As builders, architects and owners know, energy simulation is used to predict performance of new buildings as compared to local building codes and industry standards like the Canadian Model National Energy Code for Buildings. But with actual performance becoming more trusted (for obvious reasons) than predicted performance, how do you know what ‘normal’ performance is for the building type in question?
On redevelopment projects, energy benchmarking is key, allowing builders and owners to track and report improvements in energy consumption to compete with neighbouring sites. Equipped with the right data, builders and real estate owners can get more from high-performing assets, differentiating their building from others, attracting and retaining tenants, and increasing their asset’s value.
Relative building energy efficiency performance is determined through energy benchmarking. Through this process, a facility’s energy use is normalized (adjusted to align with standard weather and occupancy) and compared to its peers. Normalization is typically done in one of two ways – using either industry-wide analysis tools or custom normalization. It will come as no surprise that a building’s size is the greatest variable impacting its energy use. To compare buildings regardless of size, a building’s Energy Use Intensity (EUI) measures energy use per unit area. It is often reported in kilowatt-hours of energy per square foot of building gross floor area (or kWh/ft²).
However, this does not always allow for an “apples to apples” comparison. Weather, occupant density, vacancy, hours of use, and facility type all influence a building’s EUI, and most of these cannot be controlled by a facility owner or manager. (Imagine telling an accounting firm during tax season they must leave the office by 5 p.m.) Unless these variables are addressed, EUI results can be misleading when comparing the performance of multiple buildings. To adjust for uncontrollable factors, we use a process commonly called “normalization.” The goal of normalization is to define a typical condition for each uncontrollable factor and adjust the energy use intensity of each benchmarked facility accordingly.
Consider a facility in Edmonton which is benchmarked against a facility in more temperate Vancouver. Given identical system performance, the Edmonton facility will have a higher EUI because the colder climate requires more heating to keep occupants comfortable. For example, in 2012, Vancouver experienced 50 per cent fewer “heating degree days” (a common measure of how cold a climate is) than Edmonton.
If the Vancouver climate defined the typical weather condition, then normalizing the Edmonton facility’s energy use might cause its declared heating energy to decrease by 50 per cent. At this point, the energy performance of both facilities can be compared side by side.
Vacancy normalization is not as well understood as weather normalization, but the process is similar. First, one must determine how much energy the building occupants use. Then one must define the typical vacancy condition, and, finally, apply a normalization adjustment. This may be highly relevant if your redevelopment project is expected to boost occupancy significantly. Take, for example, a facility which is currently 50 per cent vacant; redevelopment is expected to reduce vacancy to 10 per cent. To compare the energy performance of this building before and after redevelopment, you need to normalize for vacancy.
Any change in the use of the space will also affect energy performance. Offices, residences, stores and schools all use energy differently. Mixed-use redevelopment projects are particularly prone to the impact of these changes.
Industry-Wide Benchmarking Programs
The need for normalization without the challenges of a custom program has caused industry-wide benchmarking programs to arise. The two most notable benchmarking programs used in Canada today are Energy Star’s Portfolio Manager and the Real Property Association of Canada’s (REALpac) Energy Benchmarking Program.
Energy Star Portfolio Manager is a tool that incorporates a normalization process. In calculating a facility’s score from 1 to 100, it shows where that facility falls on a bell curve of energy performance. A score of 75, for example, implies that a facility’s performance is in the top 25th percentile. The 1 to 100 score adjusts for common uncontrollable factors and is easy to communicate.
This widely accepted normalization method is accessible to the public and is based on a statistical regression analysis of key independent variables considered across thousands of buildings. What’s more, the tool already includes a large data set of peer energy use so individual facilities don’t need to collect and analyze data for anyone else in order to benchmark their own performance. And, since the required level of input detail is flexible (users can apply defaults if exact occupancy or operating hours are not known), users can refine their score over time instead of committing to a significant upfront data collection investment.
Portfolio Manager has a Target Finder module which developers can use to set performance expectations early on, ensuring the asset value is appropriately strengthened. A new buildings benchmarking module can be used by designers and developers to predict how a proposed building will stack up against existing buildings nearby. The new buildings module relies on building energy simulation model results created during the building’s design stage.
