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Valuation Techniques
of High P f
 f Hi h Performance
“Green” Real Estate
 Green
James Fi l
J     Finlay
VP, Commercial Appraisal Manager
Wells Fargo - RETECHS

UCLA – Real Estate Market Analysis
“Green Development/Valuation”
August 23, 2010
Mark S Ruff, Marcus & Millichap
Wells Fargo Environmental Commitment


 July 2005: announces 10-point environmental
  commitment


 Environmental Initiative Team
   My role: appraisal management, risk analysis, trends


 M
  More than $3.25 billion for high performance
       th   $3 25 billi   f hi h      f
  designed projects – LEED, Energy Star, solar



                                                           V6   1
Wells Fargo Environmental Finance Report




                                           2
Presentation goals:
 Overview of Appraisal-valuation problem, solutions
 Will apply standard appraisal methodology
       app y a da d app a a         odo ogy
   3 Approaches to Value – Income, Comparable Sales, Cost
 Look at key value/risk differences between
            y      /
   Energy efficiency
   On-site power generation like solar photovoltaic [PV]


 Differences in Scopes of Work w/major property groups
  1. SFR
  2. Small commercial/investment
  3. Large commercial/investment
                                                             3
Integrated building design = High Performance

 LEED is a site specific design spec
   a rediscovery of resource limitations and conditions of place


 Old school = Design, Bid, Build
        h l    D i     Bid B ild
   Inside the parcel, today’s purpose only


 New school = Integrated design, charrette team
   Inside & outside the parcel. Today’s and tomorrow’s use
                                 Today s     tomorrow s


 Balanced building systems
                  g y
   Envelop and HVAC, lights and daylight

                                                                    4
Breaking down & defining the valuation question

  Fundamentally: Is it worth more, valued higher?
    Retrofit or new construction: appraisal process is the same
    Same fundamentals of worth as any other property


  Need to identify the specific value points of high
   performance property so they can be measured
  Still being clarified, not clearly understood/defined

  Framing the problem is the first step
  Appraisal needs to use standard tools and methods

                                                                   5
Three Appraisal Approaches –
         goal is to mimic the market
I
 Income Approach: best to frame the problem
        A      h b tt f         th     bl
   Comparable to stocks, bonds, other investments; pure



 Sales Comparison Approach: intuitive, but
  weakened by lack of Close, Recent, Similar data


 Cost Approach: simple, sets bottom bar. Good
  studies exist for home upgrade cost value
                                 cost-value

                                                           6
Income Approach - Four Influences to Value
 Income based value analysis is most “granular”
 Has
 H 4 major worth categories:
       j      th t      i
    1. Income
    2. Vacancy
    3. Expenses
    3 E
    4. Risk
 Under each category are more specific elements.
 Evident in the investment discounted cash flow
                                                   7
Identifying Specific Elements of Value

 Discounted cash flow [DCF] software programs like
  Argus have dozens of data input fields
 Cover all facets of a 10-year investment holding period
 F
  From these many inputs, certain specific fields are most
        th          i   t    t i      ifi fi ld          t
  influenced by high-performance design:

                The Green 14
 This number of DCF software input fields is
  approximate. Input influence might go up or down or
  be similar to “normal” buildings

                                                             8
The Green 14
                             VALUE

INCOME        VACANCY              EXPENSES         RISK

Market Rent   Absorption           Utilities        Discount rate
              Stabilized Vacancy   Maintenance      Terminal Cap rate
              Tenant retention %   Management
              Lag Vacancy
                g       y          Marketing
                                           g
              Tenant improvemts    Insurance
                                   Property taxes



                                                                        9
Re-useable demising walls – LifeSPACE, Hayworth
Speed, flexibility, extended economic life, rapid depreciation at a first cost premium of 2%




                                                                                               10
Intangible Value - Trophy, Quality , brand labeling
 Reputational value is a key corporate asset
 Identity branding is similar in real estate
  Identity,
 Appraisals recognize positive and negative reputation


 “Trophy value” for architectural design, unique location
 Branding value of LEED Energy Star has value
                    LEED,
    Greater value from strict, high confidence standards


 “Stigma is negative reputation: the “brown” building
  discount for poor interior environmental quality, high
                                           quality
  energy use
                                                             11
The Green 14        plus   One
 On-site power generation is the +One factor
 Goal now is to get to Net Zero Energy

 Distributed power produces a measureable,
  p
  predictable, easily comparable/valued output
                    y    p                 p

