green buildings with high ratings under the Leadership in Energy and Environmental Design (LEED) program and energy-efficient systems leapfrog the competition: tenants calculate operating savings and find they can attract young talent who favor “cool space” and nods by their employers to environmental correctness.”

Other cities, such as New York, have already started disclosing energy star scores and, unsurprisingly, high profile buildings are getting called out by name for either under or over performing. Odds are you don’t want to be one of those buildings that ends up at the bottom of the barrel, so it is important to get energy use under control now.

Efficiency will make you more profitable – and sellable – either through increased NOI or decreased CAMs (which impact occupancy). Energy efficiency is, hands down, among the best investments available on the market right now with internal rates of return easily exceeding 15 or 20%. On top of that, efficiency will impact valuation through increased NOI. With some lease types, the NOI will improve directly from reduced costs while with others a decrease in CAM costs will attract new tenants, decreasing vacancy and increasing the NOI. Either way, the value of your building will increase substantially by investing in good energy efficiency projects (or decrease if you let your neighbors get ahead).

Ok, you say. You get it, it is important to be efficient – but you are pretty sure you already are! Well, as data nerds, we have to ask: How do you know? We have been to hundreds of commercial properties with energy star scores ranging from 8 to 100, and we have found cost effective energy efficiency opportunities in every single one to the tune of 5-30% reductions (see some of our case studies for examples). The thing about energy waste is that it is really hard to see. Good energy audit firms bring in tons of tools and lots of expertise specifically about efficiency and are able to find things that even a good facility chief might miss.

This is double-edged sword though – finding good projects takes real work and if you go with the cheapest audit you can find, you might not get a product you can use. Instead of opening the opportunity to accrue literally tens of thousands of dollars to your bottom line, you will be throwing away that money.

What about upfront capital? There are tons of low-interest financing options for energy efficiency investments – including zero interest loans from PG&E or deferred payments from Carbon Lighthouse directly. Many efficiency measures can also be passed through as CAMs, saving you from bearing the brunt of a 15-year depreciation schedule.

We hope that we have made a compelling case to treat these audits as an opportunity. You have to do it anyway, so you might as well make the money work for you.

(P.S. There are so many other benefits to good energy efficiency projects, we can’t even begin to cover them here, but a few are that Energy Star certified buildings are exempt from audits and that efficient buildings put less wear and tear on mechanical systems – increasing lifetime and further reducing operating costs.)

The ski resort has been working with Carbon Lighthouse over the past year to identify and reduce energy waste across both Squaw Valley Ski Resort and Alpine Meadows. Projects are currently underway that will reduce the carbon footprint of the two mountains by over 10%.

For this event, Squaw Valley worked closely with Carbon Lighthouse to determine the carbon footprint of the competition and offset it through the retirement of legally binding carbon allowances. The calculations included athlete and spectator travel, lift operations, course grooming, snowmaking and special events. The total carbon footprint of the event is 273 tons, or the equivalent of 60+ cars driving for one year.

“Our company and the entire Squaw Valley team are committed to being responsible environmental stewards as the mountain and our environment are absolutely central to the Squaw experience,” notes president and CEO Andy Wirth. Guest at the event are being encouraged to follow Squaw’s lead and think about their own environmental impact during their time on the mountain.

“We are extremely proud to be sponsoring such an important event for the ski community while reducing the environmental impact and raising awareness about climate change,” said Emma Bassein, Carbon Lighthouse’s Director of Impact. “This is just one of the many ways that Squaw Valley Ski Resort is leading the way in sustainability and we are pleased to be able to make such a large impact through both this sponsorship and our ongoing energy efficiency work with the mountains.”

The carbon neutral event has gotten a great response from the media, including a radio spot on Sacramento’s Capital Public Radio, an article in Tahoe regional news source, Yubanet.com, among others.

Carbon Lighthouse Association accomplishes its mission by competing with power plants for pollution permits in California and nine Northeastern States. In each of these States, every power plant or utility is required by law to purchase one Allowance from the State government for every ton of CO2 it emits. The number of available allowances is capped, hence the term cap-and-trade, and the Carbon Lighthouse Association (an independently governed organization from Carbon Lighthouse, LLC) participates in quarterly auctions for these same permits. This lowers the overall number of available permits, directly reducing emissions and increasing the cost of pollution. While it is better environmentally, and actually profitable, to reduce energy use on site, it is usually not practical to eliminate 100% of energy use on site. Thus, the remaining environmental impact of energy use in a building can be balanced by raising the cost of pollution. To learn more about how to cost-effectively reduce energy use in your own home, visit our article on energy efficiency for individuals.

