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Director’s Testimony on Proposed DC BEPS Delay

DC Mayor Bowser’s FY24 Budget Support Act (BSA) proposes to delay the implementation of the Building Energy Performance Standards (BEPS) by three years. Theresa Backhus, Director of the Building Innovation Hub, gave the following testimony on April 6, 2023 to the Committee on Transportation and the Environment, Budget Oversight Hearing on the Department of Energy and Environment and the Green Finance Authority.

The Building Innovation Hub (the Hub) helps the building industry in Washington, DC create and operate high-performing buildings. Our goal is to meet the current needs of the industry while simultaneously pushing it towards the innovative solutions that we will need to build and operate high-performing buildings. To do this, we provide resources and connections to help building owners, operators, designers, contractors, and tenants improve their buildings. We highlight market leaders, educate decision-makers on rising trends, connect people with information and financial tools, clarify regulatory requirements—such as BEPS and the new local building codes—and break down barriers to improving buildings. Through this work, we help ensure the District remains a highly competitive market and a leader in sustainable and equitable building practices.

The Hub is a program of the Institute for Market Transformation (IMT) and a grantee of the District Department of Energy and Environment (DOEE). The Hub is also supported by philanthropy and by our Corporate Membership Program. Our membership is composed of building owners, industry associations, engineers, architects, contractors, management companies, and consultants. They are large and small businesses operating in and often based in the District, and philanthropic funding to build capacity in the industry and workforce to create and improve buildings.

While IMT does take advocacy positions, the Hub does not. We are a neutral third party, an intermediary between the buildings industry and the government. Our role is to help the industry, so we do not advocate for or against any policy or regulation. The Hub is an information clearing house. We have our finger on the pulse of the market and a good perspective on the industry: what individuals are struggling with, how they have found success, and what they still need to be successful. The Hub conducts regular industry needs assessments to understand what buildings and building teams need to plan for the future and to succeed with BEPS and the District’s evolving regulatory requirements, as well as general performance improvements as they plan for the future.

Prior to joining the Hub, I was a consultant for developers and building owners. So, I fully appreciate the position buildings are in, and I understand the opportunities and challenges they face, as well as the current regulatory landscape in which they work. I also know that it is possible to design, build, operate, and finance high performance buildings, and that teams working together to set clear goals can make the business case to improve existing buildings. The challenge before us, collectively, in the District of Columbia is to figure out how to do this at scale.

The Hub’s Impact

Since 2020, the Hub has worked closely with industry to improve buildings and help businesses understand and position themselves for success with BEPS in both the short and long term. We have supported over 1,600 buildings and worked one-on-one with the owners and managers of approximately 90% of the buildings that currently do not meet BEPS. In the last two and a half years, we have assisted these owners and managers to understand their existing performance, energy benchmarking, the BEPS requirements, BEPS Compliance Pathway options, potential solutions to tricky issues that they are facing, the regulatory flexibility that is available to them, financial and programmatic concerns, and also the opportunities that have arisen as a result of existing building regulations.

In this time, we have seen the District’s building industry evolve from one that was less knowledgeable about building performance, energy efficiency, and BEPS, to one that, by and large, understands what is required and is also now better positioned for success with BEPS. There has been a sharp uptick in general BEPS awareness and understanding. The learning curve is flattening. For example, in 2021, there was substantial industry confusion over the difference between, and relationship of Energy Benchmarking and BEPS. In the last year, and especially the last 6 months, the Hub staff has heard fewer questions about BEPS basics and more questions related to selecting capital improvements to position buildings to comply with BEPS.

Industry Feedback

However, today the buildings industry still faces very real concerns and struggles. The feedback we are receiving include concerns about paying for building upgrades, vacancy in office buildings, the tenant role with regard to building performance and BEPS compliance, and using an ENERGY STAR score rather than Energy Use Intensity to measure whether or not a building meets the BEPS. Through direct conversations with building representatives, we have learned that many do not understand the existing flexibility built into BEPS.

We are also hearing about opportunities that the industry is taking advantage of, including using BEPS as a catalyst for energy data review and improvement, looking more closely at low- or no-cost building operations improvements, and implementing green leasing concepts within tenant spaces. We have heard from the industry that BEPS is pushing earlier communication among the design and operations staff, both within ownership and consulting teams, resulting in streamlined decision-making.

If we are serious about our climate commitments, we need to be doing this now because buildings are, by and large, the biggest emitter of greenhouse gas emissions in DC.
Office and multifamily building portfolio owner in Northwest DC

The Hub has gathered valuable information through our conversations about BEPS Cycle 1 over the last five months with DC buildings, contractors, vendors, and consultants.

Energy service providers, contractors, consultants, and other District companies have seen a sharp uptick in buildings requesting responses to BEPS-related work proposals. The Hub’s Vendor-Building Matchmaking service has made numerous RFP connections in the last six months. Over 50 vendors are currently enrolled in the matchmaking system to be alerted of BEPS-related project opportunities.

There has also been a sharp increase in requests for workforce training and development specific to BEPS-related careers and trades, such as high-efficiency HVAC design, installation and maintenance; energy auditing; retro commissioning; and mechanical and electrical contractors.

Approximately 75% – 80% of the buildings that are required to choose a BEPS Compliance Pathway have already done so. Building decision makers are concerned about the time and money already spent on preparing for the existing BEPS requirements.

What happens to the work that we have already put in? Will we need to do this all over again for Cycle 1 in three years? The data won’t be the same and we already spent the time and money on the existing status.
Commercial office building owner

Although building teams find the BEPS challenging, they recognize that these regulations are important and that many buildings are on track to meet them. After the Hub’s conversations with owners and managers of buildings that do not currently meet BEPS, approximately 75% developed actionable steps related to low- or mid-cost building improvements. Other buildings’ plans involved potentially large capital improvements.

Multifamily buildings across rental, condo, and co-op properties face unique challenges when it comes to improving building performance. Common themes we hear from this sector as challenges are 1) owners and property managers have limited control over residential and ground floor retail tenant energy use and 2) for condos and co-ops, it is trickier to find financing for improvements.

More large building owners are considering office-to-multifamily conversions. One consultant told us: “We know there are challenges, like affordability and office vacancy downtown. I am certain that some of the conversion decisions are due to BEPS.”

Over the last two weeks, the Hub team has heard concerns over existing contracts and staffing. Employers, including District-based businesses, have signed contracts for BEPS Cycle 1 consulting and planning, and have hired staff to support these contracts. There is concern that buildings may back out, and so there would not be enough work for everyone they hired. (Some of the new hires are District residents.)

Building owners are asking for certainty regarding BEPS, and specifically, clarity related to requirements, enforcement, and timelines. We hear that it can be difficult to keep up with regulatory changes. Many owners are concerned about the proposed BEPS delay. Specifically, they worry that new, COVID-impacted data (i.e. lower occupancy) may be used when re-setting the BEPS standards.

Regulatory uncertainty like this is good for no one, including us.

Benchmarking and BEPS have been driving buildings to think about their energy and carbon impact for years now. We have seen a 2-3% improvement in building performance (energy savings) due to benchmarking alone. Benchmarking and BEPS have increased awareness of how buildings use energy. The resulting awareness and insights have prompted energy-saving adjustments to building operations. Although there are many challenges facing the building industry now, there are also many opportunities. The regional building industry, and counterparts in other cities across the country, are looking to the District as a leader and model.

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