Real Estate executives are all too familiar with those “lowest price at the moment, buy it now” cold calls from energy brokers trying to sell supply contracts. What that broker or consultant (or property manager or supplier) may not be sharing with them, are the answers to key questions like: “what’s behind that price” and “how does the energy supply contract affect the management of my properties?” These are important questions, especially since energy supply contracts are often valued in the hundreds of thousands of dollars.
Below is a guide to helping you avoid common and costly mistakes before you sign your next energy supply contract.
Have a Plan
- Define your goals and purchasing strategy. Proactive energy procurement has numerous operational and financial benefits, which can be difficult to attain without clearly defined goals and strategy. Some questions to consider include: Are you more comfortable with the budget control provided by a fixed rate or are you looking to achieve the lowest rates with a risk-tolerant variable-rate product? Do you want each building or legal entity to have a customized strategy, or achieve economies of scale in aggregating your portfolio?
- Set your benchmark. Give yourself something to compare against. Do you want to beat last year’s rates, find a number that fits annual or long term budgets, or try to perform well against the utility supply rate? Pick one or two benchmarks for comparison, and then move forward using them. Over several years and contracts, these benchmarks will help put your costs and processes in context.
- Give yourself time. Since energy markets move on a daily basis and market fundamentals such as weather, supply and demand affect long term price changes, when you buy is as important as what you buy. You or your representative should be watching the markets, and advising when the time may be right. Begin the process 4 to 6 months in advance of the contract end date, and give yourself more flexibility.
Read the Contract and Ask Questions
Insider terminology can make energy contracts confusing and difficult to grasp. However, since the contract creates financial and operational obligations for your company; you should always know the impact of what you’re signing. Energy supply contracts not only identify price, building lists, and payment structure, but also provide instruction for a number of “what if” scenarios.
- What if I sell a building? Every contract has an Early Termination Fee (ETF). If you know a building will be sold during the contract term, exclude the building or ensure the new owner can assume the contract. Alternatively, a short-term and well-timed fixed rate could add value by lowering operating costs before the sale.
- What if there’s a large change in energy usage at a building? Energy contracts can contain provisions that impose penalties when usage changes outside of a specified range, such as due to efficiency upgrades, installation of new equipment or a period when the account will be off line.
- What happens upon contract expiration? Most energy supply contracts typically continue indefinitely with the supplier after a contract expires, but the rate and terms post-expiration can be hidden and unpredictable. These post-expiration terms should, at least, be made clear to you. In practice, you and your broker or consultant should be developing a new plan for renewal months ahead of expiration.
- Which accounts are included? As obvious as this sounds, it very often it isn’t clear. A contract addendum should include account numbers, service address, rate class and annual usage.
- What is the swing or bandwidth? In the cold winters of 2014 and 2015, many Northeast retail energy buyers were hurt with high usages and extra charges. Having a negotiated “swing provision” provides insurance that the supplier will provide the correct amount of energy at the agreed upon rate structure.
Avoid Racing to the Bottom
When someone jumps out and tries to “beat a price” that’s your cue to step back and closely evaluate. Those “great deals” often come at a hidden price and can create an uneven playing field. Many times, what is falsely advertised as the “lowest price” isn’t actually favorable, as suppliers or brokers will add hidden fees and pass along unnecessary risk to the customer in the contract fine print. A trusted “lowest price” is the one which results from your designed process. If you can develop a plan and achieve your benchmarks, you can comfortably execute agreements for your organization on your final RFP contracting day.
In summary, there’s a lot to think about when you’re buying energy. And there are, unfortunately, a lot of people in the energy business who profit on not sharing complete information with their customers. So remember to take the time to: create and execute a plan, read the contract and ask questions, and don’t just jump at what someone says is a great price. Of course, Bright Power’s Energy Procurement Team has a wealth of experience in these areas and is always here to help you.
While my sustainability work (which includes managing project scopes such as Passive House Institute US, Enterprise Green Communities, and LEED for Homes) made me aware of the importance of indoor environmental quality (IEQ), I never cared about it as much as I did once I had a baby. IEQ is a broad term covering the overall effects of a building’s interior on occupant health and well-being.
