Cambridge Multifamily Energy Program Terms of Reference – DRAFT 1. Introduction During the practicum11.___ Energy Efficiency Strategy, MIT students will engage in the conceptual development of a multifamily energy upgrade program in Cambridge, focused on achieving broad adoption of deep energy retrofits in multifamily housing of approximately 2-20 units. The program concept will be provided for the City of Cambridge’s and local energy utility NStar’s consideration. The practicum will provide an introduction to: energy efficiency and utility governance; multi-stakeholder program design; and social entrepreneurship. We aim to develop a viable, transformational model that can realize deep energy savings and climate change pollution reduction in Cambridge; moreover, the program will ideally be scalable to broader geographic regions. This Terms of Reference document prepared by the Energy Efficiency Strategy Project’s (EESP) research team provides background information to support the design of the program. The document suggests some further research opportunities and potential program design ideas, which the Practicum participants can consider and expand upon. This document is not meant to dictate the content of the Practicum. Rather, it presents a summary of the EESP’s research and thinking during Fall 2012. The Challenge of Achieving Efficiency in Multifamily Housing A variety of opportunities to cost-effectively reduce energy use and integrate renewable energy systems exist in multifamily housing. A recent analysis suggests that 15 percent of multifamily electricity demand, and 24 percent of multifamily natural gas demand, can be cost-effectively met by energy efficiency for the year 2030.1 Indeed, multifamily housing tends to be more energy intensive than single-family. However, achieving significant uptake of energy efficiency in multifamily housing has proven difficult. A literature review, and conversations with multifamily housing market participants during Fall 2012, suggest the following are key barriers to achieving energy upgrades in multifamily housing: ● ● ● 1 Split-incentives - Many tenants pay utility bills, while landlords are typically expected to pay improvement costs. Conversely, in cases where landlords pay some of the energy bill (such as heating), tenants have little incentive to conserve. Landlords are hesitant to improve properties, even when costs are low - Landlords and tenants often have a strained relationship, with tenants desiring property improvements. Some property developers noted that any effort to improve properties, regardless of whether it costs landlords money, as they fear tenants will demand further improvements. Owners lack capacity - Building owners, especially smaller property owners, often have minimal understanding of the energy efficiency potential of their property, and the construction processes The Cadmus Group. May 2012. Massachusetts Multifamily Market Characterization and Potential Study. Volume 1. Final Report. ● ● ● ● ● ● ● ● 2 necessary to achieve upgrades. They are often wary of committing to manage construction projects. Disaggregated owners - While data on ownership is incomplete, interviews with individuals experienced with the market indicate that a large number of rental properties in Cambridge are owned by small-scale property owners. Thus, programs must reach and sway a diffuse array of decision-makers, rather than a few individuals responsible for large portfolios. Difficulties of financing and managing upgrade process with condominiums - Condominium associations may face barriers to credit, and be difficult to coordinate to achieve upgrades. Intrusive construction - Building owners are hesitant to disturb occupants in their unit; however, many upgrades necessitate work in occupants space. This work must be performed speedily, or occur during re-tenanting. A lack of building manager and operator incentive - Building management companies and building operators have limited incentives to facilitate upgrade projects. Upgrade projects may entail additional work on their end, and they are not usually compensated for achieving energy or water savings. Technical challenges - While cost-effective energy efficiency options exist in multifamily buildings, they are often pricier than the low-cost efficiency that can be achieved in larger commercial buildings. Deep energy upgrade measures require specialized design skills in many instances. Lack of transparency around energy costs - Most tenants do not have a good understanding of the energy costs and environmental impacts of their rented units. Convoluted, fragmented energy efficiency programs - Programs offered to multifamily buildings, particular market-rate buildings, are not wholistic; they offer only a few upgrade opportunities and do not entail “whole building” upgrades. Additionally, navigating these programs can be cumbersome for building owners - The presence of various “pre-retrofit barriers”, hazards such as knob-and-tube wiring or asbestos, can necessitate additional work; this extra work increases the likelihood that a building owner or manager will drop out of efficiency programs. Poorly delivered energy programs - Some industry observers noted that utility program vendors do not always provide optimal service. Moreover, many organizations provide volunteer outreach and marketing on behalf of upgrade programs, but they have limited communication with the program vendors and intake personnel - thus, volunteer marketers do not have a strong sense of what works and why.2 Sources citing these barriers include: Ellen Tohn. October 2012. Tohn Environmental Consulting. Personal communication; Homeowners Rehabilitation. November 2012. Non-profit housing developer located in Cambridge. Personal communication. City of Cambridge staff. McKibben, Anne, Anne Evens, Steven Nadel and Eric Makres. January 2012. Engaging as Partners in Energy Efficiency: Multifamily Housing and Utilities. ACEEE and CNT Energy. Figure 1. Energy Expenditure by residential building type. Source: US EIA. 2009 Residential Energy Consumption Survey. Given these challenges, uptake of energy efficiency in multifamily housing has lagged comparable (and still low) rates in single family and commercial buildings. Indeed, in most states (though not Massachusetts) multifamily program utility energy efficiency budgets are proportionately much less than single family budgets. Hypothesized Elements of Better Energy Upgrade Programs A well designed and executed partnership between utilities, local government, businesses, community organizations and other actors may overcome these barriers, however. Together, these actors can serve to improve programs and transform markets for energy services. There is potential to: ● Use energy data to identify buildings needing upgrades, and to inspire owners and tenants to take action based on comparisons with their peers. ● ● ● ● ● Engage stakeholders, to co-create energy efficiency program architecture, and provide more targeted program marketing. Provide improved financing mechanisms, which can enable the large investments required in the housing stock and reduce split-incentives. Maximize the value of engagement in a building, by providing opportunities for deep energy improvements, addressing healthy homes issues, and exploring opportunities to implement other environmental improvements, such as stormwater improvements. Buildings may not necessarily have to undergo all upgrades simultaneously, but programs could connect buildings with timely future improvements. Improve building owners’ experience navigating programs, by providing a consistent point of contact and improving the flow of information between contractors, utilities, and outreach actors via improved customer relationship management systems. Explore the implications of allowing a greater number of vendors to participate in programs. By piloting and experimenting with these innovative approaches, Cambridge and NStar can develop replicable models to improve the delivery of sustainable energy services in multifamily housing across the state and the nation. The Following section provides background on Cambridge’s multifamily housing market, energy programs in Cambridge, and industry trends pertinent to program design. Subsequent sections explore the EESP research team’s program design ideas. Background Characterizing the Cambridge Housing Stock The prospects for a residential energy efficiency program depend in large part to the characteristics of the local housing market, and Cambridge offers a unique market for several reasons. To develop a strategy that will encourage local energy efficiency investments, it is crucial to understand the dimensions of this market. Several aspects of the local housing market are examined below, including the nature of home ownership, resident demographics, and physical characteristics of the home. In addition to Cambridge as a whole, this project targets three distinct regions of the city: Mid-Cambridge, Area IV, and Cambridgeport. We examined the specific nature of the housing market in these areas, but they did not differ dramatically from Cambridge as a whole. Home Ownership Rates Cambridge’s housing stock is dominated by multifamily rental properties. In the city as a whole, only 35% of the population lives in owner-occupied housing.3 Unsurprisingly, rental housing appears to be a more temporary living situation in Cambridge than home-ownership. Under 40% of renters have lived in their current residence for more than 5 years, compared to three quarters of homeowners. In addition to a strong rental presence, many of Cambridge’s residential units are condominiums. These account for 27% of the city’s housing.4 Some condominium owners rent out their units, creating an overlap in the rental and condominium sectors. Resident Demographics Cambridge deservedly has a reputation as a young, student-oriented city. 27% of its adult population is currently enrolled in school either as an undergraduate or graduate student. This is reflected in the rental market - 53% of the primary householders in rental units are under the age of 35. Additionally, Cambridge’s rental market has a low rate of family residence. While families make up just over half of owner-occupied housing, only 33% of Cambridge’s rental properties are rented by families. Cambridge is also a predominantly White community. The head householder in 69% of Cambridge’s residences and 63% of rental residences is Non-Hispanic White. Among minority groups, Black and Asian communities each account for 13% of rental residences, and Hispanics for an additional 8%. As of 2009, over 3,000 housing units in Cambridge were designated as affordable units and subsidized, accounting for 9.6% of the local rental market.5 3 Unless otherwise noted, all statistics in this section are from the US Census Bureau 2010 Census and 2006-2010 American Community Survey. 4 5 City of Cambridge Community Development Department, 2010 Housing Profile. City of Summer Office of Strategic Planning and Community Development. Trends in Somerville: Housing Technical Report. 2009 The vast majority (95%) of Cambridge’s rental households are located in multifamily housing. 33% of rentals are in small buildings of with 2-4 units, and another 24% are in moderate-sized buildings of 5-19 units. Physical Characteristics The housing stock in Cambridge tends to be very old, though this is true more of owner-occupied residences than rentals. 