How much will Local Law 97 compliance cost? And now you wear your scarlet letter

David Goldsmith

All Powerful Moderator
Staff member
America’s Power Grid Is Increasingly Unreliable
Behind a rising number of outages are new stresses on the system caused by aging power lines, a changing climate and a power-plant fleet rapidly going green

The U.S. electrical system is becoming less dependable. The problem is likely to get worse before it gets better.

Large, sustained outages have occurred with increasing frequency in the U.S. over the past two decades, according to a Wall Street Journal review of federal data. In 2000, there were fewer than two dozen major disruptions, the data shows. In 2020, the number surpassed 180.

Utility customers on average experienced just over eight hours of power interruptions in 2020, more than double the amount in 2013, when the government began tracking outage lengths. The data doesn’t include 2021, but those numbers are certain to follow the trend after a freak freeze in Texas, a major hurricane in New Orleans, wildfires in California and a heat wave in the Pacific Northwest left millions in the dark for days.

The U.S. power system is faltering just as millions of Americans are becoming more dependent on it—not just to light their homes, but increasingly to work remotely, charge their phones and cars, and cook their food—as more modern conveniences become electrified.

At the same time, the grid is undergoing the largest transformation in its history. In many parts of the U.S., utilities are no longer the dominant producers of electricity following the creation of a patchwork of regional wholesale markets in which suppliers compete to build power plants and sell their output at the lowest price. Within the past decade, natural gas-fired plants began displacing pricier coal-fired and nuclear generators as fracking unlocked cheap gas supplies. Since then, wind and solar technologies have become increasingly cost-competitive and now rival coal, nuclear and, in some places, gas-fired plants.
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Regulators in many parts of the country are attempting to further speed the build-out of renewable energy in response to concerns about climate change. A number of states have enacted mandates to eliminate carbon emissions from the grid in the coming decades, and the Biden administration has set a goal to do so by 2035.

The pace of change, hastened by market forces and long-term efforts to reduce carbon emissions, has raised concerns that power plants will retire more quickly than they can be replaced, creating new strain on the grid at a time when other factors are converging to weaken it.

One big factor is age. Much of the transmission system, which carries high-voltage electricity over long distances, was constructed just after World War II, with some lines built well before that. The distribution system, the network of smaller wires that takes electricity to homes and businesses, is also decades old, and accounts for the majority of outages.
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A report last year by the American Society of Civil Engineers found that 70% of transmission and distribution lines are well into the second half of their expected 50-year lifespans. Utilities across the country are ramping up spending on line maintenance and upgrades. Still, the ASCE report anticipates that by 2029, the U.S. will face a gap of about $200 billion in funding to strengthen the grid and meet renewable energy goals.

Another factor is the changing climate. Historically unusual weather patterns are placing great stress on the electric system in many parts of the U.S., leading to outages.
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Weather-related problems have driven much of the increase in large outages shown in federal data, topping 100 in 2020 for the first time since 2011. Scientists have tied some of the weather patterns, such as California’s prolonged drought and wildfires and the severity of floods and storms throughout the country, to climate change. They project that such events will likely increase in years to come. Unlike electric systems in Europe, distribution and transmission lines in the U.S. were typically built overhead instead of buried underground, which makes them more vulnerable to high winds and other weather.

Those weather extremes are raising the costs of power network upgrades for utilities all over the country. That in turn is set to raise power bills for homeowners and businesses.

Public Service Enterprise Group Inc., which serves 2.3 million electric customers in New Jersey, plans to invest as much as $16 billion in transmission and distribution improvements over the next five years to replace aging equipment and make the grid more resilient to extreme weather events, such as a highly unusual spate of tornadoes that swept the state last year.

Ralph Izzo, PSEG’s chief executive, said the plan is critical to ensuring reliability, especially as customers become more dependent on the grid to charge electric vehicles and replace traditional furnaces and gas appliances with electric alternatives. The movement toward electrification is in part driven by consumers, amid mounting concerns about climate change, as well as initiatives among cities and towns to enact mandates aimed at phasing out natural gas for cooking and heating.

“That resiliency needs to be further enhanced, because the solutions to climate change are going to put more challenges on the grid,” Mr. Izzo said. “Those are the kinds of things that really keep you awake at night.”

The historic shift to new sources of energy has created another challenge. A decade ago, coal, nuclear and gas-fired power plants—which can produce power around the clock or fire up when needed—supplied the bulk of the nation’s electricity. Since then, wind and solar farms, whose output depends on weather and time of day, have become some of the most substantial sources of power in the U.S., second only to natural gas.

Grid operators around the country have recently raised concerns that the intermittence of some electricity sources is making it harder for them to balance supply and demand, and could result in more shortages. When demand threatens to exceed supply, as it has during severe hot and cold spells in Texas and California in recent years, grid operators may call on utilities to initiate rolling blackouts, or brief intentional outages over a region to spread the pain among everyone and prevent the wider grid from a total failure.

Companies around the country are rapidly adding large-scale batteries to store more intermittent power so it can be discharged during peak periods after the sun falls and wind dies. But because such storage technology is somewhat new, and was, until recently, relatively expensive, it remains a small fraction of the electricity market, and grid operators agree much more will be needed to keep the system stable as more conventional power plants retire.

The problem could soon threaten New York City. The New York Independent System Operator, or NYISO, which oversees the state’s power grid, last month warned of possible supply shortages in the coming years as several gas-fired power plants close or operate less frequently in light of stricter state air quality rules. New York, which has set a goal to eliminate emissions from its electricity supplies by 2040 and no longer has any coal-fired power plants, also recently shut down a nuclear plant some 30 miles north of Manhattan after critics for years called it a safety hazard.

A control room at the New York Independent System Operator, which recently warned of possible electricity shortages in the coming years as gas-fired power plants close or scale back operations..

NYISO said its reserve margins—how much electricity it has available beyond expected demand—are shrinking, increasing the risk of outages. A 98-degree, sustained heat wave could result in shortfalls within New York City as soon as next year, a circumstance that would likely force NYISO to call for rolling blackouts for the first time ever.

“We already foresee razor-thin margins,” said Zach Smith, NYISO’s vice president of system and resource planning. “The risk is compounded when we take into consideration unforeseen events.”

New York is adding substantial amounts of new wind and solar generation, as well as battery storage, and NYISO has said that it is critical that the projects remain on track to improve the stability of the system in the coming years. Already, wind and solar developers across the country are facing headwinds related to supply-chain issues, inflation and the amount of time it often takes to get approval to connect to the grid.

The North American Electric Reliability Corp., a nonprofit overseen by the Federal Energy Regulatory Commission that develops standards for utilities and power producers, warned in a report last month that the Midwest and West also face risks of supply shortages in the coming years as more conventional power plants retire.

Within the footprint of the Midcontinent Independent System Operator, or MISO, which oversees a large regional grid spanning from Louisiana to Manitoba, Canada, coal- and gas-fired power plants supplying more than 13 gigawatts of power are expected to close by 2024 as a result of economic pressures, as well as efforts by some utilities to shift more quickly to renewables to address climate change. Meanwhile, only 8 gigawatts of replacement supplies are under development in the area. Unless more is done to close the gap, MISO could see a capacity shortfall, NERC said. MISO said it is aware of this potential discrepancy but declined to comment on the reasons for it.

Curt Morgan, CEO of Vistra Corp. , which operates the nation’s largest fleet of competitive power plants selling wholesale electricity, said he is worried about reliability risks in New York, New England and other markets as state and federal policy makers pursue ambitious goals to quickly phase out fossil fuel-fired power plants. His concern is that the plants will retire before replacements such as wind, solar and battery storage come online, he said, given the cost and challenge of quickly building enough batteries to have meaningful supply reserves.

“Everything is tied to having electricity, and yet we’re not focusing on the reliability of the grid. That’s absurd, and that’s frightening,” he said. “There’s such an emotional drive to get where we want to get on climate change, which I understand, but we can’t throw out the idea of having a reliable grid.”

Serious electricity supply constraints have historically been rare. Most recently, the Texas grid operator called for sweeping outages during an unusually strong winter storm last February that caused power plants and natural gas facilities of all kinds to fail in subfreezing temperatures. Millions of people were in the dark for days, and more than 200 died.

California, which experienced outages during a West-wide heat wave in the summer of 2020, also called on residents to conserve power several times last summer amid a historic drought that constrained hydroelectric power generation across the region. The state is now racing to secure large amounts of renewable energy and batteries in the coming years to account for the closure of several conventional power plants, as well as potential constraints on power imported from other states when temperatures rise.