The Emerald Campus Lecture Series brings thought leaders together with students who will lead in the future. Past speakers include David Keller, the founder of IDEO.

Raphael discussed his path into the world of clean energy, emphasizing the challenges of getting into the field and finding the most rewarding opportunities within it. To help students imagine potential future careers in clean energy, Raphael walked them through the broad array of skills demanded by clean energy work including: writing, research, field engineering, construction, marketing, and others.

The Sustainable Learning Community at Foothill College is designed to introduce sustainable themes to the general population of students. This year’s theme is energy.

If you own a building in San Francisco, you may have recently received a letter from the San Francisco Department of the Environment letting you know that an audit is due for your building by next month. You may even have gotten a notice telling you that your benchmarking statement for 2012 is overdue. Because this is the first time around, the powers that be are going pretty easy on owners, but getting it right this time will help in years to come, so here is a step-by-step guide to make sure you are playing by the rules.

1. Audits
The word “audit” rarely brings up good connotations for anyone and energy audits, sadly, are not much of an exception. We at Carbon Lighthouse prefer to use the term “really awesome way to learn a lot about your building and find tons of free cash laying around,” but it hasn’t caught on with the legislative community.

The Ordinance requires that existing commercial buildings between 10,000 and 50,000 square feet get an ASHRAE level I audit and buildings above 50,000 square feet get an ASHRAE level II audit every 5 years. Audits have to be completed by a “Qualified Energy Efficiency Auditor.” Retrocommissioning (a process of systematically going through each system in the building to test if it is operating as designed) can also be used in place of the ASHRAE Level II Audit.

Great. So what does any of that mean?

ASHRAE is the American Society of Heating, Refrigeration, and Air-conditioning Engineers. They create handbooks and standards that are the basis for many building codes. One of their standards defines the tasks and procedures involved in three different levels energy audits.

A Level I Audit is the easiest and is basically just a visual inspection or “walk-through” audit. A qualified professional (we will get to this in a bit) will talk with the building maintenance staff, review energy bills, and visually inspect the equipment and operations of the building. The end result is identification of any glaring problems and an informed guess at what energy efficiency measures could be worthwhile to pursue. This should take less than a full day onsite and minimal time for report preparation.

A Level II Audit goes further than a Level I and includes a thorough look at any efficiency opportunities in the building envelope, lighting, HVAC, domestic hot water, plug loads and any process equipment. It should include an assessment of seasonal variation and temporal changes in building loads and some level of modeling of building performance that allows the auditor to test out the effects of different efficiency opportunities. This may take two to four visits to site and up to a few weeks for report preparation. If this sounds like a lot more work than a Level I Audit, then you are reading correctly. It also tends to be substantially more useful, but more on that in the next post.

For the sake of completeness, we will explain a Level III audit as well, even though it isn’t required. A Level III should have investment-grade results – meaning that you can take the outcome of a Level III audit and go directly to bidding and construction of efficiency measures, knowing the exact savings and costs expected. This can require a fair amount of time onsite gathering data about how your building works. Depending on the systems being studied, this can take a few weeks to several months. There should be no surprise that these can be pricey, but also produce results that you can trust.

As a side note, Carbon Lighthouse’s assessments are a hybrid of Level II and III audits, where we do a thorough review of all opportunities on site and then selectively gather detailed data on only the opportunities deemed to be the most promising. This keeps costs down while providing investment-grade results where they matter the most.

So who can perform one of these audits for you? Can it be your in-house staff or HVAC contractor? The answer, frustratingly, is maybe. As part of the rule making for the legislation, the San Francisco Department of the Environment defined what qualifications make someone a “Qualified Energy Efficiency Auditor.” The chart is provided here for your convenience. We are proud to say that Carbon Lighthouse is a Qualified Energy Efficiency Auditor, according to the Department of the Environment. To the best of our knowledge, there is no list specifically about approved auditors, but SF Environment has created this list of benchmarking firms, many of whom can provide audits. PG&E has also been circulating hard copies, and your account representative will likely provide a list of firms for you upon request.

Finding an auditor you trust and going through the audit is the hard part. The actual compliance portion for the audit is quite easy. Your auditor will fill out an online form that includes some basic information about the building and what energy efficiency measures were found onsite. This report will be reviewed for completeness and any glaring abnormalities and then either approved or you may be asked to clarify. Then you are set for five years. You are not required to do anything with your audit, however that is basically treating this exercise as a tax on building owners and we will talk about why that might not be a great decision in the next post.