52% of rental units in Cambridge were built before 1940, compared to 72% of owned units. Despite the general age of the units, there is a small but noticeably number of newer properties, with around 17% of units among both rented and owned properties constructed since 1980. The housing market throughout New England is unique for its reliance on fuel oil to provide space heating. However, this effect is not as strong in Cambridge, which boasts a well-developed utility natural gas network. 60% of rental units are heated by natural gas, 21% by electricity (which includes both the old technology of resistance heating and more efficient heat pump technology), and 13% by fuel oil. Among owner-occupied homes, there is a slightly higher percentage of gas-heated homes, and a lower electric heat presence. Property and Energy Management Characteristics There are a number of useful metrics related to property management trends and energy use in Cambridge’s rental market for which data is non-existent or difficult to obtain. While the identity of property owners is publicly available through tax assessment data, it is difficult to confirm how many properties a given owner may own due to the nature of available data. It is also difficult to identify landlords who live on-site in multi-family buildings. Additionally, no good source of data exists on the number of small property owners who contract with independent property management firms to conduct business with tenant. Finally, information on the number of apartments that are individually or master metered is only available through NSTAR and is restricted for privacy concerns. Therefore, much of this information must be collected qualitatively through interviews with those familiar with the local housing market. Preliminary discussions have indicated a fragmented market where parttime property owners account for much of small-to -medium residential properties and a significant portion of landlords live on-site. While some of these owners contract with property management firms, most seem not to. Finally, most multi-family buildings in Cambridge are thought to be metered individually for both electricity and heat; however, many units, especially in larger or oil-heated buildings, have heat provided central with tenants typically responsible for electricity bills.6 In this case, landlords have greater fiscal incentive to undertake upgrades that reduce heating costs. Summary The characteristics of Cambridge’s multifamily housing market pose serious barriers to an energy efficiency program. Renters dominate the market, and the rental community is a social demographic in transition with less incentive to encourage landlords to make upgrades, and less well-established relationships with landlords. Small-to-medium rental properties tend to be owned by individuals with 6 Personal communications with Peter Shapiro (Just-a-Start) and Meghan Shaw (Cambridge Energy Alliance). small property portfolios. The transitory nature of renters and the decentralized ownership of properties will make a coordinated efficiency effort challenging. Additionally, a sizeable minority of housing units in Cambridge are condominiums. The institutional barriers to implement energy upgrades in these homes are separate from that of rental housing, but also imposing. This makes establishing a consolidated energy efficiency program that is able to serve all of Cambridge’s multifamily market challenging. Despite the difficulty of reaching this market, there is ample money to be saved and pollution mitigated by upgrading buildings. Cambridge’s building stock is older, with less efficient energy systems. Also, although natural gas accounts for the majority of space heating in the multifamily market, there is a significant presence of less efficient oil heating. This indicates that there is much room for efficiency improvements in Cambridge’s rental housing stock. Energy Programs – Past and Present Overview of Multi-Family Efficiency Programs in Massachusetts A number of energy efficiency programs pertain to multifamily building in Cambridge. These programs are described below, and summarized in Appendix 1. MassSave Homes - 1-4 Unit Buildings At present the primary mechanism for enabling multi-family energy efficiency in Massachusetts is the utility-funded MassSave for Homes program, which provides no-cost home energy assessments and incentives for efficiency upgrades like insulation, air sealing and improved heating, cooling and hot water systems. Available financing.... Low Income 1-4 Unit Buildings Please include a short description of the Weatherization Assistance Programs available in Mass - the Low Income programs for 1-4 units. MassSave Multifamily buildings - Higher Income 5+ Unit Buildings Briefly explain MassSave for Multifamily. Massachusetts Green Retrofit Initiative & LEAN - Lower Income 5+ Unit Buildings Low Income Multi-Family program (also known as the LEAN program) available for housing developments of five or more units that are owned by a Public Housing Authority, a non-profit or a forprofit entity. An additional qualification for LEAN is that 50 percent of development households must be at or below 60 percent of median income. The Massachusetts Green Retrofit Initiative, a partnership between New Ecology and the Local Initiatives Support Corporation (LISC), is another initiative that similarly to LEAN targets owners of multifamily affordable housing for efficiency upgrades. (Both New Ecology and LISC have been involved in programmatic efforts around LEAN as well.) However the Green Retrofit Initiative has slightly different income criteria and funding sources compared to LEAN, as summarized in the table below. As part of this initiative property owners can submit applications for their buildings, which are then subject to approval by New Ecology before an energy audit can take place. The Green Retrofit Initiative seeks to provide a one-stop shop for a broad range of energy efficiency services and enable building managers to identify a variety of financing options for related upgrades, while also emphasizing results and overall building performance in ways that LEAN to date has not. LEAN Program MA Green Retrofit Initiative Income Criteria 50 percent of development 50 percent of development households at or below 60 households at or below 80 percent of median income percent of median income Funding Source Utilities (NStar, National Grid, Private foundations (Barr etc.) Foundation) and federal agencies (Department of Housing and Urban Development) Do the utilities not contribute funds? I doubt it. State programs are also available to support financing for energy efficiency upgrades in affordable multifamily properties. The Massachusetts Housing Partnership (MHP) has an Energy Performance Improvement Program (EPIP) that provides loans of up to $15,000 per unit for a wide range of efficiency improvements in multi-family buildings, including water conservation, air sealing and insulation and more efficient heating, cooling, ventilation and hot water systems. The EPIP is intended to complement energy assessment grant programs like LEAN and the Green Retrofit Initiative. Outreach & Marketing Channels Provide a brief overview of the community outreach strategies... MassSave terms these “community engagement” and Efficient Neighborhoods+” Note that City of Cambridge & HEET have been outreach people & expand below. Note that for LEAN, GRI, much of the outreach has been through affordable housing networks. The played a role in creating the program & were keen to conduct outreach. Future Utility Program Directions - The Recent MassSave Plan State planning provides important signals for the future direction of energy efficiency in Massachusetts. Right now the state is in the process of developing a new energy efficiency plan for 2013-2015, and the draft plan proposes several adjustments to current multi-family programs. These include: treating condo owners as single family homeowners for the purposes of energy audits and upgrades, given that many condo owners see themselves as such; better coordinating multi-family and commercial programs to enhance service delivery, as many multi-family buildings are currently metered as commercial; and better coordinating low-income programs for both single-family and multi-family properties as well as for both non-profit and for-profit multi-family housing developments. Cambridge’s Experience to Date and Potential Next Steps New potential multi-family efficiency programs in Cambridge must recognize and build off the city’s experiences and challenges with the existing programs described above, as well as potential shifts in programs based upon the state’s upcoming 2013-2015 efficiency plan. Through the city-sponsored Cambridge Energy Alliance (CEA) the city is already connecting residents and businesses with energy efficiency retrofit programs, with a primary focus on MassSave. Working in coordination with home performance contractors like Next Step Living and community-based nonprofit organizations like the Home Energy Efficiency Team, CEA has primarily pursued an event-based outreach strategy to sign people up for home energy assessments through MassSave. Cambridge has also partnered with NStar (the utility serving the city) to do walk-in audits of small businesses in neighborhoods like Inman and Kendall Squares. Finally, the city has done some targeted mailings to landlords, finding that the landlords who are most engaged about energy efficiency tend to live in the relevant properties. CEA has found that having a motivated tenant who enjoys a good relationship with the landlord is important to the success of multi-family efficiency efforts. The city has been able to track requests for multi-family efficiency via their website, but has experienced challenges in the follow-up stages. Once its contacts are turned over to NStar, the city is unable to access data on multi-family energy audits unless it maintains contact with the landlord and tenants throughout the entire process. NStar’s contractors do not report to the City the status of different projects. The reports that NStar does submit to the city on multi-family assessments are also of limited utility, as they are not disaggregated by property. Thus, the City and other outreach partners have limited understanding of what marketing initiatives are effective, and whether they should follow up with buildings that have dropped out of the process, face pre-weatherization barriers, or are not pursuing deep energy retrofits. These reports also appear to indicate that uptake of deep energy retrofits is limited, as many of the audits focus on light bulbs or other surface-level measures while doing little to track actual implementation. To address many of these issues, the Massachusetts Green Retrofit Initiative could provide a model for new utility-funded energy efficiency programs in Cambridge and beyond. As described earlier, the Green Retrofit Initiative seeks to provide deeper engagement around a broad portfolio of energy efficiency measures and their long-term performance. This one-stop shop framework could be integrated with Cambridge’s current efforts to assess citywide solar potential and develop a guide for doing solar upgrades at multi-family properties, creating a process that engages both landlords and tenants in deep energy retrofits and their long-term impact. This would be consistent with a “strategic focus on multi-family and performance-based community engagement initiatives, combined with an overall goal of delivering