Healthy IEQ has been linked to improved productivity in the workforce (see The COGfx Study – fascinating!), and it is a key component of the newest iterations of green building standards, like LEED v4 and the WELL Building Standard. But it wasn’t economic output I was concerned about in my apartment – just a healthy infant, since, as studies from the NIH, the DOE, and the WHO (among others) have concluded, IEQ can have a very real impact on health and development. So I set out to learn more about what I could do in my own home to improve IEQ for my family:
At the suggestion of a colleague, we tested our apartment with an analyzer kit sold by Home Air Check. The test we purchased measured VOCs, actively growing mold, and toxic formaldehyde. Our apartment didn’t score well in a couple of these categories, which is why we were especially motivated.
The materials used to make and install carpet (not to mention everything that gets trapped in it!) are usually IEQ nightmares. If you do want carpet (I must say our little guy loves it – despite the rug burn), choose carpet certified by The Carpet and Rug Institute (CRI) as Green Label Plus. We also made a rule that our apartment be shoe free to reduce what we contribute from outside.
Many of us know by now to buy low (or preferably no) VOC paint. Most of our buildings, however, have layers and layers of painted walls – some of which could contain lead. Before making any holes in the walls, we wet the area with a damp napkin and vacuum the area immediately after.
We tried to find products that were GreenGuard (or, even better, GreenGuard Gold) certified or those made from unfinished wood. Since GreenGuard products tended to exceed our budget, we opted for used items since these have already spent years off-gassing! Our beautiful hand-me-down crib is unfortunately not unfinished, and it has plenty of new paint-chipped bite marks at this point…
NASA’s pioneering study on air-filtering plants in 1980 guided our selection of houseplants. We added a small bamboo, a snake plant, a peace lily, a Chinese evergreen, and a few spider plants to our collection.
Ultimately, the best solution in our apartment (which had been renovated just prior to our purchasing it) was to leave the windows open as much as possible. (Although, we are not far from a highway, so that is another consideration.)
Of course, I wish we lived in a Passive House, so we would have continuous supply air filtered through Energy Recovery Ventilation (ERVs), but we’re not there just yet. So, while I continue to be on the lookout for IEQ issues and resolutions (I’m currently saving up to buy an air purifier), I’m also learning to relax, enjoy my beautiful son, and take deep breaths – even if that means sometimes inhaling a few toxins!
Attention NYS Electric Customers:
Beginning April 1, 2017, New York State Zero Emission Credit (ZEC) charges will be assessed to all NYS customers’ electric bills. The purpose of these charges is to help NYS meet clean air goals set by the Clean Energy Standard (CES). ZEC costs will support cleaner electric generation by purchasing Renewable Energy Credits (RECs) and by keeping certain nuclear generation plants in service. These initiatives support the two NYS goals of reducing Greenhouse Gas Emissions by 40% and of requiring 50% of electric generation to be from renewable sources by 2030.
ZEC charges represent a cost increase of $.003 to $.005/kwh to the electric supply cost for all retail (ESCO) and utility supply customers. This adds approximately 2% to a typical Con Edison electric customer’s bill, when you factor in both supply and delivery charges.
New York State Steps into a Leadership Role
In the last year, the establishment of the CES has helped reinforce NYS as leader in supporting clean air, renewable energy, and slowing climate change. As we enter into a time of uncertain environmental leadership from the federal government, New York continues to move toward a future of energy largely being produced through clean and renewable methods. At Bright Power, we feel these initiatives are in sync with the long term needs of our customers and our planet.
I was planning to write an uplifting piece about the “irreversible momentum of clean energy,” following on what President Obama wrote, just before leaving office, in Science Magazine.
If you want to read that piece, click here.
But given the recent events surrounding the President’s executive order on immigration, I feel compelled to write to you about something else: standing up for what is right.
At Bright Power, we have employees who were born in over a dozen countries. My employees have been coming to me – as I imagine your employees, colleagues, tenants and friends may be coming to you – scared and unsure of the security of their place in this country.
The US has long been a place that the brightest and best from around the globe seek to come, and our companies and communities are the beneficiaries of this global braintrust. This is one of the core strengths of our economy. But how can the foreign nationals in any workplace or apartment complex in America be productive if they are forced to worry if they are the next target? How can companies continue to recruit global talent if they cannot guarantee for prospective employees a safe place here?
As leaders of organizations and in our communities, we must stand up to protect those with less power and less privilege, within our organizations, communities, and beyond. We cannot simply look at this month or this quarter and, if the numbers look good, ignore what is happening in the world around us. This is about what is good for the long-term health of our businesses, but this is also about what is right.
