Dennis Supple has done the math on everything demanded by Colorado regulators writing greenhouse gas efficiency rules for big buildings, and he’s certain his LoDo office would be lost in the equation.
The nonprofit he manages facilities for fills much of a classy brick and plate glass five-story building built in 1985 and recently renovated. But the proposed Air Quality Control Commission rule for cutting emissions in buildings over 50,000 square feet would hand over a long punch list of expensive mandates, Supple said.
“Every window in this building would have to be changed, the exterior walls would have to be widened,” said Supple, speaking out against the rules from his role as president of the Denver chapter of the International Facilities Management Association. The draft rule has an efficiency target number in mind for his place, “and the amount of insulation between the walls and the drywall would have to increase almost two to threefold to hit that number. It’s not a simple number to hit.”
Total cost to comply?
“We figured it at about $6 million,” Supple said. “Yep. And that’s a $6 million outlay that no board of directors has in their budget, at this point in time, especially in downtown Denver, in a commercial building. You just don’t have an extra $6 million laying around. The vacancy rate in downtown Denver on office space is almost 24%. And then to throw this in?”
The air quality commission’s hearing and vote next week on proposed Regulation 28 — continued from the spring after a furious flurry of comments from owners thinking it went too far and green groups who said that wasn’t far enough — promises more heated rhetoric about climate vs. capitalism. The draft would impact more than 8,000 buildings across Colorado, seeking cuts of building-related greenhouse gas emissions of 7% by 2026 and 20% by 2030.
The rule’s authors and advocates say heating, cooling and lighting big buildings is the next logical large target for greenhouse gas cuts, after Colorado has spent years going after coal-fired power utilities, oil and gas production, fossil fuel cars and trucks, and other industries. Large buildings are responsible for up to 20% of greenhouse gas emissions, the state says, and that’s separate from the emissions created by the utilities serving the buildings.
The proposed rules would lock in place the intent of legislation passed in 2021. Building owners have spent the time since then measuring and reporting their “benchmark” emissions that will set the starting line for their required cuts.
“The legislature was clear that these are reductions over and above the greening of the grid,” said Clay Clarke, supervisor of the climate change unit at the Air Pollution Control Division, whose staff is writing the rules for the AQCC to vote on. “So you can’t just essentially ride the coattails of Xcel or whoever your electric provider is.”
Environmental coalitions largely support the proposed rules, if they can get new assurances before a final vote. They want language guaranteeing benchmarking of existing emissions will be accurate, and that the system will prevent double dipping by blocking building owners from acquiring renewable energy credits from utilities that invest in clean generation. They want savings in buildings to be over and above utility savings, as policymakers intended.
The Environmental Defense Fund filed a prehearing statement saying it “supports adoption of a robust building performance standard to support the state’s GHG reduction goals via advancing building energy efficiency and electrification. If well-designed, this type of policy can drive significant energy efficiency improvements and electrification of space and water heating across Colorado, leading to emission reductions from business-as-usual levels.”
Colorado’s overall greenhouse gas reduction roadmap calls for emissions controls in all major sectors of the economy to reach the state’s targets of a 50% drop from the 2005 benchmark by 2030, and 90% by 2050, state regulators say. Big buildings must make a contribution, they said.
“They can do it through efficiency, they can do it through electrification, they can do it through some combination of those along with the use of renewable energy,” Clarke said. “What I can’t emphasize enough is this really is a win-win-win, because we’re reducing greenhouse gas emissions, but at the same time, our initial economic impact analysis shows that there will be $3 in savings for every dollar spent.”
The division’s filed “rebuttal” to all the pre-hearing statements and objections $3.61 in benefits for every dollar spent on capital costs to cut greenhouse gas emissions. The rebuttal assesses $6.4 billion in overall benefits to the buildings program through 2050, including about $5.2 billion in energy savings and $1.2 billion in “avoided social cost.” The state’s projection puts total costs of making the changes at $1.8 billion over that time.
Building owners and trade groups have so far refrained from expressing gratitude. They have taken to lengthy pre-hearing statements and a public editorial campaign to decry the high up-front capital costs of making the changes, and the looming pain for nonprofit owners like hospitals, governments and associations.
Building owners as a group are interested in efficiency because of the benefits and cost savings, so they have already made the easier changes that make economic sense, Supple said. The trade groups complain about what they call a “one size fits all” approach to the rulemaking by the state, that does not account for the vastly different ways building construction and building use play out across state industries.
There are many Denver building owners, especially traditional office towers with high vacancy rates after the pandemic changed work habits, who will simply walk away if engineers tell them they can’t economically make the state’s cuts and will face heavy fines, Supple said.
“When you’re a board of directors of a company that’s 1,500 miles away in Boston, and you have a building in Denver that’s going to cost you millions of dollars in fines if you keep it open, or you can simply board up the building and close it because you’d owe nothing, what are you going to do? It doesn’t make sense,” he said.
It’s not at all clear, either, Supple added, who will be able to take advantage of economic incentives from federal or local sources to retrofit large buildings. Nonprofits like hospitals, for example, can’t use some tax credits because they don’t report profits that can be taxed or refunded.
State regulators say they do not plan to emphasize the fines or other punitive measures in seeking compliance with the proposed regulations. They say they’ve already worked extensively with building owners to get compliance on the existing benchmarking audits and requirements, and will continue emphasizing education and cooperation.
“The initial posture here is really one of compliance assistance in working with these building owners to one become aware of the program, make them aware of all of the benefits to utilizing the program, and the implementation of these efficiency measures and other measures to reduce greenhouse gas emissions,” Clarke said. “And the real cost savings that they will likely be able to see very quickly if they do implement these measures.”