Category: Energy & Climate

Electricity Supply Issues Teed-Up for Lame-Duck

Posted on by Abigail Grenadier

A bipartisan measure to address the growing stress on the nation’s electricity grid could see a window for opportunity in Congress’s lame-duck session after the November 5 elections. The Energy Permitting Reform Act of 2024 (S. 4753), co-sponsored by Senate Energy Committee Chairman Joe Manchin (I-WV) and Ranking Member John Barrasso (R-WY), would streamline approvals for major energy development projects amid increasing demands for power.

Why it Matters

  • Permitting reform has been a bipartisan priority reflected by more than two dozen bills introduced by both parties in the 118th Congress.
  • S. 4753 aims to streamline reviews and permitting processing for energy infrastructure. Expediting approvals for pending and new projects are long-standing goals for renewable energy companies, as well as the oil and gas sector.
  • With Senator Manchin retiring at the end of his current term, the bill could be a capstone to his legislative legacy. He has urged Senate Majority Leader Chuck Schumer (D-NY) to bring it to the floor before year-end. (E&E News, Sep. 23)
  • Leader Schumer (D-NY) told reporters in July, “I’d like to get permitting reform done.”  (The Hill, July, 26)
  • The bipartisan bill has its controversies. While climate advocates argue that the bill’s fossil fuel provisions could lock in emissions for decades, others point to the need for large-scale clean energy supplies and grid reliability. Third-party analyses indicate that even with these fossil fuel provisions, the bill would ultimately lead to net emissions reductions.
  • The Roundtable believes permitting reform is essential for advancing our economy’s energy transition. The current fragmented system of environmental reviews and approvals hinders progress on launching new projects and delivering cleaner, reliable electricity to our nation’s buildings.

The High Stakes for U.S. Grid

  • America’s power grid is under increasing strain as the digital economy accelerates.
  • Data centers, AI, and electric vehicles are all demanding more power. Current infrastructure is not equipped to handle it.
  • As The Roundtable’s recent Policy Guide on building performance standards states, the transition to a digital economy raises serious concerns about electricity availability. “AI could soon need as much electricity as an entire country”  as “[v]ast swaths of the US are at risk of running short of power.” (Roundtable Weekly, Oct. 11)
  • A Wood Mackenzie report predicts that parts of the U.S. could see a 15% jump in power demand by 2030—posing major challenges for an already-stressed grid. (Politico, Oct. 18).
  • According to the latest CBRE North America Data Center Trends study, the rapid growth of AI, coupled with soaring demand for cloud services, has driven a 70% surge in data center construction across the US over the past six months—along with an unrelenting need for the electricity to power them. (Cybernews, Aug. 20)
  • Without permitting reform, meeting this growing demand will become more difficult and expensive. (Forbes, Sep. 2)

Congress returns to Washington in a matter of weeks and has the opportunity to pass the Energy Permitting Reform Act and address these grid challenges.

Roundtable Offers Policy Guide to US-DOE to Shape Effective Building Performance Standards

Posted on by Abigail Grenadier

The Real Estate Roundtable urged the U.S. Department of Energy (DOE) on Wednesday to follow a newly released policy guide as the agency awards grants for states and localities to develop Building Performance Standards (BPS). The guidebook developed by the Roundtable’s Sustainability Policy Advisory Committee (SPAC) reflects RER’s ongoing commitment to addressing climate change while ensuring the economic sustainability of real estate investments and the communities they support. (Letter, Oct. 8)

Building Performance Standards (BPS)

  • State and local governments are increasingly adopting BPS laws that impose energy and climate performance mandates on real estate.
  • These laws typically set annual limits on how much energy buildings can use and how much greenhouse gases (GHGs) they can emit, with an ultimate goal of reaching net zero emissions around 2050.
  • International groups also apply pressure for energy and emissions performance limits on buildings to drive global investments in real estate. (Roundtable Weekly, July 19)

  • The Department of Energy (DOE) in August announced $240 million in federal grants to help states and localities implement BPS laws. (Roundtable Weekly, Sept 6).

  • The inconsistent nationwide BPS “patchwork” poses significant challenges for property owners and policymakers alike. These laws must be backed by studies and adequate resources to ensure they achieve significant emission reductions—while continuing to further parallel efforts to support the recovery of business districts and increase the supply of affordable housing.
  • “Our members face a variety of local and state legislative initiatives around building performance standards which lack consistent, implementable, fact-based frameworks. The federal government has the research and analysis heft to create and maintain a voluntary system of fair, reasonable, and effective BPS guidelines to help inform these efforts ” said Anthony E. Malkin, Chair of the Roundtable’s SPAC (Chairman and CEO, Empire State Realty Trust).
  • “Our peer-reviewed, 20-point policy guide intends to help start and guide a discussion of the subject,” he continued. 
Source: US-DOE, IMT (map as of August 2024)

BPS Policy Guide: 20 Key Points

  • RER’s policy guide should shape how DOE disburses tens of millions of taxpayer-funded federal grants to states and cities across the country. It outlines 20 key points that should be prioritized when developing and implementing BPS laws. These include:
  • Develop science-based and data-driven standards. Policymakers should base building performance targets on robust cost-benefit analyses, housing affordability studies, grid resilience assessments, and actual data on energy usage.