California state Sen. Bill Dodd, Democrat from Napa, recently introduced legislation that would require the state’s electricity providers to offer programs that compensate large industrial power users for quickly reducing electricity use when supplies are tight, helping to ease strain on the grid.

“We just can’t go down the road of having rolling blackouts again,” Mr. Dodd said. “People expect their government to keep the lights on, and our reliability situation in California still isn’t where it needs to be.”

California’s prolonged drought has fueled wildfires that in turn knock out critical electrical infrastructure.

Similar challenges have emerged elsewhere in the West. PNM Resources Inc., a utility that provides electricity for more than 525,000 customers in New Mexico, has warned that it would likely have to resort to rolling blackouts this coming summer, following the June retirement of a large coal-fired power plant. It has recently proposed keeping one of the generating units online for an extra three months to help meet demand during the hottest months of the year.

Tom Fallgren, PNM’s vice president of generation, said the company faced significant delays in getting regulatory approval for several solar projects to replace the coal plant’s output, as well as construction delays tied to supply-chain issues. A spokeswoman for the New Mexico Public Regulation Commission said the agency does its best to address all utility proposals in a fair and timely manner.

Mr. Fallgren said he anticipates even steeper challenges in the coming years as the company works to replace output from a nuclear plant with a combination of renewable energy and battery storage.

“We used to do resource planning on a spreadsheet. It used to be very simple,” he said. “The math is just astronomically more complicated today.”

One of the biggest challenges facing grid operators and utility companies is the need for better technology that can store large amounts of electricity and discharge it over days, to account for longer weather events that affect wind and solar output. Most large-scale batteries currently use lithium-ion technology, and can discharge for about four hours at most.

Form Energy Inc., a company that is working to develop iron-air batteries as a multiday alternative to lithium-ion, recently announced plans to work with Georgia Power, a utility owned by Southern Co., to develop a battery capable of supplying as many as 15 megawatts of electricity for 100 hours. It would be a significant demonstration of the technology, which the company is aiming to broadly commercialize by 2025.

Form Energy CEO Mateo Jaramillo said the U.S. has ample capability to produce power, but increasingly finds itself short on electricity during periods of high demand and low production as the generation mix changes.

“That’s sort of a feature of this new grid that we find ourselves with today,” he said.

Other outage risks are mounting as extreme weather events test the strength of the grid itself. A spate of strong storms in Michigan last summer left hundreds of thousands of residents in the dark for days as utility companies rushed to make repairs. DTE Energy Co. , a utility with 2.2 million electricity customers in southeastern Michigan, had more than 100,000 customers lose power.

CEO Jerry Norcia called the storm barrage unprecedented, and said the company needed to invest more heavily in reliability. DTE now plans to spend an additional $90 million to keep trees away from power lines and is working to hire more people to help maintain its system. But it may take time for such utility improvements to fully materialize, and meanwhile, consumers may suffer further inconveniences.

Michael Fuhlhage, a professor at Wayne State University who lives just outside of Detroit, hadn’t thought much about the power grid until a few years ago, when he began noticing an uptick in the number of times severe weather caused his lights to go out. He has since started measuring outage length by the number of trash bags it takes to clean out his fridge.

In August, a storm caused a dayslong outage while he was visiting family, and he returned home to find a mess of spoiled food.

“That was probably a three-garbage bag storm,” he said. “We worry every time there’s some kind of weather coming in now, and that’s not an anxiety we had to deal with before.”
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David Goldsmith

All Powerful Moderator
Staff member

Microsoft and Jeff Bezos are backing this start-up that aims to retrofit millions of old buildings with 'green' energy​

  • BlocPower is a Brooklyn-based start-up that has "greened" more than 1,200 buildings in New York City and has similar projects in two dozen other cities.
  • The company reports it has reduced building energy costs by 30% to 50% and reduced greenhouse gas emissions by 40% to 70% in current projects.
  • In a basement amid old wiring, ancient boilers and carbon-emitting gas lines, BlocPower CEO Donnel Baird said, "We look at this and [see] a great opportunity to save the planet and make a little bit of money by focusing on what's down here."
Ina four-story apartment building in Brooklyn, New York, a very small company is implementing a very big idea: Electrify every building in the United States by leasing landlords the necessary equipment to make the transition.

BlocPower is a Brooklyn-based start-up that has "greened" more than 1,200 buildings in New York City and has similar projects in two dozen other cities. It uses a lease-to-own platform, offering landlords and homeowners green heating and cooling systems, electric appliances and solar panels. It installs the equipment and manages its upkeep. Landlords make monthly payments that cover those costs and offer returns to investors.

The company reports it has reduced building energy costs by 30% to 50% and reduced greenhouse gas emissions by 40% to 70% in current projects. It says it can reduce U.S. greenhouse gases up to 25% in 10 years and recapture up to 30% of the millions of dollars in wasted energy spent.
"I know what's inside these buildings, right? And therefore I can see the investment opportunity," said BlocPower CEO Donnel Baird, who grew up in Brooklyn. "My job as a CEO is to make it transparent to potential climate investors."
"We're going to decrease the amount of oil and gas and fossil fuels that these buildings consume, decrease the amount of emissions that are created," Baird said. "We're going to save the building owners money, and hey, you're actually going to make 10% financial returns by investing in these buildings."

In the Brooklyn building's basement, Baird made his way through a web of old wiring and outdated systems that were being pulled out, including ancient boilers and carbon-emitting gas lines.
"We look at this and we say, my God, like what a great opportunity to save the planet and make a little bit of money by focusing on what's down here, right?" Baird said.
BlocPower leases the equipment for about 10 or 15 years, and after enough money has been taken in to pay back investors and for BlocPower to collect its fees, the ownership of the equipment is transferred to the building owner.
The company is behind the first plan by a U.S. city — Ithaca, New York — to be entirely net zero by 2030. It's starting with the city's building stock.
"When we started working together towards developing this program, we realized that this is possible," said Luis Aguirre-Torres, sustainability director for the city of Ithaca. "You know, it's not only about being the first city in America, in the entire planet to fully decarbonize. It is really is about showing that it is possible."
"If you work in climate change, you think this is possible; you are always thinking about ways in which you can actually make a dent on this," Aguirre-Torres said. "And the reality is that the technology wasn't there a few years ago and the financial innovation that was required wasn't there a few years ago."
Early BlocPower backers included Andreessen Horowitz, Exelon, American Family Insurance, the Schmidt Family Foundation, Goldman Sachs Urban Investment, Kapor Capital and Salesforce. Then in January it got a big debt infusion from Microsoft, bringing its total funding to about $100 billion. It also just got a $5 million grant from the Bezos Earth Fund to digitally map about 125 million buildings across America so that each one of those buildings will have a free plan for how to become environmentally sustainable.
The company is now negotiating with several cities in California, New York, Massachusetts and Georgia to decarbonize.

David Goldsmith

All Powerful Moderator
Staff member
This ought to really help meet those pollution goals.
Council bill demands landlords turn up thermostats
Rookie pol says warmer apartments would deter use of dangerous heaters

The City Council is turning up the heat on landlords — literally.

Council member Crystal Hudson introduced a bill Thursday to make them raise the minimum temperature in apartment buildings, reasoning that it would reduce the use of dangerous space heaters.

City law requires that from October through May, landlords heat multifamily buildings to at least 68 degrees during the day and 62 at night. The bill would bump those temperatures to 70 and 66 degrees, respectively.

Hudson’s bill is backed by several key Council members, including Pierina Sanchez, who chairs the Council’s Committee on Housing and Buildings, and Gale Brewer, the former Manhattan borough president who led the charge on a similar bill in 2017, the last time the city raised minimum temperatures.

In a press release announcing the bill, the Council members invoked the deadly fire caused by a space heater at a Bronx building in January. Residents had complained that unheated apartments forced them to run electric heaters around the clock.

A faulty heating system, rather than low thermostat settings, led to the fatal blaze. Hudson’s legislation would not address that problem, although she pledged in a press release announcing the bill to “work closely with the Department of Housing Preservation and Development to ensure it holds predatory landlords accountable.”

“This bill will ensure residents whose landlords already turn on the heat can stay warm during the winter by providing suitable minimum temperatures,” her statement said.

The 145-word bill does not specify how it would improve enforcement, which is largely complaint-driven.

Since 2017, the city has received 5,574 complaints of inadequate or no heat, according to public data. An analysis by The Real Deal shows complaints have trended downward in recent years, falling from 1,303 in 2018 to 904 last year.