 Power has far lower prediction risk than EE
  [Energy Efficiency]



                                                 12
Why appraising on-site power is easier than EE
 Energy efficiency [EE] value is projecting a worth today
  of something in the future that does not happen
 EE highly impacted by occupancy, use, operations
 Financing p p
          g proposed EE = chicken & egg problem
                                     gg p
 Because EE is tough to prove, it needs lots, lots of data


 On-site power value is based on easily measured output
 Specific utility comparable energy rate
 Consistent + easy measure + known price = low risk =
  higher value
 Defined risk allows financing to happen
                                                              13
Three value “points of view” for distributed power in
                    an appraisal
  Example: Solar PV
   1. True First Cost for Initial Investment – Establishes true, all in,
      out-of-pocket cost basis. Lots of tax issues.
    Value in Exchange, worth to the next buyer, loan
    V l   i E h           th t th      tb       l
     collateral
   2.
   2     Sophisticated – 25 35 year discounted cash flow
                         25-35
   3.    Simple – quick, back of envelop method

  Watch for big culture differences per property classes:
        1. SFR
        2.
        2 Small commercial/investor
                 omme ial/in esto
        3. Large commercial/investor
                                                                           14
DCF is detailed, but complex - Two Simple Income
  based valuation methods for EE or solar PV
 First determine the reliable annual energy saving –

 1. Debt relief offset; varies by mortgage interest
     @ 5% mortgage:     value = 20x annual energy savings
    Published in Appraisal Institute Journal 1998


 2. Investment rate of return
     @ 10% rate of return:   value = 10x annual energy saving
    Power Purchase Agreements, large solar deals

  Market value might be somewhere between them

                                                                15
Cost Approach value of Efficiency upgrades
 Cost does not equal value. True, but it matters
 Null hypothesis false:“Don’t know” does not equal zero
   u    ypo        a      o      o   do    o qua       o
 Cost basis shown to be important for setting baselines
  for both EE and distributed power values
                              p
 Long-lived upgrades that save energy, add quality and
  extend life include 2 value components
                                 p
   Value during holding period and the Value at sale (residual)
 Simple ROI (Return on Investment) often presumes
  the value at sale is zero; which is wrong
   “What if I sell the house in 5 years, but ROI is 7 years?”
 Ignoring value at resale is a mistake, is not “credible”

                                                                   16
Cost Approach
 Studies of unsophisticated owners/investors show cost
  app oac s st o g
  approach is a strong influence & measure of worth
                           ue ce    easu e o    o t


 Hanley-Wood’s “Remodeling Magazine” Cost vs Value
  Hanley Wood s Remodeling Magazine           vs.
  Report. 33 projects, 80 cities. Over 10 years
   2009-10 report
   National averages
   60% have resale range between 65%-85%
   Range 50.7% to 128.9%, average 70.0%
   Windows replacements average 74%
   Back up generator 58 9% ($14,304 installed)
    Back-up           58.9% ($14 304


                                                          17
Sales Comparison Approach
                     p        pp

 Not much is Close, Recent, Similar
 But let’s consider solar PV panels (kind of a Cost basis)

 Used panels on the curb per eBay last night      (5/24/2010)
   Sharp 175 watt 24 volt used, 4 yrs old $300 vs. $560 = 54%
   Evergreen ES-190 190 watt 6 mos $460 vs. $968 = 48%
               S 90 90              $ 60             8%
   Mitsubishi PV-MF165 164 watt (vs 185) $355 vs $550 – 65%


 Check eBay values, other re-seller sites on-line
   Higher incident of thefts
      g


                                                                 18
Managing appraisal process, reviewing the report

 Find best local appraiser – competent, open
 Generally is not experienced in HP property
       a y      o    p       d       p op y
 I interview the property “champion” and get as
  much info as possible about bldg features, design
                p                g         ,     g
 Assist appraiser, supply articles, information
 Show where the null hypothesis is incorrect
 Appraiser determines final value
 Review appraisal, 95% of which is typical
         appraisal
 I might value the “wasting” items like incentives or
  on site
  on-site power (solar PV) if not done by appraiser
 Timing and fee delta: plus a week, +10% fees
                                                         19
Many are watching the upside, but bigger impact
                 is downside
                 i d     id
 Conversation today often about upside, value increase

 But the real pain is in the downside of “brown” design

 The “New Normal” is tipping with occupant expectations

 Brown = premature functional obsolescence
   Oversized floor plates, limited flexibility, poor light & air, energy
                    plates          flexibility               air


