Monthly Archives: July 2019

NYC’s New LL 97 Climate Change Rule – Part 3 – Compliance

In the last two months, I have written articles containing basic summaries about New York City’s new Local Law 97, a rule to address Climate Change targeted to existing buildings in NYC with specific greenhouse gas (GHG) emission limits, which is defined by the building’s (and the tenant’s) energy usage. The rule defines 10 different types of buildings (permanent – housing – and temporary – hotels – housing, office, retail, industrial, entertainment, etc.) each with its own GHG emission intensity limit (grams of CO2e per square foot). What is unique about this rule is that the fines for not submitting an annual compliance report and for exceeding one’s limit are very high. Potentially high 6 to low 7 figure annual fines!

The rule goes into effect in 2024; the first annual report is due by May 1, 2025. Fines to follow. That seems like a long way away. But if your building needs to make major changes to meet your limit or to lessen the exceedance and fine, then you may need all of these 4½ years to plan, design, and implement the needed changes. So the first – and perhaps the most important – piece of advice is to start NOW to see where your building stands in 2024 when it comes to LL 97. You may be surprised. In unveiling the rule, NYC emphasized they believed that 80% of existing buildings would comply with their limit based on 2016 benchmarking energy submittals. “Only” 20% of existing buildings would need to upgrade. But that is a little deceptive. Energy usage has been growing tremendously recently as businesses grow and demand for technologies – in most cases – that are energy-intensive to serve customers grows, too. Many of those buildings complying with LL 97 based on 2016 energy usage may get complacent and then learn that energy usage has risen in the intervening years due to many factors, including business growth. One must self-assess and be prepared and vigilant NOW!

LL 97 covers not only landlord-responsible functions (common lighting, elevators, space heating, etc.) but also tenant-responsible energy usage (their lighting, plug load, window AC units, etc.). If you are a landlord, this is the time to reach out to your tenants and get an understanding of total energy usage. NYSERDA’s Commercial Tenant Program is an incentive program providing free energy audits for leased office spaces. 4½ years may be necessary to understand your tenants’ energy needs and work together to manage it better. There has been concern that landlords, concerned with LL 97 compliance, may not renew leases of certain tenants that are high energy users (data centers, 24/7 operations) and encourage new tenants which use less energy to move in.

Once you have assessed your total energy usage and understand who is responsible for what usage and for what functions, you can assess whether you are currently in compliance with LL 97 and project the status in 2024. If your building is likely to exceed their greenhouse gas emission limit in 2024, the energy assessment provides the data to intelligently determine strategies to either comply or minimize the exceedance or fine.

The energy assessment can accurately tell you by how much you exceed the standard and can determine exact energy (and greenhouse gas) reductions to get you down to your limit. Then you can determine which combination of potential energy upgrades is sufficient to meet your LL 97 requirements, taking into consideration cost and side benefits, as well. You have time to plan it out and bring in the right experts to do the job.

Besides reducing your actual credited greenhouse gas emissions by reducing energy usage, LL 97 gives you two other ways to reduce your credited annual greenhouse gas emissions: purchasing renewable energy credits (RECs) and/or emission offsets. RECs are credits one obtains for implementing renewable energy, such as solar or wind project. A deduction from one’s annual building emissions equal to the number of RECs purchased by a building owner as long as the source of the renewable energy credits is considered by NYISO to be a capacity resource located in or directly deliverable into zone J load zone (NYC) for the same reporting calendar year; RECs are solely owned and will not be reused (re-sold) by the building owner, the building that hosts the renewable energy system does not receive a deduction under § 28-320.6.3. Information proving these items must be submitted to the Dept of Buildings with the application.

Emission offsets is procuring greenhouse gas emission credits that are certified by an appropriate board. Such offsets are provided to those who have reduced GHG emissions for an amount beyond that required by regulation. For calendar years 2024-2029, deductions for certified GHG emission offsets will be allowed for up to 10% of the annual building’s emissions limit. The deduction is only allowed for credits generated within the reporting calendar year, publicly registered, and retired (not to be re-sold).

LL 97 also allows a deduction from the reported annual building GHG emissions based on the calculated output of a clean distributed energy resource located at, on, in, or directly connected to the building subject to the report. LL 97 is allowing this portion to be amended based on future research and development.

Again, to summarize, 2024 seems like it’s far away, but given how comprehensive and how onerous LL 97 will be, with huge fines for non-compliance, the time to start evaluating where you stand vis-à-vis this rule is NOW!