Owner groups said the bill would increase energy use, costing landlords and tenants money, and would fly in the face of the city law capping greenhouse-gas emissions at large buildings.

“There’s no way that this is going to be efficient in terms of usage of buildings,” said Frank Ricci, executive vice president of the Rent Stabilization Association. “This is totally contrary to the intent of Local Law 97.”

Ricci also cautioned that, given high energy prices, the bill could boost rents at rent-stabilized buildings. “It would also be an astronomical cost, which, if the Rent Guidelines Board is doing its job, should relate to a rent increase for tenants too,” he said. The board is supposed to take heating costs into consideration when voting on rent increases.

After the Bronx fire, Sen. Kirsten Gillibrand and Rep. Ritchie Torres, both from New York, introduced a bill to require heat sensors in all residential buildings that receive federal funding.

Legislation was also proposed in Washington and Albany to ban the sale of space heaters that do not turn off automatically when they tip over.

David Goldsmith

All Powerful Moderator
Staff member

Energy Letter Grades Do NOT Measure Carbon Emissions​

When New York City began requiring building owners to post letter grades to denote their buildings’ energy efficiency in 2020, the idea was to spur owners, including co-op and condo boards, to cut waste. The grades are based on required annual benchmarking data on water and energy usage. The thinking was that any potential buyer who saw an F grade in the lobby would make a quick U-turn.
While there is no shortage of criticism of the letter grades, there is also a widespread misperception about them. With fines looming in 2024 for buildings that fail to meet carbon-emission goals under the Climate Mobilization Act, many boards with A and B letter grades are operating under the assumption that they won’t face fines. Conversely, many boards with D grades — more than half of the buildings that fall under the law — assume they’re facing crippling fines.
Not necessarily so, says Ben Milbank, a senior project development engineer at Ecosystem Energy Services, an engineering and construction company. “There’s not really a correlation between energy-efficiency letter grades and fine risk,” he says. “You can be burning #2 oil and still get an A grade — and yet face a fine in 2024.”
How is that possible? “Because bigger buildings with more square footage per person — less density — tend to get good letter grades,” Milbank says. “They may be burning oil, and they’re probably going to take a hit on fines.”
Put another way: benchmarking data compares a building’s energy and water usage with similar buildings nationwide; the resulting letter grade does not take into account how that energy is produced, which is a prime determinant of carbon emissions.

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Ecosystem is now running a $7.7 million project at a 172-unit prewar co-op near Union Square that illustrates the flip side of the disconnect. This 13-story building suffered from chronic heat imbalances, thanks to aging boilers and absorption chillers that operated in either heating or cooling mode, never both. Ecosystem is removing the massive cooling tower from the roof and installing nine air-source heat pumps that are powered by electricity — until the outdoor temperature dips below 40 degrees, when a natural-gas boiler will provide supplemental power. This “hybrid” system reduced the required number of heat pumps by two-thirds while making maximum use of limited roof space. As a bonus, Ecosystem helped the co-op secure a $1.4 million incentive from the state’s Clean Heat Program and $250,000 from the New York State Energy Research and Development Authority (NYSERDA).
Now comes the disconnect. “The building has a low D energy-efficiency grade,” Milbank says. “And even though this project will cut the building’s natural gas consumption by more than 80% and make it fully compliant with the Climate Mobilization Act beyond 2050, we might optimistically get it up to a C grade. That’s because of the disconnect between letter grades — how much energy and water you use per square foot — and the building’s carbon emissions. But this co-op is going to be a very efficient, low-carbon building.” His conclusion: “The letter grade is semi-irrelevant.”
Ed Ermler, a managing director at FirstService Residential, leaves no doubt about his priorities: “I couldn’t care less if I have a big fat F on my door — provided I don’t have to pay a penalty in carbon fees.”
Referring to the Union Square co-op, Milbank adds, “They’ll have a C grade out front, and nobody will appreciate the things they’ve done to reduce carbon emissions.”

David Goldsmith

All Powerful Moderator
Staff member
This could be a game changer depending on how it's enforced, especially for big players in Lower Manhattan/FiDi, Miami, and other areas at flood risk from rising sea levels.

Superstorm Sandy flooded lower Manhattan a decade ago with nearly 5 feet of water, swamping the city’s subway and destroying homes and businesses. It's going to be difficult to credibly posit a "worst case scenario" at least severe conditions.

We recently saw BlackRock walk away from 1740 Broadway in Midtown Manhattan that it had bought in 2014 for $605 million and only had a $308 million loan that was originated by Deutsche Bank and securitized into a single-asset single-borrower CMBS in 2015. What will happen to similar vintage office properties in flood zones which:
A) Are in need of upgrades,
B) Will cost much more to finance/refinance with interest rates soaring, and
C) Now need large reserves to offset potential climate liabilities?

SEC’s climate proposals are “wake-up call” for real estate​

Big impact on major operators and investors; opportunity for startups​

The real estate industry is built on other people’s money. A lot of those investors will now be asking tough questions about climate change, thanks to new regulations proposed by the Securities and Exchange Commission.
Late last month, the SEC announced that publicly traded organizations would soon need to disclose their climate change risks and exposure. The former includes direct physical risks to their business, such as the impact of sustained higher temperatures, sea-level rise or persistent wildfires, as well as transition risks stemming from the shift to a lower-carbon economy.

“We are concerned that the existing disclosures of climate-related risks do not adequately protect investors,” the SEC said. “For this reason, we believe that additional disclosure requirements may be necessary or appropriate to elicit climate-related disclosures and to improve the consistency, comparability, and reliability of climate-related disclosures.”

Because most large real estate players are private companies, they are not subject to these disclosures. And most of the big shops that are public, such as REITs, already disclose their emissions.
But the new regulations are likely to pressure the industry through the capital markets — publicly traded firms, including investment managers and big banks, which are key sources of debt and equity for major private real estate companies.

“Your business is on the line if you forgo reporting in favor of fines.”
Shadow Ventures
The new disclosures mean they will ask tougher questions about how the property portfolios they’re backing are being built and operated. Publicly traded firms that lease space will too be pushed to make greater climate-conscious demands of their landlords.

Real estate operators have traditionally been lax when it comes to reckoning with climate change. Many have stuck their head in the sand or paid fines rather than deal with the problem. The SEC’s proposal takes that option off the table.
“The lifeblood of your business is on the line if you decide to forgo reporting in favor of fines,” stated seed-stage proptech investor Shadow Ventures on the new proposals, in a report the firm shared in advance of publication exclusively with The Real Deal. “You don’t disclose, you don’t get their business.”

Breaking down the mandates​

TRD cut through the SEC proposal’s legalese and regulatory jargon to identify what real estate needs to know:
First, the proposal highlights climate-related events, — risks to projects and properties from wildfires, hurricanes, earthquakes, coastal erosion and the like. For example: How does sea-level rise affect the value of a South Florida or Lower Manhattan portfolio over the next 10 years? In the U.S. alone, roughly $1.3 trillion worth of real estate was at high or extremely high risk from wildfires alone, according to an Urban Land Institute report in 2020. Exposure has only grown since.

Second, the SEC will require companies to disclose their carbon footprint and greenhouse gas emissions, both direct and indirect. When it comes to buildings, it’s important to understand the different tiers of these emissions, widely known as “scopes.”
Scope 1: A company’s direct greenhouse gas emissions originating from a company’s owned assets

Scope 2: Indirect emissions from the generation of purchased electricity, steam, heating and cooling
Scope 3: Emissions from upstream and downstream activities in a company’s value chain
For a real estate owner doing business with a public company, Shadow Ventures speculates this would likely mean:
Scope 1: Emissions from building energy expenditure and other assets owned or controlled (vehicles, appliances, storage tanks, pipelines, wells, or other equipment directly by the company)

Scope 2: Purchased electricity or energy from assets owned or controlled by the company
Scope 3: Energy and water waste, materials purchases and inventory, construction waste, and emissions from all downstream suppliers and subcontractors.

Scope of greenhouse gas emissions (Source: Shadow Ventures)
It’s this last tier — Scope 3 — where things get interesting, industry insiders said. Landlords and developers would have to assess not only their own activities, but those of their whole ecosystem.

“I hope that this causes more pressure on our supply chain,” said Sara Neff, director of sustainability at Lendlease, a global developer and contractor. “I think this will create the market conditions to see more rapid innovation.”

