Wednesday, June 7, 2017

The Irvine Company and AB802 - Data Analytics and Behavioral Energy Efficiency

Power Generation and Supply is responsible for as much as 182.4 metric tons of CO2 equivalent (64% of total equivalent emissions from all sources) emissions in the real estate sector.[1] These figures indicate the substantial scope for reducing the amount of energy used by buildings. An increasing number of companies involved in the real estate sector are therefore trying to address this issue, by investing in energy efficient equipment and adopting greener technologies.

For example, The Irvine Company, a privately held real estate company, advertises seven principles[2], with their second being Thoughtful Stewardship - striving to operate their “properties in a sustainable, environmentally sensitive way”. They already operate the most number of LEED certified buildings in California, and rank No.1 in the nation among all building owners, in terms of the total number of Energy Star Certified office buildings for 2015.[3] These achievements directly convert to cost-savings on energy bills for newer properties, where the company pays for utilities (gross lease).

Further, they argue, that even in many of their older, low-rise buildings where tenants pay for utilities (triple net leasing), they are able to recoup their energy efficiency investments through higher rents. In order to determine the priority and type of investments to make, it is necessary for them to have building energy-use data at their disposal, to which end they have invested in sub-metering infrastructure for approximately 100 of their 500 commercial real estate properties where tenants pay for utilities.

With AB 802 coming into effect on January 1, 2017, information on whole-building energy consumption will now have to be provided to building owners by utilities. This simplifies the tracking of success of energy conservation programs and the process of benchmarking energy use of buildings. With all of this increased transparency, investments into sub-metering infrastructure could be by-passed, as information on energy use will now be readily available.

We recommend The Irvine Company to take advantage of this information, implement programs to influence behavioral changes in their clients and tenants and correspondingly follow a different approach towards reducing energy consumption. These programs have the potential to save as much as 16 to 20%[4] of the energy consumed with little to no cost, once the data is obtained. Programs involving education and training can motivate simple behavioral changes: like selecting energy efficient appliances, switching off lights when not in use, setting reasonable temperature setpoints for HVAC systems. A software-based platform which would collect energy use data (available, thanks to AB 802) and analyse the effectiveness of these programs must be developed, which would also double as a benchmarking platform to compare energy used by all buildings over the company’s portfolio.

We believe that our recommendation has the potential to achieve significant reduction in energy use for the amount of required investment. With all of the other initiatives taken by The Irvine Company towards sustainability, it would only be logical for them to explore the possibility of engaging their tenants in such a program, and continue to drive the value of their properties higher than their competition.





By Falgun Patel, Andrew Sharp, Toru Terai, Pedro Vazquez






[1] Carnegie Mellon University Green Design Institute. (2017) Economic Input-Output Life Cycle Assessment (EIO-LCA) US 2002 (428 sectors) Producer model[Internet], Available from: http://www.eiolca.net/
[2] The Irvine Company, “Principles”, https://www.irvinecompany.com/about/principles/
[3] The Irvine Company, “About”, https://www.irvinecompany.com/about/sustainability/
[4] Frankel et al, “Sizing the Potential of behavioral energy-efficiency initiatives in the US Residential Market”, McKinsey & Company, November 2013.

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