This country – the richest in the world – has been a place of refuge for so many — in my family and probably in yours, too. People who didn’t have the privilege of education or wealth, who were chased from their homes or lucky to escape with their lives, coming here with nothing but the desire to prove they could be a productive part of this open and welcoming society; a place where we judge not by who you are or where you came from, but by what you can do.
Political decisions made haphazardly about immigration, taxation, trade agreements and use of military, to name a few, have dire consequences not just on our ability to conduct business, but on our position in the world and on the lives of people in this country and across the globe.
So I stand with other business leaders, from Google to Goldman Sachs, from Ford to GE, against ugly isolationism and xenophobia, and for the loving, inclusive, and welcoming country that has been a beacon of hope and light to my ancestors, to current immigrants and to so many around the world. And I invite you to stand with me.
President and CEO
Just before leaving office, President Obama wrote in Science magazine, about the “irreversible momentum of clean energy.” Just look at the employment trends: “~2.2 million Americans… currently employed in the design, installation, and manufacture of energy-efficiency products and services… [compared] with the roughly 1.1 million Americans who are employed in the production of fossil fuels and their use for electric power generation.” We’ve seen evidence of this ourselves at Bright Power, where our staff has more than doubled in size since the last election and in 2016 alone our revenue grew over 70% — not a lot of conventional energy companies can say that. Insofar as the 2016 election was a referendum on jobs, President Trump should want to support the largest areas of employment in the energy sector (hint: they’re not coal mines). And equipment costs for renewables and energy efficiency, especially for solar energy and LED lighting, have been on a steady downward trajectory, which means that they are increasingly less dependent upon government subsidy.
All of this is good news for the real estate industry. We have a growing set of tools we can use to deliver more value to you, across your portfolio. Finding opportunities to lower energy usage and costs, fixing buildings to make them more comfortable and more efficient, and following them on an ongoing basis to reduce headaches for you and your maintenance staffs…all of this continues to work for you, no matter who is in office.
While the Clean Power Plan (CPP) itself now seems doomed, the electricity sector has already nearly achieved the 2030 carbon goal today (we’re at 27% carbon savings and the 2030 goal is 32%). So as long as we don’t start forbidding the use of renewables in favor of coal (really, Wyoming?), we should far surpass the CPP goals even without the CPP. And while the recent executive orders in support of oil pipelines mean that they will likely get built at some point in the future, it is a small enough amount of oil and far enough in the future that it’s not likely to have a major impact on prices.
Plus, energy policy has always been made primarily at the state level anyway. Rather than anything resembling unity across the states, support for renewable energy and energy efficiency is likely to become even more of a patchwork with even deeper contrasts – defined state-by-state, municipality-by-municipality. It is more than a full-time job keeping up with the constant policy and program changes, but there’s gold there if you do. Just ask the dozens of properties in California that we’ve helped access funds to pay for 80+% of our energy and water improvements.
Furthermore, despite all of the attempts to confuse the public on the issue, even after November’s election, more than two-thirds of Americans support action on climate change. This means that the President needs only to listen to the people on this one. But even if he doesn’t, we’ll keep moving forward either way.
A Thanksgiving message from our CEO, Jeff Perlman
A few weeks ago, a Bright Power employee attended a tenant meeting at a building that recently completed a heating system upgrade project with us. Tenant meetings can sometimes be like walking into the lions’ den, but in this case, the first thing he received was not a roar but a hug from an elderly lady. “Thank you! My apartment has never been more comfortable – I haven’t had reliable heat in years, until now,” she said.
Moments like this crystalize why we do what we do. Together, we make buildings better, which makes people’s lives better, and, importantly, makes those buildings more valuable and reduces our harmful impacts on the planet. It is a winning proposition all around. And we are thankful that this is the work that we get to do every day.
In this time of Thanksgiving, when we reflect on what is important to us, and especially now, as we try to heal the wounds from a bitter, bruising election season in which facts were often ignored, I want to reaffirm our commitment to some of the basic truths that we live by here at Bright Power.
