Cambridge Multifamily
Energy Program
Terms of Reference – DRAFT
1. Introduction
During the practicum 11.S948 Community Energy Innovations, 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 consideration of the City of Cambridge’s and the local energy utility
NStar. The practicum will provide an introduction to: energy efficiency and utility governance; multistakeholder 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 for the USA estimates that 15 percent of multifamily
electricity demand, and 24 percent of multifamily natural gas demand, can be cost-effectively met by
energy efficiency by 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 key barriers to achieving energy upgrades in multifamily housing:
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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. Indeed, 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 may be viewed with caution by landlords, regardless of whether it costs them
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
The Cadmus Group. May 2012. Massachusetts Multifamily Market Characterization and Potential Study.
Volume 1. Final Report.
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processes necessary to achieve upgrades. They are often wary of committing to manage
construction projects.
Owners require project financing – Few owners have cash on hand that they can spend to
achieve energy savings with greater than a few years simple payback (building owners have high
“hurdle rates”). Comprehensive building upgrades may cost thousands of dollars per unit.
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 many decisionmakers, rather than a few individuals responsible for large portfolios.
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.
Difficulties of financing and managing upgrade process with condominiums Condominium associations may face barriers to credit, and be difficult to coordinate to implement
comprehensive building upgrades.
A lack of incentives for building managers and operators to achieve efficiency - 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. Systems found in many older Cambridge multifamily buildings, such as ‘single pipe’
hydronic heating systems and cavity-less masonry wall construction, can be difficult to make
efficient, necessitating higher cost upgrades and technological innovation. Lastly, upgrades
should be performed in a manner that does not compromise indoor health (indeed, which will
improve health), nor reduce the longevity of the building, which requires skilled contractors and
designers.
Intrusive construction - Building owners are hesitant to disturb occupants in their unit;
however, many upgrades necessitate work in occupants’ space. Programs must undertake this
work speedily, perform deeper upgrades during re-tenanting periods when spaces are not
occupied, and/or devise other means of minimizing interruptions for tenants.
Convoluted, fragmented energy efficiency programs - Programs offered to multifamily
buildings, particular market-rate buildings, are not holistic; they offer only a few upgrade
opportunities and do not entail “whole building” upgrades. Moreover, navigating these programs
can be cumbersome for building owners - owners are responsible for managing contractors and
sourcing financing for projects, tasks with which they may lack experience. Additionally, the
presence of various “pre-retrofit barriers” (hazards such as knob-and-tube wiring or asbestos)
can necessitate additional work which owners must coordinate; 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 marketing techniques are effective, and why.
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 rates
in single family and commercial buildings in most regions. 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
This practicum is predicated on the notion that a well designed and executed partnership between
utilities, local government, businesses, community organizations and other actors can overcome many
of these barriers, and drive deeper uptake of energy efficiency in multifamily buildings. Together, these
actors can serve to improve programs and transform markets for energy services. There is potential to:
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Use energy data to identify buildings needing upgrades, and to inspire owners and tenants to
take action based on comparisons with their peers and a richer understanding of their buildings’
cost-effective upgrade potential.
Engage stakeholders, to co-create energy efficiency program architecture, and provide more
targeted program marketing.
Improve financing mechanisms, which can reduce split-incentives and barriers to capital, and
thereby enable the large investments required in the housing stock.
Maximize the value of engagement in a building, by providing opportunities for deep energy
improvements, addressing healthy homes issues, and implementing other environmental
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.
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.
The pilot project may target three neighborhoods in 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.2 Unsurprisingly, rental housing appears to be a
more temporary living situation in Cambridge than home-ownership. Less than 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.3 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.4
2
Unless otherwise noted, all statistics in this section are from the US Census Bureau 2010 Census and 2006-2010
American Community Survey.
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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. 38 percent of rented units are in apartments of 20 units or greater.
