Blog Post

Energy Benchmarking and Disclosure Policies: Cities Take the Lead on Energy Efficiency in Buildings

Mar 20, 2015 | Margaret A. Walls

If I want to know the calorie content of a candy bar or whether a new sweater requires hand washing, I can just look at the label before I buy. Similarly, if I want to know the operating costs for a new refrigerator, I can study the Energy Guide, a federally mandated label for all appliances. But if I’m considering renting space in a 20-story downtown office building, I might have a hard time finding out what to expect in terms of the energy bills. Some signals may exist—perhaps I can see that the windows are new and the building owner discloses the age of the heating and cooling system. Or maybe the building is Energy Star or LEED certified. But suffice it to say that the information will be imperfect, difficult to verify, and probably insufficient if energy costs are important in my leasing decision.

Several cities across the United States are addressing this information gap by passing energy benchmarking and disclosure ordinances. These are local laws that require owners of commercial and (in some cases) multifamily residential buildings  to annually disclose their buildings’ energy use and benchmark it relative to other buildings. As of March 2015, 10 cities and 1 county had passed such laws and several more cities have plans underway. The thinking is that bringing this kind of information to the marketplace—improving energy use transparency, in the words of advocates for the policies—will lead to greater demand for energy efficiency by tenants and prospective buyers and, in response, efficiency improvements by building owners. Even the simple act of filling out the required forms could make energy use more salient to building owners and managers and lead to enhanced building operations.

RFF’s Karen Palmer and I wrote about these disclosure laws in two recently released RFF discussion papers. One of them (co-authored with RFF's Lucy O’Keeffe and Kristin Hayes) is a summary of findings from a workshop we held on the topic in early December 2014. Participants included representatives from the cities that have passed, or are actively considering, disclosure laws; utilities; energy service companies; the real estate sector; energy data analytics companies; the US Department of Energy and Environmental Protection Agency; several nongovernmental organizations; and academics. We covered topics ranging from compliance, data quality, the role of utilities, how Energy Star and LEED certification schemes and ancillary policies work vis-à-vis the new laws, and more. The overarching focus of the workshop was on program evaluation. How will we know if these programs are moving the market and providing measurable reductions in energy use and carbon dioxide emissions?

This emphasis on evaluation is also the focus of our other paper. We provide an overview and critique of the disclosure laws as they are currently written (the laws are quite similar across cities), describe outcomes thus far in some of the cities, provide suggestions for how to do careful evaluation, and preview some of our own research findings that we’ll be releasing in a forthcoming RFF discussion paper in the coming weeks.

An evaluation of the policies’ effectiveness does not consist simply of calculating changes in energy use intensities or reviewing Energy Star scores over time for buildings covered by the laws. Comparing those changes to some measure of what would have occurred in these buildings in the absence of the programs is critical. We provide some suggestions for how to do this in the paper, but it’s worth noting specifically that all credible approaches require data beyond that disclosed by the covered buildings—for example, energy billing data for similar buildings not covered by these laws. We hope that as these benchmarking and disclosure programs proliferate, utilities will begin to make such data available, as some have in other contexts. The home energy report experiments conducted by OPower in cooperation with utilities, and evaluated by academics, are a good example.

These new information policies show great promise—finally, we’ll have some facts equivalent to the calorie content of that candy bar or the fridge’s energy operating costs—but rigorous evaluation is essential.