New York’s Battle Plan for Greenhouse Gases

The state's strategy for slashing emissions has implications for investors and property managers nationwide.
New York’s statewide greenhouse gas reduction program has potentially far-reaching implications for properties in New York City and beyond.

Frequently criticized for their voracious energy appetites, buildings consume approximately 60 percent of the total energy used in New York, according to the New York State Department of Environmental Conservation. Buildings are also responsible for 59 percent of statewide greenhouse gas emissions.

On April 20, just in time for Earth Day, Gov. Andrew Cuomo unveiled an ambitious energy policy that will affect all real estate owners and managers active in New York State as it aims to cut greenhouse gas emissions in New York 40 percent by 2030. The plan also looks to decrease consumer energy costs—statewide, New Yorkers pay about $35 billion annually for electricity and heating fuels—and invest $36.5 million to train over 19,500 New Yorkers for clean energy jobs.

“That’s a pretty significant move to create a workforce that’s going to be able to support the green energy programs and push them forward,” said Guy Geier, managing partner, FXCollaborative. “It’s innovative, and something I have not seen in other states.”

Cuomo’s initiative builds upon his signature 2014 energy policy, “Reforming the Energy Vision” (REV), which has facilitated the creation of an integrated energy network that combines the benefits of the central grid along with clean, locally generated power. REV has positioned New York as a leader on the energy efficiency front along with California and Massachusetts.

New York Gov. Andrew Cuomo, seen here at a groundbreaking ceremony last year.

Last month’s policy announcement includes a preliminary 2025 energy efficiency goal to cut emissions and energy costs by incentivizing building developers, commercial and institutional building owners, and residential households to reduce energy consumption by 185 trillion BTUs (British thermal units). That would be the equivalent to the amount of energy currently consumed by 1.8 million New York homes.

2030 Goal Line

“Improving the energy efficiency of New York’s buildings is the smartest and most cost-effective action the state can take to meet its climate goal of 40 percent greenhouse gas reductions by 2030,” said Institute for Market Transformation (IMT) Executive Director Cliff Majersik. Governor Cuomo’s new efficiency plan, combined with NYSERDA and utility incentive programs currently under way, will provide a necessary shot in the arm for efforts to retrofit the existing buildings across New York that are in need of energy and water upgrades, according to Majersik.

Working with stakeholders, the state will build on the initiatives underway in the NYSERDA Clean Energy Fund and will evolve utility efficiency portfolios to deliver energy efficiency at a greater scale, with more diverse options and reduced costs, by encouraging innovation and increased levels of private investment. An all-fuels approach to achieve energy savings has been put forth in NYSERDA’s white paper “New Efficiency: New York.”

NYSERDA has not established specific new financial incentives; however, it emphasizes the imperative to develop deep (i.e., 30 to 50 percent energy savings) and replicable building retrofit strategies, and to reduce the costs of energy efficiency retrofits, to enable greater market adoption. Also, according to NYSERDA, the New York Green Bank intends to work with large property owners and management companies to provide financing for incorporating energy efficiency into tenant improvements to their premises.

How greenhouse gases break down in the state of New York. (New York State Energy Research and Development Authority)

“For certain types of property owners, the Property Assessed Clean Energy Program (PACE) will be a useful tool to finance energy efficiency retrofits and pass the cost on to tenants in office and multifamily buildings, as they are the ones who receive the benefit of lower utility bills,” said Billy Grayson, executive director of the ULI Center for Sustainability and Economic Performance. This is one way to turn a costly investment with a 10-year payback into something that can be financed on property taxes for 20 years, and ultimately be a net economic benefit to both the owners and the tenants.

Investing in Improvements

Con Edison also offers a range of incentives including energy efficient upgrades of lighting and HVAC. “Many energy efficiency opportunities have a good return on investment, even without any incentives,” Grayson added. “Upgrading to LED lighting (especially outdoor lighting) can offer a great rate of return, and can be financed in ways that are immediately cash positive for owners and tenants. An incentive from Con Ed or New York City would only sweeten the deal.”

But, to get an existing building to a 50 percent reduction in energy use usually takes a significant capital investment. Grayson notes that many owners will have a tough time financing improvements to building envelopes and mechanical systems that can get them to a 50 percent energy reduction below their baseline.

“I think there’s still quite a bit of detail that the state needs to put on this program,” said FXCollaborative’s Geier. “They’ve talked about $10 million of NYSERDA grants that can be applied for to reduce carbon emissions. There’s also a $15 million NYSERDA program for fuel cell systems for facilities that will go toward reducing the greenhouse gases. And there are approximately $5 million available for offshore wind. But, in my thinking, those are fairly small numbers. They’re important—but I think the state has to create stronger incentives for building owners to do those kinds of upgrades to their buildings.”

Geier observes that on the supply side much attention is being paid to wind and solar within Governor Cuomo’s new program. “I think this initiative wants to generate 50 percent of the state’s power through renewable sources,” he adds. “California just recently passed a law that will require all new homes to be powered by solar energy, so we can probably do even more, but this is a great first step.”