How to Prepare for Building Performance Standards: An Interview with New Buildings Institute

In the United States, existing buildings account for up to 40% of carbon emissions. That presents a huge opportunity for massive energy savings—if only we could set the appropriate targets. 

In cities and states with strong climate policies, Building Performance Standards (or BPS), which set expectations for efficiency levels in existing buildings, are becoming increasingly popular as a means of reducing energy use and carbon emissions. Building Performance Standards will soon change how we design and operate buildings.  

At Slipstream, much of our research centers around building performance. Through programs such as Accelerate Performance and tools such as our EUI Analyzer, we help understand how certain factors affect an individual building's performance. To set targets for an entire city or state, however, jurisdictions must consider a vast array of data and factors that might be beyond the individual building owner's experience. 

To help building operators and designers get ahead of the curve, we turned to our colleagues at New Buildings Institute to explain Building Performance Standards and what building owners can do to prepare for the coming policies. 

About Our Guests 

As Director of Policy for NBI, Jim Edelson has been a leading advocate for advanced energy codes, pushing for higher energy efficiency measures in the U.S. and abroad. 

Director of Codes Kim Cheslak has turned code compliance into an energy-efficiency measure, helping leaders maximize savings by adopting carbon-reduction policies. Now, at NBI, she guides the future of building energy codes throughout the U.S. 

Together, Jim and Kim have worked extensively with local leaders to develop BPS policies, and they recently co-authored a set of papers dissecting Building Performance Standards and why they will be key to a clean-energy future:

• The Technical Basis of Building Performance Standards, which they presented at the 2021 ASHRAE Virtual Winter Conference. Download the PDF here.
• Raising the Standard: Building Performance and the Reshaping of Urban Energy Regulation, a collaboration with David Cohan of the Institute for Market Transformation. Download the PDF here.

So, let's start with a very basic question: what exactly is a Building Performance Standard? 

Kim Cheslak: So basically, a Building Performance Standard is a policy that is enacted on existing buildings to meet a specific target by a specific date.  

I'm going to go back and define all those terms.  

An "existing building" is any building that is currently occupied. It could be a very new building or a very old building. It could be a building that was constructed yesterday—that building is now an "existing building."

Given that there's only a few of these policies on paper right now—a "target" might have several definitions. Some of them are carbon-based, some of them are energy-based. Washington, D.C.'s is based on ENERGY STAR®, which is  a combination of carbon, energy, and performance calculations. Also, a target could be anything a jurisdiction decides—it doesn't have to be either carbon or energy; it could in theory be something else. 

And then "by a specific date"—those dates are set through the policy mechanism to say, "You have however long to come into compliance with this target."

That's the basic framework of what a BPS is. 

Jim Edelson: Right. And cities are  looking at this as a long-term objective—getting to net-zero or carbon-neutral with targets that get increasingly stringent over a period of time. So you think of it over 20 or 30 years, usually with five-year compliance periods, and usually a BPS is associated with a benchmarking ordinance beforehand, so there's data to set the standards. So, there's BPS in isolation, but it works with other things going on in the city or the state. 

This sounds like the 2019 New York City ordinance that says all buildings must comply with X carbon use by 2026. 

KC: Exactly. Local Law 97 is a Building Performance Standard. 

Actually, I'm looking at a map of existing Building Performance Standards. There are only a few in the U.S. as of January 2021—just New York City, St. Louis, D.C., and Washington state.  

JE: New York City's happens to be the strictest. It happens to be carbon, it must happen by a certain date, and it must end up at zero. Their law fully aligns their policy objective.

But in terms of laying out the technical policy, there's one jurisdiction that's farthest along, and that's the state of Washington. They've got existing rules—we write a little bit about this in the paper [we presented at ASHRAE], but it's much farther along now. The Governor's office recently introduced a second bill to expand the scope [of the threshold] from 50,000 down to 10,000 square feet.  

[Governor Inslee] and the legislature are really pushing this as an existing building mechanism. The way they wrote the first law said they were going to use ASHRAE Standard 100, which is the existing building standard for energy efficiency that sets high-performance targets across the country. That's the model language they used in developing their Building Performance Standard; they amended it and turned it into a rule. So, the state's energy strategy says, "We're going to get rid of greenhouse gases from the building sector," and now it's a question of how and when they're going to use BPS as a tool to help get there.

It's really fascinating. After doing this for 30 years, all this stuff that we once thought about is now turning into these real things that are going to require buildings to reduce their emissions. The climate moment has hit. 

So, imagine you're a building owner, and you're facing a BPS. What are the first things you have to think about to go about meeting these standards? 

KC: The first thing I think about is: what are the compliance mechanisms? Remember, for a BPS, you have a certain target set and a deadline. There are often alternate compliance paths. So, if I'm a building owner, I want to know where I am in comparison to the target, and then what are my options to be in compliance to avoid a fine.  That could be meeting the target, or it could be some other performance metric.   