 Portfolios being purged of difficult-to-green buildings
                 gp g                     g            g


                                                                            20
Moving forward, watch for:
 Standardized audit report –
   Green PCA or Resource Appraisal Report is needed
   Energy, Water, Waste, Carbon/GHG + IEQ

 R l time di l
  Real ti  disclosure, smart meters – TED 5000
                           t   t
 Social competition – Google Power Meter

 Carbon price risk is coming –
   SRECs in New Jersey
                      y

 Major new financing option – On property or energy bill
     PACE property tax lien, CA AB 811

                                                            21
Energy Measures




                  22
Role of Behavior Economics in
         Resource/Energy Efficiency
         R         /E      Effi i

H
 Humans react t stimulus : personal & social
            t to ti  l            l      i l

E
 Energy/environment f db k di l
        /   i       t feedback displays
 leverage devices that monitor & measure
  Prius mpg display – both real time and historic


 Feedback and display taps competitive nature,
  social prestige pressure (+ or -)


                                                     23
Ambient Devices Energy Orb ~ Making electricity
visible.
visible SCE test with 120 customers got a 40% reduction in
peak electric power use, more than numerical display




                                                             24
Human productivity & biophilia : powerful &
  complex value issues of high performance features

Productivity - Hundreds of studies show positive
           y                              p
  reactions to natural daylight, good air, natural views
 Healthier, happier, more productive
 Attracts and keeps talented workers


Biophilia – our hard wired reaction to the natural world
 Waterfalls, vistas, wildlife views, fireplaces all trigger
  human reactions, demonstrate the value of nature
 Grassland = herbivores = protein = survival
                           p


                                                               25
Closing thoughts
                    g     g

 Th
  There are no ex-environmentalists.
                     i      t li t


 The exact impact of a clean, well lighted
  space may not be known, but it is not zero.
   p       y               ,


 High performance design is the New Normal
                                     Normal.



                                                26
Thank you!
              James Finlay
               213 614 4850
               213-614-4850
       James.F.Finlay@WellsFargo.com
                Im
                I’m LinkedIN

Chair, Commercial RE & Finance Subcommittee,
      US Green Building Council LA Chapter

             General questions:
    Environmental.Affairs@WellsFargo.com
     http//Blog.WellsFargo/Environment
                                               27
Links, more info.
1.   Green Building Finance Consortium GreenBuildingFC.com - Underwriting
     Sustainable Property, by Scott Muldavin. Exhaustive resource, huge bibliography,
     free, constantly updated
2.
2    PACENow.org – tracks developments with PACE fi
     PACEN             k d    l         ih       financing
                                                       i
3.   US Green Building Council National – Commercial RE Newsletter
4.   US Green Building Council, LA Chapter, Commercial RE & Finance subcommittee –
     join h
     j i other real estate transaction professional
                  l                i      f   i   l
5.   Precourt Energy Efficiency Center, Stanford - Annual conference on Behavioral
     Economics and EE
6.
6    UC Davis Energy Efficiency C t
        D i E        Effi i     Center
7.   Periodicals: “Dwell”, “Natural Home”, “Green Source” by McGraw Hill
8.   My occasional blog:   GreenPeriscope.com
9.   Dept of Energy EERE newsletter http://apps1.eere.energy.gov/news/enn.cfm
10. Envir Valuation & Cost-Benefit News - http://www.envirovaluation.org/index.php
11. Environmental design + construction magazine/website http://www.edcmag.com/




                                                                                        28
31 Tannery Rd, Branchburg, NJ
First net zero electric commercial bldg in US




                                                29
Net Zero - 31 Tannery Road, New Jersey
 Efficiency + Energy + real time monitoring
 http://www7.nationalacademies.org/ffc/John_Grabowski.pdf

 Built 2006, 41,508 SF, light industrial, 37% office,
  owner occupied, operated
 Yr to date 11/2007, 11/2008 Energy Star 100, net
  positive electric (101%)
 Net energy -
      BTU/SF = kWh + gas therms = 83% on-site
 $/SF indust avg $2.49; Actual $0.49/SF


 With SRECs = + $1.11/SF positive income

                                                             30
The “Rosenfeld” energy efficiency unit – UC Davis
 Named for Art Rosenfeld started working on energy issues at
  Berkeley Lab in 1974 and is often credited with being
  personally responsible for billions of dollars in energy savings.
 the “Rosenfeld effect” explains why California’s per capital
  electricity usage has remained flat since the mid-1970s while
  U.S. usage has climbed steadily and is now 50 percent h h
    S          h    l b d      dl     d         0          higher
  than it was 40 years ago.
 Environmental Research Letters to define the “Rosenfeld” as
       o     e ta esea c       ette s   de e t e     ose e d
  electricity savings of 3 billion kilowatt-hours per year, the
  amount needed to replace the annual generation of a 500
  megawatt coal fired power plant
              coal-fired         plant.
 He is also behind “Rosenfeld’s Law,” which states that the
  amount of energy required to produce one dollar of economic
  output has decreased by about 1 percent per year since 1845.

