Energy Efficiency (or Energy Aligned) Leases

Existing commercial buildings offer substantial opportunities to save energy and reduce carbon emissions. Yet landlords often defer opportunities to invest in commercial building retrofits that appear to generate strong financial returns, because leases fail to align the initial cost of energy efficiency improvements with the benefit of energy savings. This "split incentive" for operating efficiency is a result of standard leasing practices for commercial buildings in many major metropolitan areas, under which tenants are typically the primary beneficiaries of decreased operating expenses resulting from energy efficiency improvements implemented by landlords.

CMI is engaged in a number of efforts to facilitate the adoption of the energy aligned lease solution in New York City (and other major metropolitan areas).

Guidance

CMI has published Energy Efficiency Lease Guidance, developed in collaboration with Cycle-7 and HR&A Advisors as the result of a three-day Green Lease Forum hosted by NRDC in 2009. We will continue our efforts at broad distribution of this Guidance.

Dissemination

CMI is serving on a New York City task force supporting the NYC Mayors Office of Long-Term Planning and Sustainability (OLTPS) in their initiative to craft and disseminate model energy aligned lease language. On April 5, 2011, Mayor Bloomberg announced the signing of the first commercial lease incorporating an energy aligned clause based upon the OLTPS model language. The city also committed to use the clause in all future leases for city-tenanted properties. CMI will continue to work with the OLTPS task force to implement widespread adoption of energy aligned provisions in commercial leases. To further adoption of the model lease provision, CMI worked with OLTPS to develop:

  1. an Excel-based modeling tool that analyzes the cost/benefit allocation between landlord and tenant of various hypothetical retrofit projects, utilizing the energy aligned lease strategy, and
  2. a Powerpoint presentation detailing the energy-aligned lease provision and the modeling results of a number of different retrofit scenarios.

Cooperation

CMI is collaborating with OLTPS, the Washington DC Downtown Business Improvement District and several supporting partners, including the Center for American Progress, CERES, ULI Greenprint Foundation and the US Green Building Council, as part of the 2011 Clinton Global Initiative-America convention in Chicago, to identify and persuade major building owners, tenants and property managers to commit to work with each other during commercial leasing transactions in order to optimize the efficiency of commercial buildings (e.g., by including energy aligned lease language, and by integrating high performance tenant space build-outs with central building system retrofits that will together achieve deep energy savings).

Training

NRDC has teamed with the Environmental Defense Fund to engage Cycle-7 as a consultant, to develop an energy-efficiency lease training program and curriculum based on the NRDC Energy Efficiency Lease Guidance. The team is currently in the process of rolling out the training presentation for use with large commercial tenants, landlords, attorneys and leasing agents in New York City and a number of other cities nationwide.

Collaboration

CMI is collaborating with the Greater Philadelphia Innovation Cluster – the DOE-funded building efficiency regional hub – to develop a green lease initiative for the greater Philadelphia metropolitan region, based upon the energy aligned lease solution.

Resources

Energy Efficiency Lease Guidance

Energy-Aligned Lease Language Model

Energy Efficiency Lease Pledges:

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