No, it is not technology, it is politics, and it is very much about simple regulatory sclerosis, which has produced a deadly market inflexibility. The rest is the usual political mess, and now this is being exacerbated by a socialist mayoral candidate who has raised the spectre of rent control again. Cheap populist nonsense, which will only make the problems worse, and those of us who are old enough to remember the Bronx burning, are having hives. I myself visited in February of 1977, at the hight of the garbage crisis, and with a bad snowstorm where in Manhattan garbage and snow was shoulder hight, and hearing this kind of talk does not cheer me up, particularly when the good solutions are so obvious. By April of 1979, I moved into the area, albeit at a safe distance, with my office at One Railroad Plaza in Greenwich, and my home in Norwalk. I was in the city 2-3 times a week for lunch or dinner, and passing through the Bronx was still like passing through a war zone.
The solution to the split incentive problem will unleash a whole range of solutions that are now very difficult to implement. There is a development of a whole building energy retrofit for HVAC by Hydronic Shell technologies. It is a brilliant solution for older buildings, if there is sufficient room for small extension of the facade.
The first thing to do is to understand clearly what the split incentive is: The split incentive is when the investment in an energy measure and the benefits of the investment are not in the same pocket. In other words, if the law says that the tenant pays for A/C the tenant gets the savings in the summer from doing the Hydronic Shell Solution and the landlord gets the savings in the winter. In New York that is a big difference, and it undermines the value of the investment for the landlord, even though his property would also be worth more. This is the problem that must be solved, and it is too silly we have been talking about it for the last 30 years or so, maybe more.
One answer: Green leases
Green leases are a contractual solution to make sure the cost and the benefit go to the landlord, but that is easier in market -rate properties, such as commercial buildings. It may not be as easy as that in residential buildings, so it will take some effort to solve. Nevertheless, the industry reports are that green leases have been helpful, and the use of them should probably be expanded.
How not to do it: correct sequencing. To stay with the example above of Hydronic Shell, we would need to undertake other measures at the same time, such as using radiant barrier paint on the inside of the outside walls, after all a 10 mil coating can reduce thermal load by as much as a 4" insulated wall. The shell itself comes with some insulation value, but radiant losses are huge, and coatings are available. Radiant barriers for the window should also be part of it, even after considering the increased insulation from the shell, those two factors might reduce the thermal load of the building by another 30%. In short, you reduce before you produce.
The simple principle becomes, as I covered in the previous article, you should reduce before you produce, but only up to a point. Conservation measures suffer diminishing returns after a while, but if you can reduce the installed capacity of your heating and cooling by 30-50% that should be done, but if it takes a million to go from a 30% reduction in the thermal load to 33% then that is probably dubious and you can calculate that number. So we reduce upto a point of pareto optimality, and then we shift our attention to the HVAC plant, and we may be able to reduce the icap by 30, 40 or 50%, and still meet all the performance requirements.
What not to do
An example of what not to do… in NYC, buildings are often tall, and that means roofs are small compared to the energy demand in the building. And take into account that HVAC is usually 60% or more of the total energy spend in the building. Solar PV on top of a six story building may generate enough power to pay for the common area electrical needs. But every building needs Domestic Hot Water and HVAC, and Solar Thermal Collectors (typically evacuated tubes) are on the order of 50+% efficient, while solar PV is about below 15% efficient. Plus, if you have room for geothermal, you may be able to have all your DHW from renewables, and that is a huge chunk of the energy bill. The obvious reason PV has been adopted is because people are bamboozled by the subsidies, rebates and incentives, but in this case, those are costing you an arm and a leg. So “free,” becomes expensive very quickly.
Example: in 2011, I was meeting with an engineer for the Office of Long Term Planning and Sustainability, right before she was about to go into a meeting with Bloomberg, who at the time wanted to put PV, on city buildings. My comment was, anyone who proposes that should be given a one-way ticket to Siberia. She asked if she could quote me on that, and I said, yes, of course. For the 4th of July, I sent Bloomberg a “Energy Independence Day Report,” promoting geothermal and solar thermal as the key strategic energy technologies in the City. In 2013 Bloomberg then signed Local Law 694-A, directing the Office of Long Term Planning & Sustainability to study the benefits and practicality of geothermal energy for the city. It has resulted in several pilot projects, but more could be done.
Meanwhile a complete overhaul of St. Patricks, worth about $177 million, included ten vertical column geothermal wells, reaching 2200 ft deep beneath their campus. It is designed to deliver 3.2 million BTU/hr of heating and 2.9 million BTU/hr of cooling covering about 76,000 sqft of space. In the end it boosts the value of the property, and was a typical high alpha, low beta intra-marginal investment, with a huge positive impact on CAPM. Today the complex is a shining example of what can be done in the middle of the City.
Conclusion
Clearly, an immense amount can be done, and while we have already had one small blackout during a heatwave, more is predicted, but it is totally unnecessary because of the utter lack of sensible analysis that has prevailed. Especially the insane promotion of PV makes no sense in a city where high rises dominate the skyline. Things could be far better, and energy solutions can easily be made a win/win solution for both landlords and tenants, improving property values, and the quality of life. Brute force methods, mandates, and other such always have and always will lead to market inefficiencies. If in doubt, people should re-read the history of the fiscal crisis of the seventies in NYC. It wasn't fun.