Navigating nationwide building performance standards

Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.

In recent years, the United States has witnessed a significant shift towards more sustainable building practices, with Building Performance Standards (BPS) emerging as a central catalyst for further transformation. Although relatively new, BPS are set to revolutionize urban development, impacting over twenty-one billion square feet of building space and affecting the lives of approximately seventy-four million people. As a pivotal force in the transition towards sustainable practices, these standards demonstrate the critical role that regulations will play in advancing the energy transition, not only within the US, but globally as well. These outcome-based policies are rapidly gaining momentum and setting ambitious performance targets for buildings to reduce energy consumption, curb carbon emissions, and drive action.

The development and adoption of BPS primarily occurs at the city level, with various states beginning to embrace statewide standards. This localized approach allows for the customization of standards to meet specific regional needs and challenges, but causes complexity for real estate professionals navigating varying timelines and qualifications across national portfolios.

Initiated in California in 2007, the practice of benchmarking is widely accepted across the US, offering a systematic approach for monitoring energy and water usage within buildings. These policies mandate building owners and operators to report consumption data through the Environmental Protection Agency’s Portfolio Manager tool, setting a nationwide standard for assessing building performance. To date, over forty cities and six states have implemented benchmarking policies. BPS build upon this benchmarking foundation, requiring that building owners not only measure but also improve a building’s efficiency to meet specific performance criteria. Tailored to various property types and sizes, these standards progressively intensify, enforcing a cycle of continuous improvement through regular reporting, verification and, occasionally, third-party validation.

Building performance standards impose mandatory benchmarks on properties, but they enable owners considerable autonomy in charting their path to compliance. This flexibility allows property stakeholders to select the most effective and economical technologies or tactics to meet the targets. Recognizing that not every building can transform overnight into a model of efficiency, BPS strategically introduce both interim and future targets, facilitating a phased approach that requires greater efficiency over time. This combination of short- and long-term goals provides clarity and confidence for investors, encourages gradual improvement in building operations, and shifts the market away from investments in technologies that are both inefficient and harmful to the environment. Adhering to BPS not only safeguards against substantial non-compliance fines, but also ushers in a range of significant benefits for real estate owners and operators when assessed properly:

• Enhanced property value and marketability: BPS compliance boosts the attractiveness and competitive positioning of properties in the real estate market, potentially leading to higher asset values, lower tenant churn, and attracting tenants with similar values that will pay a premium for sustainable spaces.
• Utility cost reduction: Implementing energy-efficient technologies and practices consistently results in reduced utility expenses, enhancing the long-term financial performance of the property.
• Environmental impact mitigation: Achieving BPS compliance plays a crucial role in lowering GHG emissions and contributes to broader environmental sustainability efforts, aligning with global reduction targets.
• Improved building health and Indoor Air Quality (IAQ): Compliance efforts often involve upgrades to heating, ventilation, and air conditioning (HVAC) systems and other building operations that directly benefit occupant health and comfort, enhancing the livability and appeal of the space.
• Risk mitigation in energy transition: By proactively meeting and exceeding BPS targets, owners  can future-proof their assets against upcoming regulations and market shifts toward low-carbon  energy sources and technologies.
• Recognition for sustainability leadership: Achieving superior performance through BPS  compliance can position owners as industry leaders in sustainability, enhancing their reputation  among tenants, investors, and the broader community.
• Penalty avoidance: Achieving BPS compliance allows owners to avoid the cost of fines associated with non-compliance.

Navigating the path to BPS compliance is not a one-time task but an ongoing journey that will span years. It involves continuous evaluation, adaptation, and improvement to meet evolving standards and regulations. GreenGen recommends a structured approach to your compliance journey with a few key insights to keep in mind:

1. Identify impacted assets
   Determine which properties are subject to BPS by consulting the regulation breakdown in GreenGen’s BPS Guidebook.
2. Verify data coverage and accuracy
   Ensure comprehensive and accurate data collection through utility APIs, tenant engagement programs, and by leveraging tools like Energy Star Portfolio Manager. Where data is manually reported by tenants it is still a good idea to assess data accuracy. Consider partnering with third party experts for assessment and verification as required.
3. Assess compliance
   Many local governments have begun sending letters to properties that are proactively identified as non-compliant. Alternatively, some have developed free tools to help determine compliance, like NYC Accelerator in New York or Boston’s BERDO Emissions Calculator. Otherwise, the assessment is the responsibility of the organization. It is recommended to engage a consultant for a proactive assessment to ensure enough time for project implementation to meet compliance, thereby avoiding fines and other non-compliance risks.
4. Prioritize
   Address non-compliant assets based on their compliance deadline and potential penalties, focusing first on those with the most immediate or severe implications.
5. Perform an energy audit and evaluate improvement measures
   If not already completed, an energy audit is needed to assess current carbon emissions, energy intensity, and underperforming equipment. Your energy audit should include:
   1. An assessment of building systems and improvement opportunities for building envelope, lighting systems, HVAC, controls, air quality, resilience, and water use.
   2. Pathway to compliance. Pathways should consider energy conservation measures (ECMs), equipment remaining useful life, renewables, green contracts, grid decarbonization plans, and carbon offsets as applicable per BPS guidelines.
   3. Onsite renewables feasibility assessment.
   4. Evaluation of systems for electrification opportunities. Almost all buildings will, at some point, require electrification to be compliant, your energy audit should give you a good idea of when equipment replacement will be needed in order to evaluate electric systems with like-kind replacements.
6.  Implement energy conservation measures
   Adopt a strategic, phased approach to roll out chosen ECMs, keeping in mind the timelines set by Building Performance Standards, the operational lifespan of current equipment, and any incentives that could offset costs. Aim for proactive compliance — for example, meeting a 2025 deadline means achieving and demonstrating compliance in 2024. When selecting a partner for implementation, the variety of vendors and consultants available can be overwhelming. Prioritize collaboration with a partner capable of both strategizing and executing your plan. This integrated approach is crucial as disjointed efforts between multiple entities often lead to results that fall short of expectations.
7. Consider alternative compliance strategies
   Explore options like Renewable Energy Credits (RECs) and GHG offsets with caution, recognizing that they may not be accepted as an alternative compliance pathway according to some regulations, or provide the long-term value that direct investments in building efficiency and sustainability would.
8. Monitor, report, and verify
   Comply with reporting requirements as defined by the relevant BPS regulations, which typically include periodic submissions and may require third-party verification.

In January 2022, the White House unveiled the National Building Performance Standards Coalition, which unites leaders in over forty cities, counties, and state governments around a shared goal: to enact comprehensive, community-centered building performance regulations in their jurisdictions. While notable progress has been made with the passing of standards in various cities like New York City, Boston, Seattle, and Washington, D.C., a significant number of policies are in development and are planned to roll out over the next two years – regulation is coming and building owners need to be prepared.

As the landscape of building performance standards evolves, it’s critical to look beyond traditional metrics like payback period or return on investment (ROI) when evaluating solutions. A more holistic approach that includes consideration of risk mitigation and overall asset value creation provides a clearer picture of the long-term impacts.

To view GreenGen’s comprehensive BPS regulation breakdown, gain additional insights and resources, and discover how one of their clients is avoiding substantial fines under NYC’s LL97, check out GreenGen’s GRESB partner profile.

This article was written by Katie O’shea, Director of Marketing, Green Generation Solutions, LLC.