Climate Change Isn’t Going Anywhere…and Neither Are We
Protecting and preserving our planet has always been and always will be a no-brainer for us. In the last few years, we’ve been fortunate to have strong support from federal and state governments who are committed and connected to our mission of reducing the negative impacts of buildings on the planet. It’s hard to know how the incoming president and his administration will coincide with this mission, and it’s safe to assume that we may encounter some new obstacles. But regardless of what happens at the federal level, states, municipalities and, importantly, the private sector will continue to lead.
We can’t lose sight of the important progress we’ve made. Over the last 8 years, we have largely been able to transform the conversation from “why should we reduce carbon emissions and other negative environmental impacts of our buildings?” to “how can we do better?”
With many major cities, large swaths of people and some of the most valuable property at risk of being submerged (or turned to inhospitable desert) in the coming decades, we need to work hard to prevent the worst outcomes while also planning for the impacts that wilder storms, more severe draughts and more vicious floods will have on business, the economy, humanity and the planet. All of this directly impacts our work and our clients. For example, CBRE has written about how rising sea levels effect real estate developers, Morgan Stanley about how climate change impacts investors, and the head of the Reinsurance Association of America about the climate change impacts on the insurance industry .
Our Work is Good Business
For better or for worse, saving the planet isn’t the sole driver of most decisions. Fortunately, the work we do at Bright Power to save the planet also makes good business sense. Wasting resources like energy and water is bad business and bad for the bottom line – that’s never going to change. And the benefits are more than just saving on operating costs – implementing best energy management practices leads to more comfortable spaces that are easier to lease, longer lasting equipment, and fewer emergencies and unplanned equipment replacements. A building with better indoor air, better light, fewer toxins, on-site clean power generation and lower operating costs is a more desirable building. And a more desirable building is a more valuable building. (In fact, acknowledging and evangelizing the business benefits of our work might just advance our cause with the new president and his administration…)
Resiliency is Key
We talk a lot about resiliency, often in the context of new and exciting backup power technology. But now more than ever, it’s important to talk about resiliency in a broader context. Being resilient means being able to bounce back after a hit, a storm, a change. And times they are a changin’.
Being resilient means being prepared, having a strong foundation, and clear plans and principles to turn to when something unexpected occurs. At Bright Power, we’ve spent the last 12 years building a great track record and a strong network of forward-thinking partners who understand the value of what we do for each other. We are so thankful to get to work with and for you every day. It’s because of our great achievements together that I know we will be able to bounce back from whatever tries to push us off course.
Lastly, I want to put a few things in writing that were always a part of who we are as a company, but seem like they should be made explicit given what we have heard in our national discourse over the past few months.
At Bright Power we celebrate the diversity in our workforce, are proud of our support for working mothers, and aim to create a comfortable and safe working environment for all of our employees regardless of race, religion, gender, sexual orientation or country of origin.
We are committed to making this world a better place for everyone: for you, your employees and your residents; for us, our families and our friends; as well as for all the other people and creatures all over the globe whom we may never meet. We believe that this isn’t just the right thing to do – it is the way to build a great, long-lasting and important company.
Regardless of who occupies the Oval Office, and how much support we get from the Federal government, we will continue to find opportunities to deliver solid business value that improves our communities and preserves the planet.
Real estate owners and managers are often spooked by energy and water investment projects for a variety of reasons. Maybe they’re haunted by unsuccessful past projects or maybe the results are just ghosting them. Whatever the reason may be, success lies in the approach. Below are some of our top tricks that will help you reap the treats of an intelligence-driven approach to energy and water management.
Don’t be Caught by Surprise
There’s nothing like an unsuspected scream or menacing shadow to scare the bejeezus out of you. However, scary situations are often avoidable with careful planning and awareness of your surroundings. For example, locking into a fixed-rate energy procurement contract is a proactive way to manage the cost of energy supply against volatile (and sometimes terrifying) market prices. This is a particularly useful strategy to consider in a mild autumn, when prices are stable. If you’d like to learn more about this winter’s energy market predictions, check out our blog on the subject here.
Survey the Whole Scene (or don’t just grab the first pumpkin that you see)
When you hit the pumpkin patch, you need to survey your options before landing on the perfectly shaped, sized, and inspirational gourd. That’s how we recommend implementing energy projects too, especially across a large portfolio. For example, take government and utility financial incentives: the SoCalRen program is an amazing opportunity to upgrade properties in Southern California at very low cost, but which properties should you choose? By evaluating your entire portfolio, you can assess where your investment dollars will have the biggest impact and show the highest returns.
