Clean Buildings Legislative Report — 2024 report (RCW 19.27A.220)

Summary

This is the 2024 Clean Buildings Legislative Report of the Washington State Department of Commerce, under RCW 19.27A.210 and RCW 19.27A.220, with Director Mike Fong named on the cover. It states that Commerce currently estimates over 8,366 buildings will need to comply with the Clean Buildings Tier 1 requirements, and that 1,174 of them will need to choose a compliance pathway by June 1, 2026. Commerce is requesting that the Legislature increase the $0.85 per square foot incentive cap, saying building owners reported that the cap would on average cover only 2.6% of overall construction costs.

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Clean Buildings Legislative

Report

\ Washington State
Ve

Department of

a? Commerce

2024 report per RCW 19.27A.21@nd RCW 19.27A.220

January 15,2024

CLEAN BUILDINGS Report to the Legislature

Director Mike Fong
v3.4
Acknowledgments

Washington State Department of Commerce
Michael Furze, Assistant Director
Energy Division

Clean Buildings Unit
Aaron Dumas

Annalyn Bergin

Anneka McDonald

Brittany Wagner

Danielle Saguil

Emily Salzberg

Luke Howard

Liz Reichart

Paul Currington

Energy Division

Emily Salzberg, Buildings Managing Director

Emily.Salzberg@commerce.wa.gov
360-561-8182

1011 Plum St. SE
P.O. Box 42525
Olympia, WA98504-2525

www.commerce.wa.gov

For people with disabilities, this report is available on
request in other formats. To submit a request, please
call 360-725-4000 (TTY 360-586-0772)

ADD YOUR REPORT TITLE HERE
Table of Contents

CLEAN BUILDINGS LEGISLATIVE REPORT 3
Executive summary

Overview

In 2019, Washington becamethe first state to establish a statewide performance standard for existing large
buildings. Buildings are the fastest growing source of greenhouse gas emissions in Washington State, and the
second biggest carbon polluter behind only transportation. The Clean Buildings unit within the Washington
State Department of Commerce (Commerce), is committed to dramatically reducing greenhouse gas
emissions in buildings by helping building owners meet the state’s clean energy standard.

This report summarizes the work to date in establishing and implementing Washington's energy performance
standard for existing large buildings and administering the early adopter incentive program.

Commerce currently estimates over 8,366 buildings will need to comply with the Clean Buildings Tier 1
requirements. Of those, 1,174 buildings are over 220,000sq. ft. and will need to choose a compliance pathway
by June 1, 2026. The Clean Buildings online portal allows those building owners to upload building information
and energy data streamlining the process significantly.

Barriers to implementation and solutions:

Last year, building owners commented that a big barrier to applying to the incentive program was the high cost
of conducting energy audits on all their buildings. This year, the Legislature allowed Commerce to offer an
Audit Incentive for Publicly Owned Buildings. This will help cover all or part of the cost of these energy audits.

Additionally, Commerce is requesting that the Legislature increase the $0.85 per square foot incentive cap to
provide a greater financial incentive. Commerce believes that enhancing the incentive will motivate building
owners to apply to the program. This is based on consistent feedback from building owners stating that the
incentive cap, on average, would only cover 2.6% of the overall construction costsfor building improvements.
The average cost to a building owner to meet the energy performance standard is $2M.

Goals for 2024:

1. Data: Continual improvement of the Clean Buildings portal to automate data transfer by allowing
connections to outside data sources

2. Outreach: Increase outreach and education to building owners on compliance pathways

3. Technical Resources and Tools: Develop online energy management tools to help building owners track
and plan for building improvements

Legislative mandate

This report satisfies specific requirements of Chapter 285, Laws of 2019.