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, relatively fewer units are heated by fuel oil in Cambridge, which boasts a welldeveloped 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 tenants. 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 small
property owners (frequently owning just a single property) account for much of small and medium
residential properties. 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 centrally, with tenants typically
responsible for electricity bills. 5 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; this demographic is younger, move out of units
frequently, and are busy with school and other purusuits. They thus have less incentive to invest time
advocating for home improvements, and less well-established relationships with landlords. Small-to5
Personal communications with Peter Shapiro (Just-a-Start) and Meghan Shaw (Cambridge Energy Alliance).
medium rental properties tend to be owned by individuals with 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
A number of energy efficiency programs pertain to multifamily buildings in Cambridge. These programs
are described below, and summarized in Appendix 1. Many of these programs are part of MassSave,
the suite of energy efficiency programs administered by various Massachusetts utilities. These
programs provide incentives for energy upgrades, using funds from surcharges on utility ratepayers’
bills. MassSave essentially serves as a common intake and basic structural framework for all
Massachusetts utility programs; however, individual utilities administer efficiency programs in their own
territories for their own customers, and each utility structures their program in somewhat different ways.
In Cambridge, both electricity and natural gas are provided by the utility NStar, and MassSave programs
are thus administered by NStar. NStar typically contracts with ‘lead vendors’ to implement programs,
who may subsequently subcontract or administer other contractors in these programs. Additionally,
some programs, such as the MA Green Retrofit Initiative (see below) are sponsored by other entities,
who help building owners navigate the MassSave program process.
MassSave Home Energy Services – Market-Rate Properties with 1-4 Units
The MassSave Home Energy Services program provides no-cost home energy assessments and
incentives for efficiency upgrades in market-rate properties with 1-4 units. The program is available for
whole buildings and/or individual units within these properties, and potential upgrades include insulation,
air sealing, and improved heating, cooling and hot water systems. Financial incentives include rebates
and an interest-free Residential HEAT loan (up to $25,000 with terms up to seven years) for qualified
energy efficiency improvements, as well as 75% off insulation upgrades up to $2,000.
Multiple contractors may participate in the program as Home Performance Contractors. The
entrepreneurial Next Step Living serves much of the market. They provide extensive engagement with
home owners, have innovated financing tools for a range of upgrade measures (solar, envelope, etc.),
manage contracting, and reportedly offer a good customer experience.
Low-Income Weatherization Assistance Program
The federal Weatherization Assistance Program (WAP) is funded by the U.S. Department of Energy to
provide energy assessments, air sealing and insulation upgrades in low-income 1-4 unit properties.
Households making less than 60 percent of state median income, receiving supplemental Social
Security income (SSI), or receiving Transitional Aid to Families with Dependent Children (TAFDC) are
eligible for WAP, and the average WAP grant allocation per household is around $5,500. In
Massachusetts WAP is administered by the state’s Department of Housing and Community
Development and implemented by weatherization service agencies across the state. Households that
qualify for WAP may also qualify for the other low-income programs described above.
MassSave Multifamily Retrofit Programs – Market-Rate Properties with 5+ Units
Utility program coordinators align their multifamily programs through the MassSave Multfamily Retrofit
initiative. Within this framework, NStar offers multiple different programs for different types of efficiency
projects in the multifamily sector, including programs focused on unit-by-unit weatherization, central
HVAC retrofit programs for whole buildings, heating fuel switching, and other programs. Since 2010,
MassSave has introduced the Multifamily Market Integrator (MMI) service, which aims to provide a
single point of contact for building owners as they connect with efficiency programs. The MMI can then
suggest different assessments for upgrade opportunities based, and coordinate between different utility
program administrators, and within program administrators’ programs different programs. However, it
seems that the MMI may currently act predominantly to recommend contacts to building owners, leaving
much of the retrofit coordination and project management to building owners.
Similar to the Home Energy Services program, the MassSave Multifamily programs use utility funds to
provide no-cost home energy assessments, energy efficiency upgrades and related incentives in
market-rate properties with 5 or more units. Through the MassSave Financing Program property owners
can access interest-free loans up to $100,000 with terms up to seven years to install qualified energy
efficiency improvements.
Massachusetts Low Income Multi-Family (LEAN) Program – Affordable and Low-Income
Properties with 5+ Units
The Low Income Multi-Family program (also known as the LEAN program) is another utility-funded
program available for housing developments of five or more units that are owned by a Public Housing
Authority, a non-profit or a for-profit entity. An additional qualification for LEAN is that 50 percent of
development households must be at or below 60 percent of area median income. LEAN provides
building energy assessments and grants to cover energy efficiency upgrades including hot water and
heating systems, air sealing and insulation, lighting, appliances and ventilation. It provides more
comprehensive project management for building owners, helping them prioritize construction, access
financing, and measure buildings’ performance. LEAN was initiated in large part due to demand by nonprofit housing owners for an easier multifamily program to navigate; the Local Initiative Support
Corporation (LISC) and others’ convened building owners and utility representatives to design a more
holistic program for non-profit housing developers. LEAN is delivered by New Ecology.
