Energy Challenges and Opportunities

Call me crazy, but I love a challenge. I’ve served as president of the board for two co-op buildings, each facing financial crises at the time I started. And in the aftermath of the internet bubble craze, I co-founded a financial services’ technology company and was able to build a company with offices in New York and London, and then successfully sell the business to State Street Bank. From that, I learned that great challenges provide great opportunities to reap terrific rewards, but they always come with unexpected twists.

In February of this year, I rejoined the board of my building because I saw both a challenge and an opportunity in Mayor Michael Bloomberg’s Greener, Greater Buildings Plan, an initiative to reduce carbon emissions in the city. The plan sets in motion a new series of local laws.

The first of these, Local Law 84, represents the challenge. It actually started two years ago and most folks don’t realize its potential financial impact on the value of their apartments. In a nutshell, LL 84 is about benchmarking a building’s usage and consumption of energy and water. Later this year, the city intends to make public how well, or not, a building scored. This will be available to buyers and sellers of co-ops and condos. It will signal to buyers a building’s fiscal and physical strength, and as such it will affect the price an apartment can command – i.e., shareholder value. Additionally, Fannie Mae will be studying energy usage performance data and that information may play a significant role in a building’s ability to obtain financing.

While LL 84 presents a potential threat to shareholder value, Local Law 87 is an opportunity. Beginning this January, LL 87 comes into effect, mandating that buildings over 50,000 square feet file an energy efficiency report based on an energy audit and retro-commissioning study.

What makes this an incredible opportunity is that by doing the audit early, you can pinpoint where you can save energy and make adjustments to your physical plant to start driving down operating costs. Plus, you can get cash incentives from Con Edison or the New York State Energy Research Development Authority (NYSERDA) to help you pay for the work.

In order to get a jump on the available incentives offered by NYSERDA (there’s approximately $112 million up for grabs) our board decided to start the audit in 2012. For our co-op, this specifically translated into about $120,000 in cash for projects that would reduce our operating expenses by roughly $55,000 a year, to start.

We selected Steve Winter Associates to conduct our energy audit. The firm was dogged in helping us identify ways to reduce our energy consumption by 15 percent – the target set by NYSERDA to qualify for the cash incentives. Fortunately, our building is fairly efficient in terms of its physical plant. With some minor tweaks and the replacement of a boiler that was ready to go anyway, we could get halfway to our 15 percent energy reduction target.

To get to the target, we now need to engage shareholders to make upgrades in their individual apartments. They need to replace: old appliances with Energy Star-rated ones; old toilets with low-flow ones; and incandescent and halogen lights with LEDs or compact fluorescent bulbs. Finally, we need to select an option that will reduce our largest source of energy loss – our oversized, single-pane windows.

Our energy efficiency committee sourced great vendors that offer a wide range of products and are willing to give us significant discount prices. But the windows represent 6.5 percent of our energy-saving potential, and the solutions available range from under $1,000 for an interior storm window that changes the aesthetics to $10,000 for a total window replacement. To make things more complicated, shareholder interests are not aligned and windows are not covered by NYSERDA incentives. We have shareholders who cannot afford a major cash outlay, others who are transient and don’t want to make the investment, and some who are willing to make the investment, but don’t want to change the loft window aesthetic.

And therein lies the unexpected and frustrating challenge…how to align interests for the greater good? We are in the throes of working through this challenge and would welcome ideas from other buildings. At the end of the day, we will all have a chance at this opportunity. The question is: how to grab it?