News of Energy Star Portfolio Manager being discontinued has spread like wildfire in recent weeks. Just as quickly, hot takes and half-baked solutions have filled inboxes and LinkedIn feeds.
Like most crises, the best course of action is neither full panic nor complete denial. Given that indications are that the tool will be in place until September, there is time to think clearly and execute a well thought out strategy.
This view is supported by industry sentiments. During last week’s webinar on Choosing the Right Utility Data Strategy for Your NNN Portfolio — Pros and Cons of Every Option, attendees were asked:
- 1-10, How worried are you about Energy Star Portfolio Manager being shut down?
- What is your primary concern of Energy Star Portfolio Manager being shut down?
The results were illuminating.
The average concern was a 5.5, not because attendees were lukewarm, but more because every single number, 1 through 10, was represented in a relatively even distribution.
The takeaway is that the value and dependence on Energy Star Portfolio Manager varies widely across the industry.
Still, the results were a little more concentrated in terms of the qualitative reason for concern, with approximately 40% of respondents stating that their primary concern was a loss of their single source of truth, and around 30% stating their primary concern was loss of scoring and benchmarking features.
This begs the question: what is Energy Star Portfolio Manager, really?
Once we break it down into its component pieces, we can begin to formulate gameplans for the discontinuation scenario.
Single Source of Truth
Utility data comes from many different sources. Because of this, there’s obvious value in having one (free to use) place for it all to live.
If Energy Star Portfolio Manager is discontinued, there are two primary questions in this domain:
- Will we lose all of our historical data?
- What will be our single source of truth going forward?
In terms of historical data, EPA policy already designates the property data administrator as the owner of their data.
So, as a first practical step, owners and operators should be exporting and backing up their historical data on a recurring basis.
In many cases this will live in excel, though ideally an existing technology vendor can provide redundant backup in the cloud.
The question of what will be the single source of truth going forward is a little trickier.
The most likely scenarios are that the EPA sells the intellectual property it has developed to a private company, or it spins it out into a non-profit.
It’s worth noting that if it is privatized, it likely won’t be by one of the current ESG reporting platforms. There are too many obvious conflicts of interest and inherent risks.
If privatized, more than likely, there would be one or two companies that mirror Energy Star’s current role, similar to the role credit rating agencies play. There’s an argument to be made that this competition could unlock additional value beyond what Energy Star currently provides.
If a non-profit is set up, it is ideally done so via a consortium representing all stakeholders, including technology providers, end users, and regulators.
In either of these cases, private or non-profit, it is likely that the use of Energy Star could be continued uninterrupted once users agree to have their data migrated.
The key is to be prepared for the possible scenario of a gap between providing entities, and well structured data that can be incorporated once a solution is in place.
Benchmarking and Scoring
There is something elegant about taking hundreds or thousands of data points and transforming them into a 0-100 score. In fact, we’ve applied that same model to every module in the Enertiv Platform.
Both a tremendous amount of data and technical brain power is necessary to get these scores meaningful and consistent across different assets.
For Energy Star, this means integrating a lot of qualitative information about the building (the maintenance of which is an area ripe for innovation).
Both on quantity of data and the scoring front, it is highly unlikely that this could be accomplished by an existing ESG reporting platform. Even if it was, the market has been getting this for free for decades. It’s unclear to what extent it would be willing to pay for it.
Even if a private ESG reporting platform did set up a 0-100 scoring system, there inevitably would be confusion and frustration around the differences between the two models, without a viable path for owners to understand and tweak the underlying algorithms.
Without a transfer of the intellectual property of Energy Star, built up over decades, it’s likely that the 0-100 scoring would effectively be sunset along with the program.
That is not to say that the peer benchmarking that technology companies can provide is not valuable.
Any comparisons are better than none, and there are many meaningful metrics that can be used to benchmark a portfolio, even if they’re not as intuitive as a 0-100 score.
Regulations and Reporting
In all likelihood, the speed of the proliferation of state and municipal energy benchmarking regulations across the country would not have occurred without Energy Star Portfolio Manager.
The system represented an established, agreed upon, federally funded infrastructure to leverage for local initiatives.
But at this point, these local governments are pot committed and are arguably more likely to push through decarbonization agendas without federal leadership.
No one knows what will happen, but given that most reporting append on an annual cycle, there is a high likelihood that one of the private or non-profit options previously discussed will be leveraged with little outward change to the process.
The other factor to consider are any commitments made to investors based on specific Energy Star scores.
It is likely too early to say what will happen. Ideally, the full intellectual property of Energy Star is transferred to another entity and scoring continues under the same algorithm.
If that scoring substantially changes for any reason, there will likely be hotly contested negotiations of the terms of the investment or fund vehicle.
Conclusion
Energy Star Portfolio Manager being shut down is a real risk.
However, once the initial shock wears off, it is plain that the ramifications are manageable.
Today, owners and operators should:
- Ensure historical data is blacked up internally on excel
- Engage current vendors about adding redundancy in the cloud
- Stay abreast of updates, and be prepared to follow procedures to ensure a seamless migration to whatever entity becomes the replacement
- Assume that benchmarking regulations are still firmly in place and required. Stay updated on procedural changes for reporting
- In addition to raw utility data, keep an eye on the intellectual property for the scoring algorithm. Depending on the outcome, be prepared to renegotiate investor reporting requirements
In the interim, data accuracy and integrity will be paramount. Without Energy Star’s alerts, those with strong quality assurance and reliability processes and systems in place will emerge from the storm relatively unscathed.