                                                                      31
CA vs. USA energy use per capita




                                   32

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GREEN 14: High Perf Bldg Apprasial Techniques UCLA-08-23,2010 -J Finlay8

  • 1. Valuation Techniques of High P f f Hi h Performance “Green” Real Estate Green James Fi l J Finlay VP, Commercial Appraisal Manager Wells Fargo - RETECHS UCLA – Real Estate Market Analysis “Green Development/Valuation” August 23, 2010 Mark S Ruff, Marcus & Millichap
  • 2. Wells Fargo Environmental Commitment  July 2005: announces 10-point environmental commitment  Environmental Initiative Team  My role: appraisal management, risk analysis, trends  M More than $3.25 billion for high performance th $3 25 billi f hi h f designed projects – LEED, Energy Star, solar V6 1
  • 3. Wells Fargo Environmental Finance Report 2
  • 4. Presentation goals:  Overview of Appraisal-valuation problem, solutions  Will apply standard appraisal methodology app y a da d app a a odo ogy  3 Approaches to Value – Income, Comparable Sales, Cost  Look at key value/risk differences between y /  Energy efficiency  On-site power generation like solar photovoltaic [PV]  Differences in Scopes of Work w/major property groups 1. SFR 2. Small commercial/investment 3. Large commercial/investment 3
  • 5. Integrated building design = High Performance  LEED is a site specific design spec  a rediscovery of resource limitations and conditions of place  Old school = Design, Bid, Build h l D i Bid B ild  Inside the parcel, today’s purpose only  New school = Integrated design, charrette team  Inside & outside the parcel. Today’s and tomorrow’s use Today s tomorrow s  Balanced building systems g y  Envelop and HVAC, lights and daylight 4
  • 6. Breaking down & defining the valuation question  Fundamentally: Is it worth more, valued higher?  Retrofit or new construction: appraisal process is the same  Same fundamentals of worth as any other property  Need to identify the specific value points of high performance property so they can be measured  Still being clarified, not clearly understood/defined  Framing the problem is the first step  Appraisal needs to use standard tools and methods 5
  • 7. Three Appraisal Approaches – goal is to mimic the market I Income Approach: best to frame the problem A h b tt f th bl  Comparable to stocks, bonds, other investments; pure  Sales Comparison Approach: intuitive, but weakened by lack of Close, Recent, Similar data  Cost Approach: simple, sets bottom bar. Good studies exist for home upgrade cost value cost-value 6
  • 8. Income Approach - Four Influences to Value Income based value analysis is most “granular” Has H 4 major worth categories: j th t i 1. Income 2. Vacancy 3. Expenses 3 E 4. Risk Under each category are more specific elements. Evident in the investment discounted cash flow 7
  • 9. Identifying Specific Elements of Value  Discounted cash flow [DCF] software programs like Argus have dozens of data input fields  Cover all facets of a 10-year investment holding period  F From these many inputs, certain specific fields are most th i t t i ifi fi ld t influenced by high-performance design: The Green 14  This number of DCF software input fields is approximate. Input influence might go up or down or be similar to “normal” buildings 8
  • 10. The Green 14 VALUE INCOME VACANCY EXPENSES RISK Market Rent Absorption Utilities Discount rate Stabilized Vacancy Maintenance Terminal Cap rate Tenant retention % Management Lag Vacancy g y Marketing g Tenant improvemts Insurance Property taxes 9
  • 11. Re-useable demising walls – LifeSPACE, Hayworth Speed, flexibility, extended economic life, rapid depreciation at a first cost premium of 2% 10
  • 12. Intangible Value - Trophy, Quality , brand labeling  Reputational value is a key corporate asset  Identity branding is similar in real estate Identity,  Appraisals recognize positive and negative reputation  “Trophy value” for architectural design, unique location  Branding value of LEED Energy Star has value LEED,  Greater value from strict, high confidence standards  “Stigma is negative reputation: the “brown” building discount for poor interior environmental quality, high quality energy use 11