Massachusetts Green Retrofit Initiative – Affordable and Low-Income Properties with 5+ Units
The Massachusetts Green Retrofit Initiative (GRI), a non-profit partnership between New Ecology and
the Local Initiatives Support Corporation (LISC). The GRI program is funded by a US Department of
Housing and Urban Development grant. It provides ‘turn-key’ project management for owners of lowerincome housing to participate in upgrades. The GRI provides initial benchmarking of owners’ building
portfolios, identifies promising retrofit projects, brokers financing for owners, manages retrofit
construction projects, and performs evaluation and verification of energy savings. The GRI thus helps
property owners navigate the various utility energy efficiency programs, coordinating with utility PA
vendors and contractors. It operates similar to LEAN, and has the same project management firm, New
Ecology. Unlike LEAN, however, the GRI is not a utility-sponsored program (although it assists building
owners access utility programs), and it has slightly different income eligibility criteria; 50 percent of
development households must be at or below 80 percent of area median income for the GRI, versus 60
percent of area median income for LEAN. New Ecology has noted that it would like to offer the GRI
services to market-rate multifamily housing over time.
Energy Performance Improvement Program – Financing for Lower-Income Upgrades
State programs are 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.
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:
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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.
Outreach & Marketing
Community engagement around the energy efficiency programs described above takes place through a
variety of channels. The City of Cambridge’s Cambridge Energy Alliance (CEA) and the citizen-lead
HEET (Home Energy Efficiency Team) Cambridge promote the MassSave programs to city residents.
The CEA has found that the landlords who are most engaged about energy efficiency tend to live in the
relevant properties. Likewise, CEA notes the importance of a motivated tenant with a good relationship
with the landlord is important to the likelihood that a building will participate in upgrade programs.
The utility program administrators collectively advertise MassSave. Additionally, individual program
vendors advertise their programs to building owners, property managers, and tenants. Different vendors
undertake different marketing strategies. Some have sought to form partnerships with non-profit and
community organizations, local businesses and municipal governments, to advertise programs on their
behalf. Notably, Next Step Living (the prominent contractor for MassSave Home Energy Service
program) is strong at engaging community based marketers to promote their program, who report that
Next Step Living provides valuable feedback on the success of their outreach campaigns and the status
of different recruited properties.
In contrast, NStar and its >5 unit market-rate multifamily program vendors reportedly do not
communicate with community outreach partners frequently enough to provide valuable feedback on
what outreach strategies work to recruit multifamily buildings, or what stage of retrofit individual projects
are at. This has made community organization to promote participation in these projects difficult. These
programs predominantly rely on building owners contacting the MMI.
Outreach for affordable and low-income multifamily programs like LEAN and GRI, on the other hand,
tends to be channeled via more specialized networks of affordable housing property owners, community
development corporations, and non-profit and community organizations serving low-income populations.
Many of these actors were involved in the actual design of these programs and have demonstrated a
strong commitment to outreach and implementation around them as well.
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:
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Energy data. Such data may include:
○ Monthly billing records for individual meters.
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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:
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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.
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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:
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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
2012.6 This voluntary program encourages utilities to release personal energy data to customers in a
standard format as an XML file.7 To date, 20 utilities have committed to the Green Button Initiative. This
6
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).
6
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EnerNex. Green Button Data. n.d. http://www.greenbuttondata.org (accessed October 29, 2012).
amounts to 36 million residential customers gaining digital access to their energy data (Innovation
Electricity Efficiency 2012).8
Standard Energy Efficiency Data Platform (SEED)
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.9
8
Innovation Electricity Efficiency. Green Button: One Year Later. Issue Brief, September, 2012.
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
greater understanding of a city or region’s building stock as well as enable statistical analyses of
regional or community building performance.10 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
9
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
9
10
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
10
3. Program Components
A variety of program components could be included in the ultimate design of this project. Promising
opportunities that the EESP team has identified are noted here.
3.1 Improved Program Administration & Structure
Overview
The MassSave Homes program for 1-4 unit buildings is currently operating well. In contrast,
interviewees noted challenges in the MassSave >5 unit market-rate multifamily programs, including:
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Programs provide insufficient “hand holding” and customer relationship development with
owners, who often lack technical capacity in upgrade decisions.