  • Align standards across jurisdictions. Property owners face confusing and inconsistent mandates. Policymakers should harmonize rules to ease multi-jurisdictional compliance and use landmark federal programs as a uniform means for compliance.

  • Provide clear compliance resources and fair remedies. Policymakers should ensure that BPS laws come with transparent, accessible compliance pathways that building owners can follow. This includes offering practical resources, technical assistance, and incentive programs to help owners plan for “life-cycle” capital investments and retrofits. Enforcement mechanisms should offer building owners reasonable opportunities to correct non-compliance before imposing fines.

RER welcomes engagement on the 20-point policy guide to help craft BPS laws that are fair and effective.

EPA Issues New Rules Impacting Building Air Conditioning Systems

Posted on by Abigail Grenadier

The U.S. Environmental Protection Agency (EPA) is accelerating regulatory actions that will affect how real estate owners and developers design, install, and manage air conditioning systems that use refrigerants to cool buildings.

Hydrofluorocarbons (HFCs) Impact Climate Change

  • Air conditioning and refrigeration systems in buildings depend on HFCs. An estimated 20% of the total electricity used in buildings’ worldwide electricity consumption comes from space cooling that uses high-emissions refrigerants. (International Energy Agency)  

EPA Rule on HFC Leak Detection and Repair

  • EPA issued an AIM Act implementation rule on Monday focused on leak detection and repair of equipment that uses HFCs. Starting in 2026, building owners and other operators of heat pumps, chillers, and other air conditioning systems that contain at least 15 pounds of HFC-containing refrigerants are subject to these new requirements. (POLITICO, Sept.. 23)
  • Large appliances that use at least 15,000 pounds of refrigerants must install automatic leak detection for new systems starting in 2026, and existing systems starting in 2027. (EPA fact sheet)
  • The new rule also sets requirements for HFC disposal, and HFC recycling that must be used during installation and repair of new fire suppression systems. (EPA fact sheet)

Proposed Rule on HFC Transition

  • Separately, EPA has proposed rules that would phasedown the manufacturing of HFCs controlled by the AIM Act altogether, and set “technology transition” deadlines for when buildings must install new AC systems using refrigerants that are less harmful to the environment.
  • The Roundtable submitted comments yesterday on the proposed “technology transition” rules. The comments expressed concern that EPA’s deadlines do not account for permitting and construction processes in complex buildings designed to accommodate AC and refrigeration systems years before equipment is actually installed.
  • As RER’s letter explains, strict, immutable deadlines that ‘strand’ buildings from HFC regulatory compliance are not what Congress intended and may not be the best interpretation of the statute.
  • RER also stated it seeks a partnership with EPA “to educate our industry leaders on the AIM Act’s requirements” and help regulators better understand how the HFC phasedown may impact new construction, existing building retrofits, and real estate ownership, operations, and financing.

Yesterday, RER’s Sustainability Policy Advisory Committee (SPAC) held an educational session with members to start raising awareness about the new regulations (Slide deck). RER will continue to coordinate with the EPA as implementation of the HFC phase-down and transition unfolds.

Biden Administration Announces $240 Million of IRA Grants for Building Efficiency Upgrades

Posted on by Abigail Grenadier
Department of Energy building in Washington, DC

On August 27, the U.S. Department of Energy announced plans to allocate $240 million from the Inflation Reduction Act (IRA) to 19 state and local governments to help communities adopt energy-efficient building codes and retrofit structures to meet updated standards. (Politico, Aug. 27)

Key Details

  • The initiative is expected to reduce utility costs for multifamily residents and commercial building operators, enhance grid resilience, and lower emissions.
  • “DOE is helping jurisdictions move further and faster in implementing stronger codes that will provide Americans safer, healthier, and more comfortable places to live, work, and play,” said U.S. Secretary of Energy Jennifer Granholm. (US-DOE Press Release, Aug. 27)
  • The 19 selected projects will receive direct technical assistance to support the adoption and implementation of traditional energy codes, zero energy codes, and building performance standards.
  • The grants also align with the Justice40 Initiative, designed to direct 40% of federal investments to disadvantaged communities overburdened by pollution.
  • This latest announcement follows an initial $90 million awarded to 27 projects last year from the 2021 Infrastructure Investment and Jobs Act, commonly known as the bipartisan infrastructure law, to implement updated building codes. (Politico, Aug. 27)
  • Chosen jurisdictions must go through a “negotiation process” with US-DOE before the agency ultimately awards Round 1 grants. Applications for the second round of IRA funding will close on Sept. 13. (US-DOE Press Release, Aug. 27)

What’s Next

The Roundtable is developing a “primer” for real estate stakeholders, highlighting key issues in the state and local BPS trend, with a release planned for this fall.

