City to Buildings: We Want Your Carbon

Deadlines are closer than they may appear. For co-op and condo boards that must meet the requirements of New York City’s new Local Law 97, which sets increasingly stringent goals for reducing buildings’ greenhouse-gas emissions in 2024, 2030 and beyond, the time to start their long-range capital planning is now.

What are these goals and what will you have to do? Local Law 97 and related new laws that constitute the Climate Mobilization Act require buildings of 25,000 square feet or more to reduce their greenhouse-gas emissions by certain target percentages. Obviously, it’s not as if your building has a smokestack belching this stuff up. But the power plants that supply your electricity do, since the fossil fuels that most of them burn emit greenhouse gases into the atmosphere. So these new laws take into account your building’s prorated share of those plants’ greenhouse-gas emissions.

“In New York City, the majority of the electricity comes from fossil-fuel power plants that mostly use natural gas,” explains James Hannah, an executive with the energy consultancy Bright Power. “When they burn natural gas, there’s a measurable amount of emissions” of greenhouse gases that trap heat in the atmosphere – creating a domino effect that makes the Earth hotter and, according to virtually all climate scientists, could eventually make it unlivable.

The act sets greenhouse-gas limits that go into effect in 2024 and then increase in 2030 and every five years until 2050. The act offers an alternate method of compliance for lower-income buildings like HDFC co-ops, and for buildings with at least one rent-regulated apartment. And energy professionals estimate that 80 percent of affected buildings already are compliant for 2024, and a quarter already are compliant for 2030.

“That’s accurate,” says Mark Chambers, director of the Mayor’s Office of Sustainability. “The first threshold, 2024, is designed to capture the worst-performing 20 percent. The next cap, 2030, is to capture the remainder. The foundation of this effort is carbon reduction.” He’s referring to carbon dioxide, the most significant greenhouse gas. Buildings that fail to meet the goals will be fined $268 for every metric ton of carbon emissions over their limit – which can run into five figures quickly.

“We don’t want your money,” Chambers insists. “We want your carbon.”

Your building has most likely plucked all the low-hanging fruit of retrofits to reduce your carbon footprint: switching to LED light bulbs, installing motion sensors in places like laundry rooms, insulating heating and hot-water pipes, and installing a heat-control system that measures indoor temperatures and regulates when your boiler’s burner and circulating pump cycle on and off.

But what else should your building start doing to ensure that you meet the requirements? What strategy should you employ? And how do you calculate where you stand right now, so that you can set priorities?

Step 1
While a math-savvy board can probably calculate its building’s greenhouse-gas emissions on its own, it might want to leave the job to the same professional who calculates annual energy benchmarking for Local Laws 84 and 133. That’s not only because the formula is complicated but also because it uses the benchmarking figures that get entered into the federal Environmental Protection Agency’s database and measurement tool, the Energy Star Portfolio Manager.

“The first step is to understand where you are right now,” advises Kelly Dougherty, director of energy management for the FS Energy division of FirstService Residential. “Based on information readily available from your Local Law 84 benchmarking process, you can calculate what you’re currently emitting.”

There are many variables to that calculation. Different “occupancy groups,” like a co-op or condo’s residential and retail spaces, are assigned different emission limits. There are also “coefficients” (i.e., a numerical constant applied to a mathematical formula) for each of five commodities: natural gas, No. 2 oil, No. 4 oil, electricity, and district steam, which is heating steam that Con Edison creates at three natural-gas-fueled plants and pipes into buildings in the lower half of Manhattan.

“If you take the square feet of the occupancy group and the [carbon] amount you’re allotted times square footage of those spaces, that gives you your total emissions cap,” explains Dougherty. “Then you go to how much energy your commodities used the previous year. You multiply each commodity by the coefficients provided in the law, and the difference is where you’re above or below the emissions level.”

Yes, it’s complicated. But the pertinent thing to realize is that there’s a standard way for any board or its professionals to calculate that figure.

Step 2
Now that you know where you stand, Step 2 is to create a strategy. “No one measure does it all,” says Michael Scorrano, an engineer and the founder and managing director of the energy consultancy En-Power Group. “It may be a bunch of smaller measures, or it could be capital-improvement projects – maybe it is time to upgrade your heating system. Maybe it is time to look at your ventilation and air-conditioning system.”

Any plan is going to be a combination of capital-planning strategy and local-law compliance. “If you need to do facade work outside the scope of Local 11,” Dougherty says, “we’d like to see the building plan for infiltration issues. It makes sense. Why pay for scaffolding twice?”

The specific capital-improvement projects that can help reduce your greenhouse-gas emissions will vary from building to building. A typical project, says Scorrano, includes replacing an absorption chiller, a refrigeration unit that converts heat into energy that drives a cooling system, and cogeneration, a natural-gas power plant in your building that generates both heat and electricity. Another project is a boiler replacement.

Boards might also consider solar-panel arrays and green roofs, the latter involving vegetation that absorbs rainwater, provides insulation, and helps mitigate the “heat-island effect” that makes urban areas warmer than rural ones. Advanced projects might include: converting from a fossil-fuel-based central boiler to electric-powered heat pumps; trigeneration, in which a second cogen unit combined with a chiller provides air-conditioning; and battery energy-storage systems (BESS), in which you can store the cogen electricity you generate, further reducing energy costs.