robust, cost-effective programs,” which are outlined as key objectives in Massachusetts’ draft energy efficiency plan for 2013-2015. Finally, delivery of multi-family energy efficiency services and funding could potentially be integrated with existing programs in Cambridge. In partnership with Cambridge Neighborhood Apartment Housing Services, the city has a Multi-Family Rehab Loan Program that provides up to $20,000 per unit for upgrades and addressing code violations and exterior improvements; however, this program currently does not mention energy efficiency. Integrating energy efficiency options and the MHP’s Energy Performance Improvement Program into the Multi-Family Loan Rehab Program could be another means to increase the uptake of multi-family energy efficiency in Cambridge. Healthy Homes Programs It is important that any housing retrofit program not exacerbate home health issues, such lead exposure and asthma, which effect some Cambridge residents; ideally, a program can ameliorate these issues. A number of initiatives may be considered as the program is designed, to consider how healthy homes issues can be better integrated into a multifamily program: ● ● ● The Green and Healthy Homes Initiative (GHHI) is a national project of the Coalition to Prevent Childhood Lead poisoning. In Maryland, GHHI is piloting a program that integrates family advocacy, resident education, lead and other health hazard mitigation services, and home energy upgrades. GHHI offers a Compact of Core Standards that regions’ home improvement programs are encourage to collaboratively adopt, to facilitate the development of more streamlined program delivery. It also certifies cities in which home improvement agencies have taken steps to align their delivery. The EPA has developed Healthy Indoor Environment Protocols for Home Energy Upgrades. The EPA also requires that home improvement contractors are properly certified in lead abatement. A variety of home health improvement programs have operated in the Boston area over the years. The Boston-based Asthma Regional Council of New England has resources on healthy home upgrades, including their penetration, cost-benefit justification, and recommendations for implementing programs. Energy Data Utilities, businesses, governments, and non-governmental actors are increasingly devising innovative methods to acquire, analyze, and present data about energy use in buildings. The practicum will explore ways to publicly disclose energy data, and inferred energy efficiency potential data, in multifamily buildings. Such disclosure facilitates greater transparency in renters and buyers decisions of their housing; can help pressure building owners to engage in upgrades; and can provide an engaging means of educating the public about energy efficiency opportunities in buildings. The subsections below outline background information and industry initiatives relating to energy data. Types of Data Building energy data can be classified into two broad categories: ● Energy data. Such data may include: ○ Monthly billing records for individual meters. ○ Smart meter interval readings, which may provide a data record of energy used every five minutes, 15 minutes, or hourly. Having energy use profiles using this data can allow analysts to infer what equipment exists in properties (the can “read” energy use profiles to infer the efficiency of equipment, and what equipment is in use). Thus, it can act as a type of asset data (see below). ● Asset data, referring to information about a building. Asset data may be derived from: ○ User inputs - from building operators, tenants, etc. ○ Local government tax assessor records, which may contain information on building age, size, heating systems, wall assembly, etc. ○ Representations of buildings’ size and massing, such as LIDAR data. ○ Thermal images of buildings, from which thermal fluxes may be inferred. ○ Onsite building assessments. Energy data can indicate the energy costs and pollution associated with living in an apartment. Asset data can be used to indicate the energy efficiency and renewable energy potential of a building. buildings can be benchmarked against one another, as well as evaluated for energy improvements. These opportunities are expanded upon in the following sub-sections. Benchmarking and Building Rating Two fundamental types of building ratings have been developed to benchmark buildings’ energy efficiency: ● Operations ratings are based on the actual energy consumption data of buildings. Buildings with similar uses and climates can be compared. EnergyStar Portfolio Manager is the prominent operations rating nationally, used for commercial buildings and multi-unit building. Wego Wise is used in multifamily and single family buildings. The energy use of a building is influenced by its constructions, systems operations and maintenance, and occupant behavior. Thus, an operations rating reflects all three of these considerations. ● Asset ratings assess the energy efficiency of buildings’ construction. Asset ratings may be quite complex, such as Home Energy Score or ASHRAE compliant building energy model; these models input details of a buildings construction and systems, and run energy simulations. Other asset models are based on fewer inputs, which have particularly strong building energy use prediction abilities. Asset ratings can inform potential building utility payers of how much energy the building may use under normal occupancy, regardless of how it was operated conversely. Automated Building Assessments Driven by Engineering Models Data and building energy modeling techniques are increasingly being used to rapidly assess potential energy improvement opportunities based on relatively few data inputs. Such assessment strategies include: ● ● Building operators or assessment professionals can implement relatively few pieces of asset information. This data is then used to develop a model of the buildings energy use, informed by prior detailed audit data. Tax assessor records can indicate what buildings feature the highest energy efficiency potential, based off of correlations with detailed audit data and assessor data. ● Interval meter data can be subjected to algorithms that disaggregate energy consumption into different end-use loads. A model of the buildings’ energy use may then be automatically constructed based on these inferred loads, and upgrade scenarios tested in this model. Such assessment tools are evolving rapidly. They promise to reduce the costs of auditing buildings’ energy efficiency potential, and to allow for identification of the most promising energy efficiency opportunities across a portfolio of buildings. The Appendix includes case studies of a range of building benchmarking and data-driven assessment tools. Energy Data Privacy and Disclosure The US Department of Energy has convened stakeholders to articulate principles for smart meter interval energy data; similar principles seem to hold for less granular meter consumption data VERIFY. They found that most market participants believe consumers should have the right to disclose energy use data to non-utility third-parties, and that this disclosure should be a streamlined, simplified process. They felt data should not be disclosed unless consumers opted-in to the program. Utilities have the right to use data for their business activities, including efficiency program delivery. Thus, utility vendors reportedly have access to all buildings energy usage data, though they do not share this data. Green Button Inititiative Federal recognition of the importance of energy data galvanized the creation of the Green Button Initiative, an industry-led effort to improve availability of energy data. Sparked by a challenge in September 2011 from U.S. Chief Technology Officer Aneesh Chopra to give customers greater access to their energy data, industry stakeholders worked together to officially launch the program in January 2012.7 This voluntary program encourages utilities to release personal energy data to customers in a standard format as an XML file.8 To date, 20 utilities have committed to the Green Button Initiative. This amounts to 36 million residential customers gaining digital access to their energy data (Innovation Electricity Efficiency 2012).9 Standard Energy Efficiency Data Platform (SEED) 7 White House Office of Science and Technology Policy. "Administration Announces New Tools to Help Consumers Manage Electricity Use and Shrink Bills." whitehouse.gov. January 18, 2012. http://www.whitehouse.gov/administration/eop/ostp/pressroom/01182012 (accessed October 29, 2012). 7 8 EnerNex. Green Button Data. n.d. http://www.greenbuttondata.org (accessed October 29, 2012). 8 9 Innovation Electricity Efficiency. Green Button: One Year Later. Issue Brief, September, 2012. The Federal government is developing tools which will standardize the taxonomy of energy data. Currently in beta testing, Standard Energy Efficiency Data Platform (SEED) is software for large building portfolios that provides a standard format for collecting, storing, and analyzing large. (The SEED taxonomy is based upon the Department of Energy’s Building Performance.) Database The tool is available to state and local governments and other building portfolio owners. SEED can also import data from the EPA’s portfolio manager, export data to the Department of Energy’s Building Performance Database, and publish results via an open API. SEED is free and open source. This is the DOE Building Energy Performance Taxonomy which SEED is based upon.10 SEED enables users to analyze efficiency potential, compare building performance, and track compliance with efficiency programs. Moreover, creating a large database of energy data will enable 10 U.S. Department of Energy. (2012, May 05). Standard Energy Efficiency Data Platform. Retrieved November 10, 2012, from Department of Energy: http://www1.eere.energy.gov/buildings/commercial/pdfs/doe_building_energy_performance_taxonomy.pdf 10 greater understanding of a city or region’s building stock as well as enable statistical analyses of regional or community building performance.11 Efforts to design a database of energy use and building asset data should be compatible with the SEED taxonomy. More information can be found at: http://www1.eere.energy.gov/buildings/commercial/seed_platform.html 3. Program Components A variety of program components could be included in the ultimate design of this project. A few promising opportunities are noted here. 3.1 Improved Program Administration & Structure Overview The MassSave Homes program for 1-4 unit buildings is currently operating well. However, their appear to be a number of issues hindering the success of the MassSave multifamily program. MassSave and its vendors are taking action to address these issues. Nevertheless, the case could be made to experiment with other program administration structures. The EESP team considered the following options: ● ● ● Continue to improve the MassSave Multifamily Market Integrator. Extend and expand the MA Green Retrofit Initiative to all 5+ unit multifamily buildings. Establish a City administered program. Program Priorities Priorities for a new program: ● Integrate healthy home improvements to the greatest extent possible. Have the flexibility to accommodate new healthy home initiaitives and sources of funding as these come online. ● Better communicate with community and city outreach partners. Different options exist for how a program could be administered. Outreach and marketing