Programs are disaggregated into HVAC, Weatherization, Fuel Switching, and other programs,
making building owners less likely to undertake comprehensive upgrades.
Program
administrators have made efforts to address these concerns, introducing the Multifamily Market
Integrator (MMI) program in 2010 to serve as a “one stop shop” for multifamily buildings, and
refer them to a variety of programs. However, interviews with market participants suggest that
the MMI acts primarily to refer building owners to different programs; it does not adequately
serve to diagnose what services buildings require, nor assist with project management and
sourcing of financing for different scopes of work.
Only one lead vendor serves the multifamily programs. Some suggest that this lack of
competition reduces the incentive to deliver high quality service. Additionally, this structure
makes it difficult for programs or firms that serve an “owners agent” role (such as the MA Green
Retrofit Initiative, which uses grant money to manage retrofit projects for owners of lower-income
multifamily housing) to coordinate upgrade projects, as they must coordinate schedules with a
single utility vendor.
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.
The November 2012 MassSave Program Administrators Three Year Plan suggests that they are
attempting to provide richer customer service, better recruitment of appropriate buildings into programs,
and stronger communication with community marketers. Nevertheless, a pilot program could
experiment with other program management structures.
Priorities for Improving Multifamily Programs
Based on the our interviews during the Fall, the EESP team believes the following should be priorities
for a multifamily program in Cambridge:
● Better communicate with community and city outreach partners.
Such better
communication could be achieved by introducing a ‘customer relationship management’ system,
●
●
●
wherein community based outreach organizations enter building/owner details into an online
application. Contractors would then record the status of these buildings in real-time, which
community outreach organizations can access. This system would allow community groups to
follow up with projects in a timely fashion, as well as understand what outreach mechanisms are
working.
Provide greater project management assistance to owners and property managers. This
includes: helping building owners benchmark buildings, and prioritize their buildings for
upgrades; providing direct management of which technical measures to implement (with ultimate
owner/manager sign-off); assistance in sourcing financing; and construction project
management. Owners should be free to choose their own technical scope of upgrades,
financing, and construction management, but ‘turn-key’ options should be available to them.
Provide comprehensive upgrade services. Owners should be delivered a more complete
assessment of upgrade opportunities. They need not undertake all upgrades at one time,
however. Rather, program assessments could note a comprehensive list of upgrade measures,
with recommendations for when certain measures are appropriate (e.g. immediately, at releasing, when performing HVAC/envelop maintenance, etc.) Programs should have information
systems which allow buildings to understand when they will be upgraded.
Integrate healthy home improvements to the greatest extent possible. Have the flexibility to
accommodate new healthy home initiatives, and sources of funding, as these come online.
Integrate basic healthy homes assessments into assessment protocols, and include upgrade
recommendations.
Program Management Options – Whether to engage multiple vendors
The following are options for the management of a pilot in Cambridge:
●
●
Continue the current single principal vendor structure, mediated by the MMI.
Pilot a program structure that allows multiple lead contractors, providing they are pre-approved
by the program administrator. This structure is similar to the MassSave for Homes, which allows
multiple lead contractors.
Regardless of the program structure, an ‘owners agent’ (similar to the MA Green Retrofit Initiative) could
be sponsored in some fashion for projects that wish to use their services. A pilot program in Cambridge
could sponsor such a service for building owners. The program could guarantee that these services are
cost-effective for building owners by associating program fees with their utility meters (see section 3.4
below), and charging less than building owners’ program fees.
Potential Practicum Work Items



Develop a better understanding of the typical project management costs to deliver a ‘cradle to
grave’, turn-key energy management project.
Devise a program structure that could deliver turn-key project management to building owners at
no upfront costs, paid for via owners’ energy savings.
Determine principles for a workable inter-operable ‘customer relationship management’ system,
to be used by community outreach personnel, project contractors, and vendors.

Decide if a multiple contractor program structure is appropriate. If so, develop principles for its
implementation.