Climate tech startups’ moment​

The SEC is finalizing aspects of the ruling and requesting comments by May. Some companies would be required to comply starting in fiscal 2023. Investors in the space predict brisk business for climate tech startups focused on the built environment.

Jennifer Place, a principal on the climate tech team at real-estate focused venture capital firm Fifth Wall, described the SEC’s proposal as a “wake-up call for the industry and a step in the right direction.” She identified four buckets ripe for startups: analytics, compliance, mitigation and carbon accounting. Companies have traditionally siloed carbon-impact reporting from the rest of their accounting. Now, Place said, it would be more integrated.

Place is watching to see if the big accounting firms such as PWC and EY develop their own climate-reporting frameworks or absorb or invest in startups specializing in that. Making climate-reporting frameworks mandatory also helps tackle another problem: Self-policing historically doesn’t lead to great outcomes.

“I hope this causes more pressure on our supply chain.”
Sara Neff, Lendlease
This ruling is really going to help companies become aware of what their carbon emissions are,” Lendlease’s Neff said. “You’re motivated to start reducing them and reducing environmental impact.”

Other fields ripe for innovation, according to Shadow Ventures, are building management systems, materials engineering, and technology that makes construction faster and more efficient.

Built-world startups with a climate-focused message have seen growing interest from both generalist and climate-focused VCs over the past year. Clarity AI, a platform for sustainability data, raised $50 million in a SoftBank-led round in December. Icon, a 3D home-printing startup, hit a valuation of just shy of $2 billion after a Tiger Global-led $185 million round in February; and Turntide Technologies, which builds energy-efficient electric motors, raised $80 million last March in a round led by Bill Gates’ Breakthrough Energy Ventures.

The SEC’s new regulations would accelerate and increase such bets on the space, the investors said.
Innovation and implementation will be the only way forward, Ness said. Actions such as purchasing carbon offsets and renewable energy certificates, which allow real estate operators to avoid tackling the embodied carbon in their portfolios, are becoming unfeasible because their prices are skyrocketing, and figure to rise further as the SEC proposal increases demand.

“It is getting increasingly expensive,” Neff said, “to buy your way out of this problem.”

David Goldsmith

All Powerful Moderator
Staff member

City eyes emissions-cap reprieve for some buildings​

Cap-and-trade off table, but other paths to Local Law 97 compliance in play​

Some property owners may get a break from the city’s stringent greenhouse gas rules.
At a City Council committee hearing Wednesday, the Adams administration laid out possible options for building owners who face an “insurmountable barrier” to complying with Local Law 97.

Such owners could have their fines reduced or their emission caps raised if they demonstrate that they have made every effort to meet the law’s caps.

The administration also floated the possibility of creating an alternative to penalties, such as allowing owners to instead help retrofit low-income housing. City officials are still working out whether that can be done under the existing law.
Carbon trading, which would allow building owners to buy credits from properties with lower emissions, will not be an option for building owners to comply with the law, at least for now.

Rit Aggarwala, the city’s chief climate officer and commissioner of the Department of Environmental Protection, emphasized the administration’s commitment to achieving the law’s goals.
“We have no intention of giving anyone a free pass or letting anyone off the hook,” the commissioner said in prepared testimony. “But we also see no benefit to the environment in punishing someone who is actually doing everything possible.”

The Adams administration has repeatedly hinted that adjustments to Local Law 97 may be needed. Under the 2019 measure, buildings larger than 25,000 square feet must meet greenhouse gas emission caps starting in 2024 and even stricter limits by 2030. Those who fail face a fine of $268 per metric ton of emissions over the limits. Some buildings would be on the hook for millions of dollars in penalties.

While some Council members were relieved that a carbon cap-and-trade program is off the table, some questioned whether building owners would be given too much leeway and if the city’s emission goals would be diluted.
“We need a very strong stick at the end of this,” said Brooklyn’s Lincoln Restler, adding that those who fail to abide by the law should have to “pay through the nose.”

New York Communities for Change, an organization that has opposed other suggested workarounds, warned against “gutting” the measure.
In prepared testimony, the Real Estate Board of New York once again called on the administration to reconsider the metric by which Local Law 97 evaluates buildings. The trade group argues that it will unfairly punish properties that are efficient but heavily used.

The group said the metric should instead be tailored more specifically to buildings and account for density, hours of operation, and building type. REBNY has also complained that fines will go into the city’s general fund rather than toward decarbonization. The group supports the idea of using the funds for below-market housing.

The administration is also looking at how the law applies to buildings with manufacturing space. The Department of Buildings has previously indicated that it is analyzing how the law should apply to supermarkets and other properties that must consume lots of energy.
The city is also looking to add funding sources to help building owners pay for retrofits. So far, only two buildings have used the green-financing tool C-PACE, one for $28 million and another for $89 million.

The private sector is not alone in struggling to meet emission targets. Aggarwala acknowledged that the pandemic disrupted the city’s plan to reduce by 40 percent emissions related to government operations by 2025.
He noted that the state just granted the Department of Citywide Administrative Services design-build authority, a method touted as a way to save time and money on projects.

“Over the next two years, everything has to go right: Every contract has to move on schedule, every construction project has to be on time, each supply chain has to work,” Aggarwala testified. “So the risk of failure is real.”
He added, “But if we do miss this target, it will not be because this administration has not taken it seriously.”

David Goldsmith

All Powerful Moderator
Staff member
Two Co-ops Learn the Cost of Gas vs. Electric Stoves

Electrification is the buzzword of the day. As co-op and condo boards struggle to reduce their buildings’ carbon emissions enough to comply with the Climate Mobilization Act, they’re being urged to abandon fossil fuels and embrace heat pumps, induction ovens and other appliances that are powered by electricity. As the electric grid becomes greener through a switch to renewable energy sources, the thinking goes, electrification will be a key to slowing climate change.
The gas-vs.-electricity debate comes into sharp relief from the tale of two New York City co-ops.
When a shareholder in an eight-unit co-op in Chelsea began gut-renovating his apartment in 2018, a pressure test of the cooking-gas line revealed a potential for leaks. With tightened gas line inspections looming, the co-op board faced a decision.
“We decided to invest in installing a new gas line through a single master meter in the basement,” says Henry Davis, secretary of the co-op board, noting that the co-op’s two buildings were built before World War I, and since their total square footage is less than 25,000, they don’t fall under the Climate Mobilization Act.
“We were able to run a single riser just outside the elevator, then run a pipe from the riser to each cooking device,” Davis adds. “Everyone unanimously agreed they wanted to keep their cooking gas. If you cook and bake a lot, there’s a certain instinct to use gas.”
The job cost about $150,000 for plumbers, contractors, engineers and architects, which was paid for with cash set aside when the board refinanced its underlying mortgage. “We don’t spend foolishly,” Davis says. “It was a capital investment.”

Meanwhile, a 40-unit pre-World War II co-op on the Upper West Side was taking a very different approach. “When the city tested the cooking-gas lines, we were told that if we wanted to keep our natural gas stoves, we would have to replace all the gas lines — which would have been a nightmarish and expensive ordeal — or we could switch to electric,” says Brian Scott McFadden, president of the seven-member co-op board. “It was not a difficult choice. The board voted unanimously to go the electric route.”
There was pushback. “It was minor,” McFadden says. “One or two people did not wish to change because they said flame heat is better for cooking.”
The changeover cost about $50,000, which was drawn from the co-op’s reserve fund. “It required a minor upgrade to the building’s electrical wiring,” McFadden says, adding that the board bought induction ovens for the two apartments the co-op owns, and he bought a Frigidaire induction oven for his own apartment. “It’s magical,” he says. “It boils water in eight seconds. How is that even remotely possible?”
Marc Weber of Weber-Farhat Realty manages both co-ops, and he makes no secret about which of the two solutions he prefers. “At the Chelsea co-op, they had to re-engineer the entire building,” Weber says, “upgrading and reconfiguring the gas lines. Then a contractor had to build a meter room in the basement. Scheduling access for contractors was an absolute nightmare. I never want to go through that again.”
There are additional considerations. “I would prefer to have cooking as in my own apartment,” Weber says. “But from a property management perspective, I prefer electric. It’s more cost-efficient, considering the gas line inspection regulations. And the city is making it more difficult for buildings to continue to use gas. The City Council just passed a law that will ban gas in newly constructed buildings. If there’s a book about how New York City went green, that law will be chapter one.”
And the Climate Mobilization Act will be the introduction.
At the Upper West Side co-op, the savings of money and aggravation are outweighing any misgivings about the loss of gas stoves. “We have not had any complaints,” McFadden says. “We dodged a bullet in an inexpensive way. People are giddy.”