strategies should stream buildings into different programs based on construction type - the MASSSave Homes program for 1-4 unit buildings, and a multifamily program for >5 unit buildings. Interviews with market participants suggest that the management of the MASSSave Homes program works well; thus, it should 11 U.S. Department of Energy. (2012, September 13). Standard Energy Efficiency Data Platform. Retrieved November 10, 2012, from Department of Energy: http://www1.eere.energy.gov/buildings/commercial/seed_platform.html 11 not be changed. However, our interviews revealed problems with the program administrators’ offerings for >5 unit market-rate (e.g. not “affordable”) multifamily buildings: ● ● ● They are disaggregated into HVAC, Weatherization, Fuel Switching, and other programs, making comprehensive upgrade measures difficult. They do not provide insufficient “hand holding” and customer relationship development with owners, who lack technical capacity in upgrade decisions. Program management vendors do not communicate with outside program marketers (such as community organizations or local government) about whether buildings enter into upgrade programs, making it difficult for these marketers to learn about what marketing strategies are effective. Program administrators have made efforts to address these concerns, introducing the Multifamily Market Integrator program in 2010 to serve as a “one stop shop” for multifamily buildings, and refer them to a variety of programs. However, it is not clear that the MMI sufficiently addresses these issues. Thus, the EESP team believes that management of the 1-4 unit market should continue to operate in its current fashion, but a new program management for >5 unit buildings may be warranted. The EESP team considered the following options: ● ● ● Extend and expand the MA Green Retrofit Initiative. The Green Retrofit Initiative (itself an expansion on the LEAN program) was developed to provide comprehensive whole-building treatment to affordable multifamily buildings, and richer customer service. It could be extended to all 5+ unit multifamily buildings. Continue to improve the Multifamily Market Integrator. Establish a City administered program. 3.2 Energy Map: A Benchmarking and Disclosure Tool Benchmarking and Building Rating Benchmarking and building rating programs in residential buildings can improve the functioning of real estate markets, allowing greater transparency in the anticipated energy costs of buildings. Such transparency can help stimulate upgrade activity. Nadkarni and Michaels (2012) articulate that an optimal building rating and benchmarking system for residential buildings would entail: ● ● ● Requiring annual operational updates. An asset rating of the building within a specified time (10 years), providing that cost-effective rating tools were available. Rating confidentiality, save for web-based disclosure to relevant stakeholders, like owners, tenants and prospective buyers/lessees. ● ● ● Public disclosure during time of listing for sale or lease. A standardized process for building asset rating, delivered by a certified rating authority. A consistent, easy to understand energy label, providing both asset and operational scores, comparable within and between residential building types. Certification and Recognition. One barrier to implementing energy efficiency in multifamily residences is that renters typically do not consider the energy efficiency of a home in their search for housing. To give energy efficiency a greater role in the real estate market, home energy scorecards and labelling systems are being given greater attention in the efficiency field, and the Energy Upgrade California program found that energy efficiency certification can increase the resale value of a home.12 One example is the DOE Home Energy Score.13 Other programs offer more immediately visible recognition to participants through the use of yard signs.14 3.3 Demand -Side Stakeholder Engagement & Marketing Overview The goals of demand-side engagement and outreach are two-fold. First, we hope to directly recruit participants into energy efficiency upgrade programs. Second, we hope to indirectly achieve energy savings by soliciting energy consumption data from individuals, allowing us to create analytical tools that move the multifamily housing market towards efficiency. To achieve this, we will need to conduct a thorough outreach campaign to various stakeholders in the multifamily housing sector. The Cambridge multifamily sector is a crowded space, including both a wide range of stakeholder views and a number of distinct market segments. As such, it will be challenging to develop a single program with broad appeal in the market. Fortunately, several useful tools allow us to identify and deploy effective strategies to push the market towards efficiency. Two of these are Stakeholder Analysis and Community-Based Social Marketing. Below, we discuss the complexity of the multifamily sector and the basic principles behind each of these methodologies. Additionally, a preliminary approach to conducting a stakeholder analysis in the Cambridge multifamily context is included in the Appendix. The Segmentation of the Multifamily Market 12 13 http://www1.eere.energy.gov/buildings/betterbuildings/neighborhoods/stories_eu_california.html http://www1.eere.energy.gov/buildings/residential/hes_index.html 14 http://www1.eere.energy.gov/buildings/betterbuildings/neighborhoods/innovations.html?tab=2&list=10&div=10#gro uped The multifamily housing sector is an heterogeneous mix of market segments, each with their own barriers to and opportunities for energy efficiency. Some of these segments share a unique trait that may demand that program administrators devote additional resources that target specific barriers. Others may present an unusual opening for and efficiency program that is not present in the remainder of the multifamily sector. Below, we identify several market segments that must be considered in any program design and outreach process. Resident-Landlords. While it is difficult to determine their exact number, a number of Cambridge’s landlords reside on-site in otherwise rental properties. Unlike most property owners, these individuals share the same self-interest in efficiency upgrades as single-family owners and—if they can be identified—could be targeted accordingly. Additional incentives could be designed to encourage landlords to invest in efficiency upgrades for the other units in their property as well as their own. Oil-Heated Homes. While smaller than in other parts of the state, a significant number of Cambridge’s multifamily properties are heated by fuel oil. Because of the difficulty of metering multi-family tenants individually for oil heat, it is likely that the property owner pays for space heat in these buildings. These landlords may see energy efficiency improvements as an opportunity to reduce their operating costs without losing revenue and could be targeted by traditional financial incentives. Student Housing. Students account for a sizeable portion of Cambridge’s multifamily housing market. An efficiency program could take advantage of this fact by creating student-specific program outreach strategies, either through formal university channels or through informal social networks. Partnerships with universities could result in co-branded marketing, student-specific webpages, and support from student services offices that provide resources for students to advocate for efficiency with their landlords or that advertise a list of preferred property owners. Alternately, a marketing campaign that encourages tenants to share their energy data could take advantage of the unique social network of student populations (and could also resonate with the open-data ethos of MIT’s student body specifically). Major Employers. In addition to their broad student bodies, Cambridge’s universities are also major employers in the city. They, along with other anchor institutions, such as the vibrant biotech community in Kendall Square, could be targeted for partnerships that provide tailored program outreach to employees, similar to the Michigan Saves program mentioned above. Condominiums. Currently, there are very few efficiency programs that specifically target condominiums and address the specific barriers that they pose to energy efficiency. Despite this difficulty, condominiums compose a notable percentage of Cambridge’s housing market, and it may be necessary to develop resources that specifically target these units. For example, program administrators could create a marketing campaign encouraging condominium owners to discuss energy efficiency with their neighbors and provide marketing materials that are intended to explain program benefits specifically to condominium boards. Property Management Firms. Many landlords in Cambridge contract with specialized property management firms to take care of their properties and deal with tenants. This introduces an additional level of complexity to an energy efficiency program design as there is little direct interaction between landlords and tenants in these buildings. However, this could also be an opportunity to recruit property managers to act as advocates for energy efficiency. Vacant/Available Units. Units available on the rental or real estate markets can act as valuable points of entry for efficiency program managers. Potentially working in partnership with realtors and property brokers, a program that offered certification or recognition of energy efficiency improvements could be effective in changing the rental market by increasing demand for efficient units. While this list certainly does not account for the whole of multifamily sector in Cambridge, it includes some of the markets segments that could realistically be given special attention in a program design process. Understanding the specific needs and opportunities of these segments is a crucial step in sketching out the parameters of an efficiency program. These parameters may be further set using the methodologies discussed below. Stakeholder Analysis Program administrators often make the mistake of designing a program based on what they think will work, rather than on what targeted groups have told them will work. Unsurprisingly, understanding the perspectives and interests of stakeholder groups and incorporating them into a program design can be very useful in building a successful program. Stakeholder analysis provides a formal means of determining the categories of actors that are relevant to a program as well as a methodology for mapping their interests. In a stakeholder analysis, planners begin by assembling a preliminary list of the actors that they believe are relevant to the problem at hand. In the Cambridge multifamily sector, stakeholder groups might include landlords, tenants, property managers, property brokers, building contractors, and institutional actors. After identifying the preliminary list, analysts reach out to the identified actors, gauge their interests and concerns on a given issue, and ask what other groups may have a stake in the issue. This process is repeated until planners are left with an array of stakeholders and issues that fully represents the range of perspectives and opinions on a given issue. This array is an excellent starting point in the program design process, as it provides administrators with a means of developing a program that speak to all parties’ interests. In this context, a stakeholder analysis would allow us to determine which actors are likely to act as assets or roadblocks in a given program design. It will act as a resource in proposing options that have high probabilities of success. Community-Based Social Marketing Another useful program-design methodology to consider in this project is Community-Based Social Marketing (CBSM). CBSM draws heavily from social psychology and helps program administrators target the behavioral changes that can help to achieve program goals. The formal CBSM process has 5 components:15 McKenzie-Mohr, Doug. Fostering Sustainable Behavior: Community-Based Social Marketing. McKenzie-Mohr and Associates, 2010. 