What will mandatory disclosure uncover?

by Lynne Blundell…

With the deadline passed for submissions to the Federal Government on its proposed mandatory disclosure scheme for commercial building energy efficiency, the jury is out on what the final result will be. Many of the submissions have called for fundamental changes to the scheme.

The most common objection is that building owners will be answerable for the energy use of tenants. Another key concern is the way the scheme will assess energy use of tenants.

Under the proposed scheme tenant and base building energy efficiency ratings are being considered.

The NABERS rating system, which is suggested for use in the scheme, looks at base building, tenancy and whole building.

Base building ratings provide an indication of the efficiency of all house services such as air conditioning, common lighting, lifts, pumps, core facilities and carparking. NABERS tenancy ratings assess tenant lighting, supplementary airconditioning, communications, computers and other equipment associated with tenant uses only.

Whole buildings ratings consider the tenant loads in association with the base building loads. Many in the property industry argue this rating can be misleading if prospective tenants are trying to compare their use of the building and that of a current tenant.

Scheme won’t provide meaningful information

A group comprised of Lend Lease, Lincolne Scott and Advanced Environmental, argue in their submission that the proposed scheme is flawed and will not provide meaningful information on the energy use of buildings.

Mandatory Disclosure: “Not enough meaningful information”

Lend Lease’s global head of sustainability, Maria Atkinson, and Che Wall, managing director of building services consultancy Lincolne Scott, also presented their arguments to the Senate Select Committee on Climate Policy recently, together with an alternative method for measuring energy efficiency in large commercial buildings.

The group says the Government’s scheme, which will use the NABERS energy efficiency tool, will not be effective because it does not show the real greenhouse gas emissions of buildings, or allow for the way different tenants use buildings.

Their proposed alternative method, the Carbon Disclosure Tool, would allow building owners to input information from energy bills into a simple Excel spreadsheet.

This information would then be used to demonstrate a building’s total greenhouse gas emissions annually, on a square metre basis, and to compare these to a benchmark emissions level for the building type, based on the Property Council of Australia’s building gradings.

The benchmark would be corrected for the prevailing annual weather conditions and energy use patterns of the tenant.

Atkinson and Wall say the corrections to the benchmark will prevent buildings being disadvantaged because of a specific tenant or because of significant variation in local weather conditions from year to year.

The building’s actual greenhouse gas emissions would be reported as a percentage of the benchmark, to show its performance.

Too many reporting requirements

Other large building owners such as Mirvac have also expressed concern about the lack of consistency across the various required reporting schemes (see our story on this from Issue 1)

Existing reporting requirements for large commercial buildings include the include the National Greenhouse and Energy Reporting System (NGERS) and Energy Efficiency Opportunities (EEO).

In its submission Mirvac said the proposed scheme is in direct conflict with these two established legislatory programs as, unlike them, it requires building owners to be responsible for the operational control of the space occupied by their tenants and for the reporting of their energy use.

Mirvac argues the scheme contradicts the methods used by NABERS. By using three different ratings types – base building, tenant and whole building – NABERS associates each rating with the party that influences the outcome of that rating.

This is lacking in the proposed scheme, which assumes building owners have control over the energy usage of tenants, said Mirvac,

A broad spectrum of organisations, including City of Sydney Council, Eureka Funds Management, engineering firm Connell Wagner and energy efficiency consultants Exergy Australia, were unhappy with the way building owners will be responsible for tenant behaviour.

City of Sydney in its submission recommends measures governing tenancy be modified to include only aspects that building owners can influence – allowing differences in tenant behaviour to be separately measured.

The Council suggests the Energy Efficiency Assessment report and NABERS rating certificate separates base building and tenant information and energy efficiency opportunities.

It also wants to see government buildings included in the scheme, which at present they are not, arguing these buildings account for 25 per cent of Australian office space.

Connell Wagner said the scheme should not promote whole building ratings as this would be misleading for prospective tenants when assessing multiple buildings in terms of the energy efficiencies.

“Whole building ratings should only be considered in the initial rollout of the scheme for a period of no more than 18 months. This will allow building owners to undertake the necessary metering upgrades that would be required,” Connell Wagner said in its submission.

“Base buildingratings provide the most versatile rating measure for future tenants to compare multiple buildings on an equal basis.

“Tenancy ratings should only be considered when tenants are sub-leasing spaces in existing fitouts. This information provides the new lessee with an understanding of our energy efficient the current fitout is operating.

Dr Paul Bannister, managing director of energy efficiency consultancy, Exergy Australia, says in his submission:

“It is absolutely imperative that mandatory disclosure is based on the base building performance in all cases, with whole building only being an option for buildings that can’t measure base building. Getting this wrong would utterly
undermine the credibility of the whole scheme.”

Another area of concern was the lack of skilled assessors, also raised by the Sydney of City Council. Dr Bannister said the auditing industry was massively underskilled and under resourced and does as much harm as good through producing “half-baked reports”.

“Of greatest concern here is the lack of skills to identify operational, commissioning and control measures for the improvement of efficiency rather than hardware.  We are regularly confronted with buildings where the owner has been advised that they have to invest millions of dollars in hardware when almost the same saving can be obtained by getting their existing hardware to function properly,” Dr Bannister said.

The Property Council of Australia has long argued that the mandatory disclosure proposals as they stand will not achieve a reduction in emissions. (See our previous story on this).

The PCA is pushing for accelerated depreciation to be introduced. Its green depreciation proposal ties accelerated depreciation rates to higher environmental performance.

According to PCA CEO, Peter Verwer, the last time accelerated depreciation was introduced, in 1992 as part of Paul Keating’s One Nation package, it lifted private investment in building and construction within a few months.

As 70 per cent of building construction and engineering activity is privately funded, Verwer argues, unlocking it through accelerated depreciation will provide a substantial boost to the property sector and sustainable development.

Some believe it will work

Craig Roussac: Mandatory Disclosure will provide a level playing field

But not everyone in the industry is unhappy with the proposed scheme.

Craig Roussac, sustainability manager for Investa Property Group, told TFE Investa is not concerned that the proposed scheme will be using the NABERS method.

“In our experience NABERS is an excellent tool that drives and encourages improvement in building performance. The lion’s share of our business is about operating commercial office buildings and NABERS helps us do this better.”

Roussac says it is true that under the NABERS system the difference in building occupancy or head count in a building is not recognised, but that this doesn’t matter.

“NABERS doesn’t discriminate between the management of buildings or their attributes – it just looks at how a building performs. And that is what people want to know,” Roussac says.

“We have known for a decade that mandatory disclosure was inevitable and it’s a good thing because it will provide a level playing field,” says Roussac. “ It’s just like a share price – investors expect transparency of information on the share market and so will people who buy or rent a building.”

GBCA wants extra measures

Meanwhile the Green Building Council of Australia (GBCA) is concerned that not enough is being done to reduce emissions from buildings.

GBCA chief executive, Romilly Madew told the Senate Select Committee on Climate Policy in Brisbane on April 28 that the Government’s proposed carbon pollution reduction scheme “won’t have an impact on Australia’s built environment, and so won’t achieve reductions in the very sector where emissions are both significant and most easily achieved”.

The GBCA has called for additional measures to reduce emissions which it says would save the Australian economy around $38 billion annually by 2050.

lblundell@thefifthestate.com.au