Don’t be on the Losing End of Dramatic Irony
If only you could explain to the horror movie lead that answering the door is a poor choice because you know what is lurking on the other side. Alas, they can’t see the whole picture. Buildings are complicated environments with sprawling, interrelated systems and you want someone who can think holistically across all of them in order to effectively manage energy and water. Just because there is a heating problem doesn’t mean that the solution is in the boiler room. In fact, sometimes the source of the problem isn’t related to the equipment at all. In multifamily buildings, residents are as important a factor as any to consider when diagnosing any problem. This is why we recommend whole-building audits and continuous energy management services. Having our engineers go inside a building, speak with residents, and examine all of the systems’ functionality is crucial in diagnosing the root of an issue and presenting an informed solution. Providing continuous expertise and energy management lets us help you anticipate problems and recommend how to avoid them. Otherwise you’re liable to be frightened purely because you’re operating with incomplete information.
Don’t Jump to (Scary) Conclusions
As any parent can attest, some of the scariest things are the things that we don’t understand. And the only way to combat that is to probe a bit deeper and to figure out what is actually going on. It’s like in the Wizard of Oz when they finally peek behind the curtain…or those big, spooky Halloween displays that make your five-year-old scream and cry until you show him that it is just a toy (with an on-off switch), not a real skeleton coming to life.
For example, one of our clients always found water on the floor of their boiler room. Noticing that it appeared to be leaking from the bottom of their water-tube steam boiler, they called the manufacturer’s representative to come out, drain, and inspect the boiler. When he opened it up and saw corrosion on the tubes, the rep said “it’s all gotta go.” Our client was looking at frightening repair costs, to the tune of hundreds of thousands of dollars.
Before rushing into anything, we helped our client select a nondestructive testing (NDT) company and supervised a more thorough ultrasonic testing of the boiler tubes. When the results came back, they were surprising. The corrosion had looked bad, but there was actually minimal loss of tube wall thickness. When we leak-tested the boiler, there were just two pinhole leaks and a leaking joint. The root cause was likely that this boiler had run much more than the standby boiler, and therefore experienced many more heat up and cooldown cycles. The rep replaced the two leaking tubes, we fixed the control logic so that the lead boiler would rotate weekly, and together we filled, started, and tested the boiler – just in time for heating season.
There is so much to gain from strategic energy and water management. From avoided capital costs to utility bill savings and resident retention, the list of benefits is hard to pass up. But in order to get the treats, it’s important to bear in mind these tricks.
Have you ever heard the old adage, “Sell in May and go away”? It’s a popular one among stock traders since prices often dip during the summer months, but it’s not a rule to live by, especially when it comes to energy purchasing. We prefer the saying, “Prep in October, before winter gets closer”. Now, yes, we did make that up, but for good reason!
Winter weather can impact multifamily real estate owners on so many levels. From site-level crises like freezing pipes (and residents) to portfolio-level energy costs, the only way to manage the changing seasons is to plan ahead, early and often. For tips on how to prepare your actual buildings for winter weather, check out our checklist. For energy purchasing, getting ahead of the weather is key, however, that means your strategy heavily depends on forecasting, historical data, and taking action.
In the last few years, volatile winter weather has rocked New York City and national energy markets on a number of, often cleverly-branded, occasions. In 2014, Con Edison electric supply prices climbed to $.22/kWh after a string of single digit degree days – popularly known as the northeast’s Polar Vortex. In this past, extremely mild winter, Con Edison prices dipped to $.05/kWh. Owners who allow the price they pay to float with the market are susceptible to unexpected swings like this, which is why a pre-season contract often makes the most sense.
Heading into the upcoming winter, energy market prices are looking unstable. Due to an extremely hot summer in 2016, prices are no longer trending downward. Natural gas production has begun to level off and is expected to fall short of consumption in 2017, leading to a deficit in the storage system.. As always, prices are heavily influenced by fluctuations in weather, available supply, and expected demand. In the winter, extremely cold temperatures will cause the use of heaters to rise, drain natural gas supply and, inevitably, prices will go up. In turn, warm weather during the winter months will preserve natural gas and keep prices low. If only we really knew what to expect from Mother Nature!
Accuweather and the Farmers Almanac predict relative warmth in the South and Southwest but a colder-than-usual stretch in the Plains and Northeast.