As every city goes along setting these different policies and rules, they're coming up with different paths by which buildings can comply. That's important for a building owner, because often your biggest opportunity to decrease your energy consumption or carbon footprint is during major mechanical lifecycle events, and those won't all necessarily happen by these set dates. People's boilers go out when their boilers go out; they don't go out in compliance with a policy that was set in the future.  

The third thing I'd be interested in is where all my equipment is in its lifecycle. How can I plan with not just first-cycle compliance but also long-term compliance? 

JE: This is key. Because setting this 2050 or 2040 zero-carbon target, knowing you're going to not have onsite combustion at some point—which is how Local Law 97 is written—means you have to think of every mechanical replacement—boilers, water heaters, HVAC—as the opportunity to make the switch.  

The Building Performance Standard really is about realizing these opportunities knowing the stated trajectory toward a lower carbon or energy use. 

You said the reason to comply with all these is to avoid being fined, but there's definitely a benefit of long-term return on investment here. These standards are really intended to nudge developers and building owners toward making their buildings healthier. To help them lower energy costs and raise the long-term value of their assets. That's the point of these targets, isn't it? 

JE: Right. That's one of the uncertainties with the New York City law, because a lot of meeting their standard is going to depend on how quickly the grid decarbonizes. But in addition to the compliance mechanisms, New York City also wrote into their law a trading mechanism—essentially a cap-and-trade. If you have a building that can't get to its limit, you can buy carbon credits from someone whose building is net positive.   

For the building owners, uncertainty about this carbon calculation is probably the biggest challenge of Local Law 97. It removes the predictability of what the target is going to be. 

So that's the case in New York City, largely because of the fuel mix on the grid. But you're saying in Washington state, it's really all about how the buildings use the energy. 

KC: Washington state's target pinpoints energy use, but like I said earlier, Washington, D.C. has tied itself to the ENERGY STAR score, which is a calculation of a lot of different things. ENERGY STAR also has these normalization factors around occupant density, number of computers, number of units, size of units, even number of in-unit laundry hookups—and it does all these normalizations in the background. So you could have a fairly efficient building, but if you have this odd occupancy structure, compared to the way ENERGY STAR bell-curves everything, you may end up falling below the D.C. median. As a building owner, you need to be prepared for a case in which a change might not actually impact your ENERGY STAR in the way you think it will.  

JE: It's sort of a black box. This is why Kim and I wrote this [ASHRAE] paper. Because all these technical things—like normalizations—are critical to making the policy work. 

From a building owner point of view, it's really: get involved early in the policy. Make sure you understand it. All these things are critical to get a functioning Building Performance Standard. 

If I'm a building owner in one of these places, and my benchmarking comes back with the wrong number, I might say: okay, you know what—just fine me. 

KC: D.C. has published its fines, though, and they are millions of dollars! 

Oh. Right. 

KC: And we haven't even talked about how codes play into this. 

Imagine you're building a new building that is subject to a code, and you have no guarantee that that code will put you into compliance with the BPS. 

Why not? Because you can't measure it until afterward, or because the codes don't match the BPS? 

KC: A little bit of both, but more importantly, there have been very few efforts in any of these places to match the codes with the BPS. I don't want to give the impression that cities are intentionally trying to mess up new construction—they're not. But the codes and BPS haven't been synced up. 

JE: Washington state has a first nod toward this with a New Construction tier in the BPS. 

Sounds like there's a lot for cities to consider. 

JE: Oh, yeah. And look, there's clearly a need to not have every city do this its own way. There's a lot of data to analyze, and a lot of implications. Los Angeles has help from NREL. Go look at LA100—it's the most comprehensive city model of energy use data out there. Of course, New York City and Los Angeles have the resources for heavy analysis—it's a lot tougher for smaller jurisdictions. 

Would it be helpful to have a federal Building Performance Standard? 

KC: It might help to have some federal standardization of how to set targets, or how to set an energy or a carbon target. Maybe it's just funding from DOE so that states and cities can call on technical experts to help do the analysis. 

And, honestly, Portfolio Manager is not set up for this. What would be most helpful is resources, or a more specialized tool. Maybe Portfolio Manager could handle it with upgrades, but its current iteration is not built for this.  

Does outside analysis lead to better standards? 

JE: That's what we're seeing. Because the state of Washington hired a consultant to run a stakeholder EUI process, there was so much data and so many people in the room to discuss what these EUI targets should be. And the first five years are only incentive-based, then the compliance cycle starts. So they've kind of staggered this in to get people ready to know what your targets are. 

KC: We've been working with LA for over a year to do very careful target analysis, building stock segmentation. The more data you gather up front, the better you can set your target. Even if you have benchmarking data, you don't know your building stock. 

JE: That's a key part of our paper: it's about first gathering the best data, then setting the targets. 

What do developers, design firms, and even your average, green-curious mechanical engineer have to do to get ready for this? 

JE: When it comes to emissions performance, building professionals need to understand how to design new construction for all-electric or understand how to retrofit these complex systems. 