15 1. 2. 3. 4. 5. Selecting the behaviors to be targeted. Identifying the barriers to changing these behaviors and the benefits of doing so. Developing strategies for influencing the targeted behaviors. Conducting a pilot program to test these strategies. Implementing successful strategies at scale. In the context of a multifamily energy efficiency program, the types of behaviors that might be targeted by a CBSM program are those that would either help drive participants towards home retrofits or make energy data more publicly accessible. These might include soliciting tenants to donate their energy consumption information to a crowd-sourced data collection effort, asking condominium owners to make energy use an item of interest for their homeowner associations, or encouraging landlords to sign up for a free energy audit through Mass Save. In a CBSM program, these and other behaviors would be evaluated to determine which are most useful in achieving the goals of a program. Once the targeted behaviors have been determined, CBSM program architects investigate the barriers and benefits of given behaviors. This step would entail an information-gathering campaign to help planners understand why targeted populations aren’t already adopting the desired behaviors, and what could be done to convince them to switch. The methods included in this step could include focus groups, surveys, a literature review, or direct observation. After assessing the barriers, program designers then begin to formulate strategies for intervention. The strategies selected in this step vary dramatically based on the local context and the problem of interest but there are several general tactics that have proved useful in the past. These include: providing a large number of resources to early adopters and relying on social networks to diffuse their behavior, advertising local community members who are (and are not) adopting desired behaviors, and soliciting token commitments from community members before asking that they engage in deeper behavioral changes. CBSM principles can be useful in achieving the demand-side outreach goals declared above. Furthermore, combining these methods with both a thorough understanding of the segmentation of the local housing market and a robust stakeholder assessment would ensure that the outreach and marketing strategies selected through the CBSM process are uniquely tailored to the local context. Recent Activity in Energy Efficiency Program Outreach In designing an outreach and marketing plan for Cambridge’s multifamily sector, it is useful to understand the types of approaches that have been tried elsewhere. A number of program managers across the country are experimenting with new ways of driving demand in for energy efficiency, and it is worthwhile to be familiar with their work. In particular, DOE’s Better Buildings Neighborhood Program (BBNP)16 has worked as an incubator for new and innovative program design elements, and several of the approaches that have been tried though the initiative are discussed below. However, the existence of these options does not preclude the necessity of the program design methods discussed above, and 16 http://www1.eere.energy.gov/buildings/betterbuildings/neighborhoods/ program administrators in Cambridge should not merely replicate methods that have been tried elsewhere. ● ● ● ● Incentivizing Community Organizations. Currently, NSTAR’s multifamily energy efficiency program conducts outreach through a number of community organization partners. However, these organizations are not given a clear incentive to participate other than the opportunity to offer a service to their constituents. Some energy efficiency programs, such as Los Angeles County’s Energy Champions program,17 offer financial incentives to local non-profits that successfully recruit program participants. In Massachusetts, Next Step Living is currently implementing a similar approach. Deadline-Based Marketing. Some energy efficiency program implementers--such as Efficiency Maine18--use deadlines to more effectively market energy efficiency program. By offering a lowcost installation for a limited period of time, these programs are able to motivate potential participants to take action. Bulk Purchasing. Some programs coordinate the purchasing efforts of multiple participants with a single contractor to achieve discounts from bulk purchases. Solarize Portland has been particularly successful in negotiating low prices for solar panels through this approach.19 Leveraging Anchor Institutions. Similar to community organization approaches, some programs leverage trusted organizations in the target community to conduct program outreach through. For example, the Michigan Saves program partnered with Grand Valley State University in Grand Rapids to market and implement their energy efficiency program.20 Potential Practicum Work Items Obtaining buy-in from landlord and tenant groups and condominium associations will be a crucial element to the success of any multifamily energy efficiency program. Over the coming months, we propose to conduct outreach efforts to the many stakeholder groups involved in Cambridge’s multifamily housing sector in order gauge their interests and concerns regarding energy efficiency. The methodological tools provided by stakeholder analysis and community-based social marketing will be very useful in guiding this process. Specific actions that may be taken are listed below, and a preliminary approach to a stakeholder assessment is laid out in detail in the appendix. Stakeholder Mapping – A preliminary set of stakeholders is provided in the appendix. This is not, however, an exhaustive list of the individuals who are concerned with a multifamily energy efficiency program in Cambridge and who must be consulted in its development. We must reach out specific individuals in the identified groups and, through discussions with those groups and individuals, identify additional stakeholder groups and develop a matrix of interests and interested parties. 17 https://energyupgradeca.org/county/los_angeles/energy_champions_home http://www1.eere.energy.gov/buildings/betterbuildings/neighborhoods/maine_profile.html#driving 19 http://www.portlandoregon.gov/bps/article/405686 20 http://bbmgr.org/wp-content/themes/Starkers/media/01172012BBMGR_GVSU_INFO.pdf 18 Focus groups - Due to the fragmented nature of the rental community in Cambridge, it will be prohibitively difficult to conduct outreach to each stakeholder that would be impacted by a program. Instead, we plan to conduct focus groups with representative samples of property owners, tenants, and other stakeholder groups. Through these interviews and focus groups we discuss the concerns and interests of various stakeholders and identify one or several program delivery mechanisms that could be used to implement an effective efficiency program in various settings. Interviews with building owners and managers - An important aspect of these discussions will be to identify and interview multifamily properties fitting our target profile that have already implemented energy efficiency upgrades. We intend to interview a sample of landlords and tenants in this group to understand why the decision to invest in an upgrade was made, and what factors acted as important drivers in that decision. These findings would be crucial in developing an effective program design. Deployment of intervention strategies - The previous steps will be useful in revealing the potential levers—behavioral or otherwise—that could be pulled by a multifamily program design in Cambridge. Based on these steps, we will have a clearer idea of what interventions are both feasible and likely to succeed, and we will be able to craft a program design that includes them. 3.4 Financing - An On-bill Tariff Repayment Scheme Overview The EESP team believes that an On-bill Tariff Repayment mechanisms can facilitate the financing of energy efficiency in multifamily housing, and other building types. Background Financing challenges in large part have precluded the widespread adoption of energy efficiency measures. High upfront costs for efficiency upgrades, as well as the split incentive problem between landlords and tenants, have often dissuaded customers from making investments in energy efficiency. In addition customers often lack information about financing programs, perceive them as costly or timeconsuming or face credit barriers to accessing financing, and lenders often lack data on energy savings projections and see energy efficiency as a risky proposition in the absence of this information (Deutsche Bank 2012). Effective financing programs for multi-family efficiency must proactively address these issues. On-bill financing presents a promising approach to tackle many of the aforementioned challenges. Under on-bill financing utilities make upfront investments in energy efficiency measures and the ratepayer then pays back these initial investments over time via a monthly surcharge on his/her energy bill. As a result the upfront cost barrier is largely eliminated, and the customer further benefits if the payback terms are structured such that the resulting monthly energy savings exceed the monthly repayments. By tying these repayments to regular utility bills, on-bill financing also presents a mechanism to use customer payments as a proxy for creditworthiness and reduce overall risk to lenders (ACEEE 2011). On-bill financing can also overcome the split incentive barrier in multifamily and rental properties if structured properly (ACEEE 2011). There are two main types of on-bill financing measures: on-bill loans and on-bill tariffs. On-bill loans are non-transferrable and stay with the borrower, so even if a tenant moves out of a unit or a building is sold before the upfront efficiency investment is entirely repaid, the tenant or building owner in question is still responsible for paying off the balance of the loan. As a result the split incentive problem persists, as neither landlords nor tenants are willing to take on payments for which they receive no benefit. On-bill tariffs, on the other hand, are tied to specific properties via utility meters; when a tenant moves out or a building is sold, the new tenant or building owner assumes responsibility for the monthly repayments where the previous tenant or owner left off. As a result on-bill tariffs present a powerful strategy for addressing the split incentive challenge, as they ensure that landlords or tenants can benefit from efficiency investments without facing a longer-term financial burden. While on-bill tariffs present an attractive solution to many energy efficiency financing barriers, their implementation comes with its own set of challenges. Perhaps most notably, on-bill financing can often require complicated modifications to utility billing systems (ACEEE 2011), and NSTAR in the past has declined to implement on-bill financing in Cambridge for precisely this reason (Cascadia Consulting Group 2008). However given the City of Cambridge’s and NSTAR’s current mutual interest in developing a pilot multifamily efficiency pilot that can be a model for long-term programmatic change, we believe the time is now to revisit these issues and think critically about strategies to implement on-bill tariffs in the multifamily sector. These include difficulty assuring that energy savings will exceed payments, limited support for comprehensive retrofits, and an inability for programs to cover their costs in some instances (ACEEE 2011). In conjunction with on-bill tariffs, Cambridge and NSTAR can consider several other strategies to address financial barriers to energy efficiency. These include providing energy data before or at the point of loan application to enable lenders to incorporate cost and savings projections into their underwriting (Deutsche Bank 2012), using financing products to bundle together multiple energy efficiency measures to spur deeper retrofits (ACEEE 2011), and using public benefit and utility funds to provide credit enhancements or buy down interest rates (ACEEE 2011). Employing a portfolio of these approaches will ensure that both customers and lenders can access important information, reduce their overall financial risks and have stronger incentives for participation. Program Recommendation Potential Practicum Work Items ● ● Develop guidance for establishing and managing a Fund through which on-bill repayment could be made. Pro-forma, suggesting what IRR of measures could be included in projects, given different terms of financing. 