Boards Should Focus on Building Emissions, Not Letter Grades

Many co-op and condo boards that have invested hundreds of thousands of dollars in energy-reducing projects were shocked last October when they received their first Energy Star letter grades for energy efficiency. Stephen Doherty, board president of the Amherst at 401 E. 74th St., was one of them.

The Amherst got a D, as did about half of New York City’s nearly 17,000 benchmarked residential buildings. But given everything that Doherty’s building has implemented, his shock is understandable. Over the last decade, his building has installed LED lighting throughout the building, new elevators with regenerative drives, an advanced building management system for heat controls and real-time electricity monitoring. The board has also upgraded boiler controls and installed a 250-kilowatt combined heat and power, or cogeneration, plant.

“It’s not like a letter grade that a restaurant gets, where the grade can go from bad to good if it just cleans up its act,” says the Amherst’s property manager, Ed Ermler of Midboro Management. “There is nothing you can actually do to move the score because you have such a small portion of the actual energy use that’s under the control of the building and the board. The idea is great – shame people into doing something – but how can I fix it if I really can’t fix it? That’s the problem.”

Energy benchmarking began in New York City in 2009 with Local Law 84. Each year, annual energy and water usage of buildings must be documented, and the findings are submitted into the U.S. Environmental Protection Agency Energy Star Portfolio Manager. But it really has been the October 2020 requirement to publicly display a building’s score and attendant letter grade that cemented its importance – and offered a precursor of what’s to come.

It was Local Law 33/18 that enabled the city to give these scores letter grades. The scores range from 1 to 100, with the higher numbers indicating better scores. When the law first passed, the city divided the benchmarked pool into four letter grades – A, B, C and D, with buildings scoring 20 or higher earning at least a C. The grading scale was then tightened up, and today a building has to score at least a 55 to get a C. The result of this rejiggering is that in 2020, more than half of benchmarked buildings earned a D or lower.

The publicizing of the grades has caused quite a bit of controversy about their validity. Actual energy usage is determined not only by energy efficiency but also technical and socioeconomic factors, and the scoring doesn’t take this into account. Bottom line, though, boards have to make energy investment decisions, and the question is whether to invest for a better grade – if that’s even possible – or look down the road to the looming goals, and fines, of the Climate Mobilization Act.

The goal of this 2019 law is to reduce buildings’ carbon emissions to prescribed caps. Failure to do so will incur stiff annual fines. While displaying a poor Energy Star grade in your building can be shaming, the annual fines associated with excess carbon emissions can empty your building’s wallet pretty fast. These two goals – getting a better energy grade and reducing carbon emissions – seem compatible, but in reality, they don’t necessarily go hand in hand.

“When you really sit down and dig into this whole thing,” says Ermler, the Amherst’s property manager, “the letter grade and the fines are two different things. You’re comparing apples and pomegranates. I couldn’t care less if I have a big fat F on my door – provided I don’t have to pay a penalty in carbon fees.”

It’s time for co-op and condo boards to quit worrying about their letter grades and get busy reducing their buildings’ carbon emissions.