Three Low-Carbon Lessons from China for U.S. Cities and Companies

Each year in China, 10 billion square feet of towering urban residential and commercial building space are added to an existing stock that’s already well over 200 billion square feet. Decarbonizing this massive amount of building space is an important undertaking for China, which stands by its 2016 ratification of the Paris Agreement. Not surprisingly then, U.S. cities and companies can take lessons from emerging policies and approaches in China that aim to drive down the energy intensity of every building.

According to Rocky Mountain Institute’s Reinventing Fire: China, investments in the energy performance of Chinese new and existing buildings can decrease carbon emissions 1.2 billion tons by 2030—equivalent to 3.8 percent of the total global carbon emissions in 2015. Last December, in an important step toward capturing this opportunity, China’s Ministry of Housing and Urban-Rural Development (MOHURD) released a nationwide Standard for Energy Consumption of Civil Buildings (GB/T51161-2016)—known as the “energy quota” for buildings—to limit the amount of the nation’s building energy use as measured at the meter.

The general provisions say that “the energy quota standard establishes what it is to truly achieve building energy efficiency,” which is initially defined as energy performance better than 50 percent of all existing buildings in China. The energy quota resembles the performance-assessment system underlying benchmarking and transparency policies and programs used by over 20 cities in the U.S. and hundreds of companies. However, China’s cities will eventually be taken one step further with mandated energy performance using the energy quota to support a policy that looks more like an outcome-based code.

Atlanta, New York City, and more than 35 other major U.S. cities, as well as most of the world’s 500 largest companies with enterprise carbon-reduction goals, can take note of the following lessons from China’s new energy quota standard.

1. The energy performance of buildings should be assessed relative to peers and at the meter. 

Policies and programs that drive performance as measured by the meter are key to achieving high levels of performance. This is because the alternative approach of driving performance at the technology or system level fails to address whole-building energy performance issues, which include maintenance practices and other factors that affect what amount of energy the building actually uses—sometimes amounting to double the predicted energy use.

Benchmarking and transparency programs meet the need for whole-building metered performance assessment. The conventional tool used in the U.S. for benchmarking and transparency is the Energy Star rating system, which evaluates whole-building metered energy consumption in relation to a peer group. China’s energy quota is a similar system that establishes for a given building an energy use target less than that of 50 percent of its peers and a stretch target less than that of 75 percent of its peers, which is similar in concept to an Energy Star rating of 50 and 75.

In developing this target, China defined multiple peer groups and normalization factors. As in the Energy Star methodology, China takes four main variables into account. The first variable is the weather: the bitter winter cold in Beijing and the humid heat in Hainan drives up the targeted building energy use in relation to a more temperate climate like that of Shanghai. Second, property types are differentiated, and in some cases further segmented—for instance, luxury hotels are allotted more energy than economy ones. Third, the local energy supply plays a role: coal-dominated regional electricity supply has an effect, as does availability of efficient district heating or cooling. A fourth variable is building operating conditions: factors might include long operating hours, higher occupant needs (e.g., high-intensity lighting for product display, great computing power), occupant density, and energy-intensive processes (e.g., steam cleaning of medical instruments).

China’s energy quota is not a rating system like Energy Star, but it uses a similar peer-to-peer comparison methodology to establish a targeted energy performance that is verified at the meter.

2. Challenges in combining operational targets with design standards must be overcome.

Adding operational energy targets can be problematic for new buildings or ones undergoing major renovation, because these buildings must also meet the energy code. Conventional energy codes reference design standards that can provide the basis for predicting energy consumption, but actual energy use is almost always different from predicted use due to a number of factors (e.g., operations and maintenance, process loads, plug loads). What happens if the building meets the design standard, which could be a baseline or more aggressive “reach” code, but not the operational energy target?

At this point, it’s not clear how this challenge of calibrating design standards with operational performance will be addressed in China, where the energy quota will eventually be enforced with about the same level of rigor as the design code—similar to an outcome-based energy code.

One option to address the potential discrepancy between a design code and an outcome-based code is to mostly bypass the design code and only regulate the measured operational performance. This is the approach taken by the City of Seattle and Sweden, where it is the responsibility of the building owner to comply with the outcome-based code via energy performance measurements within two years of completion.

The main challenge with bypassing the design code is the need for developers to accurately predict energy use. A detailed energy model that does a good job of taking all factors into account can add significant design cost, especially for smaller buildings, and can still fail to deliver an accurate prediction. Sweden has established an industry organization to create guidelines and resolve such conflicts, and may have created the pathway for others to follow.

China will likely take the alternative option, which is to keep the design code and not hold developers accountable for meeting a given operational performance. According to the energy quota provisions, “the energy quota standard establishes what it is to truly achieve building energy efficiency…but the standard does not specify…relevant technologies nor measures. China has established design standards for that purpose.” This approach would not, in effect, change how conventional design codes are implemented. The main benefit of this approach would be to avoid major disruption to the building codes system in China, which, according to MOHURD and independent researchers, has only begun to gain high levels of enforcement in the 50 largest cities within the past several years. Presumably the energy quota will be enforced at some point after the building begins operation.

However, a prediction challenge similar to that discussed above may emerge with this approach. Just as an energy model may not predict compliance with the energy quota, a design standard may not predict compliance, either. In exploring this issue further, a preliminary study by LBNL China Energy Group indicates Chinese government office buildings that meet the design standard would not also meet the energy quota, assuming standard operating conditions. But signs indicate this may not be an issue because China may allow a large degree of flexibility during the compliance process. For example, in Beijing, the public will be notified of commercial buildings that exceed the energy quota by more than 20 percent and, if a building operates at this level for two years, it must be retrofitted or incur a significant fine.

3. Localizing performance assessment enables a more perfect peer-to-peer comparison.

A distinctive feature of China’s energy quota in relation to Energy Star is the intention to take into account local market dynamics that can make it more costly or difficult to achieve increased building energy performance. In some markets, efficient technologies are rare and costly, energy prices are low, skilled building operators are few, and financial incentives are limited. RMI’s Portfolio Energy Optimization initiative’s work to streamline the retrofit process for companies has also led to the conclusion that, in such markets, the economics of efficiency are likely to be worse. Accordingly, buildings in those markets may not be justifiably held to the same level of performance as those in others.

China’s energy quota system requires cities to create their own targets based on local building energy-use data, which takes many of these market dynamics into account. Since 2009, MOHURD has issued a series of guidelines for cities to collect the data and conduct the statistical analyses required to create localized targets.

In the U.S., companies and local governments can consider whether it makes sense and is feasible to take a similar approach in order to adjust the Energy Star benchmarking system to be more “local” to the community or company portfolio.

More observations to come

It is safe to say that the U.S. federal government will not be a driving force for climate change mitigation, but local governments and companies can be. At the same time, China is stepping up its efforts, including scrapping plans for 85 coal power plants. Instead of building new power plants, China is increasing the efficiency of its building stock—likely to total 300 billion square feet of urban building space by 2020.

Releasing the energy quota was a significant accomplishment after several years of development. But the best work—implementation and enforcement—is yet to come. This provides ample opportunity for U.S. local governments and companies pursuing their own low-carbon solutions to observe and learn. As part of our Reinventing Fire: China program, RMI will be here to help relay insights to the U.S. markets.

Image courtesy of iStock.