CCES has the experts and knowledge of LL 97 to perform that early assessment of whether your building meets your 2024 GHG emission limit or not. If you comply now, we can advise you how to prevent energy creep to better ensure compliance in 2024. If you do not currently comply, we can advise you on cost-effective steps to comply on time and we can manage implementation to ensure you get the reductions in emissions you need. This is an onerous rule and with potential major upgrades needed to avoid high fines, 2024 is not that far away! Contact us today at 914-584-6720 or at karell@ CCESworld.com.

Government and Investor “Carrots and Sticks” for Climate Efforts

Governments, investors, and watchdog NGOs are stepping up their efforts to identify companies that are leaders or laggards in the global effort to address climate issues. While most of the effort has been to highlight and publicize those that have reduced or supported reductions in greenhouse gas emissions significantly, there is a growing sense that shame can work, too. Legal & General Investment Management (LGIM), an investment firm that invests in companies that actively address climate matters, puts out annual rankings. In their 2019 list, they voted to divest five firms from their Future World Fund due to unsatisfactory results, including ExxonMobil. Removal may occur for a variety of reasons, such as not meeting climate goals, governance, and lobbying efforts.

Such removals and additions to the list are important as investors use the list as a guide to making investment decisions. Two companies removed from the Future World Fund in 2018 were reinstated in 2019.

In April 2019, for the first time ever, renewables surpassed coal in the US power mix. A combination of the large growth in new wind and solar farms boosting renewable energy output and some coal plants were idled for routine spring maintenance caused this to occur. Hydroelectric dams, solar farms, and wind turbines generated about 68 million megawatt-hours of power that month, exceeding the 60 million that coal produced that month, according to the Energy Information Administration. This is both the most clean power ever produced in the US and the least amount of coal combusted in years.

These trends highlight the growing support for renewable power in the form of incentives and tax rebates by governments and the large number of utilities now encouraging this, too, to lessen their burden. In addition, the cost of building new renewable solar and wind farms has dropped markedly compared to the cost of building new coal-fired plants. And finally, with some exceptions cheap and plentiful natural gas are causing many plants to shift from coal to gas. If these trends continue, Despite the current US Administration supporting the coal industry by gutting environmental rules, other governments and investors are moving away from coal to renewables. It should be noted that April is commonly a month when many coal-fired power plants are shut down for maintenance. This summer, coal combustion at peaker plants should raise the level of coal combustion in the US, putting coal back “ahead” of renewables in terms of electric generation. But the longer-term trends are certainly that government incentives and investor information are causing the long-term growth of renewable power.

CCES has the experts to help your company understand how climate and energy conservation programs can result in many significant financial benefits. We can help you diversify your energy supply, find incentives with direct benefits for you, and find ways to reduce costs. Contact us today at karell@CCESworld.com or at 914-584-6720.

Talking Points: Climate Change Risk or Opportunity

Part of a series taking important concepts and wording them so you can pass basic information to your colleagues, supervisors, and contacts.

Background

There is no getting around it. Even with the politics of current US leadership being in denial, there is too much factual evidence and too many solid reports from non-partisan scientists to deny: Climate Change is real and will have grave impacts on our very being. The only things we do not know are just how fast and potentially destructive these changes will be, which segments will be hit first and hardest, and what we can do to absorb the changes. While we do not know the details, we need to prepare.

Therefore, the growth in the number and severity of severe storms, rising temperatures, rising sea levels infiltrating drinkable water, public health issues, etc. represents major risks that will cost our planet many lives and much money. However, change also represents an opportunity, seen in any business. The business person who can correctly anticipate change and prepare for it to minimize negative effects and perhaps even turn the “lemons to lemonade” will come out ahead. This has been true for hundreds of other societal and technological changes we have been through.

Climate Change Impacts

First, let’s make clear that Climate Change is not something we should do for the sake of “our children and grandchildren.” Climate Change is already impacting societies and businesses. 2018 was a record year for extreme weather events – droughts, rain bombs, wildfires, melting glaciers and polar vortexes, costing approximately $215 billion, according to insurance giant Aon. Did Climate Change cause these events such that getting the CO2 concentration back down to the long-held 280 ppm baseline will eliminate these events? No. But it is universally agreed in the scientific community that Climate Change – the increase in heat and energy in the atmosphere and oceans – contributed to making these storms more intense and, in many cases, beyond what societies planned for decades or more ago as “worst case.”

And if someone thinks that Climate Change only impacts people far away, well, note that Miami Beach – a 7.7 square mile, small part of Metro-Dade County with a population of only 92,000 – will spend $500 million for projects to pump out ocean water from the city. https://www.miamiherald.com/news/local/community/miami-dade/miami-beach/article209328849.html. And City officials openly admit that this expenditure may only temporarily delay the City’s demise. Climate Change is hurting us now.