  • 13. The Green 14 plus One  On-site power generation is the +One factor  Goal now is to get to Net Zero Energy  Distributed power produces a measureable, p predictable, easily comparable/valued output y p p  Power has far lower prediction risk than EE [Energy Efficiency] 12
  • 14. Why appraising on-site power is easier than EE  Energy efficiency [EE] value is projecting a worth today of something in the future that does not happen  EE highly impacted by occupancy, use, operations  Financing p p g proposed EE = chicken & egg problem gg p  Because EE is tough to prove, it needs lots, lots of data  On-site power value is based on easily measured output  Specific utility comparable energy rate  Consistent + easy measure + known price = low risk = higher value  Defined risk allows financing to happen 13
  • 15. Three value “points of view” for distributed power in an appraisal  Example: Solar PV 1. True First Cost for Initial Investment – Establishes true, all in, out-of-pocket cost basis. Lots of tax issues. Value in Exchange, worth to the next buyer, loan V l i E h th t th tb l collateral 2. 2 Sophisticated – 25 35 year discounted cash flow 25-35 3. Simple – quick, back of envelop method  Watch for big culture differences per property classes: 1. SFR 2. 2 Small commercial/investor omme ial/in esto 3. Large commercial/investor 14
  • 16. DCF is detailed, but complex - Two Simple Income based valuation methods for EE or solar PV First determine the reliable annual energy saving – 1. Debt relief offset; varies by mortgage interest @ 5% mortgage: value = 20x annual energy savings  Published in Appraisal Institute Journal 1998 2. Investment rate of return @ 10% rate of return: value = 10x annual energy saving  Power Purchase Agreements, large solar deals  Market value might be somewhere between them 15
  • 17. Cost Approach value of Efficiency upgrades  Cost does not equal value. True, but it matters  Null hypothesis false:“Don’t know” does not equal zero u ypo a o o do o qua o  Cost basis shown to be important for setting baselines for both EE and distributed power values p  Long-lived upgrades that save energy, add quality and extend life include 2 value components p  Value during holding period and the Value at sale (residual)  Simple ROI (Return on Investment) often presumes the value at sale is zero; which is wrong  “What if I sell the house in 5 years, but ROI is 7 years?”  Ignoring value at resale is a mistake, is not “credible” 16
  • 18. Cost Approach  Studies of unsophisticated owners/investors show cost app oac s st o g approach is a strong influence & measure of worth ue ce easu e o o t  Hanley-Wood’s “Remodeling Magazine” Cost vs Value Hanley Wood s Remodeling Magazine vs. Report. 33 projects, 80 cities. Over 10 years  2009-10 report  National averages  60% have resale range between 65%-85%  Range 50.7% to 128.9%, average 70.0%  Windows replacements average 74%  Back up generator 58 9% ($14,304 installed) Back-up 58.9% ($14 304 17
  • 19. Sales Comparison Approach p pp  Not much is Close, Recent, Similar  But let’s consider solar PV panels (kind of a Cost basis)  Used panels on the curb per eBay last night (5/24/2010)  Sharp 175 watt 24 volt used, 4 yrs old $300 vs. $560 = 54%  Evergreen ES-190 190 watt 6 mos $460 vs. $968 = 48% S 90 90 $ 60 8%  Mitsubishi PV-MF165 164 watt (vs 185) $355 vs $550 – 65%  Check eBay values, other re-seller sites on-line  Higher incident of thefts g 18
  • 20. Managing appraisal process, reviewing the report  Find best local appraiser – competent, open  Generally is not experienced in HP property a y o p d p op y  I interview the property “champion” and get as much info as possible about bldg features, design p g , g  Assist appraiser, supply articles, information  Show where the null hypothesis is incorrect  Appraiser determines final value  Review appraisal, 95% of which is typical appraisal  I might value the “wasting” items like incentives or on site on-site power (solar PV) if not done by appraiser  Timing and fee delta: plus a week, +10% fees 19
  • 21. Many are watching the upside, but bigger impact is downside i d id  Conversation today often about upside, value increase  But the real pain is in the downside of “brown” design  The “New Normal” is tipping with occupant expectations  Brown = premature functional obsolescence  Oversized floor plates, limited flexibility, poor light & air, energy plates flexibility air  Portfolios being purged of difficult-to-green buildings gp g g g 20
