Letter Grades for Buildings’ Energy Efficiency Get an F

This article is the second installment in our occasional series on the city’s system of grading buildings on energy efficiency, which goes into effect in 2020. 

Several weeks ago, I discussed flaws in New York City's upcoming requirement that buildings post A-to-F letter grades indicating their energy efficiency. The grades are based on Energy Star scores issued by Portfolio Manager, an online tool of the U.S. Environmental Protection Agency (EPA). Three issues compromise their technical validity: 

Performance Based on Square Feet. Varying ceiling heights affect how much energy is required to heat and cool a space. Cubic feet are more appropriate than square feet. 

Impact of Demographics. Wealthier residents may spend more time out of the city. Unoccupied apartments consume less energy. 

Density Matters. A 2,000 square-foot apartment would house four studio apartments of 500 square feet each. Smaller units require more kitchens, increasing overall power usage.

Energy Star scores are derived from the EPA’s nationwide database. To identify a building's energy use, units must be comparable for electricity (kilowatt hours, or kWh) and fuel burned to produce heat, hot water and sometimes cooling (e.g., gas, oil, steam). Portfolio Manager translates the heat value of each source into British thermal units (Btu). One Btu equals the heat of a lit match. 

Muddying things, the EPA measures energy usage in two ways: the amount of energy consumed at the “site,” and the amount consumed at the “source” (the power plant), which includes delivery losses to the site. Portfolio Manager records Btu per square foot of a building according to both site and source – but calculates Energy Star scores (and future letter grades) according only to source, which inflates the impact of electric usage in apartments. 

The EPA determines the relationship between site and source. A vast gap is seen in calculating source electricity since it takes much more heat to generate electricity than electricity contains: 1 kWh of electricity contains 3,412 Btu onsite. But that number increases almost three times to 9,554 Btu to calculate electric source production. This disproportionately emphasizes electricity since more than 60 percent of heat used to produce it is exhausted through power plant smoke stacks. 

By contrast, natural gas onsite, billed in therms, contains 100,000 Btu of site-heating value. Source Btu per therm is 105,000 Btu, only 0.05 times more per therm. So the increase between source and site for electricity is 29 times greater than for gas. 

Annual benchmarking data should suggest where buildings can take actions to improve energy performance. Most building electricity is consumed within apartments and stores – up to 40 percent of total source energy – which is outside the control of building owners, managers and boards. Instead, building efforts focus on gas or oil consumption, and public space electricity. 

The EPA database indicates that electric consumption accounts for 62 percent of an average building’s source energy. About 75 percent of that occurs in private spaces. Meanwhile, high-rated Energy Star buildings consume 78 percent of source Btu for electricity. Ironically, by reducing heating and hot water use to improve efficiency, they are raising the percentage contributed by electricity and demonstrating their inability to affect electric usage in private spaces. 

New York City asserts that letter grades will influence renter and buyer decisions about where they want to live. The contention is that nobody wants to live in a building that scores B, C or D – and yet, as long as grades are disproportionately influenced by electric usage in apartments and commercial spaces, they are misleading. 

Electricity is a necessity of life. Folks will not stop watching TV or using their dishwashers to improve their building’s letter grade. Simply put, letter grades should not be issued based on factors beyond the control of boards and building owners. 

Lewis M. Kwit is president of Energy Investment Systems.