Section 3(14):

By January 15, 2022,and each year thereafter through 2029, the department must submit a report to the governor
and the appropriate committees of the legislatu re on the implementation of the State Energy Performance Standard
established under this section. The report must include information regarding the adoption of the ANSI/ASHRAE/IES
standard 100-2018 as an initial model, the financial impact to building owners required to comply with the standard,

CLEAN BUILDINGS LEGISLATIVE REPORT A
the amount of incentives provided under sections 4 and 5 of this act, and any other significant information
associated with the implementation of this section.

Section 4(12):

.. the department must report to the appropriate committees of the legislature on the results of the incentive program
under this section and may provide recommendations to improve the effectiveness of the program.

Expansion bill

In 2022, the state enacted the Clean Buildings Expansion law (SB 572Zhapter 177, Laws of 2022). This law
creates Tier 2 buildings, which includes buildings between 20,000 and 50,000 square feet and all multifamily
buildings over 20,000 square feet. The first phase of this law is focused on benchmarking, energy
management and operations, and maintenance plan reporting. The law also authorized anew incentive
program for Tier 2 buildings.

Commerce is required to submit a report to the Legislature and governor in 2029 with recommendations for
building performance standards for Tier 2 buildings, which would not take effect until after the 2031 legislative
session concludes. Our 2023 key findings are below. Our recommendations for 2024 are at the end ofthe
report, beginning on page 13.

Next steps

Below are Commerce's next steps based on building owner feedback

O Data opportunities: Broaden the building dataset to find more opportunities to reduce greenhouse gas
emissions in buildings. These opportunities include lower energy use, fuel selection, and on-site generation
of electricity.

O Ongoing database development: The Clean Buildings database now allows building owners to apply for
exemptions online. Commerce greatly improved the user-experience by automatically pulling in Energy Star
Portfolio data directly into the Clean Buildings Portal eliminating the need fora separate form. GIS will be
integrated into the database next year, showcasing an accurate visual of the statewide building
distribution.

O Technicalassistance: Commerce continues to create resources that simplify the Clean Buildings
Performance Standard based on input from stakeholders. These resources make the Standard more
accessible. Continued focus on technical assistance for building owners and the industry will result in
better compliance. Statewide customer support is critical for successful implementation.

CLEAN BUILDINGS LEGISLATIVE REPORT 5
Introduction
Background

The building sector is the state’s second largest source of carbon pollution, second only behind the
transportation sector. The building sector is also the fastest growing source of greenhouse gas emissions in
Washington. As our population grows, so does the number of new homes and businesses. Investment in
building energy efficiency is the most cost-efficient way to significantly reduce greenhouse gas emissions
from the building sector. One solution to cutting building emissions lies in energy efficiency — the fastest,
cheapest way to cut carbon emissions and other harmful pollution from the built environ ment. Another
solution is to electrify end uses including space and water heating, and cooking.

The Clean Buildings bill Chapter 285, Laws of 2019) aims to lower costs and emissions from fossil fuel
consumption in the state’s existing buildings, especially large buildings. The law requires the Washington State
Department of Commerce (Commerce) to develop and implement an energy performance standard for these
buildings and to provide incentives to encourage efficiency improvements. Washington is the first state to
establish a statewide performance standard for existing large buildings. Colorado has since passed similar
legislation and several other states are considering such laws.

The Legislature directed Commerce to adopt the American Society of Heating, Refrigerating and Air
Conditioning Engineers (ASHRAE) Standard 10@018 as a reference standard and to establish energy use
intensity targets (EUIt) specific to Washington's climate zones for different building occupancy types. Energy
use intensity is measured in British Thermal Units (BTUs) per square foot per year.

All covered buildings in the state are required to benchmark their current energy use through Energy Star's
Portfolio Manager, which is a free tool supported by the U.S. Environmental Protection Agency. All covered
buildings are required to produce energy management and operations and maintenance plans. Those buildings
determined to be over the EUIt by building type are then required to produce and implement a building
improvement plan to bring their EUIto their target, or demonstrate that the owners have implemented cost
effective measures that reduce their EUIto their target.

