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DaBx PlaNYC 2020

- = A Paradigm Shift = A Report by Rogier Fentener van Vlissingen, B.A. Econ. and Bruce E. Lorentzen, E.E.
Version 2.0 (July 4th, 2013) Original Publication: July 4, 2011 Price $ .00 (!ubscri"tion) $2#.00 (!ingle $o"ies)

%a&' Pla()$2020 by %a&' %e*an+ !i+e !olutions, ,nc. is license+ un+er a $reati-e $o**ons .ttribution/(on$o**ercial/!hare.li0e 3.0 1n"orte+ 2icense. Per*issions beyon+ the sco"e o3 this license *ay be a-ailable at 444.+ab'+e**.




What war has ever been won by attacking the enemy first where he is strongest? Churchill knew: one first needs to focus on the soft underbelly of the enemy, which in World War Two meant the Mediterranean and orth !frica, where "ermany was over#e$tended%

&n ew 'ork City, the energy and (ollution monster is defined by building emissions and the soft underbelly of the energy cum (ollution beast is to be found in the vast blocks of old#line a(artment buildings, five to si$ stories high, and often of solid construction: steam heat, window !)Cs, hot water from a coil in the boiler% The current energy#efficiency cum switch*em to natural gas regime condemns these buildings to ever decreasing economic (erformance, and worse, energy renovations are often undertaken with long term money, but only book short term efficiency im(rovements, ty(ically in the +,#-,. range, making sure these buildings will be under water again with /ust a few energy (rice hikes% 0nergy efficiency investments have diminishing returns% The energy (roviders should be making them, not the building owners% They are a customer retention strategy for the utilities and oil com(anies, not a sensible investment strategy if you want to build real estate asset values% &n short, the current framework of (olicies and incentives, including the 'C Clean 1eat (rogram is develo(ing the slums of tomorrow and not solving either the city*s energy (roblem, or the clean air (roblems, but merely (ost(oning the day of reckoning% These 2investments3 are the difference between the Titanic sinking in five minutes or ten% The bigger threat is not energy costs, but "1" emissions, but also trans(ortation and delivery of subscri(tion energy, which is slated to go u( ahead of inflation as far as the eye can see% There is an alternative course of dee( energy change, which can make buildings economically viable for the long term, with ever im(roving o(erational economics, by switching to renewable energy 4W% 5enewable energy on site directly eliminates T67 costs, although a backu( connection to the grid will still be needed in most cases% &t is (ossible, and economically viable with current incentives 8although it could always be better9, to (lan a tra/ectory that develo(s a com(rehensive renewable#energy energy infrastructure over ten or so years, with com(ounding results over time, where every subse:uent investment builds on the value already there% &t is the (ath of energy inde(endence and increasing long#term asset values and therefore building (reservation% Crucially, the (aths of energy#efficiency and of energy inde(endence are mutually e$clusive% 0nergy#efficiency does not cumulatively (roduce energy#inde(endence, and it will


therefore lead to ca(ital destruction for buildings where renewable#energy energy is a viable o(tion today% 5enewable#energy is often viable in these old buildings, because they have sufficient scale to allow integration of multi(le technologies, but are not so large as to overwhelm the energy#out(ut of today*s renewable technologies%


Table of Contents
Prea*ble........................................................................................................6 7'ecuti-e !u**ary..................................................................................... %ee" 7nergy $hange.................................................................................11 On !ubo"ti*al %ecisions......................................................................13 7nergy Para+ig* !hi3t...............................................................................16 8hat9s ne't:................................................................................................21 ;he 7nergy/,n+e"en+ence Para+ig*......................................................2 8hat is hol+ing us bac0:..........................................................................33 ;echnological <yo"ia...........................................................................35 7nergy !tar an+ ()!7=%. <PP........................................................3> 8hat9s in it 3or e-eryone else:..................................................................41 1tilities an+ ?o-ern*ent......................................................................41 ?eneral Public &ene3its..........................................................................42 On ?latt @osher Ainancial Planning........................................................4# 2i3e/cycle ,n-est*ent .nalysis............................................................4# 8hat Paybac0 %oes (an+ %oes (ot) <ean........................................45 ;hat !ales*an %oes (ot O4n )our &uil+ing...................................45 Bo4 to 1se ,ncenti-es...........................................................................46 ;he !yste*s Outloo0.............................................................................4> . <o+el.......................................................................................................#1 Phase 1: ?eother*al %B8...................................................................#2 Phase 2 / 8in+........................................................................................#4 Phase 3 C !olar ;her*al BV.$...........................................................#4 Phase 4 / @aiDen......................................................................................## ;his is a &eginning not an 7n+.............................................................#5 8,A<7: !ta0ehol+ers................................................................................#6 =egulatory, .+*inistrati-e an+ ?o-ern*ent.......................................5# .3ter4or+....................................................................................................56




Pla()$2030 -ersion 2.0 4as "ublishe+ in the s"ring o3 2011. 8ith this re"ort 4e see0 to "ro"ose a *aEor alternati-e route 3or "arts o3 this "lan, 4hich has been o-erloo0e+ as an o""ortunity. ;he original "ublication +ate o3 this re"ort 4as July 4th 2011, an+ the "resent u"+ate is +ate+ July 4th, 2013. ;his "ublication +oes not see0 to a++ress all o3 the issues in the cityFs Pla()$, but it see0s to e'"lore an+ +e3ine an alternati-e 3or one "articular seg*ent C buil+ings in general an+ resi+ential buil+ings in "articular C an+ +e3ine the "ro-erbial Glo4 hanging 3ruitH in the *ar0et, 4here +is"ro"ortionately large "rogress coul+ be *a+e. ;hey are the city9s ol+/line a"art*ent buil+ings. ;he o"erati-e conce"t is that they are the so3t un+erbelly o3 the city9s energy beast, because they are o3ten e'tre*ely ine33icient, an+ yet, "articularly in the outer boroughs, they usually ha-e an abun+ance o3 s"ace in the base*ent, a 3lat roo3, an+ *aybe e-en so*e yar+ area, an+ in *any o3 the* co*binations o3 geother*al, solar an+ 4in+ "o4er coul+ be -iable o"tions. ;hus an integrate+ a""roach to rene4able/energy is "ossible, 4ith sur"rising econo*ic results, gi-ing these -enerable buil+ings a ne4 lease on li3e. Ba-ing s"o0en 4ith nu*erous o4ner organiDations, it is clear to us that nothing 4ill change unless the city sets the tone, an+ arguably the current 3ra*e4or0 o3 "olicies an+ incenti-es is so*eti*es counter "ro+ucti-e in this sector in "articular. Perha"s they shoul+ ulti*ately e-en be o4ne+ by a +i33erent grou" o3 in-estors than the current ones, 4ho by an+ large +on9t see* to ha-e the interest or ability to "ursue these o"tions, an+ 4on9t change unless an+ until the $ity sets a -ery clear "olicy, 4hich creates the right traEectory to4ar+s a 3uture o3 energy in+e"en+ence.

;he recent acco*"lish*ent o3 a "hase/out o3 resi+ual 3uel in the $ity, in the 3or* o3 the ()$ $lean Beat "rogra*, coul+ also be a le-er 3or change, i3 buil+ings 4oul+ be able to get an e'e*"tion to choose the *o+el "ro"ose+ here, an+ only s4itch to I2 or natural gas at the en+ o3 the econo*ic li3e o3 their e'isting boilers, as 3oreseen in this "rogra*. ,3 this re"ort see*s so*eti*es re"etitious, 4e o33er no a"ology, 3or it has beco*e e-i+ent that "eo"le nee+ to hear the sa*e in3or*ation in +i33erent 4ays. &y an+ large 4e ha-e 3oun+ that the "eo"le 4ho un+erstan+ these issues are the "eo"le 4ho ha-e a bac0groun+ in in-est*ents in "rocess in+ustries, be it buil+ing oil re3ineries, che*ical "lants or "o4er "lants. ;o such "eo"le, the 3act that in-est*ents in energy e33iciency are o"erational sa-ings, an+ not in-est*ents "ro"er is entirely clear. !o is the arith*etic 3act that the "ath o3 energy e33iciency "ro+uces +i*inishing returns. 2i0e4ise the 3act that in-est*ent in a +i33erent energy in3rastructure is really a 3our +i*ensional "roble*, na*ely that it inclu+es engineering integration o-er ti*e an+ an econo*ic inter+e"en+ence, 4hich "ro+uces synergies an+ co*"oun+ing returns o-er ti*e is li0e *otherhoo+ an+ a""le "ie to "eo"le 4hose bac0groun+ is in "rocess in+ustries. &y the sa*e to0en, 4ithin the real estate 3iel+, the outloo0 starts 3ro* bric0s an+ *ortar, an+ is co*"licate+ 4ith a lot o3 regulations, -arious regi*es o3 incenti-es, an+ ta' issues, an+ the outloo0 o3 architects 4ho ha-e been ins"ire+ by the utility in+ustry to thin0 o3 buil+ings +e3ensi-ely: ho4 can , burn less energy: Bere the *antra is that a +ollar sa-e+ is a +ollar earne+. &ut in truth, you cannot sa-e yoursel3 rich. Bo4e-er, "articularly 3or the class o3 buil+ing 4e are tal0ing about in this re"ort, it is ti*e to start thin0ing o33ensi-ely: ho4 can

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4e "ro+uce *ore o3 our o4n energy, an+ beco*e *ore "ro3itable an+ econo*ically in+e"en+ent: ,t is ti*e to "lay o33ense on the energy 3ront. ,t is ga*e o3 buil+ing ca"ital/assets an+ long ter* buil+ing -alues, because 4ith rene4able/energy in3rastructure, energy *o-es 3ro* liabilities to assets.

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Executive Summary
;he o""ortunity "resente+ here can be un+erstoo+ as 3ollo4s: ;here are t4o alternati-e a""roaches to 3uture energy in3rastructure o3 our cities an+ our buil+ings, an+ they are *utually e'clusi-e. ;here3ore the *ore 4e in-est in the one a""roach, the har+er it is to s4itch trac0s. ;he 3irst *etho+, an+ the +o*inant "ractice to+ay, is the "ath o3 energy conser-ation. ,n 3act buil+ing o4ners are being in+uce+ by the utility in+ustry an+ energy "ro-i+ers to *a0e their buil+ings *ore e33icient. $learly, *aEor i*"ro-e*ents are "ossible, but i3 the buil+ings in Juestion in 3act 4oul+ ha-e been ca"able econo*ically o3 generating their o4n "o4er 3ro* rene4able energy, it lea+s to +isastrous large scale ca"ital +estruction not to "ursue that alternati-e 3irst, an+ instea+ to ce*ent their +e"en+ence on 3ossil 3uels e-en 3urther by in-esting 3ortunes in burning 3ossil 3uels e-er *ore e33iciently. Aor o4ners o3 buil+ings that 4oul+ ha-e been ca"able o3 an econo*ically -iable energy in+e"en+ence strategy base+ on rene4able energy generating "otential, it *eans that current i*"ro-e*ent "rogra*s *erely se+uce the* to act against their o4n interest, an+ so*eho4 to 3inance 4hat is in e33ect a custo*er retention "rogra* 3or the utilities an+ energy co*"anies. ;his 3irst "ath al4ays has +i*inishing returns, both in ter*s o3 3inancial *ath, but o3ten the +eteriorating results o3 successi-e energy conser-ation *easures also has an engineering co*"onent, because o3 "artial o-erla" o3 4hat they +o, an+ there3ore successi-e

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in-est*ents in energy conser-ation sho4 ra"i+ly +i*inishing returns o-er ti*e. .n+ buil+ings ha-e a habit o3 li-ing a long ti*e. ;here3ore, this in-est*ent "ath o3 energy conser-ation, in the 3ace o3 a 3easible alternati-e, lea+s to ca"ital +estruction an+ is li0ely to create the slu*s o3 to*orro4. Aro* a 3inancial "ers"ecti-e, these "roEects o3ten 3inance short/ter* e33iciency i*"ro-e*ents 4ith long/ ter* *oney, thus ensuring that "ro"erties 4ill be un+er 4ater at the ne't sign o3 an energy crisis, 4hich beco*es e-er *ore li0ely in the 3ace o3 the e*erging natural gas *onoculture. ;he secon+ alternati-e is a "ath o3 an e-ol-ing rene4able/energy in3rastructure 4here there are co*"oun+ing returns, because C i3 the engineering is +one right C there are structural inter/+e"en+encies o3 +esign, 4hich can be le-erage+ in successi-e "hases o3 a "roEect. .s a result rene4able/energy "roEects that *ight ha-e une'citing returns 4hen consi+ere+ in isolation, 4ith "aybac0s o3 "erha"s 5/> years, *ight result o-er ti*e in a series o3 "roEects 4ith in+i-i+ual "aybac0s that a-erage 4/5 years. ,n short, i3 a buil+ing has the right scale 3or this ty"e o3 a +e"loy*ent, this co*"oun+ing o3 results 3ollo4s the ty"ical traEectory o3 in-esting 3or gro4th, an+ the en+ result is that the sa*e buil+ing 4hich 3ollo4s this strategy en+s u" in 2020 4ith 10/20K o3 its 2010 3ossil/3uel consu*"tion, an+ 4ill be "artially o33 the gri+, an+ co-ering the "o4er 3or at least "art o3 the tenants, as 4ell as ha-ing a 3ar better in+oor air Juality, not to *ention that the city *ight be able to 3inally *eet clean air stan+ar+s, i3 this 4ere to ha""en on any signi3icant scale. ;here3ore, by loo0ing at "roEects 3ro* the outset as intra/*arginal ca"ital i*"ro-e*ents to the buil+ing, rather than 3ro* the "oint o3

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-ie4 o3 the utilities, 4ill lea+ to *uch greater energy in+e"en+ence, greater 4ealth 3or buil+ing o4ners, better li-ing con+itions 3or tenants, an+ en-iron*ental an+ econo*ical i*"ro-e*ents city/4i+e.

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Deep Energy Change

Aro* 7nergy 733iciency to 7nergy ,n+e"en+ence. Bere 4e e'a*ine the current "aralysis in energy "olicies an+ incenti-es as it a33ects the resi+ential real estate *ar0et in (e4 )or0 $ity in "articular, an+ s"eci3ically as a""lie+ to the *ulti/3a*ily resi+ential sector. ;he i*"asse at han+ results *ostly 3ro* a counter"ro+ucti-e analytical 3ra*e4or0, 4hich is +o*inate+ by the agen+a o3 the utility sector, an+ energy co*"anies, an+ not long/ ter* real estate asset -alues an+ "ro3itability o3 buil+ings. . lot o3 =eco-ery .ct *oney 4ent unuse+, because 4e +i+ not 0no4 4hat to +o 4ith it, or 4orse, it 4as *iss"ent in so*e casesL $urrent "ractices an+ the "ublic +iscourse are 3ocuse+ on energy/ e33iciency *ore so than on energy in+e"en+ence, an+ *oreo-er the *ost "re-alentMbut e-er so 4rongM*etho+ o3 e-aluation, the "aybac0 "erio+, un4ittingly ser-es the e'tension o3 the 3ranchise o3 3ossil/3uel/base+ energy syste*s *ore than it ser-es energy in+e"en+ence, or 3or that *atter the econo*ic interests o3 the buil+ing o4ners. <ost crucially, "eo"le start in the *i++le o3 the story, 4ithout 3ra*ing the "roble* correctly, an+ thus instea+ o3 e-aluating the energy "roble* ab initio as it shoul+ be +one as a *a0e or buy +ecision, the "re-ailing "ractice ne-er e-en Juestions the utility *o+el, but blithely "rocee+s to 3igure out ho4 to beco*e a *ore e33icient custo*er o3 their 3a-orite utility or oil co*"any, an+ the "re-ailing incenti-es an+ "rogra*s all su""ort this 4ay o3 thin0ing, resulting in *arginal, incre*ental change, 4hich ne-er gets to the root o3 the "roble*.