Roundtable Requests Voluntary U.S. Guidelines for Climate-Resilient Buildings to Fend Off EU-Based Rules

Posted on by Abigail Grenadier

This week, The Roundtable urged the Departments of Treasury, Energy, and the Environmental Protection Agency to develop voluntary, science-based guidelines to help U.S. real estate companies align their climate-related programs with global targets. (July 16 letter)

U.S.-Specific Climate Investment Principles

  • Treasury’s principles can guide net-zero corporate commitments in the United States.
  • However, foreign organizations aim to exert significant influence over capital decisions in America’s real estate – which can leave buildings “stranded” in the eyes of some overseas investors because they do not meet “energy requirements being rolled out in Europe.” Bloomberg (June 18)
  • These market risks prompted the Roundtable’s letter requesting voluntary building “decarbonization curves” designed by the U.S. government reflecting climatic, market, and data conditions in our country.
  • Investment principles for America’s real estate “should not be the creation of the European Union,” The Roundtable states.
  • “This is a matter of global economic competitiveness for capital access,” said the Chair of The Roundtable’s Sustainability Policy Advisory Committee, Anthony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.). “America’s buildings should not be expected to meet standards that speak to assets, laws, power grids, and regulatory environments in Europe or elsewhere.”

U.S. Energy Programs and Recommendations

Tony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.), chair of The Roundtable’s Sustainability Policy Advisory (SPAC) Committee.
Anthony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.)
  • Malkin continued, “The United States leads the world in government developed, voluntary guidelines for all types of buildings’ energy use and emissions. Agencies like US-EPA and US-DOE know the conditions of our markets, climate zones, and power grids and can help make it easier for capital to come into real estate and grow jobs and tax revenue in the United States.”
  • The Roundtable urged the U.S. government to develop building “pathways” through a robust public input process that considers the experiences of companies that own, develop, manage and finance America’s real estate.

The Sustainability Policy Advisory Committee (SPAC) will continue to work with the agencies and Congress to shape policies that promote cost-effective investments to optimize building energy efficiency and help the real estate sector mitigate the effects of climate change.

Administration Unveils Principles for Carbon Offset Markets

Posted on by Abigail Grenadier

The Biden administration on Tuesday released principles to enhance the integrity and effectiveness of voluntary carbon markets (VCMs) and incentivize companies to prioritize reducing their emissions. These principles can guide real estate businesses that seek to offset greenhouse gas (GHG) emissions. (White House fact sheet, May 28)

All-of-Government Approach

  • The principles and joint policy statement were signed by the Treasury, Energy and Agriculture Secretaries, and White House officials directing national economic and climate policy.
  • VCMs can “channel a significant amount of private capital to support the energy transition and combat climate change, with the right incentives and guard rails in place,” they wrote
  • Markets that provide credits for greenhouse gas (GHG) mitigation are crucial for meeting the administration’s climate goals to cut emissions in half by 2030 and reach net zero by 2050.

Focus on Market Integrity

  • The principles support carbon markets based on independently verified emissions savings. “[S]takeholders must be certain that one credit truly represents one tonne of carbon dioxide (or its equivalent) reduced or removed from the atmosphere.”
  • The principles reflect the U.S.’s intentions to play a leadership role in standardizing international carbon markets.
  • Today, VCMs are around $2 billion annually. With the potential of more private capital into climate projects through VCMs, Morgan Stanley projected that the voluntary market could grow to $100 billion by 2030. (Axios, May 28)

Relevance for CRE

  • Companies may finance GHG mitigation projects such as reforestation, carbon capture, and increasing renewable energy supplies. (WSJ, May 28)
  • These tools can help real estate and other companies offset their Scope 1 “direct” emissions, as well as controversial Scope 3 emissions from supply chain sources.
  • “Concerns about the credible use of credits (for example, to address a portion of Scope 3 emissions) must also be adequately addressed for VCMs to truly drive decarbonization.” (Joint Policy Statement, May 28)
  • Specific instruments known as Renewable Energy Certificates (RECs) are commonly used in U.S. markets to address Scope 2 emissions, which are generated by power plants for the electricity used by tenants and other building occupants. (US-EPA, “Offsets and RECs – What’s the Difference?”)

The Roundtable’s Sustainability Policy Advisory Committee (SPAC) continues to work closely with the White House on climate initiatives impacting commercial real estate.