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Energy Efficiency of Buildings in Cities

March 1982

NTIS order #PB82-200346

Library of Congress Catalog Card Number 82-600522

For sale by the Superintendent of Documents,

U.S. Government Printing Office, Washington, D.C. 20402

This assessment responds to a request by the House Committee on Banking,

Finance, and Urban Affairs for an evaluation of the impact on buildings found in cities,
of energy price increases, and of Federal policies to encourage energy efficiency and
the use of renewable energy in buildings. By focusing on multifamily and commercial
buildings the report complements an earlier OTA study, Residential Energy Conserva-
tion, which analyzed the potential for improved energy efficiency of single-family
The report examines the potential for increased energy efficiency in buildings
found in cities from two perspectives: that of the energy expert who assesses tech-
nical opportunities for improved energy efficiency, and that of the real estate expert
who evaluates the financial attractiveness of real estate investment opportunities. The
study categorizes existing buildings according to their technical retrofit potential; it
also groups building owners according to the likelihood that they will invest in retro-
fits. It assesses the prospects for-large-scale stimulus of building retrofit by private busi-
nesses, public utilities, and city and State governments. Several options for Federal
policies towards building retrofit are provided. The study also includes an analysis of
the technical and economic feasibility of district heating in cities.
We are grateful for the assistance of the project advisory panel, as well as for the
background work done by several contractors and the advice of numerous reviewers
in State and local governments, universities, public interest groups, and business. It
should be understood, however, that OTA assumes full responsibility for this report
which does not necessarily represent the views of individual members of the advisory

Energy Efficiency of Buildings in Cities Advisory Panel

William Reilly, Chairman

Conservation Foundation
Francis Hooks Burr Hewitt Lovelace Victoria J. Tschinkel
Attorney Public Safety Director Florida Department of
Ropes & Gray Environmental
Neal R. Peirce Regulation
Vernon Friason National journal
Real Estate, F&H Services James A. Walker
California Energy
Lenneal Henderson George Peterson Resources
Howard University The Urban Institute Conservation and
Michael Hogan John H. Robson Commission
Utility Consultant Marquette Fuels
Joseph E. Widmayer
George Latimer Terry L. Sinnott Complete Building
Mayor, City of St. Paul San Diego Gas & Electric Services, Inc.

Review Group: Existing Building Retrofits

Dean Alford Robert Naismith Howard Ross
Claude Terry & Associates Energy Auditor Department of Energy
Paul Anderson Travis Price Joseph E. Widmayer
Honeywell Control Systems Architect Complete Building Services
James Mays
Energy Auditor

Review Group: Building Owners’ Criteria for Energy Retrofit Investments

Harley Barnes Robert Dubinsky Alisa Gravitz
Hittman Associates Private Consultant Department of Energy
Thomas Black David Engel Arthur Rieger
Urban Land Institute Department of Housing and Urban Department of Housing and Urban
Deborah Bleviss Development Development
Federation of American Scientists

Working Group on Policy Options for Bringing About Large= Scale Retrofit
of Low= and Moderate= income Housing
John Alschuler* David Engel Judy Kossy
Hartford Policy Center Department of Housing and Urban Department of Housing and Urban
Development Development
Richard Burk Francis Luzzato
Department of Housing and Urban Dennis Feck ACTION
Development Department of Energy Weatherization
Meg O’Hare
Department of Energy
Allen Cohen Gene Frankel
Department of Health and Human House Committee on Science and Arthur Reiger
Services Technology Department of Housing and Urban
Lynn Collins Wayne Gathers* * Tamara Stanton
Alliance to Save Energy Department of Energy ACTION
*Currently City Manager of Santa Monica, Calif.
** Currently at the Alliance to Save Energy.

OTA Energy Efficiency of Buildings in Cities Project Staff

Lionel S. Johns, Assistant Director, OTA

Energy, Materials, and International Security Division

Richard E. Rowberg, Energy Program Manager

Mary E. Procter, Project Director

Eric Bazques* Burton Goldberg* Doreen McGirr*

Joanne Seder Nancy Naismith

Administrative Staff

Virginia Chick Marian Grochowski Lillian Quigg Edna Saunders

Contractors and Consultants

Energyworks, Inc. Jane Silverman

Steven Ferrey & Associates Temple, Barker & Sloane, Inc.
Alan Meier Frederick Winkelmann
Real Estate Research Corp.