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;he biDarre si+e e33ects o3 this slo""y analysis inclu+e the reality that buil+ing o4ners: *ostly res"on+ to incenti-es 4hich are geare+ to the utility in+ustry, an+ not "ri*arily the econo*ics o3 their o4n business o"erations, *oreo-er,

are so*eti*es s4aye+ by -en+ors, 4ho, res"on+ing to the sa*e agen+a, are "ushing their -arious technologies as the holy grail, usually base+ on "aybac0 "erio+, 4hich *ay *a0e sense 3ro* the stan+ "oint o3 the utilities an+ energy co*"anies, as 4ell as those *anu3acturers the*sel-es, but not 3or a long/ter* o4ner o3 buil+ings, 4ho shoul+ treat these technologies as intra/*arginal in-est*ents in his buil+ings, an+ not as o"erational sa-ings. o"erate 4ith a *ish*ash o3 incenti-es, 4hich co*"letely con3use the issues, an+ *ore o3ten than not lea+ to counter"ro+ucti-e +ecisions an+ ca"ital +estruction, because they ten+ to rein3orce *arginal +ecision/*a0ing base+ on "aybac0 "erio+. generally +o not ha-e either the sta33 or the e'"erience to 3ully e-aluate o"tions 3or energy 3uture o3 their "ro"erties, or ha-e the tools to e-aluate it. ;his is a "ara+ig* change, an+ 4e are un"re"are+.

;he historical reasons are e'a*ine+ belo4, an+ a solution "ath is suggeste+, 4hich i*"lies that correct business analysis an+ in-est*ent +ecisions are as i*"ortant as i*aginati-e engineering in or+er to realiDe a success3ul rene4able/energy energy strategy 3or buil+ing o4ners. ;he a""roach 4e suggest is about 5#K 3inance an+ econo*ics an+ 3#K engineering.

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&ecause the "resence o3 rene4able generating ca"acity, 4hich is Gright siDe+,H an+ ca"able o3 being buil+ing *ounte+, i.e. on the +e*an+/si+e o3 the gri+, the i*"en+ing shi3t is 3ro* a subscri"tion *o+el o3 energy, to4ar+s a ca"ital asset *o+el o3 energy. ;his is a "ara+ig* shi3t in e-ery sense o3 the 4or+, 4here entire classes o3 buil+ing o4ners 4ill beco*e energy "ro+ucers, an+ turn energy 3ro* a business e'"ense into a "ro3it center in their business. ,ncre*ental in-est*ents un+er the current regi*e o3 con3use+ incenti-es lea+ to ca"ital +estruction, because they 3ocus on energy conser-ation 3irst, thereby "utting the cart be3ore the horse, an+ "ro+ucing +i*inishing returns, not to *ention *a0ing the e-entual +ecision 3or rene4able energy "rogressi-ely har+er, 4hile a care3ully +esigne+ *ulti/year in-est*ent "rogra* in rene4able energy in3rastructureMe-aluate+ as *a0e or buy +ecisionsMa*ounts to an in-est*ent in gro4th, 4ith abun+ant o""ortunities 3or synergistic +e"loy*ents o3 co*"le*entary technology, an+ co*"oun+ing returns. O4ners 4ho 4ill act on these insights to+ay shoul+ e'"ect signi3icantly higher asset -alues in the ne't +eca+e, 4hile o4ners 4ho 3ollo4 the "ie+ "i"er o3 energy/e33iciency retro3its accor+ing to current stan+ar+s, shoul+ e'"ect to see their in-est*ents un+er 4ater again in the sa*e "erio+, because they *ay ha-e +i*inishe+ their +e"en+ence on 3ossil 3uels, but they 4ill not ha-e eli*inate+ it, an+ *ean4hile their ca"ital 4ill be tie+ u". ;hey are o3ten 3inancing short ter* sa-ings 4ith long ter* *oney, an+ the buil+ings 4ill en+ u" un+er 4ater (again).

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On Suboptimal Decisions ,n buil+ings, i3 your "oint o3 +e"arture is to *a0e the energy in3rastructure you ha-e *ore e33icient, you are li*iting yoursel3, to so*e *a'i*u* o3 Gsa-ings,H an+ you are 3acing an unattracti-e in-est*ent "ro"osition 4here e-ery subseJuent in-est*ent sho4s +i*inishing returns, an+ there3ore this "ath beco*es increasingly unecono*ical as ti*e goes on. 7nergy e33iciency is a secon+ary obEecti-e, an+ i3 4e o"ti*iDe 3or it, 4ithout 3irst as0ing the G*a0e or buyH +ecisionsMi.e. are 4e buying our energy 3ro* the gri+, or are 4e *a0ing it oursel-esM4e are *erely *a0ing our e'isting in3rastructure *ore e33icient an+ *a0ing it har+er on oursel-es to s4itch to rene4able energy. ;o bring it bac0 to buil+ings, o"ti*iDation 3or energy e33iciency 4oul+ *a0e sense i3 the "ur"ose o3 your buil+ing 4as to burn oil as long as "ossible C "erha"s you in-este+ in an oil 4ell. ;his is not as craDy as you thin0, so*e o4ners ha-e, e.g. 2eAra0. Or i3 the Juestion 4as: Bo4 can , heat *y hot 4ater 4ith gas *ost e33iciently: $hoose a high e33iciency, con+ensing, an+ tan0/less gas hot 4ater heater. Bo4e-er, "erha"s the Juestion 4as, ho4 can , su""ly *y tenants 4ith %o*estic Bot 8ater *ost e33iciently: .n+ "erha"s there is another Juestion beyon+ that: Bo4 can , "ro-i+e *y buil+ing 4ith energy *ost e33iciently, an+ *eet *y hot4ater nee+s in the "rocess: ,s it going to be chea"er to buy energy or *a0e *y o4n: 7tc. !o, the 3un+a*ental Juestion beco*es: 8hat is the *ost econo*ically attracti-e 4ay to "ro-i+e the energy nee+s o3 this buil+ing. Once 4e ha-e a++resse+ that *a0e or buy +ecision, 4e can then 3urther o"ti*iDe by +oing 4hate-er 4e +eci+e *ore e33iciently.

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,t +oes not en+ there, because 4e nee+ to 3ace the se"aration o3 3inancial res"onsibilities bet4een lan+lor+s an+ tenantsMthe in3a*ous s"lit/incenti-e "roble*Min ne4 4ays. 7li*inating 4in+o4 air con+itioning an+ s4itching to hy+ronic heat an+ cooling 4ith absor"tion chillers an+ solar ther*al 3or "rinci"al heat in"ut 4ith an e33icient 3ossil/3uel boiler 3or bac0u" coul+ be chea"er in the long run, but 4ill ne-er be realiDe+ as long as the tenant "ays 3or one thing an+ the lan+lor+ 3or the other. 7'a*"les aboun+, sub/*etering re+uces energy bills 1#/20K but it re*ains anathe*a to *any. ;hus *any things ne-er ha""en e-en i3 they are -ery 3easible, an+ 4orth4hile. .n+ this is 4here go-ern*ent has a role to "lay in 3acilitating the 3uture. !ub/o"ti*iDation occurs 4hene-er 4e 3ail to Juestion "ro"erly 4hat the real obEecti-e o3 a syste* is. .gain, i3 you o4n that oil 4ell, "erha"s you 4ant to 0ee" a ca"ti-e custo*er, an+ your obEecti-e is to 0ee" "eo"le burning oil as long as "ossible, by *a0ing the* as e33icient as you can an+ charging the highest "ossible "rice, until it9s o-er, 3or one +ay it 4ill +ie. &ut i3 you o4n the buil+ing an+ "lan to o"erate it "ro3itably, the 3irst goal shoul+ be a "ro"er *a0e/or/buy +ecision: is it chea"er to buy *y energy, or shoul+ 4e generate our o4n: ;o+ay: O-er the ne't t4enty years: ;hat Juestion shoul+ constantly be re-isite+ as technology changes. 8e are at the ti""ing "oint.

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Energy Para igm Shift

;he country is stuc0 at all le-els in an une'a*ine+ "ara+ig* o3 out+ate+ assu*"tions that o3ten sabotages "rogress to4ar+s energy in+e"en+ence. 1tilities (gas an+ electricity) an+ oil co*"anies, ha-e historically in3or*e+ the "ublic +iscourse, an+ set the tone, an+ e'isting incenti-es are geare+ to e'ten+ing the 3ranchise o3 those businesses, because, e-en though incenti-es 4ere create+ to bring about greater energy e33iciency (by re+ucing +e*an+), those -ery incenti-es "er-ersely 3oster ongoing +e"en+ence on energy by subscri"tion. 8e ha-e a clear case o3 the 3o' guar+ing the chic0en coo". ;he historical insight 4as that it *ight be chea"er to in-est in re+ucing +e*an+ than in increasing su""ly. ;rue enough i3 you thin0 on that *acro scale. .""arently no/one e-er 3ra*es the *o+el 3or* the *icro/econo*ic stan+"oint o3 buil+ings, an+ o4ners either +o nothing, or blithely *arch along 4ith "rogra*s that *a0e their buil+ings *ore e33icient custo*ers, 4ithout loo0ing at the alternati-es. ,n short, 4hile 4e tal0 "ublicly o3 the +esirability o3 rene4able energy (such as 4in+, solar, an+ geother*al), as a society 4e +o e-erything 4e can to "re-ent the shi3t 3ro* the current i+ea o3 energy efficiency (or energy conservationMagain, base+ on re+uction o3 usage) to a ne4 "olicy o3 renewable energy, 4hich 4oul+ bring about energy independence, base+ on local "ro+uction, because 4e are stuc0 in that ol+ "ara+ig* in 4hich the gri+, an+ chea" 3ossil/3uel base+ energy are the +o*inant 3actor. ;he 3ailure o3 rene4able energy is the "re+ictable conseJuence, "articularly 4hen it is e-aluate+ in the conte't o3 the subscri"tion *o+el, an+ its success or 3ailure *easure+

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base+ on Nenergy sa-ings,N as a +irect o33set 4ith the establishe+ *etho+s. ;hat "ro+uces a sel3/3ul3illing "ro"hecy: rene4able energy is still not co*"etiti-e, unless "erha"s... 4e change the *o+el. ;he 3un+a*ental basis o3 e'isting "rogra*s, either e'"licitly or i*"licitly, is the subscri"tion *o+el o3 energy, be it in the 3or* o3 utilities an+ the gri+ (electricityOgas) or +eli-eries (oil). ;he "olicy o3 renewable energy and sustainability is treate+ as interchangeable 4ith, or e-en subser-ient to, energy efficiency, 4hen it shoul+ really be the other 4ay aroun+: the 3ocus shoul+ shi3t to an econo*ically sustainable, rene4able energy in3rastructureMan+ it isn9t sustainable unless it is also "ro3itableMan+ the tra+itional sources shoul+ gra+ually shi3t to a bac0u" role. Ob-iously once again e33iciency has a role to "lay, but i3 you +on9t 3ocus on energy in+e"en+ence 3irst, then a "re*ature 3ocus on energy e33iciency is counter"ro+ucti-e, 3or it 4ill "re-ent us 3ro* e-er getting to energy in+e"en+ence. ;here is another "er-erse conseJuence o3 4rongly "rioritiDing energy sa-ings o-er in+e"en+ent "ro+uction, is that 4ith e-ery successi-e in-est*ent in e33iciency, the Eu*" to rene4able technology beco*es har+er. 8e are literally "ainting oursel-es into a corner 3ro* an in-est*ent stan+"oint. ;he co**on "erce"tion that rene4able energy technologies are not yet econo*ically 3easible, 4hich is being "ro*ulgate+ 3ro* the 1.!. %e"art*ent o3 7nergy on +o4n, is "re+icate+ in large *easure on the 3ailure o3 the energy in+ustry to change its *o+el 3or the a""lication o3 those technologies. ;he o"ti*al "lace 3or the +e"loy*ent o3 rene4able energy is o3ten on the +e*an+/si+e o3 the gri+, as it i**e+iately a-oi+s subtantial trans"ort an+ +istribution costs (an+ other collateral costs, such as o"erating an+ *aintenance

/ 22 /

costs, or e-en so*e costs 4hich *ay or *ay not be *onetiDe+ by society at "resent, such as "ollution). ;he "ercei-e+ lac0 o3 econo*ic 3easibility o3 rene4able/energy is contingent u"on its a""lication in the subscri"tion/energy *o+el an+ *ostly on the su""ly si+e, 4ith long/haul trans"ortation, etc. ;hat 3or* o3 using rene4able energy is innately 4ea0, an+ +ys3unctional C e-en i3 it *ay so*eti*es be una-oi+able, it shoul+ be a last resort, not the 3irst consi+eration. Positi-e e'a*"les shoul+ be such o"tions as solar/ther*al 3or su""le*ental %B8, 4hich *ay be -iable to+ay, e'ce"t that it is being cro4+e+ out by current incenti-es 3or solar PV, e-en though solar/ther*al "ro+uces #/600K o3 the energy out"ut "er sJuare area, an+ shoul+ al4ays be the 3irst o"tion in the $ity. ;he "re-ailing *o+el is base+ on the utility gri+ (an+ the corollary insight o3 so*e 3orty o++ years ago that, on the *argin, it is o3ten *ore e33icient to re+uce +e*an+ than increase su""ly) an+ the subseJuent creation o3 incenti-es to achie-e this result, at both the state an+ local le-els as 4ell as at the 3e+eral le-el. 8hile this thought 4as a brea0through in its ti*e, it is no longer u" to the tas0, because it unconsciously e*be+s the e'tension o3 the 3ranchise o3 energy co*"anies an+ utilities in all "lanning, an+ ignores the "ro"er econo*ics o3 co**ercial, 3or/"ro3it, buil+ing o4nershi". ;he current energy "olicy ser-es the econo*ics o3 the energy in+ustry (utilities Pgas an+ electricityQ an+ oil co*"anies) an+ Jui'otically "er"etuates the "roble* set, 4hich is +ri-ing the cost e'"losion that the aging utilities in3rastructure is bringing about. ;he "ros"ect o3 escalating in3rastructural costs is set to be at least as i*"ortant as the cost o3 3ossil 3uel base+ energy an+ its associate+ "ollution in years to co*e. <ean4hile, buil+ing o4ners are goa+e+

/ 23 /

4ith attracti-e/soun+ing incenti-es an+ un4ittingly en+ u" acce"ting Genergy/e33iciencyH strategies that are goo+ 3or the utilities an+ oil co*"anies, but only *ini*ally goo+ 3or the*sel-es. ;he ne4 a""roach 4oul+ "ut the e*"hasis on i*"ro-ing asset -alues, an+ the econo*ic in+e"en+ence o3 the buil+ings the*sel-es, an+ e*"hasiDe energy as a "ro3it center 3or buil+ing o4ners. ;o the e'tent that the e'isting o4ners 4on9t change, ne4 classes o3 o4ners 4ill e*erge 4ho 4ill seiDe u"on the o""ortunity o3 energy con-ersion in the sector, an+ reno-ate the buil+ings 3or *any +eca+es o3 stea+ily i*"ro-ing 3inancial returns.