As with benchmarking, there are a few ways that you can get out of having to do audits. Exemptions include: having done an appropriate level audit or retrocommissioning since 2008 (only works for the first compliance period), maintaining an Energy Star Certification for 3 of the 5 years previous to your audit requirement, achieving LEED certification within the past 5 years, having a building less than 5 years old, having a building that has been unoccupied in the previous calendar year, or having a building in the nebulous category of “financial distress” (examples of which can be found towards the end of this document)

There are financial penalties for not complying of $100 per day, up to $2,500 for buildings over 25,000 square feet and $50 per day up to $1,500 for buildings between 10,000 and 25,000 square feet (though for the first year, any building making a good-faith effort to obtain an audit will likely go un-penalized). Based on those total dollar amounts – which are likely to be less than the cost of the audit in many cases, we can all agree that the larger reason to comply is for the public image and that no one really wants to break the law. Also, as we will see in our next post, if you make the effort to go with a good engineering firm and take the recommendations seriously, you could be saving a whole lot of money, not to mention doing something good for the world. Stay tuned!

2. Benchmarking
Benchmarking can mean a number of things, but for the San Francisco Existing Commercial Building Energy Ordinance (say that 10 times fast), it means entering all of the energy consumption data for your building into EPA’s Portfolio Manager Program and generating a specific custom report for the San Francisco Department of the Environment. Starting in 2013, this is required for all commercial buildings over 10,000 square feet every year from now on and the reports are due on April 1st for the previous calendar year. Note that 2012 reports are only due for buildings over 25,000 square feet, so if your building is smaller than that, you are off the hook this year.

Benchmarking is something that you can either do in-house or work with an energy firm to do it for you. The San Francisco Department of the Environment has a nice 6-step process for benchmarking that can be deceptively simple. The tough part is that in order to comply with the benchmarking requirement, you must get data from all meters in your building, including tenants with separate accounts. You will also need operating hours, the number of full time employees and number of computers for each space. You also need to include your building’s Assessor Parcel Number (which you can look up here), which should be used as the building’s unique identification number in the profile.

Once you have created a building profile, including the square footage and usage type of all of your spaces, you can in theory set up an automatic benchmarking service from PG&E. This will transfer utility data every month to your profile and it means that you only would have to bug your tenants once to get permission to access their utility history. Our experience is that PG&E’s group that manages this is very friendly but pretty understaffed, so it can take a lot of effort to get it up and running. They have, however, put together very detailed instructions that should hopefully help.

When all of the information about your building is uploaded to Portfolio Manager, you can follow this link and use your log-in information to generate the required report. When you generate the report, there is a “release data” button that will automatically transfer your information to the San Francisco Department of the Environment. They will get back to you within 2 days to say whether your report was sufficient or if you need to make any changes.

There are a few ways that you can get an exemption from benchmarking. The first is if the building was vacant for some significant (although undefined) period of time or there was a change in utility accounts (often a new tenant or owner) within the calendar year that makes it impossible to get a full 12 months of data. The other way is if the building is less than 2 years old, based on the certificate of occupancy. Instructions for getting an exemption are here (towards the bottom).

Piece of cake, right? The useful part of this exercise for you, the owner, is getting to see how much energy your building is using year after year and getting an Energy Star Score. We will talk more about what Energy Star Scores mean in the next post.

Energy waste in buildings, especially commercial buildings, is a classic example of a market failure. Complicated lease structures separate the entity that pays for energy in commercial buildings – usually the tenant – from decisions about the original design and ongoing operation of the building. Additionally, energy use, especially during peak demand times, has large costs that are socialized across all energy consumers.

Source: California Energy Commission. Energy Action Plan, 2008 Update.

Policy makers at local, state and federal levels have decided that the societal costs of wasted energy are high enough that the government should do something to safeguard the public (just like with vehicle fuel mileage standards). Energy efficiency codes are the primary and heretofore most effective method for reducing energy waste in buildings. California is the poster child for this. Since passage of California’s landmark building energy code, Title 24, in 1978 and appliance standard, Title 20, in 1976 the state’s per capita energy usage has remained almost flat while energy use in the rest of the country has continued to rise by over 30%. This reduction in energy waste has saved Californians from spending over $66 billion in energy costs and building approximately 20 power plants.[1,2,3]

Energy codes are enacted state to state. Many states have had minimal or non-existent codes until recently when having such codes was made a requirement in order to receive certain portions of the American Recovery and Re-investment Act (ARRA) funding. So hopefully we will see a leveling out of energy use across the country in the years to come.