3.5 Upgrade Ordinances Overview Residential Energy Conservation Ordinances (RECOs) specify that as part of the purchase of an existing rental housing unit, property owners must either fulfill a prescriptive set of mandatory upgrades or invest a set portion of the purchase price in efficiency improvements.34 The City should consider opportunities to implement energy conservation ordinances. Likewise, the Massachusetts Green Communities Designation and Grant Program and the Massachusetts Board of Building Regulations and Standards should provide a standard energy improvement code for existing construction, which leading Green Communities can adopt. This policy option overcomes the split incentive problem by mandating that one party--the property owner--make efficiency improvements as part of a property sale. However, there are two substantial drawbacks to this policy tool. The first is the political difficulty of implementing such an ordinance, and the second is its limited effectiveness. Because the policy only comes into effect when a housing unit is sold, an upper limit is enforced on the number of homes that would be retrofitted through this approach. The EESP team believes that, ultimately, requiring upgrades may be necessary to realizing deep energy efficiency across a broad range of properties. However, it is politically difficult to get such requirements established. Thus, efforts to grow the voluntary market for upgrades are justified. Background Previous Use RECOs have been used to advance energy efficiency since the 1980s and are in place in several cities across the nation--including San Francisco, Berkeley, Austin, Boulder, Ann Arbor, Minneapolis, Burlington, and Roseville, CA--as well as statewide in Wisconsin. In other areas, such as Portland and San Diego, proposed RECOs were abandoned due to opposition from real estate organizations and other groups. However, opposition from commercial groups is not a given. Realtors in San Francisco and Berkeley use energy upgrades as a selling point for buyers,35 and in Austin, realtor groups negotiated and support a watered-down ordinance that requires energy audits, but not mandatory upgrades.36 There are slight variations in program scope and administration that are worth discussing. While most program apply to the entire residential sector, the programs in Wisconsin, Ann Arbor, and Minneapolis 34 Beth Williams thesis. ACEEE. http://www.iamu.org/services/electric/efficiency/Attachment%20B%20Residential%20Energy%20Conservation%20 Ordinances%20ACEEE.pdf 36 Pat Coleman thesis. 35 specifically target multi-family housing.37 This implies that they are intended to address--or rather, sidestep--the split-incentive problem in rental housing. While most programs are run through a housing, building, or code department, the ordinances in Burlington and Roseville are operated by local municipal utilities.38 There are also differences in penalties for non-compliance. Most cities specify monetary penalties for noncompliance that vary in severity. In Ann Arbor and Wisconsin, noncompliance has additional legal consequences, and can actually lead to jail time. Conversely, Roseville and Berkeley do not have any established enforcement mechanisms to deal with noncompliance.39 In Boulder, landlords must be licensed by the city, providing an additional leverage point for enforcement.40 There has been a general failure to track and evaluate the impact of RECOs, and as a result, there is little information available regarding their effectiveness in achieving energy savings. 41 Applicability to Cambridge While implementing a RECO is difficult in any context, Cambridge is perhaps better situated than other most municipalities to make a successful attempt. Cambridge’s participation in the Green Communities Act and its implementation of stretch energy codes could provide a foundation for further actions around energy regulation. However, any attempt to enact a RECO is likely to face opposition from landlord and real estate interests. Additionally, the Cambridge city government lacks certain legal authorities over landlords—such as the ability to withhold rental licenses—that have been assets to programs in other areas. Therefore, implementing a RECO in Cambridge may be both politically and logistically difficult. Potential Practicum Work Items Time-of-sale upgrade ordinances present a unique means of addressing the split-incentive problem in multifamily energy efficiency, largely by sidestepping the issue entirely. However, due to the great political difficulty in establishing and implementing a RECO, it should not be assumed that Cambridge will be able to enact an ordinance. Instead, through conversations with stakeholders occurring throughout the engagement process, RECOs should be discussed as one possible solution for achieving energy efficiency in Cambridge. If a universally beneficial solution can be found, an energy 37 ACEEE. http://www.iamu.org/services/electric/efficiency/Attachment%20B%20Residential%20Energy%20Conservation%20 Ordinances%20ACEEE.pdf 37 38 ACEEE. http://www.iamu.org/services/electric/efficiency/Attachment%20B%20Residential%20Energy%20Conservation%20 Ordinances%20ACEEE.pdf 39 ACEEE. http://www.iamu.org/services/electric/efficiency/Attachment%20B%20Residential%20Energy%20Conservation%20 Ordinances%20ACEEE.pdf 40 Find a source. 41 Beth Williams thesis, ACEEE. ordinance may indeed be implemented in Cambridge, but it should only be considered as one of many potential solutions. 3.6 Comprehensive, Deep Energy Upgrade Measures Scope of Design · Outline typical measures appropriate for MF housing typologies in Cambridge. · Outline required contractor certifications Background information · Identify MF upgrade contractors. · Pre-weatherization barriers. · Status of rent controls. Conclusion Appendixes Program Summary Prog ram Tec hni cal me asu res & ava ilab le inc enti ves Inc o me Cri ter ia Fun din g Sou rce Ad min istr atio n& Co ntra ctor s Ass oci ate d fina nci ng me cha nis m Out rea ch Cha nne ls Mass Save Hom e Ener gy Servi ces Prog ram (1-4 unit buildi ngs) Tec hni cal me asu res: Inst ant savi ngs me asu res (CF L’s, pro gra mm abl >6 0% of A MI Utili ty rate pay er fun ds Ad mini stra tors : NSt ar, Nati onal Grid , oth er utilit ies 0% HE AT loan for qual ified me asu res – up to $25 ,00 0 Con with trac 7tors yea Utili ties, cont ract ors, non prof it and com mu nity org aniz atio ns, loca l e ther mo stat s, fau cet aer ator s), ins ulat ion, air sea ling , hea ting /ve ntil atio n/H VA C syst em s Ava ilabl e inc enti ves : 75 % off up to $2, 000 : Nex t Ste p Livi ng, Coop Po wer, Gre enT ek, etc. r pay bac k busi nes ses on ins ulat ion, nocos t air sea ling , reb ate s for hea ting equ ipm ent Mass Save Multi Fami ly Prog ram (5+ unit buildi ngs) Tec hni cal me asu res: Ene rgy effi cie nt ligh ting upg rad es and con trol s, occ upa ncy >6 0% of A MI Utili ty rate pay er fun ds Ad mini stra tors : NSt ar, Nati onal Grid , oth er utilit ies Loa ns I beli eve HE AT Loa ns are avai labl e for bot Con h trac unit tors & : buil Con ding serv own atio ers Utili ties sen sor s, wat er hea ting equ ipm ent, do me stic hot wat er me asu res (lo wflow sho wer hea ds, aer ator s, and pip e wra p), pro gra mm abl e ther mo stat s, n Ser vice Gro up ? So me oth er loan type exis ts that can pro vide larg er loan s to buil ding own ers. See the pro gra m des cript ion they hav e this stuff . ins ulat ion, air sea ling , hig heffi cie ncy hea ting and coo ling equ ipm ent upg rad es and con trol s, EN ER GY ST AR ® qua lifie d refri ger ator s and oth er eligi ble app lian ces Low Inco me Multi Fami ly Prog ram (LEA N) (5+ unit buildi ngs) Tec hni cal me asu res: Re pla ce me nt or rep air of hea ting syst em s and /or con trol s, repl ace me nt or rep air of hot wat er hea 50 % of uni ts at or bel ow 60 % of A MI Utili ty rate pay er fun ds Ad Gra mini nts stra tors : Acti on for Bos ton Co mm unit y Dev elop me nt, Acti on Inc. Con trac tors : LEA N Adv isor y Co mmi ttee (pro pert y own ers, com mu nity dev elop me nt cor por atio ns, non prof its and com mu nity org aniz atio ns) ting syst em s, buil din g env elo pe upg rad es thro ugh air sea ling and ins ulat ion, ligh ting upg rad es, app lian ce upg rad es, and ven tilati on upg rad es Mass Tec achu hni 50 % Barr Ad Gra Fou mini nts, Co mm setts Gree n Retr ofit Initiat ive (5+ unit buildi ngs) cal me asu res: Ben ch mar kin g of hist oric al ene rgy and wat er con su mpt ion, onsite buil din g ass ess me nts, ene rgy and wat er retr ofit proj ect fina nci ng of uni ts at or bel ow 80 % of A MI nda tion, Dep art me nt of Hou sing and Urb an Dev elop me nt stra loan unit tors s y : dev Ne elop w me Eco nt logy cor , por Bos atio ton ns, Loc non al Initi prof ativ it es and Sup com port mu Cor nity por org atio aniz n atio ns Con trac tors : Ava ilabl e inc enti ves : Co ordi nati on with exis ting reb ate or inc enti ve pro gra ms Case Study - WegoWise https://www.wegowise.com/ Monitors energy consumption primarily in multifamily buildings. ● Building Type: multifamily/residential ○ Tweaked application so it could comply with NY Law 84 and function for commercial buildings ○ Developing commercial and single-family residential platform. ● Asset Data: ○ Basic building characteristics that can be discovered in about 27 questions. ○ Do not actively use Tax Assessor data, but are exploring possibilities. ● Operational Data: Accesses E-bill online payment systems most utilities have ○ Monthly reports of energy data ○ WegoWise is not as concerned right now about smart meters and receiving 15-minute interval data. ● Visualization Tool: ○ Online dashboard WegoWise is an online platform designed to monitor energy and water use of multi-family homes. Primarily targeted at property managers, clients pay $5/building/month