/ 24 /

!hat"s next#
.ny "ara+ig* shi3t in general entails "ain, but o3ten *ainly because o3 our o4n resistance to the ine-itable. ,t is "art o3 hu*an nature to be a3rai+ o3 change. )et, 4e are alrea+y "ast the "oint 4here change is ine-itable, an+, as 4e resist change, 4e *erely "rolong the "ain an+ su33ering. .s a society, a"art 3ro* the tal0 sho4s an+ con3erences, 4e are *ostly resisting this change. 277% buil+ings are great, but there are al4ays *ore ol+ buil+ings than ne4 ones. , ha-e s"o0en 4ith buil+ing o4ners 4ho, lure+ by incenti-es to 0ee" the status Juo, or a *arginally *ore e33icient -ersion o3 it, an+ gra""le 4ith the "roble* 4hile they 0ee" on ro4ing in the 4rong +irection as they try in -ain to 3igure these issues out. ;hey are usually surroun+e+ by "eo"le 4hose basic 3ra*e o3 re3erence is subscri"tion energy. !hallo4, incre*ental changes in e33iciency result in ca"ital +estruction, i3 rene4able energy "ro+uction is -iable 3or a s"eci3ic "ro"erty. ;his inclu+es an interi* shi3t 3ro* resi+ual 3uel to natural gas or I2 3uel oil. ,3 they are the only o"tion 3or a buil+ing, 3ine, but i3 the buil+ing has an o"tion o3 s4itching ra+ically to rene4able energy, such interi* ste"s +isastrously "ost"one the *ost econo*ically 4orth4hile +ecisions. ;he change suggeste+ here is a4ay 3ro* the subscription *o+el o3 energy to4ar+s a capital-asset *o+el, 4here energy generation 4oul+ beco*e *ore an+ *ore integrate+ into buil+ings. .ll the tal0 o3 4in+ 3ar*s, solar/"o4er "lants, an+ so on, *ay be e-er so interestingM3or the utilities in+ustry, that isMbut it is Eust a si+e sho4, 3ro* the stan+"oint o3 "lanning the energy 3uture o3 the $ity, because it "er"etuates the ol+ "ara+ig*. ;he +ecisi-ely ne4 3ocus, 4hich

/ 2# /

shoul+ co*e natural to a society that consi+ers itsel3 ca"italist, co*es +irectly 3ro* realiDing that the high an+ e-er/gro4ing trans"ort an+ +istribution cost gi-es the a+-antage o3 *a'i*al local "o4er generation to the buil+ings, co*bine+ 4ith the 3act that there is a gro4ing su""ly o3 technology that enables this shi3t. ,n (e4 )or0 $ity, the a+-antage o3 local generation is three to one, as the +eli-ery cost on your utilities bill can a""roach t4o thir+s o3 the billL .n+ that +eli-ery cost is set to increase ahea+ o3 in3lation as 3ar as the eye can see. ;his si*"le 3act *a0es the a+-antage o3 local energy generation 3or buil+ing o4ners ob-ious, an+ it i*"lies that they shoul+ be in the "o4er business 3or "ro3it. .ctually, e-en though this change cannot e-en be +one in all buil+ings, achie-ing the goal is not a tri-ial un+erta0ing. Aor e'a*"le, in (e4 )or0 $ity alone, an+ the (ortheast in general, there are tens o3 thousan+s o3 ol+er *e+iu* siDe+ a"art*ent buil+ings that ha-e the ol+ +ys3unctional energy in3rastructures (e-en i3 they ha-e been u"+ate+ an+ are *ore or less Genergy e33icientH), 4hich 4oul+ *a0e trans3or*ation to the rene4able/energy *o+el re4ar+ing. .ny buil+ing o3 3i3ty units or *ore is i+eal, as long as it is not too tall, ty"ically no higher than 3i-e to eight stories. ;here is generally enough roo* in those ol+er buil+ings, an+ rene4able technologies (againM4in+, solar, geother*al) can be use+ e'tensi-ely. <ore an+ *ore energy o"tions are a""earing on the *ar0et stea+ily. Plus, the buil+ing +e*an+ inclu+es heat an+ hot 4ater, so a large a*ount o3 +e*an+ is ther*alR hence, both geother*al an+ solar ther*al "otentially ha-e a role to "lay. 8ith ty"ical buil+ings ha-ing #0/200 units, the o-erhea+ is share+ a*ongst *any househol+s, so

/ 25 /

that an integrate+ a""roach base+ on *ulti"le technologies beco*es 3easible, although it is not yet econo*ically 3easible to +o so all at once. ;he solution to the challenge o3 hel"ing the o4ners o3 such buil+ings to beco*e increasingly energy in+e"en+ent is the creation an+ i*"le*entation o3 a gra+ual rein-est*ent "rogra* o3 so*e ten years. ;o+ayFs technology can re+uce the 3ossil/3uel +e*an+ o3 resi+ential buil+ings by >0/ 0K, ta0e co**on areas o33 the gri+, an+ su""ly an increasing "ortion o3 the electrical nee+s o3 tenants. .n+ it can +o 4on+ers 3or clean airL .t that "oint, energy then beco*es a "ro3it center instea+ o3 cost center 3or the lan+lor+, so that these ol+er buil+ings 4oul+ ha-e an innate a+-antage o-er both s0yscra"ers an+ s*aller resi+ential construction, 4hich, at "resent, cannot ho"e to acco*"lish the sa*e le-el o3 in+e"en+ence 3ro* le-eraging *ulti"le technologies, because their scale is either too large or too s*all. Aor s0y scra"ers the scale o-er4hel*s rene4able generating "otential, an+ 3or s*aller *ulti/3a*ily, let alone single 3a*ily resi+ential buil+ings, integrating *ulti"le technologies is not generally an o"tion because o3 o-erhea+ costs. ;hus, by engaging buil+ing o4ners 4ith the "ro3it incenti-e, the only challenge is to *oti-ate the* to ta0e the 3irst ste", 4hich 4oul+ reJuire a signi3icant initial 3inancial in-est*ent. .s a 3rien+ly in-est*ent ban0er once "ut it, G)ou cannot cross the ?ran+ $anyon in three easy ste"s.H;he "oint is, you9+ 3all to your +eath on the secon+ ste", so 4hat you nee+ is a bri+ging strategy, to get to the other si+e in one "iece. ,ncre*entalis* +oes not 4or0 here. ;he 3irst ste" *ust be an in-est*ents that shi3ts the buil+ing to4ar+s so*e le-el o3 rene4able energy "ro+uction an+ in3rastructure all at once, 4hich 4ill usually be so*e hybri+ solution that lays the 3oun+ation

/ 26 /

3or a gra+ual e-olution to4ar+s a "re+o*inantly rene4able energy in3rastructure, an+ substantial in+e"en+ence 3ro* the gri+, subscri"tion energy an+ 3ossil 3uels in general. Once buil+ing o4ners can see the trac0 to4ar+s eli*inating energy bills, as 4ell as selling energy bac0 to the tenants, or to the gri+ at a "ro3it -ia net*etering, they 4ill clearly beco*e *oti-ate+ to +e-elo" better an+ better syste*s. 7nergy e33iciency earns a high "ayo33 in that scenario all o-er again, because it +irectly re+uces the installe+ ca"acity. ;his a""roach "uts the econo*ics o3 buil+ing o4nershi" an+ o"eration central, instea+ o3 "utting the econo*ics o3 energy co*"anies an+ utilities central, an+ 4oul+ result in a 3aster an+ *ore 4i+es"rea+ a+o"tion o3 rene4able/energy technology than 4oul+ the current Genergy conser-ationH (or Genergy e33iciencyH) a""roach o3 energy/subscri"tion "lanning *o+els. 7nergy/e33iciency in-est*ents, 4hen "ursue+ as the *ain goal, "ro+uce +i*inishing returns, an+ they really 3all into t4o categories 4hich are not interchangeable at all, although in current "ractice they see* to be. ,3 the "er*anence o3 the subscri"tion *o+el 3or energy is ta0en 3or grante+, then in+ee+ energy/e33iciency is the solution, at least 3ro* the stan+"oint o3 the energy su""liers. ,3 ho4e-er, there is a "ro3it *oti-e in buil+ing o4nershi", then this a""roach is counter "ro+ucti-e. 8hen the "ro3itability o3 the buil+ing is at sta0e, there shoul+ be a clear +i33erentiation bet4een such e33iciency u"gra+es as enhance the buil+ing en-elo"e, e.g. re"lace*ent 4in+o4s, insulation, 3lo4 restrictions 3or %B8, etc., an+ technology in-est*ents in the continue+ C albeit *ore e33icient C consu*"tion o3 3ossil/3uel base+ energy. ,*"ro-e*ents to the buil+ing en-elo"e are generally eJually -aluable in a 3ossil/3uel base+ buil+ing energy in3rastructure, as in a rene4able/energy base+ buil+ing

/ 2> /

in3rastructure, though in +etail +i33erent "riorities an+ technology choices *ight arise. One o3 the ne3arious e33ects o3 *i'ing the t4o as is no4 co**on "ractice +ue to the utilities/oriente+ *o+el, is to *a'i*iDe total ther*al e33iciency in a buil+ing at one "oint in ti*e (()!7=%. <PP), an+ it lea+s to: (a) subo"ti*iDation, relati-e to an e-entual energy in+e"en+ence goalR an+ (b) ca"ital +ecisions that sabotage such long/ter* +e-elo"*ent. !hallo4 incre*ental change +oes not a++ u" to "ro3oun+ energy change. ;he result is that the sa*e +ollars 4ill en+ u" being s"ent t4o or three ti*es o-er, thus "ro+ucing signi3icant ca"ital +estruction, 4hich the econo*ics o3 these buil+ings cannot sustain. .n e'a*"le o3 that "roble* is Ghigh/ e33iciency tan0less hot/4ater heaters,H 3or 4hich buil+ing o4ners are currently re4ar+e+ 4ith ta' incenti-es. 1nless they are "ro-ably the only o"tion 3or a gi-en buil+ing, they shoul+ be a-oi+e+, since %o*estic Bot 8ater is -astly *ore -aluable as ther*al storage than the sa-ings o3 a 3e4 &;1s by a-oi+ing storage, 4hich is negligibly s*all to begin 4ith base+ on current insulate+ tan0s. 8e are thro4ing out the batteries 4ith the bath4ater here. %o*estic hot 4ater is essentially 3ree energy storage (it can be Eusti3ie+ on the basis o3 its "ri*ary "ur"ose, hot 4ater 3or tenants, 4hile high/e33iciency tan0less hot/4ater heaters *ay burn gas *ore e33iciently than rene4able energy, but eli*inate this -aluable storage o"tion 3or the buil+ing. %o these gas heaters increase the -alue o3 a buil+ing: ;he ans4er is: they +o not, co*"are+ to using rene4able energy an+ ther*al storage (hot 4ater, an+Oor heat), 4hich "er*anently eli*inates a goo+ "ortion o3 utilities bills C assu*ing the latter o"tion "ro+uces reasonable econo*ics 3or the buil+ing. 7-entually, the rene4able/energy a""roach *ay e-en generate a

/2 /

+irect return 3ro* selling "o4er, either +irectly to the tenants or bac0 to the gri+. . buil+ing o4nerFs *ission, then, is not to burn gas *ore e33iciently, but to *a0e a "ro3it 3ro* his buil+ing. Berein the econo*ics o3 the gas co*"any +i33ers greatly 3ro* that o3 the buil+ing o4ner. Aor o4ners o3 buil+ings to be in-esting their *oney in "rogra*s that ser-e the interests o3 the energy in+ustry *a0es no sense, an+ subli*inally "eo"le sense this an+ there is *utual +istrust as a result. ;he 3un+a*ental truth is that rene4able energy at the buil+ing le-el *eans that buil+ings can beco*e "artially or 4holly in+e"en+ent 3ro* the gri+. .lrea+y years ago, it 4as establishe+ in the +ata center in+ustry that buil+ings coul+ ha-e *ore reliable "o4er su""ly i3 they 4ere in+e"en+ent, an+ use+ the gri+ as a bac0u". ;his thin0ing nee+s to beco*e *ore generally un+erstoo+ an+ acce"te+. !o, unless the buil+ing o4ner truly is "ri*arily in-este+ in the energy in+ustry, they 4oul+ +o 4ell to "ut the econo*ic 4ell/being o3 their buil+ings be3ore that o3 the energy in+ustry. ;his is the "ara+ig* shi3t that nee+s to occur. ,t *eans ta0ing res"onsibility 3or +esigning a ne4 energy in3rastructure, an+ selecti-ely using e'isting incenti-es, i3, an+ only i3, they enhance the econo*ic returns 3ro* the buil+ing in the long run. ;he corollary to this is that buil+ing o4ners *ust realiDe that e'isting incenti-e "rogra*s +o not auto*atically ta0e the long ter* econo*ics o3 buil+ing o4nershi" into account, as they are roote+ in the utility *o+el. 2i0e4ise, -en+ors 4ho are ha40ing their "ro+ucts on the basis o3 "aybac0 "erio+s (base+ on energy costs Nsa-e+N), +o not lea+ to the o"ti*al result i3 o4ners select "urely on the basis o3 the shortest

/ 30 /

"aybac0s at any gi-en ti*e. ;hey 4ill in-ariably sacri3ice the long ter* to the short ter*, an+ they are s"en+ing on o"erational sa-ings, not in-esting in ca"ital i*"ro-e*ents. &esi+es so*e o3 these choices *ay "re-ent other +esirable choices being *a+e later. ;o su* it u", 20/30 years 4ithout energy bills (rene4ables), o3ten ti*es beats 20/ 30K energy Nsa-ings,N 4hich is the ty"ical result o3 energy e33iciency o-erhauls. ;his shi3t in "ers"ecti-e *ust *ean that:

the e-er "o"ular 3ocus on energy sa-ings an+ "aybac0 "erio+ o3 the eJui"*ent *ust be +one a4ay 4ith, in 3a-or o3 the ca"ital asset "ricing *o+el, an+ energy in-est*ents shoul+ be base+ on a +iscounte+ cash 3lo4, an+ an intra*arginal analysis o3 the technology in the buil+ing o-er the e'"ecte+ li3eti*e o3 the technnologies un+er consi+eration. in-est*ents in buil+ing energy in3rastructure shoul+ also ta0e into account the successi-e engineering integration o-er ti*e, 4hich "ro+uces synergies an+ co*"oun+ing returns. $urrent *etho+s co*"letely 3ail to a++ress this issue, although it shoul+ be "lain that buil+ings can li-e 3or a century or *ore, an+ long ter* li3e/cycle e33ects o3 the in-est*ents in energy "lant shoul+ be consi+ere+. !"eci3ically the "otential 3or synergies shoul+ be ta0en into account, noting such 3eatures as that geother*al allo4s 3or energy storage in the 3or* o3 "re/heate+ hot 4ater, an+ solar/ ther*al +oes too in the 3or* o3 either "rocess heat, or "re/ heate+ hot 4ater, or both. ,n rene4able BV.$ con3igurations

/ 31 /

there is *oreo-er a +irect tra+e/o33 bet4een installe+ ca"acity an+ i*"ro-ing the ther*al "er3or*ance o3 the buil+ing en-elo"e, 4hich is another synergistic o""ortunity. 1sually 4hat this a""roach 4ill sho4 is that the initial "aybac0s o3 goo+ rene4able energy "roEects can be in the 4/6 year range, 4hile eJui"*ent o3ten has a li3e e'"ectancy o3 20/30 years or so, so that the entire &;1 -alue o3 the rene4able/energy ca"acity accrues to the "roEect o-er the rest o3 its li3eti*e, 4hile the alternati-e in-est*ent in e33iciency 4ill ha-e continue+ substantial enery bills, e-en i3 lo4er in a*ount, but still subEect to e'"ecte+ "rice rises, an+ aggra-ate+ 3urther by the relentlessly rising associate+ costs o3 trans"ort an+ +eli-ery an+ other relate+ costsM4hich *ay at so*e "oint inclu+e "ollution "enalties. ;here *ay be a++itional re"lace*ent o3 eJui"*ent +uring the "erio+ as 4ell, as co*bustion eJui"*ent ty"ically has a higher *aintenance cost an+ shorter li3e s"an, than the rene4able/energy alternati-es.

