ENERGY STAR is one of the most well-known and widely-used standards for promoting and benchmarking energy efficiency in the world. Since the Environmental Protection Agency established ENERGY STAR in 1992, the program has been adopted in Australia, Canada, Japan, New Zealand, Taiwan, and the European Union. Today, approximately 25 percent of existing U.S. commercial building space is benchmarked with ENERGY STAR.
Reporting energy efficiency through ENERGY STAR is often mandatory for commercial buildings, depending upon where they are located. Some cities and states have voluntary programs that may result in specific incentives, energy certifications, and/or ENERGY STAR ratings. But needless to say, beyond the potential rewards and fines, monitoring energy efficiency is a good business practice.
Here are 5 reasons to benchmark buildings in your portfolio with ENERGY STAR.
1. It is often required by law
Almost all buildings leased to the federal government are legally required to participate in energy benchmarking. State and local governments are following suit; many states and municipalities require state and city-owned buildings, along with commercially-owned buildings above a certain square footage threshold, to benchmark annually through ENERGY STAR Portfolio Manager. Depending on the geographic distribution of your portfolio, local benchmarking ordinances may already be a regular consideration for you and your team.
While the fines for non-compliance can vary (with some being quite steep), the greatest risk is often reputational. Simply put, organizations that fail to comply with local benchmarking ordinances in areas where the rules are stringent can risk public backlash. And with more and more cities and states adopting mandatory energy benchmarking programs and making the data publicly available, real estate investors increasingly turn to ENERGY STAR when assessing the costs and risks of potential acquisitions. In all, ENERGY STAR benchmarking is a crucial box to check for real estate organizations whenever – and wherever – it is required.
2. You get a true picture of your portfolio’s performance
Energy benchmarking helps you put your monthly energy bills into context. This is important because building performance is difficult to assess in a vacuum. Building A might pay $3,000 a month for electricity, and Building B might pay $10,000, but on its face, can we assume that Building B is less efficient? What if it is larger, has higher occupancy, is located in a region with more variable weather, or has a more energy-intensive use case? Benchmarking with ENERGY STAR can reveal how buildings perform within their class, region, and category, giving you an accurate picture of the buildings in your portfolio that are underperforming and helping you understand where to invest time and resources to make improvements.
3. Tenants care about green building certifications – and will pay a premium for them
Over the last decade, consumers have come to expect that the companies they work for and do business with also share their values. This includes committing to a lower carbon footprint. By choosing to participate in energy benchmarking and working to obtain a high ENERGY STAR score, you can signal to environmentally-conscious tenants that your values align. Of note: startups and tech companies, with their high proportion of millennial workers, tend to care deeply about environmental concerns, and 30% of the Fortune Global 500 have set (or already achieved) a public climate goal. All told, tenants place stock in their landlords’ green credentials, and the proof is in the numbers: a 2015 study by Bentall Kennedy found that ENERGY STAR-certified buildings command 2.7% higher rents.
4. Benchmarked buildings use less energy
In addition to being good for the top line, ENERGY STAR also happens to be good for the bottom line. According to an ENERGY STAR study of 35,000 buildings that entered complete energy data and received an ENERGY STAR score from 2008 – 2011, the buildings experienced average annual energy savings of 2.4% and total savings of 7% over the 3 year period. They also increased their ENERGY STAR scores by an average of 6 points during this time.
Why might this be the case? True to the old saying about “managing what you can measure,” seeing consistent data on building performance can motivate building teams to pursue cost-effective measures for driving energy efficiency in their day-to-day operations.
Want to take cost-effective efficiency measures to the next level across your portfolio? Aquicore can help. Learn more.
5. ENERGY STAR benchmarking can aid with certifications and ESG disclosures
If you plan to pursue green building certifications, like LEED, or participate in reporting frameworks, like GRESB, you may find that benchmarking your buildings in ENERGY STAR can give you a head start.
First, the same consumption data entered into ENERGY STAR Portfolio Manager for benchmarking can qualify a building for ENERGY STAR certification. To be eligible for ENERGY STAR certification, a building must earn an ENERGY STAR score of 75 or higher on the EPA’s 1-100 scale, indicating that it performs better than at least 75 percent of similar buildings nationwide.
But the benefits don’t stop there. If you’re striving to attain LEED Silver or higher, ENERGY STAR certification can also offer a leg up: LEED awards up to 20 points for ENERGY STAR scores above 75. (It bears mention that LEED certification is itself good for business: according to the Bentall Kennedy study, LEED-certified buildings command a 3.7% premium in rents and generally have higher rates of occupancy and tenant satisfaction.)
Finally, many key ESG frameworks and disclosures, like GRESB and CDP, require landlords to report building- and portfolio-level energy consumption. By benchmarking the buildings in your portfolio with ENERGY STAR, you are effectively killing two birds with one stone. Having a strong foundation of building data ready to go in ENERGY STAR Portfolio Manager come ESG reporting season can give you a significant head start on some of the more involved public disclosures that investors and the capital markets are increasingly relying upon to make decisions.
ENERGY STAR Portfolio Manager is a free tool that benchmarks all of the buildings in your portfolio. Aquicore can help automate the data collection and benchmarking process by centralizing your portfolio energy data for easy submission to ENERGY STAR Portfolio Manager.