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.11 One
example is the DOE Home Energy Score.12 Other programs offer more immediately visible recognition to
participants through the use of yard signs.13
3.3 Demand -side Stakeholder Engagement & Marketing
Overview
11
12
http://www1.eere.energy.gov/buildings/betterbuildings/neighborhoods/stories_eu_california.html
http://www1.eere.energy.gov/buildings/residential/hes_index.html
13
http://www1.eere.energy.gov/buildings/betterbuildings/neighborhoods/innovations.html?tab=2&list=10&div=10#gro
uped
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 have utility bill payers share
their energy consumption information via the ‘Green Button’ initiative, to crowd-source energy data to
populate the Energy Map.
To achieve this, we will need to conduct a thorough outreach campaign to various stakeholders in the
multifamily housing sector. Fortunately, there are several useful tools that we can avail ourselves of in
conducting outreach and setting program goals that market actors are willing to meet. Two of these are
Stakeholder Analysis and Community-Based Social Marketing.
Below, we discuss 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.
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.
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 emphasizes behavioral changes
that can achieve program goals. CBSM program architects begin by identifying the specific barriers
that, if changed, would achieve the desired result. They then construct a comprehensive marketing and
outreach campaign built around consumer psychology and social network theory that encourages
targeted populations to adopt these behaviors. Several outreach tactics that might be used in a CBSM
campaign are: Providing extensive resources to early adopters and rely on social networks to diffuse
their behavior, creating a mechanism to advertise local community members who are (and are not)
adopting desired behaviors, or soliciting token commitments from community members before asking
that they engage in deeper behavioral changes.14
CBSM principles can be useful in achieving both demand-side outreach goals declared above. We could
identify the specific behaviors that would enable increased participation in retrofit programs (which could
be as simple as initiating conversations with landlords and neighborhoods about energy efficiency), and
aim to encourage them. Alternately, we could utilize CSBM in an energy data-collection campaign, and
encourage landlords and tenants to donate energy data.
Potential Practicum Work Items
We believe that obtaining buy-in from landlord and tenant groups and condominium associations will be
a crucial element to this program’s success. Over the coming months, we propose to conduct outreach
efforts to the groups identified to gauge their interests and concerns regarding opportunities for energy
efficiency in multifamily housing. 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 is laid out in detail in the appendix.
Stakeholder Mapping – A preliminary set of stakeholders is provided in the appendix. These 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.
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.
14
McKenzie-Mohr, Doug. Fostering Sustainable Behavior: Community-Based Social Marketing.
McKenzie-Mohr and Associates, 2010.
3.5 An Adaptive Approach to Program Marketing
Overview
Traditional energy efficiency programs have had underwhelming success in the multifamily sector.
Achieving deep savings in the multifamily space requires creative approaches to unique and challenging
market barriers.
DOE’s Better Buildings Neighborhood Program (BBNP)15 provides a potential blueprint to address the
uncertainty around appropriate program designs. BBNP encourages innovation among local energy
efficiency programs, and offers a collaborative atmosphere that stresses the role of experimentation in
the search for effective solutions.
We believe that it may be necessary to replicate this principle on a smaller scale in Cambridge to
determine effective methods for addressing the multifamily sector specifically. We are interested in
implementing a suite of program design elements, and establishing mechanisms that are able to
evaluate them through an experimental design. Below, we provide a general schematic for the elements
that may be included in this, and how they may best be deployed in the local market.
Innovations in Energy Efficiency Program Outreach
A number of innovative approaches to program design are currently being tested through BBNP and
other simultaneous initiatives in the energy efficiency space. Below, we describe several that we think
may be useful in assisting program outreach in this context:
●
●
●
15
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, 16 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
Maine17--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.18
http://www1.eere.energy.gov/buildings/betterbuildings/neighborhoods/
https://energyupgradeca.org/county/los_angeles/energy_champions_home
17
http://www1.eere.energy.gov/buildings/betterbuildings/neighborhoods/maine_profile.html#driving
18
http://www.portlandoregon.gov/bps/article/405686
16
●
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.19
We will investigate whether these approaches can be appropriately deployed in the Cambridge multifamily housing sector. This requires an in-depth demand-side outreach plan that draws on the tools of
stakeholder analysis and community-based social marketing discussed above. Additionally, we must
consider the varying components of the multifamily market and determine the areas in which a given
marketing approach might be most successful.
A Market Segmentation Approach
One approach to overcome barriers to multi-family energy efficiency is to break the problem into more
manageable pieces that can be more directly targeted. Where a single approach to program outreach
and recruitment would likely only appeal to a portion of the entire multi-family market, an adaptive
approach that recognizes the different interests of varying actors in the multi-family space could be
much more effective in establishing a broader participant pool.