/ 32 /

/ 33 /

The Energy$%n epen ence Para igm

;he ne4 "ara+ig* isMbarring ne4 3inancial o"tions (P.$7 bon+s:) Mnot 3easible econo*ically i3 you try to get there all at once, but the technologies that enable it are beco*ing increasingly a-ailable. <any o3 those technologies ha-e been a-ailable 3or a long ti*e. 8e Eust nee+ to start loo0ing in the right "lace an+ "lanning in the right +irection. ,*"le*entation "lans nee+ to be +e-elo"e+ +eliberately, an+ both engineering an+ econo*ics nee+ to be incor"orate+ because o3 the inter+e"en+ence o3 technologies. 8ithout a 4ell researche+ 20/30 year energy in3rastructure "lan, o4ners o3 buil+ings 3ace 3inancial ruin, as soon as one o3 the* 3igures out the ne4 "ara+ig*, 3or it 4ill "ro*"tly +e-alue the rest. %one correctly, in-est*ents in energy in+e"en+ence are in-est*ents in gro4th, 4ith co*"un+e+ returns, an+ an al*ost unli*ite+ u"si+e, 4hile in-est*ents in Genergy e33iciencyH al4ays 3ace +i*inishing returns. ;he 4orst in-est*ents (4hich are -ery co**on to+ay, 4ith the e'isting incenti-es) are those that "er"etuate the subscri"tion *o+el o3 energy in the 3ace o3 an a-ailable alternati-e. .gain, i3 they are absolutely the only thing that can be +one, they shoul+ be +one, but i3 it can be hel"e+ at all, e-en one ste" to4ar+s a rene4able/energy in3rastructure is "re3erable. ;he reason is si*"ly that successi-e Ge33iciencyH in-est*ents are not really in-est*ents at all, but are, rather, Go"erational sa-ings,H 4hich actually ser-e to +ig the hole +ee"erR an+, to the e'tent that they tie u" ca"ital an+ *a0e 3ossil 3uels loo0 *ore attracti-e, they *a0e it har+er to *a0e the necessary transition. .n+ here 4e are caught in a cycle o3 sel3/+e3eating strategies. ;he ga" across the ?ran+ $anyon beco*es 4i+er as 4e s"en+ *ore on an energy e33iciency strategy,

/ 34 /

since it is *utually e'clusi-e 4ith the energy in+e"en+ence strategy C the -ery +e3inition o3 ca"ital +estruction, i3 4e a""reciate that 4e9ll ine-itably ha-e to *o-e to rene4able/energy energy sooner or later. On the other han+, the "aybac0 on the ne4 renewable-energy o"tions 4ill intially ta0e a longer ti*e to sho4 u", but once costs are "ai+ o33, you ha-e no utilities billsMat least 3or that "ortion o3 your reJuire*ent. ;hus, rene4able/energy in-est*ents 0ee" going u" in -alue 4ith e-ery increase in energy "rices. ;he current energyconservation o"tion, ho4e-er, al4ays co*es 4ith an ongoing subscri"tion to so*e 3or* o3 energy. .n+ thus the -alue o3 e33iciency 4ill get 4i"e+ out o-er ti*e. ,n other 4or+s, 4hile costs o3 energy, trans"ortation an+ +eli-ery rise, in-est*ent in renewable energy 3aces co*"oun+ing returns, 4hereas in-est*ent in the current energy/efficiency *o+el is a +ea+ en+, 3acing +i*inishing returns an+ loses its -alue o-er ti*e (both because o3 energy "rice hi0es, an+ because other eJui-alent buil+ings 4ill stri-e 3or net/Dero. Pro"erly un+erstoo+, an in-est*ent in a wasting asset *ight, at best, be consi+ere+ an Go"erational sa-ings,H an+ is actually an e'"ense, 4hile an in-est*ent in an appreciating asset is, o3 course, a true in-est*ent -ehicle that "ro*ises increasing returns. 2ogically the energy e33iciency ty"es o3 e'"enses shoul+ be borne by the su""liers o3 energy, an+ not by the buil+ing o4ners at all. ;he only reason that buil+ing o4ners allo4 the*sel-es to be coa'e+ to *a0e these in-est*ents, is because they belie-e, as +o the energy co*"anies, that they +on9t ha-e any other o"tion. ;he "oint is that they +o. $urrent un+erstan+ing an+ "olicies *i' the t4o as i3 they 4ere interchangeable, so 4e are ne-er able get out o3 the hole. (o 4on+er

/ 3# /

buil+ing o4ners ha-e +i33iculty co*ing to ter*s 4ith these t4o -ery +is"arate "ers"ecti-es, 4e +o ha-e the 3o' guar+ing the chic0en coo"L ;he u"shot o3 un+erstan+ing 4hy energy/conser-ation as an in-est*ent strategy "ro+uces +i*inishing returns is 3oun+e+ on one le-el on the "ure arith*etic 3act that a3ter you in-est in a 20K sa-ings, the ne't G10KH i*"ro-e*ent really re+uces your original e'"osure only by >K, an+ so on, until a li*it is reache+. On another le-el there are o3ten a++itional engineering reasons 4hy +i*inishing returns occur, because -arious solutions are only "artially co*"li*entary, so that 2S2T3. , an+ not 4. ,n short the length o3 the "aybac0s o3 successi-e e33iciency ty"e in-est*ents 4ill escalate ra"i+ly, because o3 these +i*inishing returns. ,t is an in-est*ent night*are, 4here you e-entually bu*" u" against the li*it that the ne't Gsa-ingsH o""ortunity beco*es cost "rohibiti-e. ;he o""osite a""lies to rene4able energy, 4here there are a*"le synergistic e33ects, an+ co*"oun+ing returns to be ha+, as long as the "ro"er integration o3 engineering an+ econo*ics is a""lie+, so that successi-e in-est*ents are in+ee+ a++iti-e, an+ synergistic, base+ on a "ro"er un+erstan+ing o3 the inter+e"en+ence o3 -arious energy technologies. ;he real +ecisions are *a0e or buy +ecisions, an+ they shoul+ be ta0en 4ith a -ie4 to long ter* o4nershi" o3 buil+ings, lest ca"ital +estruction be the result. 7cono*ically it is all 3easible, but it9s not being +one because 4e are o"erating 3ro* the ol+ "ara+ig*, an+ 0ee" 4or0ing in the *argin, instea+ o3 re/thin0ing the *o+el.

/ 35 /

/ 36 /

!hat is hol ing us bac&#

,n "ractical ter*s, it co*es +o4n to this: buil+ing o4ners 4ho start on the "ath to4ar+s energy in+e"en+ence to+ay 4ill ha-e signi3icantly higher "ort3olio -alues ten years 3ro* no4, 4hereas those 4ho borro4 to+ay to u"gra+e their energy in3rastructure on the basis o3 energy e33iciency alone 4ill be un+er 4ater again in a 3e4 years, as energy "rices an+ the cost o3 +eli-ery continue to rise. 1n3ortunately, *any ban0s (as , ha-e seen in rehab 3inancings by $P$) ha-e loan "olicies that actually li*it their borro4ers to energy/ e33iciency u"gra+es an+ +o not allo4 re/engineering o3 energy in3rastructure. ,n (e4 )or0, those "olicies are in turn in3or*e+ by the a "riori gui+ance 3ro* the %e"art*ent o3 Bousing Preser-ation an+ %e-elo"*ent (BP%). &an0ers a""arently thin0 this is conser-ati-e an+ "ru+ent, but it is actually a +eath sentence. !i*"ly "ut, the ban0s are 3inancing the ne't energy crisis. ;he literal i*"lication o3 these "olicies is that the ban0sF clients are "rohibite+ 3ro* being inno-ati-e as 3ar as energy in3rastructure is concerne+ an+ can only *a0e in-est*ents 4ith +i*inishing returns, an+ so they are guarantee+ to be in trouble at so*e "oint +uring the runti*e o3 the loan. $urrent BP% "olicy essentially 3orces the ban0s to "rohibit re/engineering o3 buil+ing in3rastructure, an+ there3ore "re-ents inno-ation an+ energy in+e"en+ence, thus laying the groun+4or0 3or the ne't energy crisis, an+ un+er*ining long ter* buil+ing -alue. . corollary to this issue is the resistance o3 Aanny <ae an+ Are++ie <ac to the "riority o3 P.$7 bon+s o-er *ortgages. ;his is base+ on a 3ailure to un+erstan+ an+ test 3or a "ro+ucti-e rene4able energy in3rastructure strategy 4ith co*"oun+ing returns, 4hich 4oul+ be

/ 3> /

constructi-e to long ter* asset a""reciation, an+ shoul+ there3ore be 4elco*e+ by these agencies. !o it is the current 3aulty analytical 3ra*e4or0 3or energy 4hich ga-e Aanny an+ Are++ie the e'cuse to +i*inish the role o3 P.$7 bon+s. 1n+er the circu*stances they 4ere right to +o so, but they 3aile+ to +etect that there are actually "ossibilities 4here the "riority o3 P.$7 bon+s 4oul+ be highly +esirable C i3 the solutions are engineere+ right. $o*ing u" 4ith that "art is not the e'"ertise o3 the 3inancial regulators, an+ the energy establish*ent see*s 3ocuse+ on ser-ing the utilities an+ not buil+ing econo*ics. ,n other 4or+s, 4hen an energy retro3it is +esigne+ "ro"erly to *a'i*iDe the use o3 rene4able energy, you 4oul+ actually nee+ P.$7 bon+s as a *eans o3 3inancing the initially *uch greater ca"ital layout reJuire+ to *a0e the s4itch. ,3 P.$7 bon+s are use+ 3or *ere energy/e33iciency they *iss their *ission altogether, an+ are an ina""ro"riate 3or* o3 3inancing, because they use long/ter* ca"ital 3or short ter* gains. ;he P.$7 "ro*oters 4ere narro4ly able to *a0e the case ne-ertheless, but ha+ to acce"t li*its on the siDe o3 P.$7 3inance, relati-e to the "ro"erties in Juestion. ,n regar+ to incenti-es, because they 4ere concei-e+ 4ith the econo*ics o3 the energy in+ustry an+Oor the *anu3acturers o3 certain technologies in *in+ an+ not "ri*arily 3or the econo*ic bene3it o3 buil+ing o4ners, they are geare+ to an o-erall e33iciency goal that "er"etuates the e'isting energy "ara+ig* an+ 4ill thus cause o4ners to *a0e +ecisions that are +etri*ental to their o4n long ter* econo*ic success. Ob-iously, *any o3 the incenti-es can be -aluable, but only i3 the o4ners 3irst 3igure out the econo*ics o3 their buil+ings an+ settle on energy strategies that 4ill increase the -alue o3 their buil+ings in the long ter*.

/3 /

!o*e o3 the 4orst abuses are the current incenti-es 4hich 3a-or solar PV o-er solar ther*al, 4hen in 3act solar ther*al has a 3i-e3ol+ higher energy out"ut "er sJuare area, an+ naturally there is "lenty o3 +e*an+ 3or heat in buil+ings. ;he a+-antage o3 solar ther*al o-er PV *ight actually be 600K or so, i3 4e ta0e into account the greater ability to store "rocess heat 4ith ther*al. ;he o'y*oronic high/ e33iciency tan0/less gas hot 4ater heater is another e'a*"le that is al*ost al4ays the 4rong choice, ne-er *in+ the 7nergy !tar rating. <oreo-er, 3ro* the stan+"oint o3 "ublic "olicy, it nee+s to be un+erstoo+ that the current 3ocus on Genergy e33iciencyH is counter"ro+ucti-e, not only because it +oes not a++ u" to energy in+e"en+ence, but also because it actually "ost"ones it in+e3initely an+ -irtually "re-ents it, since the +ollars that are nee+e+ to in-est in rene4able energy are being *iss"ent on e33iciency in-est*ents that are te*"orary 3i'es at best. $arbon base+ energy is co*"eting against rene4able, an+ energy e33iciency is its only *eans. !uch in-est*ents *erely "rolong the utility *o+el, but o33er +i*inishing returns to the buil+ing o4ner, 4hich a*ounts to ca"ital +estruction. .gain, this is not e-en the acce"te+ +e3inition o3 4hat an in-est*ent is. ;here is a 3or0 in the roa+, an+ the sooner o4ners start in-esting on the trac0 o3 energy in+e"en+ence C i3 it is -iable 3or a s"eci3ic buil+ing/, the less ca"ital they 4ill sJuan+er on the +elusional trac0 o3 energy conser-ation. <ost business "eo"le alrea+y 0no4 you cannot sa-e yoursel3 rich, but so*eho4 this lesson is 3orgotten 4hen it a""lies to the energy in3rastructure o3 buil+ings. &ut the longer o4ners con+one incre*ental s"en+ing on energy e33iciency, the +ee"er they 4ill be in a hole 4hen it beco*es a necessity to s4itch to rene4able/energy. ;here3ore, the sooner they start on that trac0, the

/ 40 /

*ore li0ely their "ort3olio -alues 4ill cli*b in the 3uture, an+ they9ll be buying out their co*"etitors 4ho sJuan+ere+ their ca"ital on energy/conser-ation. .""ro"riate 3inancing -ehicles, such as P.$7 (Pro"erty .ssesse+ $lean 7nergy) bon+s, are no4 gaining currency, but there, too, 4e ha-e seen stalling tactics on the "art o3 the 3inancial in+ustry, as in the li*itations Aannie <ae, an+ Are++ie <ac *anage+ to i*"ose on P.$7 bon+s, to alle-iate their concerns that P.$7 bon+s get "riority o-er *ortgage hol+ers in case o3 +e3ault. 7-i+ently, 4hat is nee+e+ is a clear set o3 criteria to assure that only truly a""reciating energy in-est*ents are *a+e, an+ those are, by +e3inition, the rene4able technologies, 4hich *any ban0s are currently e'clu+ing 3ro* their loan "olicies. =egulators shoul+ +isJuali3y in-est*ents in Genergy e33iciency o3 3ossil 3uel base+ syste*sH 3ro* P.$7 bon+s, an+ allo4 only in-est*ents in truly Gintegrate+, synergistic, rene4able/energy i*"le*entations,H 4hich, by +e3inition, 4oul+ shore u" asset -alues in the long run. <oreo-er, such in-est*ents 4oul+ +rastically re+uce ?reen Bouse ?as (?B?) e*issions e-ery ti*e. Practical 3inancial an+ engineering criteria 3or this can be +e-elo"e+, an+ are "ro"ose+ in our %a&' =ene4able 7nergy =etro3it Port3olio !tan+ar+, inclu+e+ in the .""en+i'. ;o re"eat the "oint, Gin-est*entsH in Genergy e33iciencyH 3ace +i*inishing returns an+ "ro+uce, at best, o"erational sa-ings o3 a short/ter* nature. ;hat is to say, in the long run, they al4ays get 4i"e+ out by "rice increases in energy costs. ;here3ore, they "ro+uce ca"ital +estruction an+ thus shoul+ not Juali3y 3or subsi+ise+ 3inancing or ta' incenti-esMunless the subsi+ies co*e 3ro* the energy in+ustry, 4hich 4ants to retain its clients as long as "ossible. ;he country shoul+ 3ocus 3irst on energy independence, an+ that *eans

/ 41 /

rene4able/energy "ro+uction. ;he current energy/e33iciency *easures that +o ha-e a role to "lay in su""ort o3 energy in+e"en+ence, are i*"ro-e*ents to the buil+ing en-elo"e an+ other as"ects o3 the +e*an+ in3rastructure, but they shoul+ be "ro"erly 3ra*e+ in light o3 these ca"ital +ecisions an+ technology choices 3or rene4able in3rastructure. Technological Myopia ;his is *erely another 4ay o3 un+erstan+ing 4hy this is a "ara+ig* shi3t. 8e are terribly une+ucate+ about rene4able energy technology, an+ *any ti*es , 3in+ stereoty"es turn u" in con-ersations 4hich are "re-enting the right solutions 3ro* the outset. ;he attitu+e at this "oint shoul+ be that 4e9ll entertain anything, an+ assu*e nothing. O3 course there is a +ue +iligence issue be3ore 4e integrate ne4 technologies, but +is*issing o"tions out o3 han+ is li0ely to be sel3 +e3eating. !o*e e'a*"les 3ollo4: ;he current incenti-es an+ "ublic +ialog are +is"ro"ortionately 3ocuse+ on !olar PV, 4hen in 3act heat is the biggest energy nee+ in resi+ential buil+ings, an+ hot 4ater "ro-i+es a "otential energy store, 4hich sol-es the "ea0/loa+ characteristics o3 solar energy in the 3irst "lace. ;hus !olar ;her*al shoul+ be the 3irst choice, as 3ar as solar is concerne+, "articularly since energy out"ut "er sJuare area is so*e 3i-e to se-en ti*es higher than 4ith !olar PV. ;here is a 3alse "erce"tion that (e4 )or0 4oul+ not be a goo+ "lace 3or buil+ing/*ounte+ 4in+ energy, 4hen the re-erse is true. One e'tensi-e 4in+ stu+y 4e are 3a*iliar 4ith ha+ a-erage 4in+ s"ee+s in (e4 )or0 at hal3 a 0not abo-e $hicago, the so/calle+ 4in+y city.