The NOAA predicts warmer than usual weather across the map.
Ultimately, how you decide to budget and strategize for winter energy spending depends on how much risk you’re willing to take and able to handle. If you are more conservative and want to make sure that your budgets are set and secure each year, locking in a fixed rate for your energy supply before the winter would be your best option. This strategy is very typical in supportive or affordable housing and Co-ops or condos. If you have more ability to take on risk, and have enjoyed the recent low rates in 2015 and 2016, there are a variety of flexible and aggressive strategies to implement that can help you get the lowest rates possible.
No matter which approach you take to energy procurement for your buildings, one thing is certain: now is the time to act.
EnergyScoreCards grades enable users to target their efforts and resources towards the buildings in their portfolio with the greatest potential for savings. This is done by comparing buildings to their ‘peer’ buildings, assigning grades of A, B, C or D according to how their energy and water use stacks up to these peers. Our new algorithm strives to improve on our concept of a ‘peer’ building by more closely comparing buildings to those that have similar needs.
For more information about the new grading algorithm itself please click here.
Why is my building’s grade different?
The new grade is a more accurate picture of how your building is performing compared to peer buildings. You can think of this new grade as a building’s potential for savings. So a C or a D building likely has a lot of ‘low-hanging fruit’ measures that are faster and cheaper to implement, while an A or B building is performing well relative to peer buildings – it may still have opportunities to lower energy and water use, but they may take a bit more investment of time and money.
My building’s grades improved with the new algorithm, what does that mean?
Your building is likely of a type that tends to use more energy, so when it’s compared to other buildings like it, its relative energy use is not quite as substantial. This includes older, small buildings or buildings with lots of amenity space.
My building’s grades got worse with the new algorithm, what does that mean?
Your building likely is the type that tends to use less energy, so when compared to other similar buildings, we can see that there is more room for improvement. These include newer, large buildings without a lot of amenity space and all-tenant-paid garden style complexes.
What does a grade change mean for my site staff and how do I communicate this change to them?
If you’re already using EnergyScoreCards grades to motivate or inform site staff, this shouldn’t be too big of a change. Most grades either won’t change at all or by much. For buildings that do have a larger change in grades, it likely won’t be too much of a surprise to site staff, since they know your buildings best. The most important thing to communicate is that we’re continually updating our models to make the grades more useful, and this latest change is really aimed at making the grades as actionable as possible, so buildings that now have Cs or Ds should have a lot of potential for savings.
Why did the algorithm change?
We’re constantly updating our software and modeling algorithms to incorporate the most state-of-the-art methods possible. This latest change was also driven by a lot of feedback we’ve received from clients, both in terms of grades that didn’t make sense and wanting tighter regional comparison.
Why did only some of my building’s grades change?
Since this upgrade is really a refinement of our current model, many grades won’t change much or at all. It’s also possible that your overall energy grade might stay the same, but end use grades (heating, cooling, baseload electric and baseload fossil fuel) might change. This is because the end-use and overall energy grades are calculated separately, and could differ for many reasons, such as:
- The distribution of energy use (and energy needs) between end-uses is often not equal.
- There can be no energy used for a specific end-use, giving a property an end-use grade of ‘N/A’, but that means less energy overall that will factor into the overall grade.
- You can’t tell if you’re on the border between two grades, so you might be just barely a ‘B’ for end-uses, but just barely an ‘A’ for overall energy.
- Certain types of fuel are more efficient than others, so a property may have an efficient fossil fuel baseload score, but compared to properties that have those end-uses filled by electric, may not be as efficient overall.
- Depending on the payment code, the metrics for end-uses may be measured against different building areas. For example, for TTOO buildings, the cooling index (and grade) is normalized by common area, whereas the overall energy index is normalized by total multi-family area.
How does this impact energy improvement recommendations I’ve already received from Bright Power (such as through an energy audit)?
EnergyScoreCards provides a high level analysis of building energy use. While EnergyScoreCards grades are an important input for our engineers, there are a lot of factors that go into producing the recommendations that go into an energy audit report, including equipment surveys, conversations with site staff, observations from a site visit, energy modeling, and our experience upgrading similar buildings. The energy improvement recommendations (or energy conservation measures) presented in an energy audit were custom created for your building using a lot more data than is available in EnergyScoreCards. EnergyScoreCards is a great place to keep track of these recommendations and to measure the actual energy performance improvements after you have implemented them.
