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March 23, 2017

2 state bills would reward owners who green up their buildings

  • Existing buildings hold untapped potential for energy efficiency improvements. The bills would introduce new performance incentives.


    What do you think about when you consider extreme energy efficiency? Perhaps you think about gigantic solar arrays, intricate water reclamation technology, or slick computerized building controls.

    While all those measures are well and good, you don’t have to buy fancy equipment or use high-quality materials to achieve superior energy savings. When it comes to lowering energy consumption, utility incentives — which are often just a few lines of policy text — may very well be our most powerful tool.

    In Washington, and especially Seattle, our stringent energy codes have pushed the envelope of energy efficiency innovation in new buildings. However, our existing building stock — far larger than the number of new buildings coming online each year — holds significant untapped potential for efficiency improvements. Alternative utility incentives can help.

    Frozen in place

    Utility incentives are often designed to help pay down the “first cost” of an energy-saving capital upgrade. They do this by offering a one-time rebate for the savings that the building owner captures over the life of the equipment.

    Unfortunately, these incentives are structured to encourage prescriptive “equipment-based” thinking rather than holistic or “systems-based” thinking. That means you can get an incentive to change your lights, but not to turn them off.

    A $54 million renovation of Pacific Tower included major energy-saving upgrades. The work was completed under a Seattle outcome-based energy code program. [enlarge]
    A $54 million renovation of Pacific Tower included major energy-saving upgrades. The work was completed under a Seattle outcome-based energy code program.

    Another issue with our current utility incentives is that they’re inflexibly tied to the energy code. Currently, substantial renovations to existing buildings trigger an obligation for building owners to bring the entire building up to the current energy code. However, the owner only receives rebates on improvements that go beyond the energy code.

    This is informally referred to as the “frozen in place” problem, because many projects require utility incentives in order to pencil out. Without them, it’s often cheaper to stand pat and, as a result, buildings remain “frozen in place.”

    Fortunately, these issues can be addressed by tweaks to the code. Two recent bills introduced to the Washington state Legislature would establish alternative utility incentives that would encourage building owners to reduce their energy consumption.

    Meter incentives

    House Bill 1963 would direct the Utilities and Transportation Commission (UTC), the regulatory body that oversees Washington’s utilities, to require investor-owned utilities to offer a meter-based performance program option for the calculation and determination of energy conservation. That means any building could choose to calculate their incentives via measured building performance (as reflected by the readout from the water or electric meter) rather than by set, prescriptive one-time incentives.

    Performance-based incentives pay for actual, realized savings instead of paying for unreliable, predicted savings. For every energy-saving tactic implemented, building owners (or tenants, depending on lease arrangements) save twice: once through reduced energy, and again by an incentive payment from their utility company.

    This shift in incentive structure encourages deeper energy savings in buildings by rewarding innovative approaches that blend capital measures (more efficient lights or HVAC systems) with improved operational practices (how you operate equipment day-to-day) and modifications to human behaviors (how building occupants influence energy use).

    For example, under Seattle City Light’s pilot meter-based incentive program, our client One Union Square reduced their energy consumption by 20 percent, even after starting from an 89 (out of 100) Energy Star rating. That reduction was incentivized and rewarded by performance-based incentives.

    Rewarding improvements

    Another bill, House Bill 1458, would direct the UTC to require that investor-owned utilities develop and implement a program to achieve greater energy savings in existing residential and non-residential building stock that fall below current energy code standards.

    This specifically targets the “frozen in place” problem by requiring the program to use the buildings’ energy performance baseline (the current year’s normalized energy consumption) to calculate financial incentives for increasing energy savings. In other words, building owners can receive incentives for all their energy efficiency improvements, not just those beyond energy code. California adopted similar legislation in 2015.

    How to make it happen

    Regardless of how these bills fare in the Legislature, it is encouraging to see innovative regulatory models start to emerge at the state level.

    The energy code is built to improve the energy performance of our state’s entire building stock. Stringent state and local energy codes are a major reason why our state regularly leads the nation in energy performance. However, these codes can at times stand in the way of energy efficiency upgrades in existing buildings.

    Alternative utility incentives simply offer an optional compliance path for customers who see an advantage in pursuing an alternative approach, whether that be existing-building upgrades or meter-based incentives. That means more energy efficiency investments, savings that get reinvested in our communities and a reduced statewide carbon footprint.

    We’re excited to see how the future of utility incentives will unfold. It’s just a few lines of text, but the right policy can spark creative problem-solving and unlock the potential for dynamic energy savings.

    Michael Frank is director of engineering at McKinstry.

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