Benchmarking Building Performance

A Tool for Governments to Save Energy and Reduce Greenhouse Gas Emissions

By Brian Hedman

Buildings frequently operate less energy efficiently than they could due to market failures, behavioral anomalies, imperfect or missing information, credit constraints, principal-agent problems, and prioritization of energy issues. Benchmarking programs address these failures.

Benchmarking and lead-by-example (LBE) programs track electricity, natural gas, steam, and other utility usage in a building. These data can enable cities, counties, and states to use market forces to encourage energy efficiency through comparing and reporting buildings’ energy use.

Utilities have offered energy efficiency programs for decades. These programs, however, rely on incentives funded by ratepayers; government generally cannot offer similar incentives as it cannot access funds through similar mechanisms. In response, several federal, state, and local governments have adopted a different strategy, which embeds competition based on energy use between buildings and businesses within a market.

For any market, certain characteristics increase or decrease a product’s value (for example, a building’s location, age, and condition, or public perceptions of a business). Performance benchmarking provides the market with another characteristic for assigning value to buildings or businesses by quantifying their energy efficiency and environmental impacts. Doing so creates natural competition between buildings or businesses as they vie to increase their value.
Benchmarking is typically implemented through legislation or city and county ordinances—a departure from traditionally utility-led programs. Several state and local governments also have taken the lead by establishing targets specifically for government-owned buildings.

Example Benchmarking Programs

Government Buildings—Massachusetts Leading by Example

The Massachusetts LBE program provides leadership, technical assistance, guidance, and grant funding to ensure successful implementation of energy conservation and clean energy practices in Massachusetts’ government-owned buildings. The program also provides assistance with waste reduction and recycling, environmentally preferable procurement, toxics use reduction, water conservation, sustainable transportation, and open space and natural resource protection within government buildings. This “lead-by-example” approach is intended to induce greater efficiency in nongovernmental buildings by demonstrating such benefits in the government sector.

Though this program, Massachusetts has reduced greenhouse gas emissions by 25 percent from the LBE baseline and has reduced fuel oil heating in state buildings by over 16.7 million gallons since 2006 (a 72 percent decrease), with 11 agencies or campuses ceasing all heating oil use and nine reducing it by at least 50 percent.

U.S. Department of Energy (DOE) Better Buildings, Better Plants Program and Challenge

DOE’s Better Buildings, Better Plants Program and Challenge (commonly called Better Plants) is a national initiative designed to increase energy efficiency in commercial and industrial facilities. A voluntary leadership initiative, the Better Plants Challenge asks CEOs and executives of companies, universities, school districts, multifamily residential organizations, and state and local governments in the United States to become partners by publicly committing to energy efficiency.

The Better Plants program aims to achieve the following:

• Increase the efficiency of commercial, industrial, and multifamily housing facilities by 25 percent or more in 10 years
• Save more than $80 billion in energy costs for organizations within the United States
• Create jobs in the United States
• Improve energy security
• Mitigate climate change impacts

City, County, and State Benchmarking and Transparency/Disclosure Programs

Cities, counties, and states have adopted benchmarking policies to encourage energy efficiency through comparisons and reporting of private buildings’ energy use. These policies generally include policies requiring owners to report their buildings’ energy use to the city, county, or state and policies that make information on building energy use publicly available. In return, programs frequently support participation by offering resources such as the free technical assistance.

These policies seek to reduce energy usage and CO2 emissions through disclosures of energy use to buyers and tenants. More efficient buildings can command a premium in rent or purchase agreements, creating a natural market force that increases building efficiencies as owners compete for tenants and buyers.

Often, these programs require disclosure of energy use information through a public website. Several cities do not require public disclosures of building data, but do require disclosures for certain real estate transactions or for current building tenants. Others limit public reporting to summary statistics for buildings in various categories.

Evaluation of Current Programs

Though evaluations of current programs remain limited, certain evaluation issues and findings have emerged anecdotally or formally.

Seattle reports a 99 percent compliance rate and a median ENERGY STAR^® score of 68. New York City saw cumulative energy savings of 5.7 percent during the first four years of its policy (2010 through 2013); the savings percentage steadily increased over each year during that period. The building types most positively affected by the policy were colleges and universities and office buildings. Across the board, older buildings achieve higher energy savings than newer buildings.

Evolving Programs Yield New Data

Benchmarking programs can effectively use market forces to increase energy efficiency and sustainability. Measuring the policies’ impacts, however, may present challenges, and scant evaluation has examined this to date. Identifying key market transformation indicators and tracking these indicators over time will reveal program impacts. As these programs evolve, new approaches will likely emerge for evaluating savings, impacts, and new innovations in program enhancements designed to improve savings.