OTA Publishing Staff

John C. Holmes, Publishing Officer

John Bergling Kathie S. Boss Debra M. Datcher Joe Henson

OTA thanks the following people who took time to provide information or to review part or all of the study.
Thomas Bull, Office of Technology Assessment Lou McLelland, University of Colorado
Clark Bullard, University of Illinois Hans Nyman, St. Paul District Heating Development Co.
Thomas Casten, Cogeneration Development Corp. Deborah Pederson, Office of Technology Assessment
Gary Dodge, Office of the Mayor, St. Paul, Minn. Jenifer Robison, Office of Technology Assessment
jack Gleason, Institute for Local Self-Reliance Danilo T. Santini, Argonne National Laboratory
Paul Greiner, Edison Electric Institute Barry Siegus, Conference of Mayors
Eric Hirst, Oak Ridge National Laboratory Lawrence G. Spielvogel, Consulting Engineer
Eric Leber, American Public Power Association Steve Strahs, Northeast Solar Energy Center
Gerald M. Mara, Center for Renewable Resources David Strom, Office of Technology Assessment
Richard Morgan, Environmental Law Institute Norman Taylor, International District Heating Association
Beth McPherson, Center for Renewable Resources Jerry Wade, Economist and Private Consultant
Bruce McCarthy, New England Electric System

Reviewers of Case Study Materials

Buffalo, N.Y. Jersey, City, N.J.
Richard Coley, Buffalo Savings Bank Harold A. Duncan, McConnell Fuel Oil Co.
Richard Deptula, Niagara Mohawk Power Corp. Charles W. Lawrence, New Jersey Energy
John Garfield, Office of the Erie County Executive Research Institute
Gerald Kelly, Greater Buffalo Development Foundation Steven Miller, Office of the Mayor
Robert Litzenburger, Buffalo Energy Project John S. Nettleton, Planner, Rick Cohen & Associates
Thomas J. Murphy, Office of the Mayor Sam Tsarinides, Department of Human Services
Kenneth E. Sherman, New York Public Interest
Research Group, Inc. San Antonio, Tex.
Arthur F. Worden, Wilson, Klaes, Brucerk & Worden, Lou Fox, Deputy City Manager
Consulting Electrical and Mechanical Engineers Mary Flurry, Department of Planning
Mike Garcia, Mexican-American Unity Council
Des Moines, Iowa Rolan Lozano, Department of Planning
Barbara J. Ashton, Office of Neighborhood Development Howard G. Rogers, Energy Consultant
Richard L. Bryan, Des Moines Savings William R. Sinkin, Texas Bank
Martha Hock, Citizens United for Responsible Energy F. E. Thornton, City Public Service
Robert Mickle, City Planning and Zoning Commission
Craig Severance, lowa Center for Local Self-Reliance
Linda Wheaton, Neighborhood Housing Services
E. E. Young, lowa Power

Tampa, Fla.
Jan Abell, Local Community Design Center
H, D. Cusick, Greater Tampa Chamber of Commerce
Renee T. Faass, Energy Conservation Coordinator
Richard D. Garrity, Department of Public Works
G. J. Kordecki, Tampa Electric Co.
Ron Rotella, Director of Housing Inspections


Chapter Page
1. introduction and Summary of Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Importance of City Buildings in National Energy Use: Will Energy
Efficiency Make a Difference. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3. Technical potential for improving the Energy Efficiency of Buildings in Cities. . 41
4. Will Building Owners Invest in the Energy Efficiency of City Buildings? . . . . . . . 99
5. Retrofit for the Housing Stock of the Urban Poor. . . . . . . . . . . . . . . . . . . . . ...143
6. Prospects for District Heating. . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... . . . . . . . . 165
7. Private Sector Efforts to Stimulate Energy Retrofit of Buildings . . . . . . . . .. ....197
8. Potential Role of Utilities Improving the Energy Efficiency of Buildings. ....2ll
9. public Sector Role in Urban Building Energy Conservation. . . . . . . . . . . . . . ..241
10. Case Studies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... .269
11. public Policy Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . .... . . . . . . . . . . . . . 299