In Cambridge, there are several elements of the multifamily market that could be targeted specifically in
a program design. Some of these are:



19
Resident-Landlords. While it is difficult to determine their exact number, a subset of
Cambridge’s landlords resides 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.
Possible Approach: These landlords would reasonably respond to the same incentives offered to
residents who own their homes. Identifying these individuals using tax assessor records and
conducting targeted program outreach could prove beneficial.
Oil-Heated Homes. 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 oil-heated multifamily buildings. In
these homes, landlords would have an opportunity to reduce their operating costs without losing
revenue and could be targeted by traditional financial incentives.
Possible Approach: As with resident-landlords, owners of these properties may be interested in
traditional financial incentives. Identifying these individuals using tax assessor records and
conducting targeted program outreach could prove beneficial.
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.
Possible Approach: The student population could be recruited either through formal university
channels or through informal social networks. Partnerships with universities could result in co-
http://bbmgr.org/wp-content/themes/Starkers/media/01172012BBMGR_GVSU_INFO.pdf




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.
Possible Approach: Program administrators could establish partnerships with major employers
who would see energy efficiency as an asset in an employee benefit program. Employers could
direct employees to participate in existing programs, and could be convinced to offer additional
incentives. It may also be possible to organize a challenge between a group of participating
employers to see which company can save the most energy.
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 is
likely necessary to develop resources that specifically target these units.
Possible Approach: A program could recruit energy champions within condominiums and
empower them with resources specifically designed to recruit condo owners and address the
concerns of homeowner associations. A marketing campaign could encourage 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 a program design as there is little direct interaction between
landlords and tenants. However, this could also be an opportunity to recruit property managers to
act as advocates for energy efficiency if a reasonable solution could be found through the
stakeholder analysis process.
Possible Approach: Interviews with property management firms and landlords who contract them
could reveal opportunities for property managers to include energy efficiency in their list of
services. This would allow them to differentiate themselves on the market and provide an
additional service to both landlords and tenants.
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.
Possible Approach: Available units present an excellent point of entry for an energy efficiency
program. One way to take advantage of this would be to develop a RECO that mandates energy
efficiency improvements when residential units are sold. A less direct way of moving the market
may be to develop a service that calculates the efficiency and predicted energy cost of available
units. This information could be provided to prospective tenants and buyers, and could
encourage building retrofits for the purpose of making a unit appear more attractive on the
market.
Each of these categories represents a slice of the larger multifamily housing market that may be more
easily accessed by program administrators through segment-specific outreach and program design.
Creating an energy efficiency program that both takes advantage of pathways presented by certain
market segments and focuses specifically on the barriers posed by others would be a significant step
forward from current practices in program design methodology. However, it is important to note that the
market segments identified above do not account for the whole of the multifamily housing market, and it
is important for program administrators to balance the benefit that they would receive in pursuing each
segment-specific approach against the opportunity cost of not using these valuable program resources
elsewhere.
Potential Practicum Work Items
Based on the demand-side outreach steps described above, it may be prudent to implement a program
marketing approach that is driven by segmentation in the multifamily housing market. The conclusions of
the stakeholder analysis and community-based social marketing steps may reveal certain program
design elements that would apply specifically to a subsection of the housing market. In this event, we
could consider implementing multiple program marketing and implementation strategies that combine to
touch the market from several directions.
3.5 Financing – An On-bill Tariff Repayment Scheme
Overview
The EESP team believes that an on-bill tariff repayment mechanism can facilitate the financing of
energy efficiency in multifamily housing, and other building types. On-bill tariffs can overcome upfront
cost barriers to energy efficiency by enabling customers to pay back the initial costs of upgrades over
time via a charge on their utility bill. They also address the split incentive barrier, by associating
repayments for upgrade work with the utility bill to which energy savings accrue.
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 repayment presents a promising approach to tackle many of the aforementioned challenges.
Under on-bill repayment financiers make upfront investments in energy efficiency measures and the
utility bill-payer 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.
There are two main types of on-bill repayment 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. 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 longerterm financial burden.