Such an array of choices can be confounding. Where do you start? One place is the Retrofit Accelerator, a free city assistance program. “We operate this program for people like boards who want to know ‘How do I start?’ and ‘How do I assess our energy performance?’ ” says Chambers of the mayor’s office. “That will start conversations about what their options are. We give building owners straight advice and connect them to other resources. It’s kind of a one-stop shop.”

Hannah of Bright Power advises: “Have an energy-efficiency professional involved in a project to make sure you’re getting the most out of your systems. Don’t replace your old system with a new version of your old system.”

And keep in mind it’s not all nuts and bolts. Boards must consider not only physical changes to the building but also “behavioral changes” that reduce energy consumption. That means “not only making sure you have LED lighting in common areas but in people’s units as well, and making sure people have Energy Star appliances,” Hannah says. Such behavioral changes usually can’t be dictated but come about through steady, regular messaging.

Step 3
Once you’ve settled on a multiyear capital plan and figured out a general budget, how will you pay for these initiatives? “There always seems to be something else that keeps landing on buildings,” says Peter Lehr, director of management at Kaled Management. “Co-ops and condos get slammed with new laws one year after the other, and it’s getting more costly.”

Fortunately, the Climate Mobilization Act itself contains provisions to help manage costs. For one, the city “may grant an adjustment of the annual building emissions limit” to buildings under “financial hardship,” as defined by specific metrics of arrears and taxes, or certain other particular circumstances. For another, the law establishes a sustainable-energy loan program used around the country. Called PACE, an acronym for Property Assessed Clean Energy, the program is available to cooperatives, though virtually never to condominiums. It allows boards to get long-term, inexpensive financing to do qualifying types of renovation projects that have a public benefit such as reducing greenhouse-gas emissions.

Of course, federal, state, and city incentives have long been available to help lower the cost of green capital projects. “I think there will be a continuing need for incentives,” says Chambers. “They’ll change as markets change, but I anticipate continued incentives since so much property needs to meet the reductions. We’ll continue to advocate for incentives at the state and national level.”

To meet the ongoing emissions reductions that kick in after 2030, both co-op and condo boards should take a long view and combine a variety of financing elements. “Look at when your underlying mortgage expires and how much you’re going to need over the next 10 to 15 years,” says Dan Wurtzel, president of FirstService Residential. “And put together a plan so money is there from refinancing, secondary financing, and maybe you mix in an assessment.”

Condos are more restricted in traditional financing since there’s little common-property collateral because each resident’s apartment is real property. Condo boards sometimes turn to relatively high-interest private lenders. But, says Wurtzel, “some banks provide financing to condo associations. In many condos, the ability to obtain a loan will require a supermajority of unit owner approval.”
In co-ops and condos, Wurtzel adds, “your budget will determine whether you want to go out and get financing or start assessing over 5 or 10 years. Start this early enough to build up a war chest of reserves. The bottom line is, it’s not okay to say, ‘We don’t need to focus on this now since it’s 10 or 11 years away. Let’s put on the back burner.’ The planning and costs for your building to comply is a long term commitment.”

Alternate Routes
As noted earlier, the new laws create exceptions for certain buildings. “There is an alternate compliance pathway for buildings with any rent-stabilized or affordable apartments,” including HDFC and Mitchell-Lama buildings, says Hannah. For buildings in those categories there is a checklist of 13 energy-conservation measures that must be implemented in lieu of having to stay below the emissions cap.These 13 “prescriptive measures” include such steps as repairing all heating system leaks, insulating all pipes for heating and/or hot water, weatherizing and sealing windows and ductwork, installing timers on exhaust fans, and installing radiant barriers behind all radiators.

Is there concern that some buildings might keep a single rent-stabilized apartment simply to keep the boards from having to do the calculations and instead use the “prescriptive” path? How many otherwise affected buildings does this represent? “I wish we had that stat,” Vicki Been, deputy mayor for housing and economic development, said in an email. “But as you may know, the state refuses to make info available on rent-regulated apartments at the individual apartment level.”

And it may not matter. “The law was not intended to allow building owners to get out of any kind of performance,” says Chambers. “Buildings that have a single rent-stabilized unit are not exempt – they just have a prescriptive pathway. There are a lot of energy-conservation measures they need to do.”

An additional criticism noted by groups including the Real Estate Board of New York are loopholes exempting city-owned buildings, including New York City Housing Authority buildings, as well as places of worship and buildings under 25,000 square feet.

“This law is designed to yield significant energy reductions from large buildings, which account for the lion’s share of emissions,” Chambers says. “But this is not the end of the story. We begin with these larger buildings. We’re going to have to develop similar packages on how best to address buildings under 25,000 square feet.”

Indeed, such exemptions may have to be modified between now and 2050 if New York City is to reach its goal of 80 percent lower greenhouse-gas emissions. In a “technical amendment,” which typically follows legislation in order to clarify language, the city has already specified that the Department of Buildings can revise the 2030 standards; that building owners may calculate their carbon emissions based on time of use; and that emissions deductions that an owner can claim by purchasing greenhouse gas offsets or renewable energy credits or by using “clean distributed energy resources” do extend to future compliance deadlines.

And remember, these deadlines are closer than they appear. “This stuff is real and it’s looming, so boards need to be prepared,” Scorrano of the En-Power Group says. “Start now contemplating what type of measures you can implement over the next 10 years. A lot of this stuff could overlap with capital improvements you’d need to make in the building anyway. Start engaging now so it’s not a panic to get this done last-minute. Be proactive. Anytime you can save energy, you might as well get the benefits as early as you can.”