David Goldsmith

All Powerful Moderator
Staff member

NY unveils “playbook” for building owners to cut emissions​

Time running short for landlords to comply with carbon caps​

With the clock ticking on owners of the city’s biggest buildings to cut emissions, the state has launched a resource to steer them through the process.
Dubbed the carbon neutrality playbook, the online guide outlines four steps for owners to reduce greenhouse gases without breaking the bank.

Gov. Kathy Hochul, joined by Mayor Eric Adams, announced it Thursday at the Empire State Building, which has gotten the green treatment from owner Empire State Realty Trust.

The tool’s launch comes two years before landlords of properties 25,000 square feet or larger must curb their carbon footprint or face fines of $268 for every metric ton that exceeds the limits imposed by the city’s Local Law 97.

Only the city’s highest emitters — about 20 percent of the building stock — will need to make significant changes to comply with 2024 caps. Stricter limits coming in 2030 will affect three out of every four buildings.
The playbook says owners should first create a dedicated team to spearhead portfolio-wide carbon cuts. The team should reach out to contractors who can estimate project costs, and run retrofit plans by tenants who may be disrupted by renovations.
The next step is a building analysis. The team should review architectural drawings, utility use, and mechanical, electrical and plumbing plans to inform an energy model — a breakdown of consumption and expenditures.

A point person should also evaluate when leases will expire; vacancies can be used to get work done.
Step three is the energy model, which identifies how the building performs during every hour of the year.
Finally, those findings will be used to craft an emissions-cutting roadmap that compares the costs of retrofit plans, calculates savings from avoided fines, outlines financing options and analyzes the long-term cost savings of renovations.
Within each step of the guide, the state has also included examples of retrofits planned or performed by L+M Development Partners, Hines, Empire State Realty Trust and Omni New York, who were chosen by the state to model energy refits.

The Durst Organization, the Real Estate Board of New York and others have argued that some buildings, despite being energy efficient, cannot economically comply with Local Law 97 because they are packed with tenants who rely heavily on servers.
But the state intends the four case studies to serve as proof that while retrofits are daunting, they can be done.

David Goldsmith

All Powerful Moderator
Staff member

Get Ready for Another Energy Price Spike: High Electric Bills​

Rates have jumped because of a surge in natural gas prices and could keep rising rapidly for years as utilities invest in electric grids.

Already frustrated and angry about high gasoline prices, many Americans are being hit by rapidly rising electricity bills, compounding inflation’s financial toll on people and businesses.

The national average residential electricity rate was up 8 percent in January from a year earlier, the biggest annual increase in more than a decade. The latest figures, from February, show an almost 4 percent annual rise, reaching the highest level for that month and approaching summer rates, which are generally the most expensive.
In Florida, Hawaii, Illinois and New York, rates are up about 15 percent, according to the Energy Department’s latest figures. Combined with a seasonal increase in the use of electricity as people turn on air-conditioners, the higher rates will leave many people paying a lot more for power this summer than they did last year.
The immediate reason for the jump in electric rates is that the war in Ukraine has driven up the already high cost of natural gas, which is burned to produce about 40 percent of America’s electricity. And supply chain chaos has made routine grid maintenance and upgrades more expensive.

What is particularly worrisome, energy experts said, is that these short-term disruptions could be just the start. They fear that electricity rates will rise at a rapid clip for years because utilities and regulators are realizing they need to harden electric grids against natural disasters linked to climate change like the winter storm that left Texas without power for days last year. Power companies are also spending more on new transmission lines, batteries, wind turbines, solar farms and other gear to reduce greenhouse gas emissions.

U.S. utilities could spend hundreds of billions of dollars in the coming years to repair and upgrade grids.

Almost all of those costs will filter down to monthly electric bills.

“This is an affordability emergency,” said Mark Toney, executive director of The Utility Reform Network, or TURN, which represents ratepayers in California, where rates in February were up 12 percent from a year earlier and utilities are asking regulators to approve further increases. “If you want to control inflation, one of the things you have to control is energy costs.”

Natural gas prices have surged in recent months as U.S. producers have sent more fuel to Europe, which wants to use less Russian gas. Utilities in a few places, like Hawaii and Puerto Rico, rely on some power plants fueled by oil, which has also become much more expensive. The price of coal, which accounts for roughly 20 percent of U.S. electricity, has gone up, too.

The Biden administration has been urging the industry to produce more oil and natural gas, but energy experts say it could take a year or two to significantly increase supplies.

A Critical Year for Electric Vehicles​

Demand for electricity is also rising because of climate change. The National Weather Service expects this summer to be hotter than average in most of the country. People who can least afford higher bills could feel the pain the most because most moratoriums on power shut-offs during the pandemic have ended. Last month, the White House sought to soften the blow of higher bills by making hundreds of millions of dollars available for home energy assistance.

“Consumers are going to pay the price for this,” said Gordon van Welie, chief executive of ISO New England, the electric grid operator in the Northeast, where electric rates are among the highest in the country. “The reality is we’re going to be dependent on gas for a very long time.”

Even the cost of wind turbines and solar panels, which had been falling for years, has risen recently because of supply chain problems. But analysts said that over the next decade those renewable sources should help tamp down energy costs, reducing the toll that volatile oil, natural gas and coal prices can take on family budgets and business profits.

The problem is that building new wind and solar installations and the related power lines and batteries will have an upfront cost.

“Wind, solar and hydro are exactly what you need,” said Mark Cooper, a senior fellow for economic analysis at the Institute for Energy and the Environment at Vermont Law School. “We should have been much further along in the transition, which we haven’t been.”

Relying more on the grid​

Residents of Massachusetts and other New England states have long endured some of the highest electricity rates in the country. Then in January, rates jumped again. And government forecasters say summer temperatures in the Northeast will be far above normal.

Natural gas sells for about two to three times as much as it did two or three years ago, when a glut sent prices tumbling. New England faces an additional challenge: It does not have enough pipeline capacity to import the fuel from producers like Texas or Pennsylvania.

Some cities and towns in Massachusetts are trying to rely less on gas, including by seeking to ban its use in new buildings. Local and state officials want builders, homeowners and businesses to switch to greener technologies like heat pumps, which operate on electricity, rather than a furnace powered by natural gas or oil. Massachusetts is also encouraging people to buy electric cars to reduce gasoline use.

While those technologies use less energy than furnaces and gasoline cars, they place new demands on the electricity network, forcing utilities to build more wind and solar farms and power lines, Mr. van Welie said. “You’re putting more and more of your eggs in the same basket, which is the grid,” he said.

As utilities spend more, rates will climb further. The national average residential electricity rate in the first two months of the year was nearly 14 cents per kilowatt-hour. In Massachusetts the average exceeded 25 cents in February. Hawaii topped all 50 states at more than 38 cents.

The Energy Information Administration, a federal agency, forecasts that rates a year from now will average about 15 cents a kilowatt-hour, or $150 a month for the typical household that uses 1,000 kilowatt-hours.

Power companies are spending more on new transmission lines, batteries, wind turbines, solar farms and other gear to reduce greenhouse gas emissions.Credit...Mason Trinca for The New York Times
Some people find that it can be hard to escape high energy bills, even when they conserve.

Thomas Popik moved to Arlington, Mass., a Boston suburb, from New Hampshire in December after buying a home that uses a heat pump. But Massachusetts’s electricity rates are so much higher than in New Hampshire, where they averaged about 22 cents per kilowatt-hour in February, that his monthly bills are about the same in a more efficient home.

Mr. Popik plans to add solar panels to further reduce his costs and environmental footprint. And if electricity rates continue to climb and service is unreliable during bad weather, he said, he may disconnect from the grid — an approach embraced by some residents of California.

“You’re going to see more and more people doing that kind of thing, especially if rates become unreasonable,” said Mr. Popik, who is the chairman and president of the Foundation for Resilient Societies, a nonprofit group that focuses on critical equipment and services like electricity, fuel, telecommunications and aviation. “Solar, battery, backup generator — under that paradigm, why should I be charged high electricity rates?”

Utility executives said they understood that growing frustration. Mr. van Welie of ISO New England said federal and state officials needed to come up with policies that lowered the cost of energy, including by using renewable energy more efficiently.

But in a highly polarized political system, there are few energy reforms that can win bipartisan support. President Biden’s signature energy and climate proposal has stalled in Congress because the measure has no Republican backing and Democrats have a narrow majority.