/ 42 /

8hat shoul+ be un+erstoo+ is that aroun+ buil+ings 4in+ turbulence is an i*"ortant "heno*enon, so the 3ocus shoul+ not be on la*inar 4in+s, but on 4in+ turbulence, 4hich goes han+ in han+ 4ith higher -elocities, an+ +i33erent o""ortunities 3or har-esting 4in+ energy. ,n short 4in+ energy in cities an+ aroun+ buil+ings is a s"ecialty, an+ cannot be e-aluate+ li0e 4in+/3ar*s in ;e'as or the 2ong ,slan+ !oun+. 8ith geother*al energy the con3usion is "otentially e-en greater, an+ "eo"le in+iscri*inately *i' together all -arieties, inclu+ing the +ee" geother*al that har-ests -olcanic energy, such as geyers, etc. ;hat "articular 3or* o3 it is "re-alent in ,celan+, an+ it has its o4n uniJue set o3 "roble*s. ,n ()$ "eo"le usually only 0no4 o"en loo" geother*al as they ha-e hear+ horror stories o3 "roEects that +rille+ 1,#00 3t holes only to *iss the aJui3er they 4ere trying to reach. !uch e'"eriences then lea+ to a stereoty"e that geother*al is no goo+ in (e4 )or0. ,n ()$ either o"en loo" or close+ loo" geother*al can be an o"tion, an+ close+ loo" technologies 4hich are i+eal 3or the %B8 a""lication, an+ since hot 4ater ten+s to be 30/#0K o3 the &;1 loa+ o3 ()$ a"art*ent buil+ings, this one o3 the *ost strategic technologies aroun+. $lose+ loo" geother*al can o33er as high as 400K e33iciency, an+ generally reJuires no *ore than a 6 by 14 3t 3iel+ 3or a 4ell, 4ith +rilling +o4n to 1003t. Aor retro3its it is o3ten the only o"tion, an+ 3or %B8 it is the "er3ect technology. ;he geother*al 4ell coul+ e-en be installe+ in the base*ent, un+er a buil+ing.

/ 43 /

<ost i*"ortantly, a hybri+ geother*al %B8 syste*, 4ell +esigne+ 3or energy/har-esting, "ro-i+es both energy storage, an+ it is e33ecti-ely a base loa+ generating ca"acity, li*ite+ only by the nee+ 3or "erio+ic "auses, so as not to e'haust the heat trans3er ca"ability o3 the surroun+ing soil (or the 4ater in case o3 an o"en loo" syste*) in the geother*al 4ell. nergy Star and !"S #DA MPP

;he "roble* 4ith the 7nergy !tar "rogra* is that it is 3ocuse+ on the co*"onent le-el, an+ this is *islea+ing 3ro* the stan+"oint o3 +eci+ing a larger integrate+ syste*. , ha-e alrea+y *entione+ the reasons 4hy the highly rate+ tan0/less gas hot 4ater heaters are conce"tually al*ost al4ays 4rong. ;here are *any other e'a*"les once you are +esigning a co*"lete syste*. ;he ()!7=%. <PP has sol-e+ *any "roble*s, an+ acco*"lishe+ a lot, yet the 3act re*ains that it 4rongly "rioritiDes energy e33iciency, an+ by"asses a 3easibility assess*ent o3 a rene4able energy solution. ,t *a'i*iDes total &;1 e33iciency at one "oint in ti*e, but ignores the longitu+inal e33ects o3 integration o3 syste*s. ;hus it causes relati-e o-er s"en+ on the best you can +o right no4, an+ ignores 3uture "otential, nor +oes it "re-ent choices in the "resent, 4hich are e'"ensi-ely going to shut out i*"ortant o"tions in the 3uture. . buil+ing li-es 100 years or *ore, but to the <PP there is only right no4. ;he <PP *o+el ob3uscates the "roble* o3 +i*inishing returns by 3ocusing on the total e33iciency gains o3 a co*bine+ "roEect, an+ thereby the +i*inishing returns that are e-i+ent i3 you e-aluate "roEects successi-ely, are s4e"t un+er the rug. .s a result buil+ings

/ 44 /

are set on a +isastrous, +ea+/en+ course o3 +i*inishing returns an+ ty"ically achie-e no *ore than 20/30K e33iciency i*"ro-e*ents. ;he <PP also "enaliDes a++itional electrical +e*an+ un3airly, 4ithout regar+ to the i*"ro-e+ utiliDation 4hich results 3ro* our +esign *etho+ology o3 A,=!; +oing hybri+/geother*al %B8, o"ti*iDe+ to run o33 "ea0 3irst, to be later re"lace+ 4ith locally generate+ electricity. ;his ste" is the *ost strategically i*"ortant rene4able/energy technology in the city, 4ith the *ost i**e+iate "ayo33s, yet it is "ractically ignore+ *ost o3 the ti*e, an+ "er-ersely the Ghigh e33iciencyH gas heaters 4in the +ay. ;hus again, sub/o"ti*iDation, *aEoring in a *inor, is a 4aste o3 resources, an+ lea+s to ca"ital +estruction i3 a rene4able/energy alternati-e e'ists. ;he "ro"er 4ay 3or a buil+ing o4ner to use the ()!7=%. <PP 4oul+ be to +o a 30 year ca"ital bu+get 3or the energy in3rastructure o3 the buil+ing, an+ to thoroughly *a' out on rene4able energy o"tions, an+ easily e'cee+ the ()!7=%. <PP criteria, so that the "roEect can still Juali3y 3or the 3inancial incenti-es. ;he "resent e33ect o3 the <PP is to guarantee un+er"er3or*ance, 3or all buil+ings are going to target the 20/30K i*"ro-e*ents at the lo4est cost "ossible, Eust to Juali3y 3or the incenti-es. ;hus the <PP brings +o4n "er3or*ance instea+ o3 increasing it. 8ith a""ro"riate rene4able/energy in3rastructure, *any i3 not *ost buil+ings coul+ achie-e 6#K re+uction in ?B? e*issions, be "artially in+e"en+ent 3ro* the gri+, an+ thereby ha-e greater resiliency as 4ell.

/ 4# /

/ 45 /

!hat"s in it for everyone else#

Aunnily enough, the u"shot o3 these i+eas is that: (a) o4ners o3 the buil+ings that coul+ i*"le*ent rene4able solutions 4oul+ *a0e *ore *oney an+ +i-ersi3y their businessesR (b) society as a 4hole 4oul+ get 3aster a+o"tion o3 rene4able energy an+, along 4ith it, cleaner air an+ other bene3itsR an+ (c) the gri+ 4oul+ be signi3icantly unclogge+, so that the econo*ics o3 the utilities 4oul+ be 3a-orably i*"acte+ o-erall. Plus society 4oul+ 4in a *easure o3 energy in+e"en+ence, an+ the balance o3 "ay*ents 4oul+ i*"ro-e. 2astly, 4e 4oul+ e'"erience an increase in security an+ "ublic sa3ety, 3or those buil+ings that are e-en "artially o33 the gri+ 4oul+ stay lit in the ne't blac0out. 7-er since hurricane !an+y, "eo"le no4 un+erstan+ 4hat buil+ing resiliency *eans. ;he insurance co*"anies, to na*e Eust one "arty 4ith 4ho* a buil+ing o4ner *ight li0e to stay on 3rien+ly ter*s, *ight li0e that. $tilities and %o&ernment 8hen loo0ing at the ()$ gri+ 3ro* 20,000 3t, an+ realiDing that the resi+ential buil+ings that 4oul+ generally Juali3y 3or the ty"es o3 in3rastructure +e-elo"*ent +escribe+ here are *ore in the outer boroughs, it beco*es clear that "utting the* on a "ath o3 "rogressi-e gri+ in+e"en+ence, an+ "ositi-ely i*"ro-ing the gri+ utiliDation 3or another "art, 4oul+ i*"ro-e the econo*ics o3 the gri+ o"erators, an+ allo4 the* to concentrate on the areas o3 greatest econo*ic i*"ortance, 4hich in (e4 )or0 $ity is <anhattan. ;hese structural changes coul+ be constructi-e to the "ro3itability o3 utilities, an+ +eser-e their su""ort inclu+ing, "otentially, 3inancial incenti-es.

/ 46 /

%eneral Public Benefits 2i0e4ise, 3ro* a stan+"oint o3 national security e33ecti-e energy in+e"en+ence, an+ increase+ resiliency 3or a large nu*ber o3 buil+ings shoul+ be +esirable 4ith a -ie4 to insulating e-en "arts o3 cities 3ro* su""ly +isru"tions inclu+ing 4eather e*ergencies, an+ "ossible sabotage. ;he technologies e'ist to achie-e this sort o3 in+e"en+ence to+ay, but the current "olicy 3ra*e4or0, inclu+ing -arious incenti-e "rogra*s "re-ent it 3ro* ha""ening, because they 3ocus the attention in the 4rong "laces. One o3 the *easures that shoul+ also be su""orte+ 3ro* a "ublic "olicy stan+"oint is to encourage buil+ing o4ners to ta0e o-er the energy su""ly o3 their tenants. O4ners 4ill Juic0ly learn to 3igure out 4hich buil+ings gi-e the* the best o""ortunities to "ro3it 3ro* energy, an+ in general, in (e4 )or0 $ity, it9s the ol+er a"art*ent buil+ings, *ostly in the outer boroughs, 4hich o33er the best "otential 3or *a0ing *oney 3ro* energy, 4hile the high/rises o3 <anhattan are the real energy sin0s, an+ ha-e energy conser-ation as their only o"tion. ,3 o4ners beco*e *ore res"onsible 3or the energy consu*"tion o3 the tenants, central BV.$ 4ill beco*e *ore "re-alent, since it is 3ar *ore energy e33icient, "articularly in *ulti/3a*ily li-ing. 8ith to+ay9s 4ater/+ri-en air han+lers, retro3its ha-e beco*e -ery 3easible. ;here are nu*erous other technologies that are being hel+ u" because o3 the arti3act o3 tenants "aying their o4n electrical an+ gas bills, e-en 4hile "rohibiting lan+lor+s 3ro* charging *ore than the utilities 4ill lea-e the* 4ith "lenty o3 "ro3it *argin, an+ i*"ro-e the econo*ics o3 buil+ing o4nershi" "er*anently. One other issue "robably *erits attention, an+ that is the "ublic

/ 4> /

health +i*ension. (ot only +oes it *a0e *ore sense 3ro* an air Juality stan+"oint to s4itch to rene4able energy +irectly, rather than ta0ing interi* ste"s to go 3ro* one 3ossil 3uel to another, but the "rogressi-e re*o-al o3 in+oor burning o3 3ossil 3uels o3 any 0in+ 4ill ser-e to i*"ro-e in+oor air Juality, 4hich then enables us to tighten u" buil+ings *ore, an+ along 4ith the s4itch to 4ater +ri-en (hy+ronic an+ solar/"o4ere+ 4ith absor"tion chillers) BV.$ syste*s. ,t shoul+ be note+ that i3 this ty"e o3 an energy con-ersion is "ursue+, +i33erent +ecisions shoul+ be *a+e as to 4hat ty"e o3 re"lace*ent 4in+o4s to use (they can be *uch tighter, i3 they +o not ha-e to acco**o+ate 4in+o4 aOc). 8hen co*bine+ 4ith heat/ reco-ering -entilation, this coul+ be one o3 the *ost i*"ortant "oints o3 "rogress in ter*s o3 en-iron*ental health in *ulti/3a*ily li-ing. $ertainly, 4ith asth*a being the 0in+ o3 "roble* that it is, in the !outh &ron' in "articularMthe "utati-e asth*a ca"ital o3 the 4orl+ Mthere is e-ery reason to be cleaning u" in+oor air right along 4ith out+oor air, an+ base+ on the +e-elo"*ents suggeste+ here, electrical coo0ing is set to beco*e *ore econo*ical 3or large nu*bers o3 a"art*ents. &etter in+oor air Juality has +irect econo*ic -alue.

/4 /

/ #0 /

'n (latt )osher *inancial Planning

One o3 the bigger "ractical i*"e+i*ents to achie-ing the 0in+s o3 in-est*ent outloo0 4e are tal0ing about in this "a"er is the "re-alence o3 slo""y 3inancial "lanning in the real estate an+ "ro"erty *anage*ent sectors. 1n+erstan+ably *anu3acturers o3 eJui"*ent try to "ush their eJui"*ent out on the basis o3 o33ering a su"erior "aybac0 co*"are+ to certain alternati-es, an+ o4ners o3 buil+ings too o3ten 3all into this tra". ;he ()!7=%. <PP also +e 3acto encourages this ty"e o3 *arginal analysis o3 eJui"e*ent, in lieu o3 "ro"er 3inancial *o+eling o3 the buil+ing. ;a' incenti-es 4or0 against "ro"er analysis the sa*e 4ay. Various go-ern*ent incenti-es *a0e the issue 4orse 3ro* ti*e to ti*e, because the incenti-es can s0e4 the +ecisions. Bere the ol+ nostru* is true once again: 3inancial incenti-es can *a0e a goo+ "roEect better, but they can ne-er *a0e a ba+ "roEect goo+. ;he 3irst or+er o3 business re*ains to e-aluate a "roEect 3ro* an integrate+ engineering an+ econo*ics stan+"oint, lest 4e +istort the "icture 4ith 3inancial incenti-es. 'ife-cycle (n&estment Analysis ;he "ro"er analysis 4oul+ be to loo0 o-er the ne't 20/30 years, because that *ight be the li3e/s"an o3 a rene4able in3rastructure. ;he energy e33icient buil+ing *ight ha-e achie-e+ a re+uction in energy consu*"tion o3 30K, 4hich is 4i"e+ out again 4ith energy "rice hi0es in the ne't 10 years. <ean4hile, the sa*e buil+ing ne't +oor 4ill ha-e e-ol-e+ to a "oint 4here it has eli*inate+ 0K o3 +irect 3ossil/3uel consu*"tion, ha-e the co**on areas o33 the gri+, an+ be selling electricity to so*e or all o3 the tenants. 7'ten+ those t4o *o+els 3or 2# or so years, an+ e-en 4ith hea-ier u" 3ront

/ #1 /

in-est*ents, the energy in+e"en+ence *o+el 4ill be the 4inner *ore o3ten than not, i3 the buil+ing is right/siDe+. ,n short, i3 you +o a "ro"er ca"ital bu+get, it 4ill beco*e e-i+ent that the higher ca"ital in-est*ent in rene4able technology is o3ten 4arrante+ because 30 years o3 no energy bills easily out "er3or*s 30K Genergy sa-ings.H ,n short the biggest "roble* is 3inancial *etho+ology, not technology. )hat Paybac* Does +and Does !ot, Mean ;he "aybac0 "erio+ o3 a "roEect is si*"ly a calculation o3 the a*ount o3 ti*e it ta0es 3or the in-est*ent in a certain "iece o3 eJui"*ent or *easure to "ay 3or itsel3 base+ on "ros"ecti-e sa-ings, incenti-es, etc. ,t is a nice an+ intuiti-e *easure 4hich is use3ul 4hen e-aluating eJual alternati-es, 4here there are absolutely no inter/ +e"en+encies. ,n short, i3 you9re at a 3or0 in the roa+, an+ e-erything else is absolutely the sa*e, but you Eust ha-e to guess right or le3t, an+ it9s e'actly #0O#0, then the "aybac0 *ay be use3ul as a selection criteria. <ost +ecisions ha-ing to +o 4ith buil+ing energy in3rastructure, are not o3 that nature, 3or there are inter/+e"en+encies 4ith other +ecisions an+ technology choices all the ti*e. !o, i3 your business is: stan+ing on the corner selling hot 4ater by the "ail 3ull, your choice bet4een a tan0/less gas hot 4ater heater an+ a solar ther*al solution can be +eci+e+ base+ on "aybac0, 3or you are going to get the sa*e "rice "er "ail o3 4ater in either scenario (or can you get a "re*iu* 3or solar 4ater:). Bo4e-er, i3 your business is to o"erate a buil+ing, an+ you realiDe that by +esigning hot 4ater storage 3or energy har-esting, you9-e Eust enable+ yoursel3 to s4itch to rene4able sources, 4hich are all "ea0 loa+ "ro+uction, such as !olar an+ 8in+ C they reJuire storage C an+ the ans4ers beco*e -ery +i33erent.

