MYTH AND REALITY: Section 433 of the Energy Independence and Security Act of 2007

Buildings consume more than 70% of our nation’s electricity and about 40% of our total energy used, and they account for almost 40% of our carbon pollution.[1]   Section 433 adopts the fossil fuel reductions and timing established by the widely adopted Architecture 2030 goals.  It aims to make the federal government a leader in incorporating energy efficiency and clean energy into building design.

On October 15, 2010, DOE issued a proposed rule to implement section 433.[2]  DOE sent a draft final rule to the Office of Management and Budget on August 31, 2011 for interagency review.[3]

Myth:  Section 433 requires all federal buildings to eliminate use of fossil fuel-generated energy by 2030.

Reality:  Section 433 does not affect existing federal buildings, absent a “major renovation.”  Section 433 requires DOE to issue revised energy efficiency performance standards for new Federal buildings.  These standards also apply to federal buildings undergoing a major renovation, if such renovation also exceeds a cost threshold.  For buildings that are “public buildings” (e.g., office buildings, warehouses, and courthouses), the performance standards apply to a major renovation that also requires congressional approval (the cost threshold for congressional approval is currently $2.79 million).[4]  For other buildings, the performance standards apply to a major renovation that also costs at least $2.5 million.

Section 433 directs the Secretary of Energy to establish criteria for identifying “major renovations.”  In establishing the criteria, the Secretary shall “take into account the scope, degree, and types of renovations that are likely to provide significant opportunities for substantial improvements in energy efficiency.”  DOE has the responsibility to identify through rulemaking which types of renovations should be defined as “major renovations” subject to the performance standards, consistent with the purposes of section 433.

For new buildings and major renovations that are subject to the performance standards, buildings designed in 2030 or later must be designed to achieve a 100% reduction in fossil-fuel use.

Myth:  Section 433 imposes absolute and inflexible mandates.

Reality:  Section 433 provides for substantial flexibilities in implementation.  For both new buildings and covered major renovations, section 433 allows DOE to adjust the standards where the head of the agency designing the building certifies that meeting the applicable fossil fuel reduction level is technically impracticable given the functional needs of a particular building.  DOE has proposed to incorporate cost as a factor in evaluating whether a level of reduction is “technically impracticable.”

DOE’s proposed rule also took comment on additional ways to implement the requirements in a flexible and workable manner.  For example, DOE requested comment on the possibility of allowing the use of renewable energy credits to help an agency offset fossil fuel use and still meet the requirements, treating various fossil fuels differently based on their relative carbon contributions, and providing credit for efficient systems such as natural gas-fueled combined heat and power (CHP).

With respect to renovations, DOE also has substantial discretion to define, through rulemaking, the types of renovations that are “major” for purposes of section 433 and thus are subject to the performance requirements.

Myth:  The requirements of Section 433 are not supported by the building sector.

Reality:  The reduction levels for fossil fuel-generated energy use required by section 433 are based on the building design goals set in the broadly supported 2030 Challenge developed by Architecture 2030.  The 2030 Challenge has been adopted and is being implemented by almost 75% of the 30 largest U.S. architecture and engineering firms.  It also has been adopted by numerous professional and national institutions, including the American Institute of Architects, the U.S. Green Building Council, the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE), the U.S. Conference of Mayors (for all city buildings), the National Association of Counties (for all county buildings), the states of Ohio, Illinois, Minnesota, Washington, Oregon, and California, as well as U.S. cities, universities, businesses, and other organizations.[5]  While the 2030 Challenge establishes the reductions as goals for new buildings and major renovations, adopters are in fact designing and constructing buildings that meet the standards today.[6]

Myth:  Section 433 will discourage energy efficiency upgrades in existing buildings because many retrofit projects will not achieve sufficient energy savings to meet the performance standards across the whole building.

Reality:  Nothing in section 433 requires a retrofit project to reduce the entire building’s energy use to a level that meets the performance standards.  Moreover, applying section 433 in a manner that discourages energy efficiency upgrades in existing buildings would be contrary to the purpose of section 433, and DOE has ample authority to issue rules and implement the standards in a manner that avoids such a result.

Myth:  The requirements of Section 433 are unrealistic and unachievable.

Reality:  The American Institute of Architects has stated that “Section 433’s targets are achievable today” and that architects are already meeting the current targets.   Further, effective design strategies and advanced technologies continue to develop, making it very reasonable to expect that the 100% reduction target can and will be achieved in the nearly two decades before it becomes effective.[7]

Experience demonstrates that we can achieve dramatic improvements in building efficiency.  For example, in only six years, from 2006 to 2012, the national model energy code for residential and commercial buildings has been strengthened by 30%.[8]  In addition, the Energy Information Administration’s Annual Energy Outlook projections of building energy use to the year 2030 have dropped by nearly 70%, just since 2005, due to more efficient design practices.[9]  In one example of advancements in energy and architectural design that are already being achieved, the General Services Administration has achieved a net zero deep energy retrofit at a federal building in Grand Junction, Colorado.[10]

In addition, the performance standards in section 433 are measured against a baseline that does not include most of these recent improvements.  In practical terms, this means that much of the progress toward the 55% and 65% reduction requirements has already occurred.  The baseline specified in section 433 references a survey of existing buildings in the U.S. as of 2003 to determine average energy consumption across the country for particular building types.  This baseline is an average of existing buildings in 2003, not a typical building built in 2003.  Thus, it incorporates the energy consumption of much older and less efficient buildings.  DOE estimates that at least 56% of the buildings surveyed were constructed prior to 1980.[11]  Efficiency has advanced dramatically since that time.

Myth:  Section 433 would effectively ban efficient technologies such as combined heat and power (CHP) systems, which usually run on natural gas, and it conflicts with the President’s “all of the above” energy strategy.

Reality:  CHP systems are highly efficient systems that generate both heat and electricity.  Nothing in section 433 bars the use of CHP, and such a result would be contrary to the goals of section 433.  Section 433 provides DOE sufficient authority and flexibility to ensure that implementation of the performance standards does not discourage the use of CHP.

In the proposed rule, DOE expressed its intent to ensure the final rule does not penalize or discourage the use of on-site CHP systems, and DOE invited comment on how appropriate credit might be given to such systems in determining compliance with the rule.  DOE also requested comment on the possibility of treating cleaner fossil fuels such as natural gas differently from more carbon-intensive sources. 

Myth:  The requirements of section 433 are duplicative of other requirements to reduce energy consumption in federal buildings.

Reality:  Section 433 is the only provision that provides a long-term road map for improving the energy efficiency of new federal buildings to achieve the significant reductions needed to address climate change.  Establishing the long-term goals is important to provide industry certainty regarding the timing and level of necessary improvements.  Section 433 also ensures that the federal government’s purchasing power is deployed to demonstrate the viability of new technologies and to provide a market for those technologies that will allow them to be brought to scale and produced affordably.

While there are other requirements for energy efficiency in federal buildings, they do not negate the need for section 433.  For example, prior to the requirements enacted by section 433, the Energy Conservation and Production Act established building performance standards, but it directed that new Federal buildings be designed to meet energy efficiency performance standards that are 30% below ASHRAE standards or the International Energy Conservation Code.  It did not provide any roadmap for phasing-in specific reductions over time, or establish an ultimate goal of carbon neutral buildings.  In addition, while Executive Order 13514 addresses a variety of issues related to sustainability and energy efficiency, including greenhouse gases, it simply requires agencies to develop their own targets and plans for reducing greenhouse gas emissions.  Also, executive orders are not law and may be changed by a president without any congressional action.  The requirements of Section 433 complement rather than duplicate other requirements.