All this sounds great, right? The thing about building codes, though, is that they only impact new construction and substantial renovations. Until recently, financial incentives for voluntary efficiency improvements seemed like the only way that jurisdictions could encourage energy efficiency in existing buildings. That was until a few cities pioneered the way with new legislation that required some combination of regular energy benchmarking, disclosure of Energy Star ratings and energy audits for commercial buildings.

You can think of these laws as the equivalent of tracking the miles per gallon (benchmarking) and getting a smog test for your building (auditing). So far six cities (Austin, D.C., New York City, Philadelphia, San Francisco and Seattle) have passed such rules. San Francisco’s was enacted in February 2011.

Each city ordinance has its own nuances, which were developed through long multi-stakeholder negotiating processes involving the environmental and real estate communities. I personally participated in the negotiations in New York as part of the New York State Energy Research and Development Authority (NYSERDA). One of the many issues that we had to consider was if there were enough qualified professionals available to perform the benchmarking and auditing services in the legislated timelines. Of course that also meant that we had to define what a qualified professional was (sneak peak to the next installment of this series: Carbon Lighthouse is a qualified energy auditor for compliance in San Francisco).

The laws, all of which share similar frameworks, do some pretty great things from an environmental perspective. For starters, there will be widely available and up-to-date data on the amount of energy being used across a huge population of buildings. Prospective owners and tenants will be able to use that data to evaluate new properties and owners of underperforming buildings will feel pressure to become more efficient, both in terms of energy and operating costs. The audits go a step further to get building owners to buy in – literally – to the idea of energy efficiency. The mandated audits will help owners and managers understand where improvements could be made in their building, though they stop short of requiring that those upgrades are made.

If you are a data-obsessed building nerd, like we all are here at Carbon Lighthouse, this is all great news. The downside, however, is that benchmarking and audits aren’t free to building owners and knowing how to comply can be really confusing. The next two posts will cover how to comply if you are a building owner and how to make sure that you are investing in your building rather than just paying a tax to the data collectors.

[1] California Energy Commission. Building Energy Efficiency Standards, Frequently Asked Questions.
[2] California Energy Commission. AB 758 Comprehensive Energy Efficiency Program for Existing Residential and Nonresidential Buildings.

The event has more than a dozen  sponsors, including Paypal, NEA, and Sequoia Capital, and former winners of the Social-E Challenge include Kiva, Embrace, and Carbon Lighthouse. Judges included top Silicon Valley companies and investors like KPCB.

Carbon Lighthouse is always excited for opportunities to give back to the community, and was delighted to be able to provide guidance and support to some of the most promising Social Entrepreneurs.

The International School of the Peninsula has two age-appropriate Palo Alto, CA campuses. ISTP offers nursery through 5th grade language immersion programs in Mandarin-English and French-English, in addition to an international middle school. With over 30 years of experience, they are one of the longest-running language immersion schools in the Bay Area, and their Cohn Campus building was constructed in 2000.

“Part of the International School of the Peninsula’s mission is to help our students develop an international consciousness, which includes a strong sense of global responsibility in all of its forms,” said Head of School Philippe Dietz. “We are committed to teaching by example – making our facilities eco-friendly and educating our students and employees on the importance of eco-responsibilities.”

The International School of the Peninsula joins several schools that have worked with Carbon Lighthouse to complete energy efficiency projects and become Carbon Neutral. “Our project at the International School is a perfect example of local leadership. We are proud to have worked with such a great school, and are happy to be able to provide them with an attractive financial return,” said Emma Bassein, Director of Impact for Carbon Lighthouse.

Building owner Jim Flood said, “In addition to saving our tenants money on their utility bills, this project makes a significant dent in our building’s carbon footprint. Carbon Lighthouse’s work aligned with our mission to preserve the integrity of this historic space while modernizing our operations as much as possible. Even better, the project was smooth and stealthy, and posed no disruption to the day to day business of our tenants.”

Our CEO, Brenden Millstein, commented, “The Flood Building has demonstrated environmental leadership by profitably reducing its energy use and enabling tenant energy savings as well. We were excited to take on the challenge of helping Flood optimize their resources by digging into the data and delivering economically valuable projects.”

For more details, check out the Wall Street Journal Marketwatch coverage here.