In April, the Energy Efficiency Investment Act of 2015 became the first federal energy-efficiency bill since 2007 to be signed into law. The act encourages commercial energy efficiency, especially at the federal level, and exempts certain grid-enabled electric water heaters from pending federal water heater energy conservation standards.

It also established the Tenant Star program. While manufacturers have lauded the water heater fix and HVAC mechanical contractors have approved the push for increased building efficiency, many more in the industry are recognizing the potential of the long-awaited Tenant Star program, which will give tenants and building owners a way to work together to achieve significant energy savings in leased commercial spaces.

ENCOURAGING ENERGY EFFICIENCY

Currently, the Energy Star program rates building energy use as a whole. The Tenant Star program would zoom in on individual leased spaces and motivate those tenants to make energy-efficiency improvements in order to earn the Tenant Star designation.

“It’s for tenants who are trying to do better, but, for whatever reason, can’t find space in an already-recognized building,” said Charlie McCrudden, senior vice president of government relations for ACCA. “At ACCA, for example, we have a floor and a half in a 12-story office building — that’s our space. If we’re out there looking for an Energy Star or LEED [Leadership in Energy and Environmental Design] Platinum office space and are unable to find it, this Tenant Star program would recognize ACCA, as a tenant, for making certain improvements to our leased space.”

Guido Zucconi, assistant vice president of congressional affairs for Air-Conditioning, Heating, and Refrigeration Institute (AHRI), said that, instead of publicly shaming tenants for being less efficient, it’s “more of a public praising for tenants to be more efficient, which could lead to them being willing to spend more money and make more efficient choices — it’s a sales idea.”

Though tenants do not receive any money for earning the Tenant Star rating, there will still be plenty of motivation for them to utilize the program.

“If you rent half of the fifth floor of a building and you want to upgrade, there’s incentive to make the highest-efficiency choices possible regarding HVAC or water heating needs or even space layouts, lighting, and more,” Zucconi said. “There is not a financial incentive, but you get to tout that you’re a Tenant Star space — a highly efficient space.”

THE TIMELINE

While many in the HVACR industry are excited about the program, it’s likely still a few years from implementation. But, with the passage of the Energy Efficiency Investment Act of 2015 in April, the wheels are already in motion.

Through a notice-and-comment rulemaking, the U.S. Department of Energy (DOE) and U.S. Environmental Protection Agency (EPA) will soon begin collecting data and public input in order to determine “what the baseline efficiency is and then figure out what would qualify as Tenant Star,” Zucconi said.

Then, within a year of collecting information and public input, “the DOE secretary and the EPA administrator … will put out for public notice and comment how they plan to structure the Tenant Star program,” McCrudden said.

Compared to tax credits, which often expire and are not renewed in a timely manner, programs like Tenant Star provide consistent motivation for consumers to make improvements to their spaces. “We’ve been supportive of it as an idea, and we’ve been trying to get away from the government incentivizing people with money,” Zucconi said. “While those programs work, they’re expensive, and it’s painful because they expire and have to be renewed. It’s hard to plan for, but this comes with zero cost to government and is consumer-driven, and it’ll create competition. We like these sorts of ideas. Manufacturers love to compete in that high-efficiency space.”

A ‘TRIPLE WIN’

Along with AHRI and ACCA, the Real Estate Roundtable — an advocacy group that represents real estate ownership, development, lending, and management firms as well as other national real estate trade associations — has been a constant supporter of the Tenant Star program. Roundtable president and CEO Jeffrey DeBoer called Tenant Star a “triple win that will spur the economy by creating jobs, enhancing energy security, and preserving our environment by cutting greenhouse gases.”

He added, “The program will allow building owners to attract financiers, investors, and tenants in the increasingly competitive national and global markets for real estate.”

Anthony E. Malkin, chairman, president, and CEO of Empire State Realty Trust Inc., and chairman of The Roundtable’s Sustainability Policy Advisory Committee (SPAC), also expressed high hopes for the program.

“Tenant Star will align office tenants with their landlords to make smart, cost-effective investments in energy-efficient leased spaces,” Malkin said. “Broad adoption will save businesses billions of dollars on energy costs in the coming years and generate new American jobs in the energy-efficiency field that cannot be exported,” said Malkin.

The program will likely create opportunities for mechanical contractors. “This increases the scope of entities looking to make improvements,” McCrudden explained. “If the building owner is unwilling to improve the whole building and the tenant elects to do it for just his or her space, that’s going to create opportunities for HVAC contractors to go in there and make improvements in energy efficiency and water efficiency, lighting, building envelope, and what have you.”

Individual tenants will have the freedom to choose whether they want to be in a more efficient space in a building, and building owners will also be able to tout that they have highly efficient spaces within their buildings.

“If you’re a building owner and you have a Tenant Star tenant, you can re-lease that space as a Tenant Star-qualified space,” Zucconi said. “It elevates the value of the whole building; it’s a trickle up. The tenants start making more efficient decisions, and, all of the sudden, that space — that building — becomes more valuable.”

For more information on the Energy Efficiency Investment Act of 2015, visit http://bit.ly/SB535.

Publication date: 7/6/2015

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