to have their electric, gas, and water consumption automatically tracked each month. As part of the energy assessment for each building, property managers respond to approximately 27 questions regarding the physical characteristics of each property. WegoWise’s main value-add is in automatically tracking monthly energy consumption and payments. Property managers share e-Bill account numbers and passwords with WegoWise. WegoWise then screen scrapes data every 20 days to update energy consumption. WegoWise offers their clients comprehensive analysis of building energy information. Users can build custom reports to compare specific buildings and specific energy consumption. Generated charts show how the client’s buildings perform compared to physically similar buildings in the same climate zone and with the same type of heating system in WegoWise’s database. Users can also specify a geographic location for comparison. For example, perhaps they only want to know how their buildings compare to buildings in Massachusetts, or even more specifically in Boston. They are showed how their buildings compare to efficient buildings. This efficiency threshold is based upon performance information of the top 25% of similar buildings in WegoWise’s database. WegoWise also offers the option to compare the energy performance developments, not just single buildings, which may be valuable to expansive property owners. WegoWise offers a simple, easy-to-use energy monitoring tool to property managers. Automatically capturing utility bill information saves the time of users having to enter information manually. Moreover, graphs and charts help property managers understand which are their low- and high-performing buildings. WegoWise has been used to show changes in building performance after retrofits, to help qualify a building for other energy funding, and to verify LEED performance criteria. A main obstacle with WegoWise is getting utility data if building tenants pay their own utility bills. Property managers must have tenants sign releases of information and acquire their individual utility account numbers and passwords. This can slow the process and some tenants do not want to release their information. However, if property managers are able to obtain the permission of 50 to 60% of tenants, WegoWise can calculate an average consumption pattern for units and then create a building estimate. Some buildings overcome this obstacle by including a data release provision in leases. WegoWise has developed and extensive network within Massachusetts, but is working nationally with presences in New York, California, and other areas as well. WegoWise is looking to expand its market by developing a similar online platform for commercial buildings and single-family homes. Online energy management is a young market and WegoWise is one of only a few companies in the arena [EnergyScoreCards is a potential competitor]. Case Study - EnergyView PDF Report Community map of building energy performance and individual ratepayer comparison calculator. ● Building Type: Multifamily/residential/commercial ● Asset Data: ○ Tax assessor records and geographic survey information ■ 35 features were collected from these data sets ● Operational Data ○ Monthly electric and gas data from NSTAR ● Visualization Tool: ○ Color-coded map which ranks building performance. This tool was only ever hypothetical and never launched live. ○ Online calculator for an individual to enter household data outputs graphs on: ■ Monthly electricity use compared to similar homes ■ Electricity usage distribution ■ Monthly gas use compared to similar homes ■ Gas usage distribution EnergyView was developed by an MIT PhD student and faculty member to model energy consumption in residential and commercial buildings. Their approach used exclusively remotely available data, meaning no home visit was necessary, nor did anyone need to collect descriptive information from building owners or tenants. Using tax assessor records, geographic survey information, and monthly energy information provided by the local utility NSTAR, the authors created models to predict energy usage for 6,500 buildings in Cambridge, Massachusetts. These models were able explain about 75% of observed variance in energy consumption given building characteristics. From their models, the authors designed two potential tools. For utilities - which are able to access all of their clients’ data without privacy restrictions - the authors developed a map which color codes buildings by energy consumption; this tool enables utilities to readily see which buildings which are consuming more energy than would be expected by their given features. For individual ratepayers, the others created an online calculator where users can manually enter their monthly energy information and then see resulting charts which compare their energy usage to the predicted energy usage of similar buildings. The authors noted the difficulty in assigning specific utility records to buildings. If utilities were able to include a Building ID code which matched with tax assessor parcel IDs, this would facilitate the analysis process. The authors also stated knowing whether buildings were owner-occupied or tenant-occupied would be helpful, but that information was not available in tax assessor records. The authors faced another challenge when multiple meters were associated with one building. They didn’t necessarily know which meters were attached to units and which were associated with common spaces. This suggests a potential difficulty in conducting remote energy analyses; without tenant or owner input, it may hard to know what space meters represent. EnergyView faces limitations in that due to privacy restrictions, only utilities can use the mapping feature. Moreover, utility energy data sets do not necessarily identify which meters are for occupied spaces and which are for common spaces, making the analysis more complicated. However, even with these obstacles, EnergyView and similar platforms have the potential to be scaled up and offer utilities mapping tools which could enable them to target efficiency programs at high energy users. This relationship diagram explains how different data relates to each other in EnergyView. Case Study – Cambridge Solar Map http://www.cambridgema.gov/solar/ Academic Paper by Christoph Reinhart and Alstan Jakubiec Ranks solar potential of roofs and provides info on solar potential, financial costs, environmental benefits, and installation information. ● Building Type: Multifamily/residential/commercial - indiscriminate ● Asset Data: ○ LIDAR scan ○ RADIANCE/DAYSIM simulation ○ Standard local weather data ● Operational Data: ○ None ○ Potentially this could be added to make an even more convincing tool. ● Visualization Tool: ○ Interactive map which color codes solar suitability on roofs ■ Users can search for specific addresses or zoom and move map ■ Generates numerical breakdowns for individual roofs of solar potential, financial costs, and environmental benefits. ■ Provides an installation overview. While not an efficiency or energy consumption map, the Cambridge Solar Map demonstrates the power of an interactive map for relating energy information to individual homeowners and to community groups. Developed by MIT’s Sustainable Design Lab, the map color codes roofs for excellent, good, or poor photovoltaic potential. The data used to build the map includes a LIDAR scan of Cambridge to establish urban geometries, a solar radiance simulation model built by Christoph Reinhart, and local weather station data. The developers used the specifications of a SunPower 185-watt panel to calculate the annual PV generation. Users are able to search a specific address or manually move the map and select buildings. Upon selection, the “Solar Tool” generates PV related information for that building if it has a ranking of excellent or good. This information generated includes estimates of potential PV size (kW), annual electricity generation, cost of installation, tax credits and rebates, annual revenue, payback time, and environmental benefits. The map also provides links to find out more about how to get a PV system installed. The power of the Solar Map is that individual homeowners can quite quickly determine whether their home may be suitable for solar power and see and estimate of financial benefits for installing a system. Installers or other community groups can use the map to target specific homes or neighborhoods which would benefit the most from PV installations. Individual homeowners may be able to convince neighbors to also install solar, and perhaps negotiate a group discount on contractor cost. One of the map developers also noted that they compared the map to an existing MIT solar installation. The solar installation seemed to be under producing based on what the map predicts. The system is currently being analyzed, but this suggests that the map could also be used to verify system performance after installation. The Sustainable Design Lab is continuing to work on the map. In the future, they would like to develop a tool to outline panels on a roof to get more specific information about system configuration. They also recognized the potential of incorporating actual energy consumption data to enable house-to-house comparison and augment the financial incentive calculations. If possible to generate, a community efficiency map could benefit from leveraging similar features to the Cambridge Solar Map. These include: ● Simple, easy-to-understand color coding ● User-friendly searching and moving ● Speaks to multiple user groups - individuals, community groups, contractors, utilities, and government agencies ● Includes estimates of savings and financial incentives Case Study – Next Step Living http://nextstepliving.com Next Step Living is a one-stop-shop for home energy assessments and weatherization. ● Building Type: Residential ● Asset Data: ○ Audits ○ Infrared Imaging ○ Blower Door Tests ○ Tax Assessor Records ● Operational Data ○ Utility bills ■ 12 months pre-installation and 12-months post-installation ○ Energy assessment database ● Visualization Tool: ○ Heat Map compares tax assessor record characteristics to audits of similar homes in the NSL database Next Step Living (NSL) is a Massachusetts-based turnkey home energy assessment and weatherization provider. NSL accounts for 90% of the home performance market in Massachusetts and will be expanding to Connecticut and Maryland. The four-year-old company conducts 25,000 home energy assessments per year and expects that number to continue to grow. NSL collects twelve months of utility data from customers before they complete a weatherization of their home. NSL also asks for 12 months of energy data post-installation. Using this information, NSL is building a detailed database of home energy audits. Using 20,000 homes worth of data, NSL built a “Heat Map” of Somerville. They used a handful of important data points pulled from tax assessor records to compare Somerville homes to similar homes in their database of audits. They color coded homes so that “hot” homes were the ones with the most potential for upgrade. Next Step Living’s Heat Map is leveraging an increasingly popular method of analyzing home efficiency performance by comparing remote, publicly available housing data (from tax assessor records) to historic energy audits of similar buildings. This enables contractors to develop building profiles before contacting potential customers. They can