Enter the lobby of Rocky Mountain Institute’s (RMI’s) new office at Boulder Commons in Boulder, Colorado, and the first thing you notice is an artistic display of mosses and other organic materials mounted to the wall.
The nearby wall covering is made of beetle-kill wood that cuts at an angle leading you down the hallway. The building looks clean and contemporary – with splashes of colour and fun design elements that provide a fitting home for the growing global clean energy non-profit organisation.
But perhaps what is most exciting and cutting edge about Boulder Commons is what you can’t see, and there is far more than meets the eye to this huge office.
It is the first net-zero energy (NZE) leased building in Colorado and the largest NZE development of its type in the United States. In addition to being cutting edge in energy efficiency and renewable energy supply, it sets a new paradigm for net-zero energy lease structures.
A CUTTING-EDGE LEASE FOR A CUTTING-EDGE BUILDING
Net-zero buildings have experienced a boom in popularity over the past year. A report from New Buildings Institute revealed a 74 per cent increase in certified and emerging net-zero buildings from 2015–2016. But despite industry progress, the number of leased net-zero buildings lags significantly behind owner-occupied projects. This presents a challenge to the industry’s long-term growth and viability.
Although the value proposition for an owner-occupied net-zero building is clear (lower energy and maintenance costs, higher employee productivity, and fewer employee sick days), the value proposition for both landlords and tenants in a leased building depends on a more complex relationship.
How do you true up energy use and costs on a monthly basis when they are typically calculated on an annual basis? How does a developer recoup the investment from a solar PV system when tenants pay a monthly bill to an electric utility and landlords have committed to buying less, not more? How can tenants prioritise energy efficiency when they manage and control only a small portion of the energy-using infrastructure and equipment? And conversely, how can landlords encourage tenants to save energy, particularly as plug loads overtake lighting to become the driving end use in net-zero energy buildings? Managing these complexities while giving shared net-zero goals “legal teeth” is where the net-zero lease comes in.
BRIDGING THE LANDLORD-TENANT DIVIDE
At Boulder Commons, Morgan Creek Ventures worked with RMI and the legal team at Holland & Hart, to develop a first-of-its-kind lease structure that built a strong business case for both tenants and landlords to actively contribute to meet the development’s net-zero goals. This resulted in a lease that allocates a budget for factors like energy use or transportation that could make or break the development’s ability to meet energy demands through on-site renewable energy sources (in this case a 596 kW PV system) on an annual basis.
So, for example, RMI is incentivised to stay within its plug load (energy used by products that are powered by means of an ordinary AC plug) energy budget. If RMI exceeds this budget, it will be charged a fee to offset this overage with renewable energy certificates (RECs), and be required to meet with the landlord to discuss ways to more proactively manage energy use. This establishes a win-win because RMI has full control over how this energy budget is allocated and managed through plug loads, and Morgan Creek Ventures can more accurately size the PV system because it knows what types of loads to expect.
Transport-related emissions are treated similarly. Costs for parking are separated from the cost for space rent, which incentivises RMI employees to use other ways to get to work. If RMI’s staff commute by public transportation, carpooling, or riding their bikes instead of using personal vehicles, over time RMI will pay less in rent as parking spaces are turned back over to the landlord to be put on the market (parking costs account for approximately 13 per cent of RMI’s total lease cost).
MOVING THE MARKET FOR NET ZERO FORWARD
Boulder Commons is merely the tip of the iceberg in scaling leases that benefit owners, landlords, tenants, and the environment.
“The buildings industry is notoriously an industry of followers. Nobody wants to go first,” said RMI manager Cara Carmichael. “We have gone first, and we want to share what we learned to help push the market to zero using smart lease structures. If we can’t get our heads around a solution that’s broadly adoptable to address issues around split incentives and green leasing, then we are never going to achieve our climate objectives.”
A version of RMI’s lease at Boulder Commons is publicly available on RMI’s website to encourage others to follow suit, and RMI will be working with the City of Boulder to develop and scale a set of net-zero lease guidelines. In the meantime, RMI staff can come to work each day knowing they are practicing what they preach with a carbon-free footprint—all in a shiny new office space that we’re proud to show off.