Owners demonstrate compliance on a five-year cycle according to administrative and reporting procedures
developed in WAC 194-50-150. Compliance dates for Tier 1 buildings vary by building size:

O June 1,2026 Buildings over 220,000 square feet
O June 1,2027 Buildings between 90,000 and 220,000 square feet
O June 1,2028 Buildings between 50,000 and 90,000 square feet

The Legislature charged Commerce with conducting rulemaking to establish administrative rules for the law,
creating a database of covered buildings in the state, notifying building owners of the requirements of the law,
establishing an incentive program for early adopters of the standard and providing customer support to the
industry.

CLEAN BUILDINGS LEGISLATIVE REPORT 6
Progress

At the program inception in 2021, Commerce identified 15,020 buildings that could be subject to the
mandatory requirements of the law. After a deeper quality assurance on the covered buildings list, Commerce
identified 6 ,657 buildings that would not be covered, reducing the buildings covered by44%. Commerce
currently has 8,363 buildings in the database and expects that number to stay consistent as we continue
communications with building owners.

The new online exemption process is a big step toward refining the data. Available since July, it allows building
owners to apply for an exemption from the performance standard. This streamlining greatly reduces the
number of hours our team will have to spend reaching out to owners individually.

Commerce also streamlined the online user experience by automatically pulling Energy Star Portfolio data
directly into our Clean Buildings Portal. Building owners no longer have to fill out a separate form to send us
this data. This automation quickly and accurately fulfills each buildi ng owner’s benchmarking requirement
while reducing the number of hours program staff have to spend entering data.

This year Commerce completed 39 county web map applications to show Tier 1 buildings for each county. The
map will prepare the program for the expansion to include Tier 2 buildings. Staff are reviewing assessor data,
updating building square footage, and communicating with building owners as needed. GIS should be
integrated into our database next year.

Building owner notification

The Clean Buildingsteam continues to refine the list of Tier 1 buildings. Staff meet with building owners,
property managers and building personnel to gather information about their buildings. Commerce staff are still
receiving and reviewing building plans and updating the database. Commerce staff are also reviewing
buildings in selected counties where building square footage is suspected to be in error. This is helping us
create amore accurate list of covered buildings.

Staff continue to perform data quality checks and update building owner information . As a result, letters are
sent regularly to newly identified building owners regarding the Clean Buildings Performance Standardand the
incentive program.

CLEAN BUILDINGS LEGISLATIVE REPORT 7
Figure 1. Possible covered Tier 1 buildings by county

© 2023 Mapbox © OpenStreetMap

Incentive program

RCW 19.27A.220requires Commerce to administer an Early Adopter Incentive Program for early compliance
with the Clean Buildings Performance Standard. The Legislature authorized $75 million for participating
utilities to offer as incent ives to building owners for early compliance. Eligible buildings can also receive utility
conservation incentives, in addition to other financing mechanisms.

To be eligible for the incentive program, buildings must be served by at least one electric utility, gas company
or thermal energy company participating in the program. Buildings must be at least 15 EUI (energy use
intensity) over the target by building type. Buildings that demonstrate early compliance with the standard may
receive 85 cents per gross square foot of floor area. Participating utilities pay this incentive directly to the
building owners.

The incentive program launched on July 1, 2021. As of September 2023 Commerce have approved five
incentive applications with 22 applications waiting to be finalized. Owners will be installing a wide range of
measures including new solar arrays, heat pumps, updating HVAC controls, replacing failing windows,
upgrading lighting, and replacing end-of-life systems.

Commerce believes that enhancing the incentive will motivate building owners to apply to the program.
Preliminary construction costs for buildings applying for the Early Adopter Incentive Program average
$2,010,358. Initial incentive calculations average to 2.6% of theconstruction costs for building improvements.