For these reasons, Energy Star Portfolio Manager has the greatest market penetration: Programs like LEED for Existing Buildings and Toronto’s Civic Action Race to Reduce use the tool to evaluate facility energy performance.
While the tool has successfully benchmarked hundreds of Canadian facilities, until recently those facilities were still being compared to peers south of the border. That changed on July 10, 2013, when Natural Resources Canada launched a Canadian version of the Energy Star Portfolio Manager tool. Now, all Canadian buildings are compared to Canadian peers.
Last updated in 2009, the bell curve used to generate a score is based on a data set of thousands of Canadian buildings. Still, the Canadian tool currently provides scores for only office buildings and K-12 schools. Other building types are expected to be added over time.
REALpac’s Energy Benchmarking Program. In September 2009, REALpac, in collaboration with the Canada Green Building Council (CaGBC) and the Building Owners and Managers Association of Canada (BOMA Canada), announced an energy consumption target for office buildings of 20 equivalent kilowatt-hours of energy use per square foot of building area per year (20 ekWh/ft²/year), to be achieved by 2015. For short, the program is known as “20 by ’15.” Shortly thereafter, REALpac again collaborated with CaGBC, BOMA and various energy experts to develop a publicly-accessible tool to help the commercial real estate industry understand their energy use and measure it in a meaningful way.
The first annual REALpac Energy Benchmarking Survey (2009) provided an up-to-date look at how Canadian office facilities perform. A custom normalization methodology was developed and applied. An online tool is now available to benchmark 2012 data against peers. Normalized results are available immediately, and a peer-to-peer comparison is released once per year in REALpac’s Energy Benchmarking Report. While interim reports are not available, REALpac’s reports tend to have the most recent data available across the industry.
Occupancy Rates and Energy Costs – Partners in Asset Value
As in any other business, rea
l estate value is tied to expenses and income. An asset is more valuable if utility bills cost less. Lower expenses increase the asset’s Net Operating Income (NOI) and, consequently, the asset value itself. The U.S. Environmental Protection Agency (EPA) points out that at a capitalization rate of 8.5 per cent, a $0.50/ft2 annual reduction in energy costs would result in an asset valuation increase of $5.90/ft2. In Canada’s current lower capitalization-rate climate, even larger asset value increases are implied. While energy benchmarking allows asset managers and owners to reduce and report lower expenses, the leading driver of stronger asset values is actually the leasing power of proven high performance buildings.
According to the U.S. EPA, managers of REITs with large portfolios confirm that both tenant comfort and building occupancy are higher in buildings benchmarked and labeled with their Energy Star program. Higher occupancy increases the asset’s NOI and thus the asset value as well. The dual benefit of high occupancy rates and low energy costs create the winning case for building energy benchmarking.
Saving Energy: Beyond Benchmarking
While benchmarking verifies and reports success, benchmarks alone don’t save energy. Once a building’s performance is determined, it is important to act to improve that performance. As such, benchmarks are most effective when tied to conservation policies and targets so owners and managers can take action to improve. In large organizations and government groups, choosing a single benchmarking method allows everyone – from owners to builders to shareholders – to consistently measure success. This shared language helps distributed decision-makers reach common goals.
Mandatory public disclosure of facility energy use is rapidly gaining in popularity. While not yet mandated in Canada (but already policy in several U.S. cities), it is on the horizon. In 2012, Healthcare of Ontario Pension Plan (HOOPP) launched Canada’s first public building energy and carbon emissions label. ASHRAE released the Building Energy Quotient (bEQ) program; and CaGBC launched the Green Up program. Recognition of these programs is expected to grow rapidly, and by comparing apples to apples, builders, owners and managers can understand how their buildings are performing relative to the market and achieve the asset value boost associated with a higher performing building.
Eric Chisholm, P.Eng, LEED AP, is a project associate at Halsall Associates in Toronto. He is a Certified Energy Manager registered with the Association of Energy Engineers, and can be reached at: email@example.com A slightly modified version of this article originally appeared in the May 2013 issue of Canadian Consulting Engineer.