Climate Change Risk

Climate Change risk is not a new phenomenon. Many governments and businesses (mostly in Europe) factor Climate Change into their decision making and forecasting. Business school define and quantify different Climate Change risks as follows:

• Competitive (cost) risks
 potential decline in consumer demand for energy-intensive products
 rise in costs or lack of availability for energy-intensive processes
 rise in costs or lack of availability for transportation fuels

• Reputational risks from perceived inaction on climate change

• Regulatory risks from tightening legislation

• Physical risks from Climate Change (extreme weather, rising sea levels, etc.)
 Asset damage
 Inability to make or transport product, raw materials
 Health and safety risks
 Project delays
 Crop damage or agricultural transition as certain crops no longer are viable in certain areas and new supply chains become necessary

Climate Change Can Be An Opportunity, Too

It is often the case that situations that introduce risk can result in the flip side: an opportunity. Companies that can manage or minimize risk will be stronger for it and those that can develop and sell products to minimize risk or Climate Change impacts for others can do quite well in the market. I gave a lecture on Climate Change years ago where I devoted a portion of it to malaria and the forecasts that in a few decades the incidence of malaria will likely grow because the warming Earth will allow the mosquitoes that spread malaria to travel further north and south on Earth, exposing potentially hundreds of millions of more people to the virus for the first time. A person in the audience noted that he works for a company that manufactures medical equipment and they have a line of products specifically for malaria. If what I said was right, there will be a greater need for these machines and sales would rise and they can make a lot of money. He then stopped and realized he said something politically incorrect. But he was right that Climate Change can represent an opportunity for his employer to increase sales. While it is unfortunate that Climate Change may cause greater suffering, his company is well positioned to address that and make profit from it, too. So for smart companies anticipating Climate Change effects, this can be a business opportunity, too.

I wish there was a quick fix or easy answer to address Climate Change and avoid the potential worst-case situation. In the absence of effective, focused global government action and despite the growing clamor “in the streets” by the public for solutions, the potential enormous risks of Climate Change – plus some potential opportunities – is now becoming a reality which the market and smart businesses will examine and use to their effectiveness and growth.

We hope this has given you some basic talking points to bring up the issue in your firm and begin the conversation. CCES has the experts to help assess Climate Change and potential risks and opportunities for your community and company. Contact us today at 914-584-6720 or at karell@CCESworld.com.

Trump Administration Repeals, Replaces Obama-Era Clean Power Plan

Please note that this is a technical evaluation of current federal regulations. On June 19, 2019, the US EPA issued the final Affordable Clean Energy (ACE) rule replacing and repealing the Obama administration’s Clean Power Plan (CPP). ACE establishes emission guidelines for states to use when developing plans to limit carbon dioxide (CO2) at their coal-fired electric generating units (EGUs). ACE will allow states to set emissions standards for coal-fired plants. CPP, in effect since 2015, developed national standards to address CO2 emissions from power plants, allowing for a transition to cleaner sources of energy by 2030. The US EPA then projected that CPP would result in $26 billion to $45 billion net climate and health benefits, including the avoidance of 300,000 missed work-days and school-days, 90,000 asthma attacks, 1,700 heart attacks, and 3,600 premature deaths annually.

Instead, the new rule, ACE, will relieve the power industry of meeting these emission standards. This will, in particular, benefit the coal industry. ACE will likely face court challenges from several states, as well as environmental groups who see the repeal of CPP and adoption of ACE as steps backward from fighting to reduce greenhouse gas emissions, an accepted Clean Air Act pollutant. Shortly after adoption of the new rule, several state attorneys general signaled their intent to sue the US EPA over ACE.

ACE establishes that efficiency improvement of an electric generating unit is an acceptable approach for emissions reduction of CO2, giving coal-fired plants more options to reduce carbon intensity. The US EPA would consider technical feasibility, cost, non-air quality health and environmental impacts, and energy requirements in determining the most appropriate ways to reduce CO2 emissions. States will establish unit-specific “standards of performance” that reflect the emission limitation achievable through application of improving efficiency. ACE believes that the US EPA’s role is to be a technical advisor of potential strategies to minimize greenhouse gas emissions. The states’ role is to develop plans that establish unit-specific standards of performance that reflect application of best efforts to control emissions, taking into consideration, among other matters, the remaining life of the electric-generating unit. States must submit plans to the US EPA that establish their standards of performance and include measures that provide for the implementation and enforcement of such standards, due in three years. Therefore, states do not have to have any standards currently (CPP has been repealed) and by the time a plan is approved, it can be much longer.

CCES has the experts to provide technical advice on federal, state and local energy and environmental regulations so that you better understand how they impact you. Contact us today at 914-584-6720 or at karell@CCESworld.com.