In the many conversations Commerce had with buildings owners since 2021, they told us that the cost of the
Level Il Audit was a barrier to applying to the program. Last yearCommerce asked the Legislature to address
this. The 2023 Legislature passed the Audit Incentive for Publicly Owned Buildings. Thanks to this legislation,
Commerce will offer an energy audit incentive. The funding, which begins later this year,will be used to cover
part or all of the cost of conducting an investment -grade energy audit. The program will reserve a portion of

CLEAN BUILDINGS LEGISLATIVE REPORT 8
the funding for public buildings in overburdened communities. Funded at $20M, this program has the potential
to serve several thousand large public buildings before the mandatory compliance deadline of 2026.

Commerce continues to provide customer assistance for the incentive program by helping users establish
their Energy Star Portfolio Account for benchmarking building energy use and giving tutorials on the
Department of Energy's Energy Asset Score tool for reporting building audit information.

Customer support and outreach

Customer service is one of the most important ways Commerce maintains our relationship with building
owners. It’s important to support them by responding to their questions qu ickly and clearly. Stakeholder and
building owner feedback suggests that collective understanding of the program has increased significantly
over the last year.

Commerce's partnership with the Smart Buildings Center Education Program (SBCEP) has been verfelpful in
developing tools and resources for stakeholders. The SBCEP plays a big role in educating building owners and
operators on smart building practices and technologies. They’ve held workshops, trainings, created videos and
web-based content, and maintain a page on theirwebsite dedicated to the Clean Buildings program.

A few of our partnership successes include:
1. Developing a free tool kit through the Tool Lending Library to support clean buildings bill compliance
2. Expanding Tool Lending Library presence in eastern Washington and southwestern Washington

3. Developing and hosting smart buildings trai nings, including digital training videos posted to the Smart
Buildings Centers YouTube channel

4. Enhandng the smart buildings curriculum for building operators
5. Ongoing quarterly outreach through marketing partners

The Clean Buildings Team worked witha number of other compliance advocates to help the program reach
more building owners than it have could alone. These successes included:

O City of Issaquah launching a new Clean Buildings Incentive Program providing no-cost consultant services
to improve energy efficiency

O King County cities, Puget Sound Energy (PSE), and energy consultants hosted a Clean Building Symposium
to discuss the latest advancements and best practices in creating energy-efficient and sustainable
buildings

The program is also promoting The Clean Buildings Accelerator program that provides building owners with a
wide range of personalized assistance from some of the largest utilities in the state: Avista Corp, Pacific

Power, Puget Sound Energy, City of Seattle, and Snohomish County.

When owners sign up for the Clean Buildings Accelerator program they receive:

1. Guidance for Clean Buildings Law compliance

CLEAN BUILDINGS LEGISLATIVE REPORT 9
2. Assistance in setting up your Energy Star Portfolio Manager account and PSE’s EnergyCAP tool for
automatically benchmarking your building(s). By using PSE’s EnergyCAP tool, owners can bring the cost of
benchmarking down to zero.

3. Tailored coaching, virtual energy scans of space-and water-heating systems, and prioritization of energy-
saving opportunities

4. Templates for the required energy-management plan and operations -and-maintenance plan

As of September 2023, the Clean Buildings Team has responded to more than 840 documented and logged
support requests between January and September of 2023. Commerce staff offers one-on-one support for all
stakeholders, from small businesses to large corporations. Our relationships with stakeholders improve every
time they reach out for assistance.

Figure 2. Requests for assistance by type

Building Owner Notification Request
Other

Website

Policy

Early Adopter Incentive Program
Data

Compliance/Technical Assistance

Clean Buildings Portal

oO
oO

100 150 200 250

Stakeholders engage with the Clean Buildings Team through our customer support forms, virtual training
seminars, and Q&A sessions. These events have been popular and effective in educating building owners and
their representatives.

The program continues to create self-led educational resources, training videos, tools and guidance
documents to help stakeholders understand the complexities of the Clean Buildings Performance Standard.