  • 22. Moving forward, watch for:  Standardized audit report –  Green PCA or Resource Appraisal Report is needed  Energy, Water, Waste, Carbon/GHG + IEQ  R l time di l Real ti disclosure, smart meters – TED 5000 t t  Social competition – Google Power Meter  Carbon price risk is coming –  SRECs in New Jersey y  Major new financing option – On property or energy bill PACE property tax lien, CA AB 811 21
  • 24. Role of Behavior Economics in Resource/Energy Efficiency R /E Effi i H Humans react t stimulus : personal & social t to ti l l i l E Energy/environment f db k di l / i t feedback displays leverage devices that monitor & measure  Prius mpg display – both real time and historic  Feedback and display taps competitive nature, social prestige pressure (+ or -) 23
  • 25. Ambient Devices Energy Orb ~ Making electricity visible. visible SCE test with 120 customers got a 40% reduction in peak electric power use, more than numerical display 24
  • 26. Human productivity & biophilia : powerful & complex value issues of high performance features Productivity - Hundreds of studies show positive y p reactions to natural daylight, good air, natural views  Healthier, happier, more productive  Attracts and keeps talented workers Biophilia – our hard wired reaction to the natural world  Waterfalls, vistas, wildlife views, fireplaces all trigger human reactions, demonstrate the value of nature  Grassland = herbivores = protein = survival p 25
  • 27. Closing thoughts g g  Th There are no ex-environmentalists. i t li t  The exact impact of a clean, well lighted space may not be known, but it is not zero. p y ,  High performance design is the New Normal Normal. 26
  • 28. Thank you! James Finlay 213 614 4850 213-614-4850 James.F.Finlay@WellsFargo.com Im I’m LinkedIN Chair, Commercial RE & Finance Subcommittee, US Green Building Council LA Chapter General questions: Environmental.Affairs@WellsFargo.com http//Blog.WellsFargo/Environment 27
  • 29. Links, more info. 1. Green Building Finance Consortium GreenBuildingFC.com - Underwriting Sustainable Property, by Scott Muldavin. Exhaustive resource, huge bibliography, free, constantly updated 2. 2 PACENow.org – tracks developments with PACE fi PACEN k d l ih financing i 3. US Green Building Council National – Commercial RE Newsletter 4. US Green Building Council, LA Chapter, Commercial RE & Finance subcommittee – join h j i other real estate transaction professional l i f i l 5. Precourt Energy Efficiency Center, Stanford - Annual conference on Behavioral Economics and EE 6. 6 UC Davis Energy Efficiency C t D i E Effi i Center 7. Periodicals: “Dwell”, “Natural Home”, “Green Source” by McGraw Hill 8. My occasional blog: GreenPeriscope.com 9. Dept of Energy EERE newsletter http://apps1.eere.energy.gov/news/enn.cfm 10. Envir Valuation & Cost-Benefit News - http://www.envirovaluation.org/index.php 11. Environmental design + construction magazine/website http://www.edcmag.com/ 28
  • 30. 31 Tannery Rd, Branchburg, NJ First net zero electric commercial bldg in US 29
  • 31. Net Zero - 31 Tannery Road, New Jersey  Efficiency + Energy + real time monitoring  http://www7.nationalacademies.org/ffc/John_Grabowski.pdf  Built 2006, 41,508 SF, light industrial, 37% office, owner occupied, operated  Yr to date 11/2007, 11/2008 Energy Star 100, net positive electric (101%)  Net energy - BTU/SF = kWh + gas therms = 83% on-site  $/SF indust avg $2.49; Actual $0.49/SF  With SRECs = + $1.11/SF positive income 30
  • 32. The “Rosenfeld” energy efficiency unit – UC Davis  Named for Art Rosenfeld started working on energy issues at Berkeley Lab in 1974 and is often credited with being personally responsible for billions of dollars in energy savings.  the “Rosenfeld effect” explains why California’s per capital electricity usage has remained flat since the mid-1970s while U.S. usage has climbed steadily and is now 50 percent h h S h l b d dl d 0 higher than it was 40 years ago.  Environmental Research Letters to define the “Rosenfeld” as o e ta esea c ette s de e t e ose e d electricity savings of 3 billion kilowatt-hours per year, the amount needed to replace the annual generation of a 500 megawatt coal fired power plant coal-fired plant.  He is also behind “Rosenfeld’s Law,” which states that the amount of energy required to produce one dollar of economic output has decreased by about 1 percent per year since 1845. 31
  • 33. CA vs. USA energy use per capita 32