8 November 2012 – Comment [Updated] : Well, we had it wrong.

NABERS has released its decision on whether to recognise low emissions from district trigeneration or cogeneration energy with improved star rating. And the answer is yes. And no.

Yes the lower emissions in co/trigen energy will be recognised in the NABERS rating, in the same way green power is separately recognised.

And no, it won’t be included in the “headline” number (our words) – the rating used by the Commercial Building Disclosure rules for mandatory disclosure – and by valuers and green building indexes.

  • NOTE: See below for clarification on the use of the two numbers in a NABERS rating from NABERS’ Matthew Clark and strong support for the NABERS district trigen decision from GPT’s Bruce Precious

This headline number relates strictly to the greenhouse emissions intensity of the building itself.  In other words the building’s intrinsic efficiency.

See the NABERS announcements relating to district trigen

The questions
The big questions are, why has NABERS adopted this approach to low emissions energy if the infrastructure is outside of the building in a district system while  low emissions infrastructure on the inside of the building, such as an on-site co/trigen plant is included in the headline number?

Another rather bigger question is if NABERS doesn’t reward lower emissions from a district co/trigen in the headline number, the one that the market values, then what is the fundamental purpose of the NABERS rating?

The Property Council of Australia’s submission to NABERS on trigen said that NABERS’ purpose was to allow property owners to differentiate their building and be rewarded for their work. That would not be the case if all buildings hooked up to district trigen benefitted equally in their NABERS ratings.

This is what the PCA said in its submission:

“Owners are encouraged to connect to the trigen scheme as an opportunity to improve their NABERS rating but there is no real commercial value if everyone else does the same.

“Indeed, NABERS is meant to differentiate one building from another. The proposal seems to undermine the purpose of the NABERS scheme.”

The question and answer section that accompanies the decision by the NABERS team says that various groups use the rating for different purposes.

In the NSW Energy Savings Scheme for instance, which rewards building owners for efficiency upgrades, “It is important to their scheme that they are rewarding only efficiency – not a reduction in emissions.”

It goes on: “Similarly, the mandatory disclosure legislation that relates to NABERS [Building Energy Efficiency Disclosure Act 2010] is specifically for energy efficiency, not emissions reduction.”

So the question about what NABERS is for, is actually a very big question.

Maybe it’s the elephant in the room.

The other possibility for the elephant, is the equity question.

If most of the big building owners have achieved great things with their buildings, including installing their own co/trigen plants in the basements, then several people have pointed to the issue of what happens with smaller property owners who can’t afford these wonderful initiatives. Who can barely keep the place running, let alone carry out major energy/environmental retrofits.

These owners would benefit enormously from a district trigen system.

But if NABERS recognised their environmental performance with the trigen energy use and a lower headline number, then these B grade owners might start to snap at the tail of the big boys.

And this is a tough market.

What NABERS says
NABERS boss Matthew Clark, director water and energy programs spent some time explaining to The Fifth Estate the nuances of how NABERS works and we’ve learnt a lot. Among the things we’ve learnt is why so much of the industry gets confused about a system that has been billed as ultra simple – a measure of the energy actually consumed on site, via analysis of the bills.

It’s not quite that. Because of the two numbers already noted.

Clark said there were some contentious views in the lead up to the decision on district trigen.

The City of Sydney, which is planning a major trigeneration network, was understandably disappointed with the result on trigen, he said.

“The decision was a lengthy process,” Clark said. “There was different feedback from different parts of the industry.

“It’s clear when look at the public submissions there is disagreement in different parts of the industry on how NABERS should treat cogen [and trigen].”

The problem with including the district trigen value in our so-called headline or building efficiency number, Clark says, is that you can’t guarantee an owner will hook up the system.

“When a building is sold, by law the owner cannot force the buyer to buy electricity from the same supplier as the vendor.”

On the other hand providing two numbers also allows the owners to show the improvement in performance if district trigen is used.

NABERS is all about transparency and allowing people to make their own decisions, Clark said.

If a building has a co/trigen plant in the basement then the building is more efficient and the headline star ratings will reflect that.

The environmental rating or secondary number will reveal the truth of how many emissions the building releases. If the trigen plant in the basement is not turned on, then the rating will reflect that.

Thermal energy is different
If the district energy system is thermal energy, which requires building owners to alter the building to accommodate the system, such as by the installation of equipment such as absorption chillers, this will improve the NABERS headline number because it relates to the efficiency of the building overall and rewards the better efficiency of the building.

How to rate trigen
“One thing we heard strongly from the market and one of the things originally proposed was that we would need some ways of understanding how much greenhouse gas was associated with trigeneration system,” Clark said. “We would need an accreditation process.

“We would still like that standard to be determined. And we will facilitate an industry group in order to do that.”

The concern was that this is a highly complex issue.

So for now emissions from external trigen will be judged on a case-by-case basis with the owner paying for the costs to do so.

