Energy demand to heat, cool and power buildings creates by far the largest contribution to U.S. greenhouse gas emissions. Any realistic program to reduce domestic emissions must seriously tackle building efficiency. Recent energy policy legislation—the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007—created a number of programs at the Department of Energy (DOE) to promote building energy efficiency, such as the Net-Zero Energy Commercial Building Initiative. The American Recovery and Reinvestment Act of 2009 built on that foundation.  Also known as the Stimulus Bill, that Act created the Energy Efficiency and Conservation Block Grants and the State Energy Program, which would distribute $6B to states that bring their energy codes into line with the most recent national model energy codes. Despite the flurry of federal attention, building energy codes remain a state-by-state patchwork (as this map from the DOE shows)—some states have established energy codes which require energy efficiency improvements, while other codes actually create roadblocks for energy efficient development.  The American Clean Energy and Security Act of 2009 (ACESA) attempts to resolve these issues by not only creating a standard national energy code, but also requiring states to work towards achieving the dictates of that code.

Updating National Model Building Energy Codes

State action to enact energy codes (though those codes are often based on the national model energy codes), creates a national patchwork of standards. ACESA, however, would address that by requiring the Secretary of Energy to release updated national model energy codes at least once every three years. The model codes would set ambitious goals for energy savings: 30% in the period 2009-2016, and at least 50% for codes developed after 2016. Furthermore, Title II of ACESA modifies the Energy Conservation and Production Act (42 U.S.C. §6833), stating that any code should be “set at the maximum level of energy efficiency that is technologically feasible and life-cycle cost effective, and on a path to achieving net-zero-energy buildings.”

States would have to certify the updated codes within a year-showing that the codes they adopted either met or exceeded the total energy savings of the national model and would have to report on their progress towards compliance within another year. ACESA would also provide incentive funding to states implement the new codes, or when a state fails to comply with the code, to local jurisdictions working towards compliance. To make compliance, states would have to show that 90% of new or renovated construction

Retrofit for Energy and Environment Program (REEP)

While the updated building codes target new buildings, the REEP program would facilitate the retrofitting of existing buildings, creating “maximum cost-effective energy efficiency improvements” and funding that program in proportion to the energy savings demonstrated by the participating jurisdictions. This program targets what some have called the “low hanging fruit” of energy efficiency.  A 2007 study by McKinsey and Co. showed that almost all retrofitted building improvements come considerably more cheaply than other efficiency improvements, such as the development and market penetration of hybrid vehicles. Many of those improvements are in fact “negative marginal-cost” in that they pay their costs back. As the study (and others) explain, however, coordinated programs are needed to make these retrofits a reality. The REEP program would be the first national program of this kind.

Impacts of Energy Efficiency Building Codes

These programs come at an important time for the green building movement; while a number of jurisdictions have begun green energy code updates and energy efficient retrofit programs, recently there have been signs of a backlash. In July 2008, a coalition of ventilation, heating and other building construction trade groups sued the city of Albuquerque, arguing that federal efficiency laws preempted local regulation. That litigation has yet to come to trial—but comprehensive federal standards of the type suggested in ACESA would likely moot litigation of this type by aggressively advancing efficiency standards at all levels of government.

The “low hanging fruit,” “negative marginal cost” contentions are encountering skeptics who question whether new aggressive standards will actually achieve the results proponents claim. A recent study published by the Commercial Real Estate Development Association (also known as NAIOP) showed that increasing energy savings in commercial buildings-are requiring longer and longer payback durations-with the maximum (no-cost) savings achievable being 23%. While other studies have found greater possible energy savings, this controversy outlines one of the challenges facing a successful national green building program. We will examine the controversy over energy savings further in a subsequent post.

For further information about this topic, please contact Akin Gump.