Important considerations for a on-bill financing pilot include:
Fund management – A Fund Manager is required to: determine underwriting criteria, including
standards of creditworthiness of its customers; source capital to subsequently lend to projects; engage
in customer management and communications; coordinate with other program partners; ensure
compliance with lending laws; and other responsibilities. Traditionally, utilities have been hesitant to
take on these responsibilities, as they lie beyond their scope of expertise. Some programs include third
party fund managers (or multiple lenders) who simply use a on-bill tariff as a repayment vehicle. MPower
(profiled below) is one such example of a fund manager and on-bill repayment system.
The source of funds - A variety of different sources of financing can be used for upgrade projects.
Relying exclusively on utility ratepayer funds precludes energy efficiency programs from achieving scale
and can also put utilities in the position of acting as financiers – a role beyond their traditional areas of
expertise that can raise overhead costs and expose them to liability under consumer lending laws (EDF
2011). To address these issues, effective programs must leverage outside sources of capital and
enable utilities to act as capital intermediaries rather than fund managers. Additional sources of capital
include debt (e.g. from Community Development Financial Institutions [CDFIs] and banks), equity (e.g.
from federal New Market Tax Credits and mission-driven investors) and foundation and government
grants. These sources of capital along with existing utility ratepayer funds can be pooled into a broader
energy efficiency fund, which can be managed by a non-utility partner with relevant financial expertise.
The fund can then directly finance energy efficiency upgrades and recoup these upfront payments via
the monthly on-bill tariff.
Underwriting criteria - Customers’ creditworthiness and/or credit rating are also often barriers to
financing. Some efficiency programs using on-bill repayment systems have used customers’ utility bill
payment history as a proxy for creditworthiness.
Security – When a lender makes a loan, they typically want security – that is, a claim to some property
if they are not repaid. Typically, unsecured loans will have higher interest rates, as they present less
risk to lenders. However, households may be less likely to agree to assume debt, if a lender has a claim
to their property. On-bill repayment systems can use the threat of having utilities discontinued if
payments are not made as a form of limited security; repayment rates tend to be quite high in the few
on-bill repayment systems introduced in North America to date.
Establishing appropriate utility billing systems - On-bill repayment can often require complicated
modifications to utility billing systems (ACEEE 2011), and NSTAR in the past has declined to implement
on-bill repayment 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 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.
MPower – An Innovative On-bill Repayment Mechanism in the Multifamily Space
The example of MPower, a new energy efficiency program in Oregon that uses on-bill tariffs to target the
multifamily affordable housing sector, is instructive with respect to the financing issues outlined above.
The program currently draws 30 percent of its funding from utility incentives, 20 percent from U.S.
Department of Housing and Urban Development (HUD) grants and 50 percent from CDFI debt; in the
long term the program seeks to structurally supplant the HUD grants with equity from New Market Tax
Credits to ensure sustained financing (Warner 2012). The program fund is managed by the non-profit
Network for Oregon Affordable Housing, and organizations such as the CDFI Craft3, the Energy Trust of
Oregon and Enterprise Community Partners provide additional support in terms of funding, technical
assistance and service delivery (Warner and Daniel 2012). The MPower model highlights the need for
strong partnerships and a deliberate stakeholder engagement strategy to ensure sustainable program
design and financing, and we encourage the City of Cambridge to play a leadership role in convening
relevant financial players who can support and manage an energy efficiency fund.
Other considerations
In conjunction with on-bill repayment via a tariff mechanism, Cambridge and NSTAR can also 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.
Potential Practicum Work Items
●
●
Develop guidance for establishing and managing a Fund through which on-bill repayment could
be made. This could include suggested terms for an RFP to engage a on-bill repayment fund
manager.
Develop a pro-forma, suggesting what IRR of measures could be included in projects, given
different terms of financing.
3.6 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.20 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, 21 and in Austin, realtor groups
negotiated and support a watered-down ordinance that requires energy audits, but not mandatory
upgrades.22
There are slight variations in program scope and administration that are worth discussing. While most
programs apply to the entire residential sector, the programs in Wisconsin, Ann Arbor, and Minneapolis
20
Beth Williams thesis.
ACEEE.
http://www.iamu.org/services/electric/efficiency/Attachment%20B%20Residential%20Energy%20Conservation%20
Ordinances%20ACEEE.pdf
22
Pat Coleman thesis.