How does this compare to Portfolio Manager’s Energy Star score calculation?
Portfolio Manager also uses a Machine Learning Regression algorithm to calculate their Energy Star score. However, we’re using a different type of algorithm that performs much better with different types of building data, and we’re ‘training’ our algorithm on a much larger database, making it both more accurate and better able to properly model many different types of buildings. We’re also only comparing buildings to those in their climate region, and we have a custom model for each of those regions. The EnergyScoreCards grading model also grades by energy end-uses (heating, cooling, baseload electric and baseload fossil fuel) in addition to total energy and water use, so you can see which parts of your energy consumption have the biggest potential for improvement. Finally, we’re able to grade buildings based on both the owner-paid portion of utility use or whole-building data, whereas whole-building data is required for an Energy Star score.
When is this rolling out?
Will historical grades change to the new algorithm?
Will I be able to access old grades?
Not on the EnergyScoreCards website. Your EnergyScoreCards Energy Analyst can supply you with a spreadsheet showing your Most Recent Year grades before and after the change for reference.
EnergyScoreCards, Bright Power’s premiere utility bill analytics software, is releasing an upgrade to its proprietary grading algorithm in October 2016. With this upgrade comes improved accuracy, refined regional analysis, and a focus on the potential for saving energy and water at every building. We’re excited to release this upgrade and give our clients an even deeper, more sophisticated understanding of energy performance past, present and projected. In this blog, we’ll take a deep dive into our new grading methodology and explore the nuances of multifamily building energy analysis.
Why do we grade buildings?
Making intelligent decisions about how to manage energy and water at the portfolio level requires distinguishing between the good, the bad, and the liability in terms of efficiency. If a property owner has two buildings on the same block with very different energy usage, does that mean that the one using less energy is performing closer to its potential? Is it even worth looking into energy saving measures in the ‘better’ performer? What if the buildings are very different ages or have different types of tenants? Or what if one building is in NYC and the other is in Los Angeles?
EnergyScoreCards grades help answer these types of questions and allow you to understand how efficiently your buildings are performing, and where best to focus your efforts and resources within a portfolio to maximize savings. We do this by comparing energy and water consumption metrics for your properties to those of similar buildings in our database of over 20,000 multifamily buildings.
As anyone who knows multifamily buildings can tell you, defining what “similar buildings” means is easier said than done. Multifamily buildings vary in terms of their location, size, age, construction, system types, amenities provided, the size and configuration of apartments, and many other physical and operational factors. On top of that, a variety of metering and payment structures means that in some cases we have access to whole building data, and in others only the portion of consumption paid for by owners. All of these factors and more must be taken into account in order to develop a meaningful and accurate grading methodology.
As our database grows, we are better able to understand the energy and water needs of all different kinds of multifamily buildings across the country. We also continually update our software to incorporate the most state-of-the-art tools available to provide value for our customers. As such, we have recently updated our EnergyScoreCards grading algorithm and it’s our most substantial change to the grading system yet. Our new model is able to better define the concept of a ‘similar’ building and uses new statistical tools to figure out which characteristics are the most important when it comes to grading. With the new model in effect, grades will be ‘fairer’ and will better indicate potential savings by being based on things that owners can actually change.
The EnergyScoreCards Dataset
Our database includes over 20,000 buildings with 800,000 units grouped into more than 6,000 properties, each with over 30 data fields such as total square feet, building age and resident demographics. By analyzing all of this data, we can figure out which building characteristics have the biggest impact on energy needs, and use these to calculate building grades.
To get an idea of the geographic span of our dataset, here’s a map of the U.S. with bubbles representing properties grouped by location.
Why this matters to you
This recent upgrade to EnergyScoreCards is part of Bright Power’s ongoing efforts to continually improve our data analysis and software to give building owners all of the information and guidance they need to better manage energy and water at their buildings. With improved peer comparison, our grades allow for:
- More targeted audits
- Better distribution of resources across a portfolio
- Continued confidence in our ability to understand your building’s needs
Stay tuned for more improvements, we’ve got so much more on the way!
For more on how we’re better defining building peer groups, read on below:
Which building characteristics affect energy use?
One of the main features of EnergyScoreCards is the building energy grades, which allow property owners to understand how their properties compare to other buildings in terms of energy and water use. But determining a fair way to compare properties to similar buildings can be challenging. Our goal is to figure out what information is relevant to building energy use and how we can use this to group buildings with their peers.
