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Half Of D.C.'s Buildings Could Require Upgrades Under New Climate Law

Owners of hundreds of buildings across D.C. will soon be required to make investments to improve their energy performance under a sweeping new law. 

An aerial view of D.C.'s Central Business District and East End.

The D.C. Council passed a bill Dec. 18 aimed at addressing climate change by reducing the city's greenhouse gas emissions that has been lauded as "historic," "groundbreaking" and the "strongest climate legislation" in the nation. The bill, which Mayor Muriel Bowser plans to sign into law Friday, calls for cutting D.C.'s greenhouse gas emissions by 50% by 2032. 

With a majority of D.C.'s emissions coming from buildings, the bill puts heavy responsibility on property owners to improve their sustainability in the coming years. HOK Director of Sustainability Anica Landreneau, who serves on the D.C. Green Building Advisory Council, estimates about 50% of D.C.'s buildings will need to improve their energy performance. 

The exact threshold for which buildings will be affected has yet to be determined. The bill gives the D.C. Department of Energy & Environment until 2021 to establish a standard Energy Star score that buildings must meet, and it requires that standard to be at least at the level of D.C.'s current median score. 

Once the standard is established, buildings above 50K SF will have five years to make improvements or pay a fine. That net will gradually widen to all buildings above 10K SF by 2026.

"I view the new standard as a great opportunity to continue to engage our building teams to set new goals and further our current energy management program," said Tower Cos. Vice President of Strategy and Sustainability Eugenia Gregorio, who also serves on the D.C. Green Building Advisory Council. "It also encourages us and others in the industry to stay on top of new trends and innovations." 

The new law will establish a task force of commercial real estate industry representatives to help with the implementation, which Gregorio said was critical in making sure the regulations work for the industry. 

"It's really important, because it will ensure the implementation details are reasonable, that the requirements are achievable and that the overall program adds value to building owners," Gregorio said. "The goal of this is to be a win-win for everyone. I think it can be with that kind of collaboration."

Residential, institutional and commercial buildings contribute 74% of D.C.'s gas emissions

Globally, about 40% of greenhouse gas emissions come from buildings, Landreneau said. But since D.C. has a relatively small industrial sector and a public transportation system that reduces vehicular travel, 74% of the District's emissions come from its buildings. 

"That’s our biggest chunk of opportunity for improvement, and we only turn over less than 3% of that per year in terms of new construction, so you have to address existing building stock if you're going to chip away at that 74% that comes from buildings," Landreneau said. 

The buildings will not be required to reach the standard within the five-year window, but the bill forces them to either complete a pre-selected checklist of improvements or choose their own upgrades to improve their energy score by 20%. Building owners who do not pursue either path will be forced to pay a fine.

Owners needing to make upgrades will be able to utilize multiple financing methods, including low-interest PACE bonds and the D.C. Green Bank, a new fund D.C. established prior to the bill's passage that allows owners to borrow money for building upgrades and pay it back out of their future energy savings. The fines for noncompliant buildings will also help support the Green Bank.

"It's not free money, but the idea is you can borrow money and pay for it out of energy savings so it would be revenue neutral to a point and revenue positive after you've paid it back," Landreneau said. 

The types of improvements owners will make could range from replacing windows and insulation to overhauling the HVAC system to a complete re-skinning of a building's exterior. Gregorio said there are several no-cost and low-cost improvements owners can make, such as performing a night audit to ensure a building is not wasting energy in the overnight hours.

Beyond the low-cost upgrades, Gregorio said most improvements that require significant investment would be paid back in energy savings within five years. Tower Cos. has long focused on sustainability and has reduced its overall energy consumption by 25% since 2010, Gregorio said, but it still may have to make some improvements to older buildings. Some real estate owners who haven't actively pursued sustainability goals may have more work to do.

"There are other building owners who, if they don’t have a long-term perspective, they might have a different view than we do, but I think these short-to-medium payback periods make a lot of sense; they reduce operating costs and help attract and retain tenants," Gregorio said. "You shouldn't look at the initial upfront cost by itself. You have to look at the longer-term life cycle view."