Resources created this year include:

e New sections ofthe Frequently Asked Questions page

e Seven guidance documents to navigate different exemption types

e Energy Management Plan reporting tool
e Operations and Maintenance reporting tool

The Clean Buildings Team also actively participated in several workgroups with higher education
representatives, utility providers, state facilities managers, and industry professionals. Our staff remain

CLEAN BUILDINGS LEGISLATIVE REPORT 10
accessible to provide presentations for associations, organizations, and businesses. In 2023, the Clean
Buildings Team presented at a variety of different events such as:

e Puget Sound Energy Commercial Strategic Energy Management Awards
e WA State Alliance of YMCA's meeting

e Smart Building Exchange

e Building Owners and Managers Association (BOMA) meeting

e School district meetings

e County-level facilities managers meetings

e Commercial energy management professionals meetings

e State Board or Community and Technical Colleges meetings

Technical support

The Clean Buildings Programprovides considerable technical support to building owners, utilities and industry
professionals. It’s critical that people understand the technical requirements of the standard so that they can
comply with it. Stakeholders often need technical help with compliance forms, creating and connecting their
Energy Star Portfolio Manager account, understanding their EUI and EUIt, calculating square footage, applying
requirements for multiple buildings connected by shared heating sources, determining the responsible party
for compliance, and many other topics.

Support is provided in several formats, including webinars, guidance documents, one-on-one meetings, Q&A,
emails and phone calls through the Clean Buildings hotline. The need for technical support will be even greater
once the program expands to Tier 2 buildings: those between 20,000— 50,000 sq. ft. and all multifamily
buildings over 20,000 sq. ft. Building owners will be notified in July of 2025 and the mandatory reporting
deadline is July 2027. Commerce has increased staffing for our support team this year , which has already had
a positive impact.

Technical support is the key to turning our goal of reducing greenhouse gas emissions into a reality. Building
owners have very real and complex problems. Our team researcles and develops guidance to address these
challenges. Decarbonization district heating systems, sub-metering, compliance cycles, and multiple property
ownership are just some of the issues the program is addressing.

Commerce staff continue to schedule virtual meetings tailored to specific inquiries. These meetings are issue -
focused and include a wide range of stakeholders, depending on the topic. Many industry professional
associations include our technical team in their own workshops and workgroups. A num ber of these activities
are recorded and posted on our website as an added resource to help stakeholders better understand the
performance standard.

Clean Buildingsworkgroup

A clean buildings workgroup was formed in the FY23-25 Capital budget to analyze the costs of Tier 1
compliance for certain building types, including higher education, state-owned buildings, and more.
Membership organizations are listed in the capital budget and will include at least 20 participants. There are
two key deliverables for the workgroup:

O Analysis report of financial investments by December 15, 2023
O Final report with recommendations by September 1, 2024

CLEAN BUILDINGS LEGISLATIVE REPORT 114
Commerce posted an RFP on July 7, 2023, to hire a consultant to assist with the financial impact analysis work
and facilitation of the workgroup. After a public procurement process, Commerce contracted with SBW
Consulting, Inc. The workgroup expects to begin meeting in early fall of 2023.

The workgroup will meet approximately 10-15 times and conclude by September 2024. Participants are
expected to attend approximately one meeting a month.

Recommendations for the September 2024 report will focus on helping building owners attain compliance.
Such recommendations will include, but are not limited to:

Oo Identifying energy efficiency investments or other strategies for increasing energy efficiency in the
buildings sector

Oo Providing a cost-benefit analysis of options, including energy efficiency, to meet the goal of reducing
greenhouse gas emissions from the buildings sector

Oo Recommendations to balance financial investments while maximizing clean energy benefits for the
state, including any statutory changes that may be necessary

Commerce will keep stakeholders up to date on workgroup progress and findings through the regularly
published Clean Buildings Bulletin and our program webpages.

Rulemaking

Commerce conducted two rulemaking sessions this reporting year. The first was an emergency rule change
regarding the covered building exemption timeline. The second was rulemaking for Tier 2 buildings. The
program also expects to file a notice of proposed rulemaking (CR-101) before the end of 2023 to initiate
rulemaking related to provisions in House Bill 1390 (Chapter 291, Laws of 2023). This bill focuses on
decarbonization planning for district energy systems and includes an alternate Clean Buildings compliance
pathway for buildings connected to these systems.