There are many factors which contribute to a building’s energy use. Many of these are permanent factors, such as the age of the building or its size, and many are things that a building owner or manager can change, such as the specific heating, cooling and distribution equipment in the building. Our new algorithm does a better job of normalizing for the permanent features of a building, so that the grade is only based on the things that an owner can change – the fixable factors. So now you can know if the huge electric bill at your 30-story building is because it’s not performing efficiently or if it’s in line with other tall buildings with lots of elevators.
Our new algorithm also breaks up our dataset into more geographic regions that have similar climates and energy use patterns. You can see the new regions in the map below.
But how can we tell which building characteristics are important for determining how much energy a building should use? Fortunately, our new grading model can help answer this question, and ranks building characteristics on how much they impact a building’s energy and water use.
Once we understand what affects energy use, we can look at what types of buildings use more or less energy based on the most predictive characteristics. The graphs below show the Energy Use Index (EUI – kBTU/sqft/yr) vs different building characteristics, for all NYC buildings with owner-paid heat and hot-water. No discernable trends are apparent for any of these characteristics on their own…
…but when we look at the EUI compared to multiple characteristics at once we can find ‘pockets’ of parameter space that stand out. In the graph below, each circle represents a group of buildings binned by average apartment size and the age of the building. The size of the circle represents the number of properties in the bin and the color represents the median EUI of the bin. From this, we can see that old buildings with small average apartment size have the most intense energy use. While buildings with small average apartment size built around the 1960s also have relatively high EUIs, these constitute a relatively small number of properties (as shown by the circle size), and so it’s difficult to tell if this is a strong trend. On average though, energy use becomes more efficient with increasing apartment size for buildings of any age, which makes sense as you have fewer residents occupying the same space.
Similarly, the graph below shows how EUI varies with total building area and the average apartment size, and we see a trend of small buildings with small average apartment size using energy the least efficiently.
These graphs allow us to identify types of buildings that require more or less energy per square foot, even when operating efficiently. We can explore this trend further by looking at the distribution of EUIs for two ‘types’ of buildings:
- Old, small buildings with small apartments
- New, large buildings with large apartments
While there is some overlap in the distributions, there is definitely a tendency for old, small buildings with small apartments to use more energy per sqft. In our model, we want to grade these buildings fairly, so they’ll only be getting C’s and D’s if their use is inefficient compared to buildings like them, and not compared to all buildings.
How do we use this information to grade your buildings?
In order to fairly compare buildings to their peers, we calculate each building’s predicted EUI based on its permanent characteristics using our entire database of buildings. This predicted EUI can be thought of as its peer building’s use. To calculate this predicted EUI, we use a Machine Learning algorithm called a Random Forest Regressor. This algorithm is effective at fitting both numerical characteristics (such as building square feet) and categorical characteristics (such as the type of fuel used for end-uses), and it’s also not as susceptible to overfitting as other types of models (something data scientists always worry about). A Random Forest Regressor is constructed of many decision trees, each of which determines the energy use of a building by traversing through the tree based on all of its characteristics. The final predicted EUI is then calculated from the average predicted value from all of the 200 trees in a given model. Since our grading algorithm uses around 60 models total, that means we’re calculating the predicted EUI for buildings in our database using 12,000 different Decision Trees!
A portion of an example decision tree is shown below.
Example Decision Tree
To determine the predicted EUI for a given property, traverse the tree from left to right. At each node, take the top or bottom branch, depending on whether the statement in the node is true or false. For example, for a property with the following characteristics:
- Average apartment size = 1300 sqft
- Total size = 800,000 sqft
- Number of Units = 250
- Year built = 1950
You would traverse the tree, by answering: TRUE, TRUE, TRUE, FALSE
We then calculate the grades based on how much a building’s actual EUI compares to the predicted EUI, so the grades represent how much a building’s energy use differs from a typical peer building based on changeable factors.
With our improved peer comparison, you can think of your building’s energy grade as its potential for savings. A ‘D’ really just means you could be saving a lot of money! You wouldn’t expect your aging apartment building in Minnesota to ever have the same energy consumption per area as a new garden development in California, but with the right focused effort, it can still get an ‘A’.
To download the pdf version of this article, click here.