Denver building owners are facing millions in fines for failing to comply with new extreme energy requirements.
The fines could be as much as $0.70 per kBtu per year for buildings larger than 25,000 square feet that do not meet the city's green energy-savings target. This could result in cumulative penalties of over $2.8 million for some building owners.
The city has set aggressive targets to cut carbon emissions and electrify buildings, with the goal of reaching a 7% energy use reduction by 2026 and 2030 for buildings larger than 25,000 square feet.
The penalties are intended to be a deterrent for building owners who do not make the necessary changes to meet these targets, but the unintended outcomes could lead to bankruptcies or shuttered business. All bad news as some communities struggle to comeback following the pandemic.
However, not everyone is in support of these requirements. Dave Davia, CEO of the Rocky Mountain Mechanical Contractors Association, a construction trade organization, expressed concerns about the feasibility of these mandates. “The move to decouple from fossil fuels and move towards an all-electric energy environment is going to be challenging, especially within the timeframes that have been outlined,” said Davia.
The timeline for compliance is a major issue highlighted by Davia.
He pointed out that getting a permit for construction in Denver can take up to two years, and with the 2026 deadline for gas appliances already in place, it may be difficult for building owners to meet the requirements in time. He also mentioned supply chain and labor shortages that could further delay the process.
Katrina Managan, the director of buildings and homes in Denver's climate office, stated that the city is providing resources and technical assistance for building owners facing economic hardship. She also clarified that electrification is not a requirement to reach the city's energy targets and that there are alternative paths to compliance for buildings that find it challenging.
According to Managan, the targets set by the city are based on the top 15% of buildings in each category in 2019. This means that 21% of buildings in Denver already meet the 2030 targets, with the majority of them being heated with natural gas or steam.
However, a penalty cost analysis conducted by Group14, a consultancy firm hired by Denver, showed that the cost of upgrading buildings to meet the targets may be too high for some building owners.
For example, a 26,250 square foot multifamily building built in 1938 would take 66 years to recoup the estimated cost of $288,087 for upgrades to meet the 2030 targets. This raises concerns about the financial burden on building owners, especially those who serve low-income residents.
Despite these concerns, Chelsea Warren from the Office of Climate Action, Sustainability, and Resiliency reassured that there is flexibility built into the program for building owners to adjust their compliance plans and timelines if needed.
The city is also working towards a ban on gas furnaces and water heaters in new construction and will stop issuing permits for certain gas heating and cooling systems in existing buildings after 2025, aiming for complete electrification in commercial buildings by 2027.
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Davia highlighted the issue of supply and lead times for electric equipment needed for retrofits, expressing concerns about meeting the demand with the current market conditions. He also pointed out the global aspect of climate change, questioning the effectiveness of Denver's actions in the larger scale of things.
The clash between extreme energy targets and the feasibility for building owners to meet them remains a contentious unsettled issue in Denver.