“It’s going to require government and regulatory direction, and that’s hard to get here in the U.S.,” Mr. van Welie said.

Renewable energy could help lower costs​

Rates in the first two months of the year were lower than a year earlier in fewer than a dozen states. Most were in the Midwest and Northwest — areas that rely extensively on wind or hydroelectric power, which tend not to be affected by the swings of global commodity markets.

In Oregon, for example, electric rates fell almost 1.5 percent in January and less than 1 percent in February, though some companies like Portland General Electric did raise rates modestly. Even so, rates at that utility remain well below the national average. The utility, the largest in the state, gets about 20 percent of its electricity from hydroelectric dams, 13 percent from wind turbines and 2 percent from solar panels.

The utility has also recently installed software to improve its ability to incorporate energy from sources like rooftop solar panels and batteries on a neighborhood-by-neighborhood and business-by-business basis. This gives the company more control and flexibility.

Many electric grid operators and utilities have not invested in such tools and cannot monitor and control small energy systems to choose — the lowest-cost renewables over the course of the day, taking into account whether the sun is shining and wind is blowing.

“We have been focused on renewable energy for over a decade, leveraging technologies to allow us to integrate ever-increasing amounts of renewables at the lowest cost for customers,” Maria M. Pope, the chief executive of Portland General, said in an interview.

In much of the United States, utilities are fighting the growth of rooftop solar. Regulators in California have proposed greatly reducing incentives for residential solar systems, though the measure has stalled because of opposition from the solar industry and homeowners. In Florida, Gov. Ron DeSantis recently vetoed a bill backed by utilities that would have effectively gutted incentives for rooftop panels.

Still, utility executives said they were cognizant that they couldn’t just keep raising rates, especially as more people used the grid to power electric cars and heat pumps.

Overall, the greater reliance on the electric grid will reduce costs, said Richard McMahon, senior vice president energy supply and finance at the Edison Electric Institute, a utility industry group. Electric cars and heat pumps, for example, will require less maintenance, do away with fill-ups at gas pumps and reduce heating bills.

“Customers are going to need to think bigger picture: What’s my total energy costs?” Mr. McMahon said.

The Energy Information Administration expects average electricity rates to fall to about 10.5 cents per kilowatt-hour by 2030 and roughly 10 cents by 2050 because of a greater use of renewable energy.

“This is a race between getting to the future and being stuck in the past,” said Mr. Cooper, the senior fellow at the Vermont Law School. “The future is less expensive.”

Noah Rosenblatt

Talking Manhattan on
Staff member
A good discussion every building board should listen to regarding Local Law 97

We've got a deep dive in store for you today. Orest Tomaselli of CondoTek and Elegran's Ben Willig take us into the weeds when it comes to the recently enacted (and soon to be enforced) Local Law 97. The spirit of the regulation is all about making buildings green, but the details can be complicated. With buyers and sellers always wanting to know more, this is a great bit of info to know! Highlights: 1:40 - What is Local Law 97? 3:55 - How are emissions reductions measured? 5:45 - What's with the building grades? 7:30 - What sort of financial impact are buildings looking at? 12:55 - "Shadow capital needs" - How can buyers examine potential impact before purchasing? 16:10 - What should buildings do now to prepare if they haven't already? 21:10 - Can carbon offsets help?


New member
I've been to a shocking number of open houses and showings where the brokers didn't even know what Local Law 97 was, much less what, if anything, a building was doing about it (perhaps this is feigned ignorance to not address the real issue, or perhaps people just don't know about it). Given the potential impact it could have on a building's financials in the near term, it's worrisome as a potential buyer that very few people seem to pay it any attention.

My question is: what kind of due diligence can a prospective buyer do? Especially when few brokers even know this law exists.

So far, I've been looking at the Local Law 33 energy efficiency grades (the A - D letter/number grades required to be posted publicly), but I've read that those scores use a different criteria from LL97, and that some buildings with an A might be out of compliance with LL97 and some with a D might be within compliance of LL97. Not to mention something like half of the residential buildings in NYC are graded either a D or a fail. My head is spinning.

What else should I be considering? I'm guessing the real information I seek lies within the coop/condo financials and the board minutes, which I cannot review until I have an offer accepting, right? Anything else to consider as a buyer right now?


David Goldsmith

All Powerful Moderator
Staff member
This is yet another issue which is going to lead to maintenance increases and assessments in Coops. View the multiple threads on this forum over the last 2 years regarding several issues all which point to inevitable increases.

Noah Rosenblatt

Talking Manhattan on
Staff member
This is yet another issue which is going to lead to maintenance increases and assessments in Coops. View the multiple threads on this forum over the last 2 years regarding several issues all which point to inevitable increases.
I've been to a shocking number of open houses and showings where the brokers didn't even know what Local Law 97 was, much less what, if anything, a building was doing about it (perhaps this is feigned ignorance to not address the real issue, or perhaps people just don't know about it). Given the potential impact it could have on a building's financials in the near term, it's worrisome as a potential buyer that very few people seem to pay it any attention.

My question is: what kind of due diligence can a prospective buyer do? Especially when few brokers even know this law exists.

So far, I've been looking at the Local Law 33 energy efficiency grades (the A - D letter/number grades required to be posted publicly), but I've read that those scores use a different criteria from LL97, and that some buildings with an A might be out of compliance with LL97 and some with a D might be within compliance of LL97. Not to mention something like half of the residential buildings in NYC are graded either a D or a fail. My head is spinning.

What else should I be considering? I'm guessing the real information I seek lies within the coop/condo financials and the board minutes, which I cannot review until I have an offer accepting, right? Anything else to consider as a buyer right now?

david has been great with awareness on the topic. We just did a interview with Orest Thomaselli of condotek, also trying to raise awareness as his company offers audits for buildings. Not shocked to hear the agents know very little about this, perhaps because its years away or that its a topic that agents tend to shy away from as it may affect deals?


New member
David, Noah, (and anyone else who may know),

Is there any city resource available right now that buyers can look at to determine what LL97 liability might be like? The fact the LL33 uses different criteria from LL97 makes that grade not the best indicator.

David Goldsmith

All Powerful Moderator
Staff member
Operating expenses on the rise again. I think there is little question this will lead to increased monthly charges in Coops/Condos.
Winter is coming: Landlords face brutal heating season

High fuel costs, volatile prices and a daunting forecast feed owner anxiety​

With temperatures dropping into the 40s in New York, landlords are cranking on the heat.
But given the rising cost of fuel, many already had the jitters.

“There’s a lot of anxiety going into this heating season,” said Aaron Weber, an owner at Weber Realty Management, which oversees 400 apartments across Manhattan and Brooklyn.
Last winter, landlords were slammed by natural gas bills as high as 60 percent above the previous year’s levels. Utility providers such as Con Edison blamed a colder season and rising energy costs.
Since September 2020, the price of natural gas has more than quadrupled, surging to $8.81 per million British thermal units, a 16-year high.

Now, ahead of the official Oct. 1 start to the city’s heat season, which runs through the end of May, ConEd warns commercial heating bills could jump another 28 percent, and National Grid projects prices could climb by 30 percent annually as an even more frigid winter pressures already tight supplies.
For many landlords — particularly, rent-stabilized building owners already hammered by inflation — the price pop will mean fiscal pain. Some buildings may not have the reserves to survive the winter in good financial standing.

The long game​

Landlords buy fuel in one of two ways: They lock in prices with multi-year contracts or pay market price each month.
Those entering the heating season mid-contract are in the best shape to weather recent price hikes.

Zachary Kerr, whose portfolio spans 1,000 units in Brooklyn, is about 18 months into a three-year agreement for natural gas. He’s paying around 46 cents per therm, a price he signed up for in 2021.
The move paid off handsomely: Natural gas prices in September rose to $1.08 per therm, according to National Grid.
But for owners with expiring contracts, the price jump will be a big budget hit.
“For owners who are coming out of contract, it’s like, how do you cope with that?” Kerr said.


Landlords on month-to-month plans likely won’t fare much better.
Weber, for example, arranges gas service for the owners of nearly 30 buildings. As a result, he opts to pay that monthly market price.

His management firm views gas contracts as a gamble with someone else’s money. “It’s like you’re betting in the casino that prices are gonna go up,” he said. “So if prices go down, we just look like assholes.”
Sometimes they do go down. During the fracking boom of the 2000s, natural gas prices plummeted. But few are predicting that now. Heading into heating season, natural gas futures have been exceptionally volatile, reflecting great uncertainty about what gas will cost in the coming months.
That means landlords without contracts risk a huge jump from one month to the next. For rent-stabilized building owners, who cannot raise rents to compensate, increases have become unsustainable.