/ #2 /

That Salesman Does !ot O-n "our Building !ales"eo"le shoul+ be a-oi+e+ at all costs. Ba-e your engineers tal0 to their engineers but not unless an+ until you ha-e a clear i+ea o3 your o"tions on a t4enty/thirty year 3or4ar+ loo0ing basis. Particularly you shoul+ ha-e a clear -isualiDation o3 the *eaning o3 the t4o *aEor alternati-es 4e ha-e "ainte+ here. !ales"eo"le 4ill be "ushing incenti-es, ta' brea0s, an+ "aybac0 "erio+s. ;heir 3ocus is on selling the eJui"*ent they re"resent, an+ 3iguring out the long ter* "ro3itability o3 your buil+ing to the* is only a co*"lication. ;hus clai*s are e'aggerate+, an+ 3inancing an+ incenti-es are use+ to +istort +ecision *a0ing, an+ usually Juic0 "aybac0s are toute+ as a co*"etiti-e a+-antage. .ll o3 those shoul+ *a0e the buil+ing o4ner run 3or the hills, an+ 3irst 3igure out his long ter* energy "lan. ;he 7nergy !tar label *ay be one o3 the biggest "roble*s in this area. .s "ointe+ out else4here, Eust because the eJui"*ent is *ore e33icient at the co*"onent le-el, +oes not *a0e it the o"ti*al eJui"*ent 3or your buil+ing. Aor e'a*"le, highly e33icient 7nergy !tar/rate+, con+ensing boilers *ay beco*e a *aintenance "roble* i3 they are un+er utiliDe+, an+ i3 they are only a bac0u" source o3 energy that *ay be a serious consi+eration. .o- to $se (ncenti&es Aocus 3irst on the engineering an+ econo*ics on a cash basis, an+ only a3ter you are con-ince+ the "roEect *a0es sense on that basis, see i3 the a-ailable 3inance an+ other incenti-es can *a0e it *ore realistically achie-able an+ e-en better. %o not let the incenti-es lea+ you by the nose. ;o re"eat: ?oo+ 3inancing (ta' incenti-es, subsi+ies, etc.) can *a0e a goo+ "roEect better, but they can ne-er *a0e a ba+ "roEect goo+.

/ #3 /

!ales "eo"le *a0e the *ost *oney by *a0ing ba+ "roEects loo0 goo+. O4ners only 3all 3or those *isre"resentations, i3 they +o not ha-e the 4here4ithal to *a0e long ter* +ecisions about energy in3rastructure, an+ that *eans a current long ter* ca"ital "lan 3or the energy in3rastructure o3 a buil+ing. The Systems Outloo* .long 4ith a long ter* "lan, o4ners shoul+ al4ays ha-e a clear i+ea o3 the syste*s i*"lications o3 -arious technologies 4hich can either hel" o3 hin+er each other. $orrect engineering integration o-er ti*e can *a0e the +i33erence bet4een success or 3ailure. One e'a*"le: ,n one business a solar "anel su""lies #0K o3 the electrical loa+, so the siDe o3 the utility bill 4as cut in hal3. ;he un+erlying consu*"tion has not change+, an+ i3 4e can re/engineer so*ething 4hich re+uces consu*"tion by 10K, it 4ill re+uce the re*aining bill by 20K. ;hat9s a si*"le one to one e33ect, 4hich synergistically increases the "aybac0 o3 the in-est*ent in rene4able generating ca"acity, but the econo*ic i*"lications are -ast. Aiguring out that 10K sa-ings *ay not be 4orth4hile ta0en in isolation, but is a tre*en+ous boost to the solar "roEect i3 it is i+enti3ie+. .nother issue that 4e ha-e allu+e+ to in these "ages concerns storage an+ base loa+ "o4er generation, as o""ose+ to "ea0 loa+ "o4er such as 4in+ an+ solar energy. . 4ell +esigne+ hybri+ geother*al %B8 syste*, i3 it is o"ti*iDe+ 3or energy har-esting C *eaning 4ith storage larger than 3or *ini*al hot 4ater reJuire*ents alone C 4ill enhance the subseJuent "ayo33 3ro* in-est*ents in either 4in+ ("re3erably) or solar PV (i3 that9s the best you can +o). &ut i3 it has been engineere+ to Eust ser-ice hot 4ater nee+s, it 4ill ha-e to be re+esigne+ later, 4hich is al4ays *ore e'"ensi-e.

/ #4 /

)et another e'a*"le is that 4e shoul+ loo0 at buil+ing issues 4ith an eye 3or the alche*y o3 energy, an+ not assu*e that anything is 4hat it see*s. Peo"le assu*e in *ost cases that coo0ing 4ith gas is 3ine, but it is the biggest source o3 in+oor air "ollution in resi+ential li-ing. Plus, i3 4e can s4itch to electric coo0ing, 4e can ha-e tighter 4in+o4s, an+ use heat reco-ery -entilation. ;he s4itch to electric coo0ing is not unreasonable i3 4e start to "ro+uce *ore o3 our o4n energy. ;hus, i3 4e9+ gone the energy e33iciency route, 4e 4oul+ ha-e or+ere+ the 4rong re"lace*ent 4in+o4s. ;hat9s a 20 year *ista0e. ;hese are all e'a*"les 4hy a long ter*, integrate+ loo0 at the buil+ing as an energy syste* is nee+e+. (ot only that, 3or tenants, eli*inating a se"arate gas bill is a huge sa-ings. ,n *y o4n 0itchen ;U% is #K o3 the gas bill, so , 4oul+ sa-e *oney by s4itching to all/electric coo0ing. !o again: 4ithout a coherent 20 year ca"ital "lan 3or energy, base+ on soli+ engineering "rinci"les, ca"ital +estruction is the ine-itable result. 8e ha-e s"o0en 4ith *any o4ners 4ho are too busy 4ith their energy e33iciency u"gra+es to s"en+ ti*e on long ter* "lanning. ;hey are so busy +igging the*sel-es into a hole, that they ha-e no ti*e to thin0 about ho4 they are going to get out o3 it, an+ the "resent regi*e o3 energy "un+itry *a0es the* 3eel goo+ about +igging the hole in the 3irst "lace. .3ter all, their utility, or an agency li0e ()!7=%. gi-es the* a ba+ge 3or being a *ore e33icient custo*er, so they *ust be +oing "retty 4ell...

/ ## /

/ #5 /

+ ,o el
;he 3ollo4ing "utati-e *o+el is base+ on so*e buil+ings that 4e ha-e e-aluate+ at one "oint, an+ 4hich can ser-e as a ty"ical e'a*"le, though they ha-e (but o3 course) since 3allen "rey to the current craDe o3 energy/e33iciency/cu*/s4itch9e*/to/natural/gas con-ersions, 4hich is no4 creating the city9s ne't energy crisis. ,t shoul+ be note+ that this "resentation *a0es a lot o3 assu*"tions 4hich are not true in e-ery case, e-en i3 they *ight ha-e been in the un+erlying cases. 7-ery buil+ing is +i33erent. ;his *o+el is a co*"osite, 4hich assu*es the "er3ect situation, but in "ractice there 4ill be as *any "lans as buil+ings, e-en i3 the "rinci"les o3 syste*s integration re*ain the sa*e. 8e also too0 so*e "oetic license 4ith nu*bers 3or the sa0e o3 this "resentation, so as not to create +istractions li0e 4>.#4K 4hen a "lain #0K *a0es it *uch clearer 4hat is going on. ,t is -ery i*"ortant to un+erstan+ the alche*y o3 energy, an+ the 3act that on the +e*an+ si+e 4e are +ealing o-er4hel*ingly 4ith +e*an+ 3or heat, thus solar ther*al an+ geother*al shoul+ be high on the list as they can create -ery i*"ortant e33iciencies. 8e ha-e stu+ie+ a "roEect 4ith so*e a"art*ent buil+ings in the &ron', but 3oun+ that ter*s o3 the a-ailable $P$ 3inancing *a+e a re+esign o3 the energy in3rastructure i*"ossible. Aor the rest, 3or the sa0e o3 this generic "resentation 4e +o not +iscuss *anu3acturers, only 3eatures. Our "ur"ose is to be technology agnostic an+ in+e"en+ent in this "lace. 2astly, note that this e'a*"le is base+ on a ty"ical ol+/line a"art*ent buil+ing in the outer boroughs, 4ith #0S a"art*ent units,

/ #6 /

a stea* boiler, running on I5 oil, 4ith an esti*ate+ re*aining li3e o3 #/10 years. %B8 3ro* a coil in the boiler, *a0ing u" #0K o3 the &;1 loa+. 8in+o4 .O$s C lan+lor+ "ro-i+es heat an+ hot 4ater, the legal *ini*u*. Plenty o3 s"ace in the base*ent, su33icient groun+s 3or 2/3 close+ loo" geother*al 4ells (Eust 1003t +ee"), a 3lat roo3 4ith no sha+ing "roble*s, an+ goo+ e'"osure to 4in+. Phase /0 %eothermal D.)

!ince this buil+ing "ro-i+es "er3ect con+itions a hybri+ geother*al hot 4ater syste* is "ossible, eli*inating #0K o3 the 3ossil/3uel &;1s right a4ay. ;he buil+ing is "art o3 a co*"le' that is all burning I5 oil. ;he e33iciency o3 the ol+ coil in the boiler is ca 40K, or to "ut it +i33erently, at least 3or the hot 4ater, on a yearOroun+ basis, 50K o3 the &;1s are lost to ine33iciency, in e33ect +isa""earing u" the chi*ney. ;he 3un+a*ental +esign issue o3 the ne4 Bot 8ater syste* is that it shoul+ be +esigne+ 4ith energy storage in *in+, ca"able o3 running at o33/"ea0 rates at the outset, an+ to be run 4ith local 4in+ "o4er later in Phase 2 or 3 o3 the "roEect. .t this "oint a 12/1> ton hybri+ geother*al %B8 4oul+ co*"arati-ely "ro+uce a syste* e33iciency in e'cess o3 100K, na*ely as 3ollo4s: e33iciency o3 geother*al heat "u*": 400K, "ro-i+ing "reheating o3 4ater 3ro* #0A to 100A. (ote that 400K e33iciency *eans that 3or e-ery 1 04B in"ut, the heat eJui-alent o3 404B is "ro+uce+ by heat e'change 4ith the groun+. e33iciency o3 con+ensing gas hot 4ater heater (4ith tan0, 3or storage is a high -alue), "ro-i+ing te*"erature rise 3ro* 100 to

/ #> /

120A (technically actually 3ro* 100 to 13#A, an+ blen+e+ +o4n) is #K. 60K o3 the &;1 are "ro+uce+ 4ith 400K e33iciency, an+ 30K o3 the &;1s are "ro+uce+ 4ith #K e33iciency, 3or a syste* e33iciency o3 ca 300K, or "rosaically, 4e "ay 3or 1 &;1, an+ 4e recei-e 3 &;1s in -alue. in short, the syste* 4ill 4i"e out a 4ho""ing oil bill, an+ instea+ use a s*all a*ount o3 natural gas, an+ so*e electricity 3or the "u*"s an+ co*"ressors. ;his solution ten+s not to 4or0 al4ays at () "o4er rates, but it can 4or0 -ery 4ell i3 the 4ater storage is +esigne+ 3or energy har-esting, an+ the buil+ing co**on areas, inclu+ing the heat "u*"s run on a ti*e o3 use tari33. . -ital "art o3 "roEect econo*ics is also the 3act that by ta0ing %B8 o33 the boiler, its li3e e'"ectancy has Eust been increase+ 4ell "ast the ti*e the geother*al "roEect is "ai+ bac0 3ro* sa-ings. 7Jually i*"ortant, 4e ha-e Eust "ro-i+e+ a base/loa+ generating ca"acity, 3or geother*al is not +e"en+ent on the 4eather. Aro* the -ie4 "oint o3 the gri+, i3 this is +one on a ti*e o3 use basis, the +e*an+ is shi3te+ to the night ti*e, an+ the syste* hel"s e-en out +e*an+, 4hich shoul+ Juali3y 3or an e'e*"tion un+er <PP. .s a si+e issue, being able to cost/Eusti3y the s4itch to ti*e o3 use *etering in the co**on areas, the buil+ing can also s4itch to 100K linearly +i**able 27% lighting 4ith "hoto/sensors, 4hich is another +eri-ati-e -alue/a++ 3ro* this "roEect. .t to+ay9s rates "aybac0 shoul+ be in the 4/6 year range. ;he buil+ing no4 has an energy har-esting an+ storage 3acility, 4hich

/# /

su""lies the +e*an+ 3or +o*estic hot 4ater, but "ro-i+es -aluable energy in3rastructure in the "rocess. $urrent "ractices 4oul+ ha-e s"eci3ie+ high e33iciency gas heaters 3or this "art o3 the reJuire*ent, 4hich 4oul+ ha-e been a *uch s*aller in-est*ent an+ a Juic0er "aybac0, but 4oul+ ha-e 4aste+ the o""ortunity to create the long ter* -alue o3 a base loa+ generating ca"acity an+ energy storage, as 4ell as the sa-ings 3ro* the 27% "rogra* suggeste+ abo-e. ;he "ayo33 3or the 27%s can co*e right a4ay, 4hile the energy har-esting 3acilitates the har-esting o3 o33/"ea0 rates, an+ later the har-esting o3 4in+ "o4er an+Oor solar PV. Phase 1 - )ind 8e assu*e that the %B8Oenergy har-esting syste* is largely "ai+ o33 in year 3i-e, an+ no4 4e a++ a 4in+/turbine to the syste*. 8e Eoint/-enture 4ith the cell/to4er on the roo3 3or the battery, gi-ing the* unli*ite+ bac0u", an+ selling the* our "o4er at a "ro3it. !ince 4e alrea+y ha-e the 3ree storage in the 3or* o3 geo/ther*aly "re/heate+ %B8, 4e can ta0e the co**on areas, inclu+ing the geother*al syste* o33 the gri+ co*"letely, an+ relegate the gri+ to a bac0u" role, not a "ri*ary one. <ost li0ely 4e 4ill ha-e an e'cess an+ be able to sub/*eter an+ su""ly at least so*e o3 the tenants as 4ell, an+Oor ha-e our o4n electric car charging stations. Aurther, here is the 3irst o""ortunity to i*"le*ent electric coo0ing along 4ith the sub/*etering. ,n the 4orst case 4e +o net *etering, 4hich ho4e-er gi-es lo4er returns. Phase 2 4ill ha-e a 3/# year "aybac0, +e"en+ing on -arious -ariables.