identify neighborhoods and communities that offer the greatest opportunity for savings and target their outreach efforts there. Case Study - Retroficiency http://www.retroficiency.com/ Creates building audits with minimal information by using algorithms to model building performance and making comparisons to prototypical buildings with same characteristics from historic audits. ● Building Type: Commercial ● Asset Data: ○ Builds increasingly accurate building profile, but starts with basic info and improve over time by augmenting with more information. ● Operational: ○ 15-minute interval data ○ 12 months of historical energy data Retroficiency developed two different tools to conduct remote energy assessments which are highly accurate. Retroficiency leases their tools to energy auditing businesses or to utilities which are able to conduct audits in less time and with less demand of inputs from property owners. Retroficiency’s Virtual Energy Assessment (VEA) requires only an address and 12 months of historic energy consumption data to identify end use loads such as heating, cooling, and lighting. (VEA may also use 15-minute interval data from clients if they have smart meters installed.) VEA can identify building usage patterns and recognize moments of inefficiency such high use during periods of low occupancy. From these analytics, VEA can make recommendations for upgrades or performance measures to reduce energy use. Retroficiency also offers an Automated Energy Audit (AEA) which uses limited building asset information to make accurate energy profiles of a building. A building owner or property manager can enter in just a few building characteristics and the AEA will compare that building to Retroficiency’s library of thousands of actual audits to build an energy model of the building. As the property manager enters more information overtime, the model becomes more accurate. Similar to the VEA, this is a remote energy assessment tool and it also makes efficiency recommendations. Retroficiency does not currently work in the residential sector though it has been building a database of multi-family [bigger than houses or garden-style apartments] energy models. In an interview, CEO Bennett Fisher indicated that Retroficiency’s VEA and AEA tools could be modified to work for residential homes if demand existed in that market. Case Study – Renew Boston Lean Program Program management Case Study – Seattle Benchmarking & Reporting Policy Covers MF housing >5 units. http://www.seattle.gov/environment/benchmarking.htm Appendix: Green Leasing Overview Green Leases are one policy tool that has been implemented to overcome the split incentive problem discussed above. The term refers to a standard rental lease that includes a mechanism to finance energy efficiency improvements in a home. Typically, a Green Lease includes language stating that if a landlord makes improvements of a certain type, he may raise the rent immediately to begin to recoup the cost. If structured properly, a Green Lease benefits both landlords—because repayment on capital improvements is guaranteed—and tenants—whose increases in rent will be more than offset by decreases in utility bills. As part of defining a scope for the Cambridge Multifamily Energy Program, we have investigated the viability of utilizing Green Leases and related policy tools that target the split incentive problem. Previous Use While Green Leases are not uncommon in the commercial sector,50 the practice has not yet gained a foothold in the residential rental market. Late last decade, the Cambridge Energy Alliance began to consider advocating for their use locally, but the initiative lost steam and has not been restarted.51 Applicability to Cambridge Previous use of Green Leases in the residential housing market have generally been restricted to rent controlled areas. In these situations, Green Leasing provides a convenient and mutually beneficial mechanism that allows landlords to be compensated for making improvements to the home without causing an increase in total living costs to the tenant. This benefit is not as clear in a rental market without rent control, where there is no legal barrier to a landlord who wishes to raise rent upon expiration of a lease. Cambridge currently has an uncontrolled rental housing market. Rent control had previously been established in the 1970s, but the market was deregulated by a statewide ballot initiative in 1994. Predictably, opening the market has led to both increased average rents52 and greater investment in rental housing53 in Cambridge. Green Leases are structured to confront a formal barrier in the rental housing market, where landlords may be unable to guarantee a revenue stream (in the form of increased rents) to recover the cost of capital investments. However, because of the lack of rent control, the barriers to rent increases in Cambridge are informal rather than formal. Landlords are hesitant to increase rents because of the extralegal protests raised by tenants. The key barrier is the willingness of tenants to accept rent increases on principle. Green Leases are not intended to confront this barrier, but instead present a legal mechanism for certainty and transparency once parties have already agreed to the general concept. Potential Practicum Work Items 50 See: http://www.imt.org/finance-and-leasing/green-leasing, http://www.greenleaselibrary.com/bestpractices.html, http://www.ci.berkeley.ca.us/uploadedFiles/Planning_and_Development/Level_3__Energy_and_Sustainable_Development/BEES2011FINALfullWeb.pdf 51 Beth Williams thesis, Jason Jay thesis. 52 New York Times, http://www.nytimes.com/2003/06/15/nyregion/when-rent-control-just-vanishes-bothsides-of-debate-cite-boston-s-example.html?pagewanted=all&src=pm 53 Henry Pollakowski, MIT Center for Real Estate. 2003. http://www.nmhc.org/files/ContentFiles/ThirdPartyGuide/cr_36.pdf. While Green Leases may be useful in providing a formalized mechanism of implementing efficiency improvements in rental housing, we do not believe that they confront the most fundamental barriers to efficiency in multifamily housing in Cambridge—that is, the agreement by all parties that efficiency improvements and resulting rent increases are mutually beneficial for both landlord and tenant. In light of this, we believe that a focus on Green Leases would a misallocation of this effort’s limited resources and political capital. Instead, we believe that our efforts should focus on the informal barriers preventing energy efficiency in the multifamily housing market and must entail a comprehensive outreach and educational campaign to the small landlord and tenant communities. Appendix: Stakeholder Analysis Approach Overview There is a wide range of groups that must be consulted in as part of a stakeholder analysis. Because there is little centralized representation within the city of Cambridge for the major stakeholder categories (landlords, tenants, condominium owners), it would be prohibitively difficult to reach every individual with a stake in multifamily energy efficiency. However, there are several existing groups that represent varying interest groups. Our stakeholder analysis process should include conversations both with these formal organizations and with individuals chosen to represent broad and unorganized groups. Existing Groups On the landlord side, there are several state and regional organizations of small property owners to conduct outreach to. These include the Small Property Ownership Association,54 the Massachusetts Rental Housing Association,55 the Greater Boston Real Estate Board,56 and the Boston chapter of the Institute for Real Estate Management.57 There are also a number of condominium associations that represent property owner interests as well. While less organized, there are also established mechanisms that can be used to reach tenant groups. The focus of tenant advocacy groups is typically on eviction and poverty, though it clear that energy savings has relevance to this mission. The nonprofit Cambridge Economic Opportunity Committee58 serves as the local Community Action Program. On the city side, the Environmental and Transportation Planning Division59 within the Cambridge Community Development Department is also an important actor in this space. Unfortunately, the majority of tenant-engagement activities are restricted to subsidized housing, and there are few existing means of organization among market-rate 54 http://spoa.com/ http://www.massrha.com/ 56 http://www.gbreb.com/ 57 http://www.iremboston.org/ 58 http://www.ceoccambridge.org/ 59 http://www.cambridgema.gov/CDD/etdiv.aspx 55 tenants. This is made more difficult by the transitory nature of Cambridge’s rental population, particularly its students. One final group of interest that may advocate tenants’ interests in stakeholder discussions are Heating Assistance Organizations that provide resources to support residents that are unable to pay their energy bills during the winter. Beyond landlords and tenants, there are a number of related industries with an interest in energy efficiency in multifamily housing. These include, but are not limited to, property management firms, energy contractors, and realtors. Another relevant actor is Just-A-Start,60 a local organization dedicated to mediating landlord-tenant disputes in the Boston area, with a heavy focus on Cambridge. Just-A-Start’s mediators have valuable experience navigating the institutional context of landlord-tenant relationships, and it is likely that they will be able to act as an important resource in conducting outreach and information to these groups. Finally, NSTAR’s current multifamily housing program includes an outreach component conducted in partnership with local community organizations and likely has established inroads into local communities that can be leveraged for this project. Potential Practicum Work Items One approach to stakeholder analysis would take a three-tiered approach to gathering input. These steps would include: 60 Interviews with Formal Organizations. Representatives could be easily identified through publicly available information. Interviews with these representatives would be valuable both in determining their interests and concerns relating to multifamily energy efficiency and their views on stakeholder groups that should be consulted in the process. Focus Groups with Representative Individuals of Stakeholder Groups. Ideally, this would be a random sample of landlords, tenants, condominium owners, property managers, and other interested parties. It is likely, however, that we will have to resort to less random methods of selection, relying either on open marketing, personal relationships, or referrals from formal groups. Interviews with Previous Program Participants. Previous program participants could be identified by NSTAR and interviewed to understand both the factors that weighed on the decision to invest in efficiency upgrades as well as the categories of actor that were involved in the process. http://www.justastart.org/ Resources, Contacts and Organizations Multihousing News http://www.multihousingnews.com National Multi Housing Council http://www.nmhc.org/ ● NMHC is a national association representing the interests of the larger and most prominent apartment firms in the U.S. NMHC's members are the principal officers of firms engaged in all aspects of the apartment industry, including ownership, development, management, and financing. ● National Apartment Association http://www.naahq.org/Pages/welcome.aspx