You should see all the innovation that's coming out about how to replace something with gas in it with something that's all-electric. That's really the design industry's big challenge right now. Heat pump technology is the answer. So, really, it's about learning heat pump technology and learning about how heat pumps build efficiency and go toward a clean electric grid. 

KC: Yes! I want to re-emphasize what Jim said about designing electrical systems and designing with heat pumps. There's a difference in the way you design these systems that's critical. Engineers are stuck in doing things the same way they've always done them. And that's fine, because most of the time it does okay. But engineers are also good at adapting, and they're going to have to adapt. 

Likewise with building operators—you can't just have a building operator who uses a gas furnace to put in heat pumps and then instantly expect him or her to understand how to operate the building to meet the needs of the occupants.   

There are bizarre design specifications behind heat pump systems, where it's not consistent system-to-system, to where how far the registers need to be spaced. So you end up with hot and cold zones and then we end up with the pink CFL problem. That's a problem we're having right now [during the February 2021 Texas energy crisis]—articles are coming out with people saying, "Thank God I didn't replace my gas stove.""  

So, there has to be other training—that could come from the federal level. Something to prepare us not just for Building Performance Standards but the electrification that will come with them. 

So Building Performance Standards are a symptom of the need to decarbonize buildings. Like you said, unless we make people do it, they're not going to do it. While we wait for the technical analysis at the national level, we can help building owners get ready for what's coming. 

JE: We think the Building Performance Standard is the right mechanism, but it has to be both calculated and implemented in the right way, and it has to be coupled with a whole series of mechanisms that support the market development. The big thing with [New York state's approach] is cost compression—how are we going to drive down the cost of replacing these heat packs, of putting an extra shell on, of new water heaters?  

It's really exciting because, at least in the New York state, there's the political will and the dedicated funding to take on this challenge, and that's why this bill is so effective and why it's probably going to overtake where California is. 

Looking at their website, Washington state includes an incentive program in their BPS. In five years the standard will be mandatory, but there are some incentives if you meet the targets before then. Are these incentive programs necessary to helping people prepare for a BPS? 

JE: We think it's a really good way to introduce the mechanisms. 

KC: Keep in mind that incentives are also going be key to equity. 

JE: Right. That's the other thing the Climate Leadership and Community Protection Act in New York says. 35 to 40 percent of all state expenditures on meeting climate goals must be directed toward disadvantaged communities. So that's another key part of designing BPS correctly. 

KC: Affordable housing are going to be affected by these standards. Once you get down to the 10,000 square foot threshold, that also affects small businesses. We will have churches and other sorts of community assets that may not have the same financing accessibility as office buildings. They will need financing support. 

How you structure a combination of policies is critical to the equity piece. Just saying "affordable housing is exempt" is a terrible idea, because then you saddle the residents with high utility bills forever. It's important to make sure that everybody benefits from cleaner buildings. 

And healthier buildings. 

JE: Exactly. Another issue is what will happen to the stranded gas customers, who tend to be less advantaged? Both New York and California have dockets open to start addressing that, because we can't ignore that any longer. 

KC: Yeah, it almost doesn't matter when you put gas equipment in your affordable housing project—it must come out, even if that system is only two years old. Certainly this isn't great from a first cost or embodied carbon standpoint, but the win is in health benefits, lifecycle costs, and not getting so far behind that you can never catch up.  

The other thing I want to point out is that BPS is not the only solution we can rely on. I mentioned 10,000 square feet earlier—that is the lowest size threshold that anyone is playing with right now. 

That's pretty small, though. 

KC: It is pretty small. And in the current policy landscape, there is almost no place for a policy like BPS on buildings smaller than that. We have to be very careful about the smallest size threshold that we set these policies at.  

JE: It doesn't work on single-family homes. That's another thing. 

What I hear our researchers talk about is there's a lot of work being done on electrification in single-family homes, and commercial electrification is the giant hole. 

JE: Well, now we have 120-volt heat-pump water heaters, so it might be getting easier. 

So here is this big market and policy driver that's going to basically redefine the way we think about buildings, and so much of it is focused on rehauling our existing structures.  

JE: The fact is, there's a lot more energy to be saved in existing buildings than in new construction. For all the effort that's gone into codes, this is where the big step can be made to achieve climate objectives. 

KC: And equity also. The equity potential in existing buildings is way higher than in existing buildings. So you do hit a series of things by addressing what can happen here. 

So to go back to our original question: if I'm a building owner, why should I care about Building Performance Standards? 

KC: Because you don't want to be fined. (laughing) And of course, because a future with lower energy costs is good for everyone—not to mention the benefits of addressing the climate crisis. 

JE: And to face that challenge, states and cities and the federal government are realizing how important it is to get regulatory oversight over existing buildings, so you should get ready for it. 

Thank you to Jim and Kim for taking the time to share their expertise with us. Download a PDF of their full paper, The Technical Basis of Building Performance Standards, here.