The Cost of Emissions: What Hospitals Need to Know About Building Performance Standards

by | Oct 29, 2024

Justina Hierta

The number of cities and states requiring building owners to reduce energy use and the associated emissions has grown rapidly in recent years. Building Performance Standards (BPS) require existing buildings to meet increasingly strict energy efficiency and emissions reduction targets and levy fines when targets are not met.

These standards typically target larger, existing buildings, including shopping malls, multifamily residential complexes, and office buildings. Hospitals, given their size and intensity, are likely to fall into the first wave of compliance cycles as BPS become enforced. By complying, health systems can enjoy multiple benefits, including avoiding fines, reinvesting savings in facility upgrades, and improving patient care.

Jurisdictions Implementing Building Performance Standards

According to the EPA, buildings are responsible for more than 30% of greenhouse gas emissions in the U.S. and up to two-thirds in dense urban areas like New York City. To reduce the effects, over half a dozen large cities and more smaller ones have implemented Building Performance Standards. Four states—Washington, Oregon, Colorado, and Maryland—have also implemented BPS regulations. Each of these cities and states has committed to achieving net zero greenhouse gas emissions by 2050 at the latest.

We will likely see more cities and states adopt regulations for Building Performance Standards by the end of 2025. Cities that have committed to passing BPS regulations include Chicago, Evanston, Minneapolis, Atlanta, Philadelphia, Pittsburgh, Los Angeles, and San Francisco. Additional states, including California and Massachusetts, are also likely to pass regulations soon.

The State of Building Performance Stands in the U.S.

The state of building performance standards (BPS) in the U.S.
Source: Institute for Market Transformation

Penalties for Non-Compliance

Under BPS policies, building owners are required to achieve increasingly strict targets designed to improve the energy performance of buildings. Penalties for non-compliance can be quite significant. Some cities, such as New York and Denver, are levying fines based on emissions above an increasingly strict threshold; the annual penalties per average building under these regimes have been estimated to reach millions of dollars per year. In Boston, fines are up to $1,000 a day. In Oregon, fines can reach a dollar per square foot per year. Beginning in 2031, Seattle will fine a building owner $10 per square foot per year in addition to fines under the Washington state standard. 

A large hospital that does not invest in improved data tracking and controls, energy efficiency, electrification, engineering upgrades, and a strategy to mitigate remaining fossil fuel usage could face an annual fine exceeding $10 million under a regulatory regime like Seattle’s.

Benefits of Compliance 

Given the acceleration of BPS adoption across the country and corresponding penalties, every health system needs to strategically plan for the transition to a lower carbon footprint across its building portfolio. Implementing the strategies for energy efficiency, real estate optimization, and capital projects necessary to avoid penalties is an investment. However, building owners reap the return on these investments in numerous ways:

  • Reducing future utility bills
  • Meeting climate commitments
  • Reducing the size of power purchase agreements (PPAs)
  • Satisfying growing stakeholder demands
  • Improving resiliency 

Early Compliance and Dramatic Results in Boston

The Building Emissions Reduction and Disclosure Ordinance (BERDO) was enacted in 2013 in response to the Boston Climate Action Plan, which aims to reduce greenhouse gas emissions and improve the energy performance of buildings in Boston. Spanning more than two million square feet, Boston Medical Center (BMC) requires significant energy to serve its patients. 

By implementing Oakwell’s holistic strategies of sustainability management, real estate optimization, and energy efficiency, BMC achieved BERDO compliance and its goal to halve Scope 1 and 2 emissions ahead of schedule. The health system has dramatically reduced its energy consumption, physical footprint, and environmental impact, even while increasing patient volume, with more than $150 million projected in energy savings. (See the figures and projected energy savings in our illustrative case study.)

Holistic Strategies for Your Health System

Health systems nationwide will need to comply with Building Performance Standards or pay meaningful penalties. Understanding and achieving the necessary energy performance of buildings may feel daunting, but you have experts available to walk with you through every step of the process. The Oakwell team has a proven track record of helping health systems implement holistic strategies that reduce their carbon footprint and comply with regulations while increasing profitability through cost-saving initiatives and real estate optimization.

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