Commerce filed an emergency rule change CR-103e) under WSR 2305-101 effective February 15, 2023. The
rule previously gave building owners up one year to apply for an exemption. Building owner feedback indicated
that exemption decisions need to be received earlier in order to make capital decisions. With this rule change,
applications for exemptions may be submitted no sooner three years prior to the compliance date and
submitted to Commerce no later than 180 days prior to the compliance date. This rule was made permanent
June 2023.

If buildings meet one of the exemption criteria in RCW _19.27A.210(7)(c),building owners can now apply for an
exemption three years prior to their scheduled compliance date.

Tier 1 buildings over 220,000 sq. ft. can apply for an exemption beginning June 1, 2023
Tier 1 buildings over 90,000 sq. ft. can apply for an exemption beginning June 1, 2024
Tier 1 buildings over 50,000 sq ft. can apply for exemption beginning June 1, 2025.

Additionally, Commerce held six rulemaking workshops for the Tier 2 program in 2023. Staff covered many
technical topics such as customer support, equitable program design, and how reporting requirements will

CLEAN BUILDINGS LEGISLATIVE REPORT 12
work. Each rulemaking workshop was followed by a two-week comment period. Over the rulemaking period,
Commerce received 54 comments focused on funding, technical assistance, treatment of condominiums, and
clarifying connecting buildings. Thirty-nine organizations, including trade associations, environmental
advocates, local governments, utilities, businesses, and individual building owners and tenants submitted
these comments.

Table 1. Workshop topics and number of attendees

Workshop topic Attended

Rulemaking Kick-off: Introduction to the Clean Buildings Expansion 259
Customer Outreach, Technical Support and Benchmarking 134
Energy Management Plan and Operations and Maintenance 139
Annex Y and Administrative Requirements 99

Tier 1 Amendments 130
Cumulative Review 185

The cumulative review concluded the Tier 2 rulemaking workshops. Stakeholders were given four opportunities
to attend the cumulative reviews. One was virtual and three were held in person in Seattle, Sookane and
Kennewick. These meetings were attended by atotal of 184 people.

A diverse group of stakeholders attended these workshops, including building owners, representatives from
utilities, architects, engineers, non-profit entities, higher education, and many trade and membership
organizations. All workshop materials were posted online and followed up with a two-week public comment
period. Each workshop included opportunities for input and discussion.

After speaking with thousands of building owners during the last two years, a number of changes to the Tier 1
rules were proposed. These changes will make itclearer for owners of the state’s largest buildings to
understand how to achieve compliance in 2026.

Highlights

e Clarified the definition of certain types of structures
e Rewrote and clarified benchmarking requirements
e Clarified definitions of connected buildings and campus-level buildings.

The Tier 2 rulemaking process willbe complete by the end of 2023. Commerce will file proposed rules (CR-
102) in October, host a hybrid public hearing in November, and file final rules (CR-103) in December.

Recommendations

Commerce has three key thematic recommendations for implementing the standard .

Data

O Integrate GIS into the Clean Buildings Portal
© Continue quality assurance on covered buildings lists and building details to better understand the state's
building stock and make recommendations on how to improve the standard.

CLEAN BUILDINGS LEGISLATIVE REPORT 13
Outreach

O Create simpler and more accessible resources to explain the Clean Buildings Standard

O Research additional assistance opportunities to support building owners struggling to apply for the
incentive program

O Provide more customer support and technical assistance to building owners to aid in early compliance with
the law before mandatory compliance dates.

Technical Resources and Tools

O Develop web-based Energy Management Plan, Operations and Maintenance program, and Benchmarking
program tools/resources

O Expand Accelerator type programs statewide

O Analyze completed projects to produce case studies for early adopter incentive program projects

CLEAN BUILDINGS LEGISLATIVE REPORT 44


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