“If gas prices stay the same, it’s a problem. If gas prices go up even more, it’s a major problem,” Weber said.

Rent dearth​

Come October, owners of stabilized apartments can bump the rent 3.25 percent on new one-year leases and 5 percent on new two-year leases.
But that won’t offset rising operating costs, which include utility expenses, a report last week by the landlord group Community Housing Improvement Program found.
When the Rent Guidelines Board penciled out the revenue boost owners would need to keep pace with costs, it estimated that fuel prices would dip by 1.7 percent. The board made a similar prediction last year, forecasting that fuel prices would grow by 0.1 percent and owners would need a 2 percent rent hike to keep pace with costs.

But the board voted for a half-year freeze last year, followed by a 1.5 percent hike. Fuel costs rose 19.6 percent during those 12 months, CHIP found.
“One of the things the board discussed before the vote was, ‘Well, we don’t need a larger increase because fuel costs are going to decrease,’” Kerr said. “But that didn’t happen.”
This year, CHIP estimates owners' gas expenses — about 7 percent of their overall costs — will run about $150 annually per unit.

Add that to jumps in interest rates, maintenance and insurance, and CHIP expects the average stabilized building owner will have annual operating income of $293 per unit — not enough to cover repairs.
If a boiler blows mid-winter, for example, a replacement runs $172,600, the state estimates. It would take a 50-unit building nine years to save up for the swap, the report finds.

Oil premium​

The 15 percent of city buildings still running on oil heat — typically, older properties offering affordable housing — face even more dire straits.
Over the course of the last heating season, prices for No. 2 heating oil surged over 127 percent from October to mid-May.

Weber said in January it cost about $6,034 to fill the tank of an HDFC co-op in Morningside Heights. By March, it cost $10,650.
“That was out of the blue,” Weber said. “We did not budget for that when we started the year.”
Luckily, a co-op owner in the building sold a unit, triggering a 5 percent flip tax.
“That saved them. They would have run out of cash if they didn’t have this flip tax income,” Weber said. “The timing was extraordinary.”
But the building likely won’t be able to swing another big price jump, the manager said. About 40 percent of its income goes toward fuel and most of the rest pays the mortgage.
Weber floated that the property could increase maintenance fees. “Otherwise, they’ll default on their mortgage,” he said.

“Record-breaking cold”​

Owners are also bracing for higher delivery fees. If a cold snap sets off a spike in demand, utility companies will charge a premium for transportation, a CHIP spokesperson said. The Farmer’s Almanac is projecting “potentially record-breaking cold” and greater than average snowfall for the Northeast.
Last February, Kerr paid $8,252 for the gas to heat one of his properties. Delivery fees were another $7,700.
“It’s not cheap,” Kerr said.
Couple those variables with the rising cost of doing business and for many owners, particularly smaller and rent-stabilized landlords, the months ahead are looking long and dark.
Even those who locked in prices for this winter know their comfort is temporary.

“I'm very fortunate going into this year that I'm going to be okay, on the gas side,” Kerr said. “But I don't know what's going to happen in a year and a half when my contract expires, and that worries me.”

David Goldsmith

All Powerful Moderator
Staff member

Proposed rules for emissions caps leave neither side happy​

Department of Buildings lays out how to calculate and offset building emissions​

The city has drafted rules for buildings to cut carbon emissions as the first deadline to do so rapidly approaches.
The Department of Buildings on Thursday proposed regulations for Local Law 97, including how to calculate a building’s energy use and emission limits and how property owners can offset emissions through renewable energy credits.

Building owners have a lot riding on the rules. They have been bracing for the law and seeking ways to comply with it before annual fines running into the millions of dollars begin in 2024.

The proposal states that property owners can purchase credits — which are generated by projects such as wind and solar farms — to offset the greenhouse gas emissions attributed to utility-supplied electricity. Most of that power comes from natural gas.
The provision is a blow to buildings that use far more natural gas and oil than electricity — typically, residential buildings with heating systems powered by fossil fuels. Owners of these buildings were hoping to use renewable energy credits to offset their carbon emissions and avoid Local Law 97’s large fines. If the draft rules are enacted, that will not be possible.

Commercial buildings that use a lot of electricity, such as those with data centers or trading floors, are not off the hook either. Although the draft rules would limit competition from residential buildings for renewable energy credits, there still will not be enough credits to go around when the law kicks in.
That is because the credits must be connected to New York City’s grid. No one expects many wind turbines or solar farms to appear in the five boroughs. However, projects outside the city that connect to its grid will be eligible.

Two such projects, the $11 billion Clean Path New York and the Champlain Hudson Power Express, will generate credits eligible for Local Law 97 offsets, but the law’s fines will kick in long before those projects come online. They are not even under construction yet.

The first set of emission limits under Local Law 97 apply in 2024, when buildings larger than 25,000 square feet must begin to meet stringent greenhouse gas emissions caps or face penalties. Stricter limits kick in six years later, and buildings citywide must reduce emissions by 80 percent in 2050.

To be sure, the environmental lobby is not happy with the proposed rules on renewable energy credits either. The green groups say they are too permissive and will give some building owners an alternative to cutting their carbon footprints through energy efficiency retrofits.
A coalition that includes Food & Water Watch, New York Communities for Change, New York Public Interest Research Group and Treeage is calling on the Adams administration to cap energy credits at 10 percent of a building’s total pollution or 30 percent of the emission volume above a building’s cap.

“If Mayor Adams allows building owners to ‘opt out’ of upgrading their buildings by buying renewable energy credits, the law will be gutted, eliminating thousands of jobs and leading to massive air pollution hazards,” the group said in a statement.
But the real industry argues that if building owners have an incentive to buy the credits, more clean-energy generation and transmission projects will be built. The credits can be a crucial part of such projects’ financing.

The industry has asked that property owners be allowed to use renewable energy credits generated outside the city. That proposal ultimately did not move forward.
The rules proposed Thursday also specify that owners cannot double dip on offsets for clean energy generated onsite. In other words, if they use energy credits for electricity generated by solar panels on the premises, they are not eligible for a separate deduction granted for producing clean energy onsite.

One real estate industry source said one helpful aspect of the proposal is that it lays out how to calculate a building’s carbon footprint. The math can be quite complicated, and the rules will aid building owners trying to figure out their exposure to fines under Local Law 97, and how to comply with the statute.

David Goldsmith

All Powerful Moderator
Staff member

NYC condos, co-ops face costly emissions bill​

Fines to hit big apartment buildings if they don’t decarbonize soon​

Mary Anne Rothman is concerned about Local Law 97 because it seems like nobody else is.
The ambitious law, passed in 2019, sets greenhouse gas emission caps for buildings across New York City. The biggest carbon producers — around 5,400 buildings — have until 2024 to get under their emissions caps. The rest of the top 75 percent of emitters have until 2030.

Buildings are responsible for 70 percent of New York’s globe-warming emissions, and multifamily buildings are the biggest culprits. Boilers, furnaces and water heaters alone make up 40 percent of New York’s carbon emissions.

But as the first compliance deadline nears, some co-ops and condominiums are struggling to line up financing and construction services to get legal before the law’s stiff penalties kick in.
Each building’s emissions limit is based on its size and type. Supermarkets, for example, can emit more than condos, because they need massive refrigerators to keep food from spoiling.

But one frightening constant applies to all buildings, regardless of how densely occupied they are: For each ton of emissions over the limit, the fine is up to $268.
“Everyone is not thrilled by this legislation,” said Rothman, executive director for the Council of New York Cooperatives & Condominiums, in something of an understatement.

The real estate industry has for years been seeking changes to the law, but the objections have come almost entirely from commercial property owners. Condos and co-ops have been virtually absent from the conversation.
Many members of that world don’t even know about the law. Rothman could not recall a single conversation about it with condo or co-op board members in the past eight months.

“What scares me most,” Rothman said, “is how few New Yorkers are tuned into this at this late date.”

People in glass houses​

New York’s taste for glass skyscrapers has made compliance complicated. In 2010 the city introduced its first energy code, which aimed to make construction more efficient. Apartments built since then use half as much fuel per square foot as those constructed before 1980, according to the Urban Green Council.