Working out a generic formula for district trigen will take time.

“We will convene an industry panel and we will encourage industry groups to work together [to find a formula],” Clark said.

“We suggest we will give the industry up to two years and will encourage them to come up with a formula as quickly as they can.”

Clark thinks a solution will surely be found in that time frame.

But if a methodology isn’t decided in that time frame, then guess what? The electricity from the co/trigen will be rated the same as grid electricity.

Item No 4 in the facts sheet says: “An industry-working group will be initiated to develop an accreditation standard for low emissions electricity. If an acceptable standard has not been created by 25 October 2014 standard grid emissions factors will be used.

Feedback
One of the early bits of feedback on the decision came from consultant Jonathan Prendergast who has contributed a few articles to The Fifth Estate on the trigen and NABERS issue.

Prendergast raises the issue of why a trigen in the basement should be rewarded with better star ratings in the headline number when the owner still has the choice to turn it on or not, or is forced to keep it off, just as the owner of a building can chose to connect to a district trigen or not. (In fact as DEXUS Property’s Tanya Cox said our Political Salon, many in-building trigens are not switched on.)

Valuations
Prendergast also says you need to be mindful of the investment industry and valuations.

“Valuers have come to the party with NABERS, and now recognise the sustainability initiative actually improves the building’s value, through increased yields and lower vacancy.

“But this is only for the proper star rating [meaning the headline number for NABERS]. The secondary star rating is quite irrelevant in this regard.

“It’s the same with a Building Management System. The new building owner could choose not to use it.

“The point is, like precinct trigen, the infrastructure is there, available for the new building owner.

“Therefore, it should be captured in the building valuation. If it is not used properly, then that opportunity is lost, by the new owner’s choice, and their subsequent NABERS ratings will go down.”

Of course we could ask the valuers to take on the secondary numbers. But it took them a century to move this far (our comment).

Matthew Clark says there is a misunderstanding about some of these issues. First, as he’s explained above, a trigen in the basement won’t impact on a building’s NABERS environmental rating unless it’s turned on and the bills prove there are lower emissions.

That’s what NABERS measures, he says, the actual greenhouse gas emissions, through actual bills, delivered in the previous 12 months.

NABERS: it’s not about emissions.
So there we were thinking that NABERS was all about reducing emissions in the built environment. It is. But not if you look at the CBD legislation.  And not if you read the official literature from NABERS on its district trigen decision. And not if you read the PCA submission on this.

Mmmm.

What can we say?

Of course building efficiency is hugely important.  And we’re being probably needlessly cynical here.

It’s like a car: how many cylinders are under the bonnet; whether it’s fuel injected or uses an old carburetor are all hugely relevant to how it performs. If it’s a horse and buggy then in environmental terms all you have to worry about is the methane.

The elephants, the elephants
But underneath the arguments and issues is the niggling question that won’t go away.

If NABERS was designed to primarily rank buildings against each other, to measure efficiency rather than to reduce total emissions – although of course it does that with its environmental rating – then do we need something else to help bring down emissions?

Maybe it’s trying to find a way to make the environmental performance part of NABERS the headline number.

Maybe it’s mandatory disclosure for tenants, as discussed in our Political Salon.

Maybe it’s finding a way to reward and include the building owners who can’t afford sustainability managers or facility manages on staff and who would benefit from district trigen.

Everything Matthew Clark says and what the NABERS decision came up with is fair and reasonable. But fair and reasonable to whom?

The retail rating tool too will soon be changed to make it more fair, Clark said.

Apparently bigger centres have bigger open spaces and have more intensive energy uses on a square metre basis than smaller centres. They tend to rate lower on the NABERS scale than smaller centres on a square metre basis. So now the algorithms will be reworked because this is considered unfair.

But so is the burning up of the planet unfair.

So are hurricanes Sandy and Katrina and the Queensland floods.

Has anyone noticed? Nature is unbelievably unfair. Cruelly unfair.

It really doesn’t give a damn about the fairness of how your asset compares to other assets. It’s all about total emissions.

CLARIFICATION

NABERS’s Matthew Clark emphasises that there is one NABERS Energy rating, “the one that includes clean energy. We don’t make a distinction in the way you suggest. A NABERS certificate shows how much the energy efficiency of the building contributed to the rating, and how much clean energy purchased by the building owner has added.

“Only the energy efficiency component must be disclosed by the Commercial Building Disclosure laws, but there is nothing preventing owners from telling everyone their full NABERS rating.”

FEEDBACK

GPT sustainability manager Bruce Precious said he fully supported the NABERS decision on district trigen.

“My congratulations go to the NABERS team for delivering, in my view, an entirely appropriate response to district thermal/electricity.  The precedent for dealing with lower greenhouse supply of electricity has already been set with the Green Power example, light brown power should be treated similarly once there are established protocols for measuring it.”

tperinotto@thefifthestate.com.au