/ 50 /

Phase 2 3 Solar Thermal .4A5 !o*eti*e aroun+ year 10 4e no4 co*e u" to boiler re"lace*ent, an+ by that ti*e 4e install substantial solar/ther*al ca"acity, along 4ith an absor"tion chiller, an+ s4itch the buil+ing to hy+ronic heatOcooling. Potentially at this stage 4e can buil+ a laun+ro*at in the base*ent using e'cess heat 3ro* the solar "lant, as 4ell as integrating heat reco-ery 3ro* the 3acility, in the "rocess greatly re+ucing the total societal loa+ 3ro* the laun+ry "rocess. .t this "oint 4e a++ storage 3or the solar/generate+ hot 4ater, 4hich 4ill range 3ro* 13#A/200A, an+ sel+o* i3 e-er nee+ the bac0u" o3 the gas hot 4ater heater. 8e "ro-i+e a bac0u" boiler 3or the heat. ,3 it 4as not +one yet, the s4itch to electrical coo0ing coul+ be +one in this "hase, or it can 4ait. ;he "oint is, it *ay 3acilitate the eli*ination o3 all gas 3ro* li-ing areas. .t the en+ o3 "hase 3, in the tenth year o3 the "roEect, the buil+ing has re+uce+ its reliance on 3ossil/3uels by 0K, an+ cut its electrical consu*"tion in hal3. ;his en+s the *aEor "art o3 the "roEect, other ste"s can 3ollo4 later, +e"en+ing on 3inances, an+ co*"lete the "rocess. (otice that 4ith the intro+uction o3 solar ther*al BV.$ an+ the eli*ination o3 the 4in+o4 air con+itioners, the buil+ing9s electrical loa+ has been re+uce+ e-en 3urther, an+ this is the ti*e 4hen an e-en greater nu*ber o3 tenants can be ser-ice+ 4ith locally generate+ electricity, a++ing another long ter* re-enue strea* to the buil+ing. Phase 6 - 7ai8en ;his "hase coul+ consist o3 the s4itch to electric coo0ing (though that coul+ ha-e been integrate+ earlier), but it certainly inclu+es a

/ 51 /

4in+o4 re"lace*ent 4ith *uch tighter 4in+o4s, an+ "ossibly heat/ reco-ery -entilation. Other i*"ro-e*ents to the buil+ing en-elo"e are no4 also "ossible. ;he ti*ing o3 this last "hase is o"tional, +e"en+ing on 3inancial consi+erations. &y 3ocusing on the "ro+uction ca"abilities o3 the buil+ing 3irst, e-ery enhance*ent to the buil+ing en-elo"e no4 yiel+ *ore salable electricity either to the tenants or bac0 to the gri+. ;his "rocess can go on. This is a Beginning not an nd

7nergy in+e"en+ence certainly is the en+ 4e shoul+ ha-e in sight 4hen 4e start this "rocess, but it is only Eust beginning. Aor again, as 4e are crossing o-er into "artial "ro+uction o3 energy an+ re+uce+ +e"en+ence on the gri+, e-ery successi-e incre*ental i*"ro-e*ent in the buil+ing en-elo"e 4ill "ayo33 in being able to su""ly the electrical nee+s to a gro4ing "ortion o3 the buil+ing, an+ there3ore "ro+uce a +irect re-enue strea* associate+ 4ith it. ;he -ariations are en+less, an+ 4ill be +i33erent 3or e-ery buil+ing, but the logic is clear: by "ro"er integration, an+ by le-eraging the a-ailable synergies through a long ter* syste*s 3ocus on the buil+ing as an energy "ro+ucer, an+ a "otentially -ery sel3/su33icient energy syste*, +ee" energy change is 3easible to+ay. 8e can only ho"e that it 4ill be encourage+ *ore, since 3or the *o*ent the syste*s o3 incenti-es an+ "rogra*s no4 in "lace are un4ittingly "re-enting it.

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!%*,E- Sta&ehol ers

&uil+ing o4ners. (ote that 4hile 4e 3ocus in "articular on 3or "ro3it o"eration o3 buil+ings, naturally also the city9s *any B%A$ ty"e o4nershi" arrange*ents shoul+ be intereste+, but they are o3ten e'clu+e+ 3ro* the ta' a+-antages, an+ *ust see0 3un+ing in other 4ays. 1n3ortunately o3ten ti*es 3or "ro3it o4ners o"erate their buil+ings in such a 4ay that they cannot access the ta' incenti-es either. ;his is one reason 4hy P.$7 bon+s 4oul+ be such an i*"ortant "art o3 the solution, though eJually -ariations on J#1 ta' abate*ents coul+ 4or0 as 4ell. ;he best can+i+ates 3or this "rogra* are o4ners o3 buil+ings that ha-e +one nothing to +ate, an+ are still o"erating on the "ro-erbial !tea* boiler, 4ith a coil in the boiler, burning I5 oil, 4here the %B8 co*"onent o3 the &;1 consu*"tion "robably a""ro'i*ates #0K o3 the buil+ing9s heat loa+. ,+eally the boiler shoul+ still ha-e a 3e4 years o3 use3ul li3e le3t in it at the outset, or in any case the +esign o3 a rene4able energy "lan shoul+ be base+ on 4here a buil+ing is in the cycle o3 structural u"gra+es o3 -arious 0in+s. O4ners 4ho ha-e in-este+ in the current regi*e o3 energy e33iciency "rogra*s, in *ost cases 4ill 3in+ that "art o3 that in-est*ent 4as 4aste+, although in *any cases the "aybac0s are -ery short, than0s to -arious incenti-es, so it *ight not be i*"ossible to s4itch to the energy in+e"en+ence trac0 suggeste+ here. Bo4e-er, once this energy *o+el is un+erstoo+, it *ight be better to sell those buil+ings, an+ start o-er 4ith a +istresse+ buil+ing.

/ 53 /

,t shoul+ be note+ that ()$ $lean Beat in its current 3or* has been counter "ro+ucti-e in this area. ;he "re-alent s4itch to natural gas a*ounts to little *ore than Gin-estingH in the +i33erence bet4een the ;itanic sin0ing in # *inutes or 10, an+ is har+ly 4orth the 3uss, 4hile a *assi-e o""ortunity 3or "er*anent ?B? re+uctions an+ $lean .ir i*"ro-e*ents is being *isse+. 8hat buil+ing o4ners 4ho are serious, long ter* in-estors, shoul+ also un+erstan+ is that base+ on the a""roach suggeste+ here, ol+/line a"art*ent buil+ings 4ill beco*e -astly less energy/intensi-e co*"are+ to resi+ential buil+ings that are either larger or s*aller C because the econo*ies o3 scale "ut the* out o3 reach 3or the integrate+ a""roach to rene4ables 4hich is so "otentially 3ruit3ul 3or the *i+siDe a"art*ent buil+ings. ;hus *aEor shi3ts in in-est*ent strategy are in the o33ing, an+ a"art*ent buil+ings 4ill beco*e *uch *ore attracti-e "laces to li-e. ;enants o3 a"art*ent buil+ings: ;hese 4ill be healthier buil+ings. 7-en ne4 coo" con-ersions shoul+ not be inconcei-able 4ith this "otential. (e4 )or0 $ity an+ !tate, an+ Ae+eral ()$ 7cono*ic $o*"etiti-eness 7-i+ently, the econo*ic co*"etiti-eness "osition o3 the city is at sta0e i3 -ast tracts o3 housing can re+uce their use o3 3ossil 3uels by >0/ 0K an+ co*e "artially o33 the gri+. BP% (Bousing Preser-ation an+ %e-elo"*ent) .s "ointe+ out here, the energy in+e"en+ence strategy is constructi-e to long ter* buil+ing -alue, an+ there3ore to buil+ing "reser-ation. ;he current energy e33iciency regi*e is not, as long as the rene4able energy o"tion is -iable 3or a

/ 54 /

buil+ing. 7'a*"le: t4o i+entical buil+ings in 2011, 4ith 100 units, an+: one beca*e 30K *ore e33icient, but the sa*e buil+ing ne't +oor 4ith a +i33erent o4ner chose the energy in+e"en+ence "ath, an+ eli*inate+ >0K o3 its 3ossil 3uel consu*"tion, "lus is o33 the gri+ 3or the co**on area, an+ selling "o4er to #0K o3 the tenants. 8hat 4ill gas, electric, an+ oil "rices be in 2020: 8hich buil+ing is 4orth *ore: 7Jually i*"ortant, so*e classes o3 buil+ings *ay beco*e less -iable, i3 one class o3 buil+ings has a huge a+-antage 3ro* an energy stan+"oint. %7P (%e"t. o3 7n-iron*ental Protection) $learly the 3act that energy in+e"en+ence 4ill "ro+uce +is"ro"ortionately larger returns in eli*inating "ollution shoul+ get the interest an+ su""ort o3 %7P. $o*"liance 4ith the $lean .ir .ct *ay be 4ithin reach. %B$= .gain, the econo*ic -iability is at sta0e, *ore attracti-e neighborhoo+s are a +irect conseJuence o3 3e4er "articulates in the air. &ut also, the -iability o3 one class o3 buil+ings *ay be i*"ro-ing, 4hile other ty"es o3 buil+ings *ay beco*e less -iable. %e"t o3 Bealth C ;he i*"ro-e*ents in healthy li-ing con+itions 3ro* this "lan 4ill be substantial. ()P% !ecurity. ?ri+ in+e"en+ent buil+ings 4ill stay lit in the ne't energy crisis. %B! Bo*elan+ !ecurity is i*"ro-e+ i3 a goo+ seg*ent o3

/ 5# /

resi+ential buil+ings are energy in+e"en+ent. ;he *onoculture o3 (atural ?as is a security "roble* in its o4n right, that shoul+ be unacce"table, "articularly since it is a-oi+able. .lso see belo4 on i*"ro-e*ents to the city9s co**unications in3rastructure. %O% !a*e reasons as %B!. (ational security is i*"ro-e+ 4ith energy in+e"en+ence o3 buil+ings. %O7 . ne4 energy "ara+ig* is 3inally here. ;he e'a*"les are ()$ centric, but the "rinci"les are o3 national rele-ance. %P! ;he %P! has a role to "lay in +e-elo"ing all the -arious regulatory changes to 3acilitate the transition to the ne4 energy "ara+ig*, "articulary it shoul+ be note+ that cell to4ers are going to be co*"etiti-e 4ith necessary buil+ing in3rastructure. ()!7=%. Ob-iously, ()!7=%. shoul+ ha-e an interest in hel"ing +e-elo" ne4 long ter* *o+els along the lines suggeste+ here. ;he "resent <PP "rogra* 3a-ors the interests o3 the utility in+ustry abo-e the econo*ic interests o3 the o4ners. ,nterestingly, once "rogra*s are re+esigne+ 3ro* the stan+"oint o3 buil+ing -alues, *ore +rastic re/ engineering o3 energy in3rastructure 4ill beco*e -iable, so here is one case 4here the "ro3it *oti-e o3 the buil+ings actually can "ro+uce a greater "ublic goo+.

/ 55 /

7Jually i*"ortant, the econo*ics o3 the gri+ 4ill actually be i*"ro-e+ by these changes, so $on7+ison stan+s to bene3it an+ shoul+ be an acti-e su""orter. (),!O 7cono*ics o3 the gri+ are changing, an+ these i*"ro-e*ents coul+ beco*e Juite signi3icant, gi-en the nu*bers o3 buil+ings o3 this ty"e. A$$, $ellular co*"anies. Particularly 4ith buil+ing *ounte+ 4in+ turbines, there is a "roble* 4ith a col+ start in case o3 a "o4er outage, so battery bac0u" is nee+e+. ;his situation len+s itsel3 to "artnering 4ith cellular co*"anies, an+ as a result cell to4ers 4oul+ ha-e in+e3inite bac0u", in lieu o3 the legal 24 hours. &uil+ings 4ith this in3rastructure 4oul+ thus be natural "artners 3or cell to4ers. 2aun+ro*ats ,3 su33icient roo3 s"ace is a-ailable, solar ther*al *ay acco**o+ate laun+ro*ats in buil+ings 4ith a solar hot 4ater su""ly, 4hich in the "ast ha-e been +isa""earing, but *ay beco*e highly econo*ical i3 they can "artner 4ith buil+ing o4ners in solar/ther*al "roEects. <oreo-er, there are other heat reco-ery o"tions i3 the buil+ing is s4itching to central BV.$, 4ith absor"tion chillers etc, -astly i*"ro-ing the econo*ics o3 laun+ro*ats, an+ re+ucing the en-iron*ental bur+ens they "ro+uce. ,t is 4orthy o3 note that lan+lor+s ha-e lost cases against "rohibite+ 4ashers an+ +ryers in the absence o3 in buil+ing laun+ry roo*s. P.$7 bon+s 4ill beco*e ne4ly rele-ant i3 they a+o"t the ne4 "ara+ig*.

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.s suggeste+ in this re"ort, the =,?B; @,(% o3 energy in-est*ents are actually con+uci-e to a""reciating asset -alues, an+ thus "rotect the interests o3 *ortgage hol+ers. ;hey shoul+ be encourage+ by these agencies. (o P.$7 bon+s shoul+ be "er*itte+ 3or *ere energy e33iciency u"gra+es, 4hich cannot +e*onstrate co*"oun+ing returns. ((one o3 the* can, as they "ro+uce +i*inishing returns by +e3inition). ;he criteria 3or a4ar+ing P.$7 bon+s shoul+ be the econo*ic +e*onstration o3 a "ath o3 "rogressi-e synergies o3 any 3uture energy i*"ro-e*ents to4ar+s 3ull energy in+e"en+ence, 3or it is that outloo0 o3 co*"oun+ing returns 4hich 4ill +ri-e buil+ing -alues. Our "ro"ose+ =ene4able 7nergy =etro3it Port3olio !tan+ar+ is the solution. $P$ an+ =eal 7state 2en+ers in general. $P$ a""arently cannot change unless BP% "ro-i+es ne4 +irecti-es, but in+e"en+ent len+ers coul+ change their "olicies i3 they are not behol+en to such gui+ance. ;heir resulting loan "ort3olios 4ill be a lot healthier ten years 3ro* no4, 4hen the current cro" o3 energy e33iciency u"gra+ers are li0ely to be un+er 4ater i3 they borro4e+ the *oney. Auture ,n-estors (ote that the +irect i*"lications o3 this "ro"osal is a total change in the 3inancial outloo0 o3 ol+ line a"art*ent buil+ings in the city (an+ other cities li0e it). ;he current cro" o3 o4ners o3 these ol+/line buil+ings are o3ten *ore tra+ers than o4ners o3 long ter* inco*e "ro"erties. ;he 4ay to *a0e Juic0 *oney is to buy a +istresse+ buil+ing, turn it aroun+ 4ith *ostly cos*etic changes an+ +u*" it on the ne't suc0er. ;his *o+el *ay be getting a little long in the tooth, as the ne't real estate

/ 5> /

boo* is li0ely to be 3ar a4ay. .s long as current o4ners +o not un+erstan+ 4hat the i*"lications o3 these changes in energy in3rastructure *ean, they9ll re*ain stuc0 an+ 4ill e-entually en+ u" selling out to ne4 o4ners 4ho +o un+erstan+ the energy con-ersion "otential. $on7+ison an+ 1tilities in general. <any as"ects o3 these +e-elo"*ents are "otentially highly bene3icial to 1tilities. Aor e'a*"le, i3 a hybri+/geother*al %B8 syste* is "ro"erly +esigne+ 3or energy har-esting, a buil+ing can *o-e to ti*e o3 use *etering, heat 4ater at night, thereby i*"ro-ing utiliDation on the local gri+, 4hile at the sa*e ti*e re+ucing the on "ea0 +e*an+. ;his a""roach 4ill allo4 utilities to +irect their ca"ital resources to other o""ortunities, 4hich in (e4 )or0 are li0ely to be in <anhattan, 4hich is "ri*arily a heat sin0 4hich huge +e*an+. 8ith the increasing har-esting o3 4in+ "o4er an+ an+ "erha"s !olar PV in the outer boroughs this o""ortunity is enhance+. <anu3acturers o3 rene4able energy technologies. $learly, the 3uture is integration. ;hus there 4ill be o""ortunities 3or tea*ing u" 3or *ore integrate+ solutions, an+ the econo*ics 3or rene4able energy 4ill change 3a-orably in certain *ar0et seg*ents as a result o3 these changes. .t the sa*e ti*e res"onsible *anu3acturers shoul+ s4itch to selling to integrators, instea+ o3 trying to "reten+ that any single solution coul+ 4or0. ;here are no sil-er bullets. ;his is a syste*s "roble*, not a co*"onent "roble*. =ight no4 sales "eo"le an+ contractors 3or the *anu3acturers are o3ten "art o3 the "roble*. Oil co*"anies. .ctually there shoul+ be a +eliberate "lan 3or buil+ings that co**it to this "lan to be allo4e+ to burn I5 till

/5 /

the en+ o3 li3e o3 the current boiler, i3 they un+erta0e this ty"e o3 re/engineering C consu*"tion 4oul+ be cut in hal3 in the 3irst "hase any4ay. 2i0e4ise, I2 oil shoul+ be encourage+, "articularly in the cases 4here it is only a su""le*ental or bac0u" heat source. %i-ersi3ication o3 energy source is *aterially i*"ortant a*i+st the i*"en+ing natural gas *onoculture, 4hich is intro+ucing absur+ le-els o3 -ulnerability.