21
specifically target multi-family housing. 23 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.24
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. 25 In Boulder, landlords must be
licensed by the city, providing an additional leverage point for enforcement.26
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.27
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
23
ACEEE.
http://www.iamu.org/services/electric/efficiency/Attachment%20B%20Residential%20Energy%20Conservation%20
Ordinances%20ACEEE.pdf
23
24
ACEEE.
http://www.iamu.org/services/electric/efficiency/Attachment%20B%20Residential%20Energy%20Conservation%20
Ordinances%20ACEEE.pdf
25
ACEEE.
http://www.iamu.org/services/electric/efficiency/Attachment%20B%20Residential%20Energy%20Conservation%20
Ordinances%20ACEEE.pdf
26
Find a source.
27
Beth Williams thesis, ACEEE.
ordinance may indeed be implemented in Cambridge, but it should only be considered as one of many
potential solutions.
Conclusion
Appendixes
Program Summary
Program
Technical measures & available incentives
Income
Criteria
Funding
Source
Administration &
Contractors
Associated financing
mechanism
Outre
MassSave
Home
Energy
Services
Program
(1-4 unit
buildings)
Technical measures: Instant savings measures
(CFL’s, programmable thermostats, faucet
aerators), insulation, air sealing,
heating/ventilation/HVAC systems
>60% of AMI
Utility
ratepayer
funds
Administrators:
NStar, National Grid,
other utilities
0% HEAT loan for
qualified measures – up
to $25,000 with 7-year
payback
Utilitie
non-p
comm
organ
busine
MassSave
MultiFamily
Program
(5+ unit
buildings)
Technical measures: Energy efficient lighting
upgrades and controls, occupancy sensors,
water heating equipment, domestic hot water
measures (low-flow showerheads, aerators,
and pipe wrap), programmable thermostats,
insulation, air sealing, high-efficiency heating
and cooling equipment upgrades and controls,
ENERGY STAR® qualified refrigerators and
other eligible appliances
Loans
Utilitie
Contractors: Next
Step Living, Co-op
Power, GreenTek,
etc.
Available incentives: 75% off up to $2,000 on
insulation, no-cost air sealing, rebates for
heating equipment
>60% of AMI
Utility
ratepayer
funds
Administrators:
NStar, National Grid,
other utilities
Contractors:
Conservation Service
Group
I believe HEAT Loans
are available for both unit
& building owners?
Some other loan type
exists that can provide
larger loans to building
owners.
See the program
description - they have
this stuff.
Low
Income
MultiFamily
Program
(LEAN)
(5+ unit
buildings)
Technical measures: Replacement or repair of
heating systems and/or controls, replacement
or repair of hot water heating systems, building
envelope upgrades through air sealing and
insulation, lighting upgrades, appliance
upgrades, and ventilation upgrades
Massachu
setts
Green
Retrofit
Initiative
(5+ unit
buildings)
Technical measures: Benchmarking of
historical energy and water consumption, onsite building assessments, energy and water
retrofit project financing
50% of units
at or below
60% of AMI
Utility
ratepayer
funds
Administrators: Action Grants
for Boston
Community
Development, Action
Inc.
Contractors:
Available incentives: Coordination with existing
rebate or incentive programs
50% of units
at or below
80% of AMI
Barr
Foundation,
Department of
Housing and
Urban
Development
Administrators: New
Ecology, Boston
Local Initiatives
Support Corporation
Contractors:
Grants, loans
LEAN
Comm
owner
develo
corpo
and c
organ
Comm
develo
corpo
and c
organ
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,28 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.29
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 rents30 and greater investment in
rental housing31 in Cambridge.
28
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
29
Beth Williams thesis, Jason Jay thesis.
30
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
31
Henry Pollakowski, MIT Center for Real Estate. 2003.
http://www.nmhc.org/files/ContentFiles/ThirdPartyGuide/cr_36.pdf.
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
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,32 the Massachusetts
Rental Housing Association,33 the Greater Boston Real Estate Board,34 and the Boston chapter of
the Institute for Real Estate Management.35 There are also a number of condominium associations
that represent property owner interests as well.
32
http://spoa.com/
http://www.massrha.com/
34
http://www.gbreb.com/
35
http://www.iremboston.org/
33
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 Committee36
serves as the local Community Action Program. On the city side, the Environmental and
Transportation Planning Division37 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
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,38 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:


36
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.
http://www.ceoccambridge.org/
http://www.cambridgema.gov/CDD/etdiv.aspx
38
http://www.justastart.org/
37

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.