The city later passed more efficiency measures that have pushed builders toward green technology, such as better insulation and tighter building wrappers.
But, as Dutch architect Stefan Al writes in his book “Supertall” about modern skyscrapers, contemporary tastes have made it harder to design environmentally.
The taller a skyscraper gets, the more pressure its upper floors exert on lower ones. That’s why ancient architects built their tall structures with wide bases and smaller apexes. The tapering approach worked for the pyramids, but in a dense metropolis with expensive land like Manhattan, a developer has no room for a wide base to support an 80-floor highrise.

Instead, builders have to rely on one of the marvels of modern construction: concrete.
Today’s concrete is exceptionally strong: A table-sized slab of it in the half-mile-high Burj Khalifa could support the Eiffel Tower. But environmentally speaking, concrete is the emissions equivalent of a two-pack-a-day smoker.
Producing cement, the glue that binds concrete together, demands significant amounts of fossil fuel. All told, concrete is responsible for 5 to 8 percent of the world’s fossil fuel expenditures.

The good news for city buildings is that past emissions from construction do not count toward Local Law 97 limits. The bad news is that retrofitting old properties built before energy efficiency was a thing is ghastly expensive.
Newer ones have their own emissions issues. Glass towers that climb hundreds of feet into the air and bake in unobstructed sunlight require powerful air conditioning systems. Air conditioning accounts for 10 percent of U.S. emissions.

One57, the Extell Development Billionaires’ Row condo tower that launched the Manhattan supertall boom, emits more than 5,600 tons of carbon a year, according to the latest city benchmarking figures (current through 2020). But Local Law 97 allows One57 no more than 5,000 tons. That means the building could be fined $200,000 a year.

Zeckendorf Development’s 15 Central Park West, one of the city’s most lucrative condos ever, appears to be nearly 125 tons past its limit. That comes out to a $33,000 fine.
But those are rounding errors for new, ultra-luxury buildings, where monthly common charges for a single apartment can be five figures.

Age before beauty​

Older condominiums not sealed as tight as new construction face a steep climb to get in shape for Local Law 97. Marc Schwartz, a member of the 1235 Park Avenue condo board, views his 60-unit, 1928 building like an aging parent.

“My dad’s around the same age, and they’re both constantly in need of a bypass or something,” Schwartz said. Orsid, the building’s property manager, approached Schwartz in 2019 to tell him the building needed to get its act together.
The building brought on a contractor to identify how it could reach compliance. Since then, the board has added small efficiencies as maintenance needs arise: better insulation to accompany a new roof and modern steam heating valves, for example.

“A lot of the work we did 10, 15 years ago is now coming back to help us,” Schwartz said. “But if you had to do all this at once, it’s a big problem.”
Orsid launched an information blitz to get the nearly 200 co-ops and condos it manages up to speed with the law’s deadlines. “People think, ‘Oh, compliance, I just need to check a box,’” said Dennis de Paola, an executive at the company. “That’s not how this works.”

It can be particularly difficult for condos, where residents own their units rather than shares in the building, and may be resistant to change. There can also be delays in financing and difficulty lining up contractors.
At a recent question-and-answer session, city employees ran 17 attendees through various ways to finance retrofits. While there are plenty of options — through Con Ed, NYSERDA, HPD and others — owners seem inundated with information, if they are paying attention at all.

It can even be complicated for public officials whose jobs revolve around housing. Pierina Sanchez, who chairs the City Council’s Housing and Buildings Committee, lives in a 75-unit co-op, one of the buildings that must reduce its emissions by the 2024 deadline. Sanchez says they lack the engineers to help get into compliance.
“I personally feel the pain, along with my neighbors,” Sanchez said. She said raising even a couple hundred dollars per unit could be “catastrophic” to a senior on a fixed income.

David Goldsmith

All Powerful Moderator
Staff member

Hundreds of building owners get undeserved “F” energy grades​

Error in Con Edison data reporting: DOB​

Hundreds of New York City buildings were slapped with F letter grades for energy efficiency last week, but the city says the fault for the bump in failures lies in Con Edison’s reporting.
Several hundred buildings received the failing grade by mistake, the Department of Buildings’ Andrew Rudansky told The City. Those grades are being pinned on data reporting errors by the utility company, which said it is working to resolve the issues.

According to the grading system, a D is actually the worst a building can do because an F means the property didn’t submit data. Updated scores could be released next month.

Landlords have previously taken issue with the system, saying the grades can spark shame around their properties.
Those who fail to post their score publicly were subject to a $1,250 fine at the end of October, but Rudansky said those waiting for an adjustment on their F won’t be penalized for failing to post. Nearly 2,000 addresses received Fs in the last month, roughly 10 percent of all new grades.

Grades are calculated using an Energy Star metric that compares the energy consumption of buildings across the country with similar densities and uses. They became required when Local Law 95 passed in 2018; buildings with 20,000 square feet or more are subject to the regulation.

Beyond the reporting snafu, energy efficiency appears to be improving slightly throughout the city. In 2021, 20.1 percent of buildings earned an A and 16.5 percent earned a B. Preliminary data for this year scores the A share at 20.5 percent and Bs at 17.2 percent. Meanwhile, buildings with a D grade dropped by 3.6 percentage points.

While landlords only get fined for failing to post their grades, another environmental law coming into effect soon has more bite. Starting in 2024, Local Law 97 will subject building owners to a fine of $268 per ton of greenhouse gas emissions above a certain threshold.

David Goldsmith

All Powerful Moderator
Staff member

Multifamily faces stricter emission caps​

Proposals for Local Law 97 also have some wins for real estate​

Multifamily building owners may need to slash emissions even more than they thought.
Proposed rules for the city’s Local Law 97 lay out emission caps for 60 different property types, modeled after the Energy Star Portfolio Manager, a federal program that owners already use for reporting energy use.
The law’s original language had only 10 building types. The expansion to 60 is viewed favorably by the industry, which had complained about buildings being forced to meet standards for very different properties.

But the proposed rules include another change: In 2030, the coefficient used to calculate the cap on carbon emissions for multifamily properties is reduced by nearly 20 percent compared to the law’s language.
That means owners will need to reduce emissions even more, or face fines.
Lower emission caps for certain office and life-science properties are also of concern to the industry, given the already unstable nature of investment and leasing in commercial spaces.

Property owners, environmental advocates and others are expected to sound off on these issues at a hearing today.
“While the proposed rules include several positive features, the rules also mandate even more stringent emissions standards without providing the tools that will help owners reach those targets,” Zachary Steinberg of the Real Estate Board of New York said in a statement.

Another point of interest is how renewable energy credits can be used to offset building emissions. The use of such credits is not capped, a fact that environmental advocacy groups have said “guts” Local Law 97 and will lead to owners opting to buy credits rather than upgrade their buildings.
A coalition that includes Food & Water Watch, New York Communities for Change, New York Public Interest Research Group and Treeage has called on the Adams administration to cap energy credits at 10 percent of a building’s total pollution or 30 percent of the emission volume above a building’s cap.

City Council members have also referred to the limitless use of credits as a dangerous loophole that threatens the effectiveness of the law, according to the Daily News.
But there are significant restrictions on credits: They can only be used to deduct emissions generated by electricity, meaning that emissions from fossil fuels burned for heat and hot water in residential buildings are not eligible.

The credits also have to be sourced locally, and few if any are available in New York City. Some could become available from two projects expected to start delivering renewable energy to the city in 2026 and 2027.
Urban Green Council projects that sufficient credits should be available “to nearly meet or even exceed the maximum demand” by 2030. The group estimates that more than one quarter of the city’s multifamily properties and two-thirds of office properties above their 2030 caps can get under them with credits alone.

The group, whose board includes industry figures, recommends letting property owners offset their emissions by funding electrification of affordable housing projects. Similarly, City Comptroller Brad Lander on Monday recommended letting owners of over-the-cap buildings pay into an affordable housing fund rather than be fined. The fund would help with retrofitting rent-stabilized buildings.

Lander’s recommendation addresses industry’s complaint that fines would go into the city’s general fund rather than toward fighting climate change. But he also recommends limiting the use of renewable energy credits, which help fund clean-energy projects. DOB officials have indicated that the agency is interested in further limiting the use of credits, either through additional rule or a separate law.

The city’s proposed rules would be a reprieve for some building types, including grocery and other high-energy-use stores. These stores were previously lumped in with other retail, but are given separate categories and caps under the proposed rules. Store owners lobbied the city for the change.
The proposals leave some questions unanswered. For example, the industry is still waiting for the city to offer other options for offsetting emissions.