/ 60 /

/ 61 /

.egulatory/ + ministrative an


!i*"ly "ut, there is a long list o3 areas 4here changes as conte*"late+ herein can be, an+ nee+s to be, su""orte+ 4ith regulatory an+ a+*inistrati-e change. 8ithout any atte*"t at being e'hausti-e, here are so*e o3 the*: 8or0ing 4ith $on7+ison an+ %P! to 3acilitate the ti*e/o3/use transition 3or buil+ings that un+erta0e the geother*al %B8 con-ersion, inclu+ing 3inancial incenti-es 3ro* the 1tilities, inclu+ing "otential rate abate*ents base+ on a realistic assess*ent o3 the econo*ic -alue o3 these i*"ro-e*ents to their o"eration. <a0ing a s*ooth transition 3or lan+lor+s to s4itch to central BV.$, an+ seeing to it that their econo*ics *a0e sense. ,t coul+ be a 4inO4in 3or lan+lor+s an+ tenants, but it *eans brea0ing through the econo*icOregulatory 4all that se"arates the interests o3 lan+lor+s an+ tenants. 7nabling the a++ition o3 centraliDe+ cooling creates better li-ing s"ace 3or tenants, an+ 4ill +o 4on+ers 3or lan+lor+s in res"ect o3 solar/ther*al econo*ics. ?etting serious about the security an+ sa3ety i*"lications o3 energy +i-ersi3ication, inclu+ing "re3erential insurance treat*ent o3 energy in+e"en+ent buil+ings. $oor+inating $ity, !tate an+ Ae+eral energy incenti-es, an+ see0ing change 4here they are counter"ro+ucti-e. !ee0 change at Aannie <ae an+ Are++i <ac, an+ enact*ent o3 P.$7 bon+s un+er the con+itions +escribe+ here, an+Oor create J#1/ty"e treat*ent 3or buil+ings un+erta0ing these con-ersions. (ote that this energy con-ersion i*"ro-es long ter*

/ 62 /

econo*ics, but it reJuires an unusually large in-est*ent at the outset, an+ so*e 3or* o3 incenti-e *ay be nee+e+. ;ry to create incenti-es allo4ing *ore o3 this energy re/ engineering to be +one all at once, instea+ o3 o-er ten years as +escribe+ here. 1se re+uction o3 ?B? e*issions as the "olicy obEecti-e, not s"eci3ic technologies. ?et "ublic health interests seriously in-ol-e+ in the in+oor air Juality issue, an+ the *o-e to4ar+s electrical coo0ing. 7ngage 4ith A$$, $ell/to4er o"erators, an+ %B! to *an+ate the collaborati-e energy "lanning 4ith buil+ing *ounte+ cell/ to4ers, inclu+ing coo"eration on a structural le-el to enable *a'i*al +e"loy*ent o3 roo3/*ounte+ rene4able/energy energy eJui"*ent alongsi+e cell/to4ers, an+ *an+ating acco**o+ation. ;he current 3or* o3 roo3/to" leases shoul+ be outla4e+, 4here the cell co*"any si*"ly gets the 3ree run o3 roo3to"s. ;he buil+ings shoul+ be a4ar+e+ *ar0et rates 3or their electricity, an+ also get co*"ensate+ 3or "ro-i+ing in e33ect in3inite bac0u" "o4er. ;his econo*ic bene3it shoul+ accrue to the buil+ings 4hich re/engineer their energy in3rastructure an+ enable this ty"e o3 arrange*ent.

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8hat has been +iscusse+ here is a 3airly siDable e'ce"tion to the co**on assu*"tion that rene4able technology is not yet econo*ical. &y shi3ting attention to the +e*an+ si+e o3 the gri+, an+ to those ty"es o3 buil+ings that o33er the right scale 3or the a""lication, a ra+ical structural change can be achie-e+. 7-en 4ith current incenti-es it coul+ be +one i3 it is +one gra+ually o-er ten years. 8ith changes in incenti-es the "rocess coul+ "ossibly be s"ee+e+ u". ;he "it3alls are that incre*ental s"en+ing on e33iciency ne-er 4ill a++ u" to energy in+e"en+ence, an+ there3ore the +o*inant assu*"tion o3 the +ay C that energy e33iciency is all 4e can +o until rene4able energy beco*es *ore econo*ical C are nothing but sel3/ 3ul3illing "ro"hesies 4hich rest on une'a*ine+ assu*"tions, 4hich are o3ten 3e+ by e-aluations in an entirely +i33erent 3ra*e o3 re3erence. 8hat is true on the su""ly si+e, in "o4er "lants, an+ re*ote energy "ro+uction, is o3ten not true at all on the +e*an+ si+e, 4here a*ong other things the ;U% "roble* starts to 3all a4ay, an+ 3urther synergistic integration o33ers co*"oun+ing returns on long ter* in-est*ent "rogra*s. ,t shoul+ be note+ that in the *eanti*e the 1rban ?reen $ouncil has "ro+uce+ their 0by#0 re"ort, 4hich "ro-i+es a nice, o-er arching 3ra*e4or0, an+ 3urther *a0es it clear ho4 i*"ortant it is that o4ners o3 buil+ings that allo4 easy con-ersion +o not *iss the o""ortunity, 3or the relati-e energy intensity o3 buil+ings 4ill +eter*ine -alues increasingly in the 3uture, an+ o4ners shoul+ re/ thin0 their "ort3olio strategies ra+ically. 1n3ortunately, buil+ings that ha-e 3allen into the ()!7=%. <PP tra" an+Oor the ()$ $lean Beat 4a-e o3 gas con-ersions, 4ill 3in+

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the*sel-es at a +isa+-antage. (ot only +o those "rogra*s re+uce ()$Fs chances o3 *eeting $lean .ir stan+ar+s, those buil+ings 4ill be 4orth less in 3uture, because they sJuan+ere+ their "otential. ;he short/ter* e33ects o3 the current Pla()$ on *arginal i*"ro-e*ents in energy is un3ortunately yet another e'a*"le o3 legislating *e+iocrity, as both this "lan an+ the 1rban ?reen $ouncilFs 0by#0 re"ort *a0e clear. <ost i*"ortantly, the strategies "ro"ose+ here can be +one i**e+iately, an+ li0e the 0by#0 re"ort, they are *ost econo*ical i3 they are s"rea+ out o-er ti*e, an+ integrate+ 4ith the nor*al re"lace*ent cycles o3 buil+ing in3rastructure. !*artly +esigne+ incenti-es coul+ s"ee+ things u" 3urther. . "ro"er 3ocus on long/ter* buil+ing -alues an+ buil+ing "reser-ation, 4ill shi3t the attention to rene4able/energy.

/ 6# /

.""en+i' . ,n June o3 2013 4e "ublishe+ the G%a&' =ene4able 7nergy =etro3it Port3olio !tan+ar+ 3or <ulti/3a*ily &uil+ingsH ;he "ur"ose o3 this +ocu*ent is as 3ollo4s:

&y si*"li3ying the structure o3 incenti-es an+ obEecti-es, *ore can be +one 4ith less. ,n the interi*, the +ocu*ent "ro-i+es a te*"late 3or "ro"erty o4ners to +e-elo" a 3inancial "lan an+ se"arate the Juestions o3 4hat is goo+ 3or the 3uture -alue o3 *y "ro"erty, 3ro* ho4 can , Juali3y 3or subsi+iDe+ Ggreen 3inancingH an+ other a-ailable incenti-es, an+ still *a0e econo*ic sense 3or *y buil+ing. ;he +ocu*ent honors the "rinci"le that a+-antageous 3inancing can ne-er *a0e a ba+ "roEect goo+, it can only *a0e a goo+ "roEect better. &uil+ing o4ners shoul+ 3ocus on *a'i*iDing the 3uture -alue o3 their "ri*ary asset, their buil+ings. ?o-ern*ent shoul+ 3ocus on the real obEecti-e, in this case re+ucing ?reen Bouse ?as e*issions, not on "ro'ies, li0e energy e33iciency, 4hich only cause +istortions in the *ar0et, an+ are counter "ro+ucti-e.

DaBx Renewable Energy Retrofit Portfolio Standard

for Multi-family Buildings - 06/04/ !
Pur"ose: ;his +ocu*ent sets 3orth "ro"ose+ criteria 3or e'isting *ulti/3a*ily buil+ings to transition to a rene4able energy in3rastructure an+ Juali3y 3or 3inancial incenti-es such as *ight be "ro"ose+ by 3inancial institutions 3or green *ortgages an+ s"ecial energy retro3it 3inancing. ,t "ro-i+es both consu*er "rotection an+ assurance o3 asset a""reciation o3 the

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"ro"erty. ,t there3ore assures the "ro"erty o4ner o3 the soun+ness o3 their "lan, an+ 3ir* "ros"ects o3 asset a""reciation, an+ the un+er4riters o3 a""reciation o3 their collateral.

$riteria C the buil+ing shall:

,nitially, achie-e a 2#K/#0K re+uction in e*issions, 4ith #0K or *ore o3 the re+uction co*ing 3ro* rene4able generation. .chie-e a re+uction o3 #0K/6#K o3 total buil+ing e*issions 4ithin 10 years, 4ith #0K o3 the re+uction co*ing 3ro* rene4able energy generation. Pro-i+e a co*"rehensi-e energy "lan 3or 30 years on a net "resent -alue basis, co*"aring against the e'isting in3rastructure, 4ith co**ensurate e33iciency enhance*ents, 4ith the re3erence case 3ro* %O7 3or energy "rice in3lation.


Ainanciers an+ la4*a0ers shoul+ target incenti-es 3or re+uctions in e*issions, 4ith a #0K rene4able stan+ar+, in or+er to buil+ asset a""reciation in real estate. 7nergy e33iciency is an o"erational sa-ings, an+ 4hen *ista0en 3or "ri*ary +esign criteria lea+s to ca"ital +estruction. ,t is suggeste+ that this stan+ar+ be a+o"te+ as basis 3or e'e*"tions 3ro* e'isting rules, such as the ()$ $lean Beat Progra*, but also o3 the 7nergy !tar reJuire*ents, an+ e-entually ta' incenti-es shoul+ be a+Euste+ accor+ingly. 1ntil that ti*e, buil+ing o4ners *ust 4or0 aroun+ these counter/"ro+ucti-e rules. ,3 subsi+ies are on eJui"*ent, they bene3it energy co*"anies an+ *anu3acturers, not buil+ing o4ners. ,3 subsi+ies are on buil+ings 3or achie-e*ents in e*ission re+uctions, they sti*ulate +e*an+ 3or eJui"*ent Eust the sa*e, but 4ill 3ocus on asset a""reciation, instea+ o3 ris0ing ca"ital +estruction. (otice that 4ithin the ban+4i+th o3 each "hase, incenti-es coul+ be use+ to sti*ulate higher achie-e*ents in e*ission re+uctions. (otice also that by "ro-i+ing u" to a 10/year horiDon 3or such a "lan, things can be "hase+ in on the bac0 o3 nor*al re"lace*ent cycles in lieu o3 3orcing unecono*ical

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re"lace*ents. ;y"ically this "rogra* 4oul+ e'ten+ the econo*ic li3e o3 the ol+ boiler. %e"en+ing on the ty"e o3 3inancing a-ailable an+ econo*ic re"lace*ent cycles, the results can o"tionally be achie-e+ all at once or s"rea+ o-er 10 years. <oreo-er ne4er technologies can be a+o"te+, by allo4ing "hase+ i*"le*entation.

,n the long ter* 7nergy !tar reJuire*ents 3or subsi+iDe+ 3inancing or ta' incenti-es, shoul+ be aban+one+ as they can con3lict 4ith goo+ +esign an+ econo*ics. 2onger ter* all incenti-es 3or s"eci3ic technologies shoul+ be "hase+ out in 3a-or o3 incenti-es 3or rene4ables in buil+ings, i.e. also at the 3e+eral le-el (,=!). Only the results *atter, not the technologies use+. (ote that also "ublic sa3ety is i*"ro-e+ by buil+ings co*ing "artially o33 the gri+. !o*e buil+ings *ay e-en en+ u" 4ith an energy sur"lus. ,n+oor air Juality 4ill i*"ro-e 4ith the re*o-al o3 co*bustion sources. ;enants 4ill enEoy a higher Juality o3 li3e an+ lo4er energy costs i3 buil+ings can generate energy at a co*"etiti-e "rice le-el, 4hile lan+lor+s get another re-enue strea*. ;he s"lit incenti-es bet4een lan+lor+s an+ tenants 4ill be a thing o3 the "ast. !elling energy to tenants at retail is *ore attracti-e than selling it bac0 to the gri+ at 4holesale.

&y 3ocusing any i*"ro-e*ent incenti-es on in+i-i+ual "ro"erties, 4ith a""ro"riate bench*ar0s, a 3ar *ore ra"i+ an+ 4i+e scale a+o"tion o3 rene4able energy is assure+, along 4ith signi3icant a""reciation in real estate -alues.

DaBx Renewable Energy Retrofit Portfolio Standard for Multifamily Buildings by Rogier Fentener van Vlissingen is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License. Based on a work at Permissions beyond the scope of this license may be available at 2141 Starling Avenue, Starling Gardens. 404 * Bronx, ! 104"2#4$$$ %. &1'#'2$#"42' * (. )1&#*4) 0)*) * +aBx+SS,

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$P$ C $o**unity Preser-ation $or"oration %7P C ()$ %e"art*ent o3 7n-iron*ental Protection %B$= C ()! %e"art*ent o3 Bo*es an+ $o**unity =ene4al %B! C 1! %e"art*ent o3 Bo*elan+ !ecurity %B8 C %o*estic Bot 8ater %O% C 1! %e"art*ent o3 %e3ense %O7 C 1! %e"art*ent o3 7nergy %P! C ()! Public !er-ice $o*ission A$$ C Ae+eral $o**unications $o*ission BP% ()$ %e"art*ent o3 Bousing Preser-ation an+ %e-elo"*ent BV.$ C Beating Ventilation an+ .ir $on+itioning <PP C <ulti/3a*ily Per3or*ance Progra* ()$ C (e4 )or0 $ity (),!O C (e4 )or0 ,n+e"en+ent !yste* O"erator ()P% C ()$ Police %e"art*ent ()! C (e4 )or0 !tate ()!7=%. C ()! 7nergy =esearch an+ %e-elo"*ent .uthority P.$7 bon+s C Pro"erty .ssesse+ $lean 7nergy ;U% C trans"ortation an+ +istribution costs 3or gas or electric +eli-ery.

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