A. Options for Thirteen Building Types in the St. Louis Climate Zone. . .........313
B. Estimated Cumulative Energy Savings From Packages of Retrofits for
Thirteen Different Building Types. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...327
C. Retrofit Descriptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . 334
D. Sources for Retrofit Costs and Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...359

Chapter 1

Introduction and Summary of Findings


Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 3 The Future: Federal Policy Options for
Stimulating the Retrofit of Buildings
Summary of Findings . . . . . . . . . ........ 4
in Cities . . . . . . . . . . . . . . . . . . . . . . . . . 20
overview . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Option A: No Intervention . . . . . . . . . . . . 20
Building by Building Retrofit Potential.. . . . 5 Option B: Small Federal Market
Technical Description. . . . . . . . . . . . . . . . 5 Assistance Role.. . . . . . . . . . . . . . . . . . . 20
Capital Costs . . . . . . . . . . . . . . . . . . . . . . . 7 Option C: Large Active Federal Role. . . . . 21
lmportance of Solar Retrofits. . . . . . . . . . . 8
The Difficulty of Predicting the Outcome of
a Retrofit to a Particular Building . . . . . , 9
Will Owners of City Buildings lnvest in the
Tab/e No. Page
Energy Efficiency of Their Buildings?. . . 10
1. The Gap Between Likely Energy Savings
Why Do Homeowners Forego the Large
Through Retrofit and Technically
Potential Returns on Retrofit?. . . . . . . . . 12
Feasible Savings by the Year 2000:
High Cost of Finance. . . . . . . . . . . . . . . . . 12
Building Types Covered in This Report. . 5
impact of Risk... . . . . . . . . . . . . . . . . . . . 12
2. Thirteen Types of Buildings With
The lmpact of Two Forms of Subsidies:
Significantly Different Retrofit Options.. 7
Lower Financing Costs and Tax Credits. 13
3. Three Ways to Express the Relative Cost
When the Building Owner is the
Effectiveness of Energy Retrofits . . . . . . . . 8
Government . . . . . . . . . . . . . . . . . . . . . . 14
4. Retrofit Payback Criteria, Holding Periods
General Prospects for Retrofit of
and Access to Financing, and Advice for
Buildings in Cities. . . . . . . . . . . . . . . . . . 14
Different Types of Owners. . . . . . . . . . . . 11
Prospects for District Heating . . . . . . . . . . . . 15 5. Owners Likely, and Not Likely to Retrofit
Their Buildings . . . . . . . . . . . . . . . . . . . . . 14
Prospects for Private Sector Marketing
6. Two Forms of Federal Subsidy . . . . . . . . . 21
of Energy Retrofits . . . . . . . . . . . . . . . . . 15
Will Gas and Electric Utilities Stimulate
Investment in Energy Retrofits?.. . . . . . 17
Public Sector Programs to Stimulate Energy
Retrofits . . . . . . . . . . . . . . . . . . . . . . . . . 17 Figure No. Page
Potential Role of City Governments l. Combinations of Loan Terms and Interest
in Urban Building Retrofit. . . . . . . . . . . 17 Rates Which Allow the Value of Energy
Potential Role of State Governments Savings to Exceed the Cost of Borrowed
in Urban Building Retrofit . . . . . . . . . . . 19 Money the First Year. . . . . . . . . . . . . . . . . 13
Chapter 1
Introduction and Summary of Findings

The future of buildings in this Nation’s cities port–all commercial buildings, all multifamily
arouses both interest and concern. Great de- buildings, all housing occupied by low-income
partment stores and hotels, museums and cul- people, and single-family homes located in cen-
tural centers are by and large to be found in tral cities—are also important. These categories
cities. The office buildings of the financial dis- of buildings together used about 14 Quads of
tricts of New York, Chicago, Houston, and San primary energy in 1980, half of all U.S. building
Francisco shelter major economic decisions af- energy i n that year. Most of the rest of energy in
fecting our Nation. Some of the most exciting buildings was used by middle and upper in-
modern real estate development has occurred come single-family homes located outside cen-
within cities—Baltimore’s Harbor Place, Bos- tral cities (about 10 Quads of primary energy).
ton’s Quincy Market and San Francisco’s Ghira- The technical and economic prospects for im-
delli Square. The Nation’s rediscovery of its proved energy efficiency of single-family homes
own past has found expression in loving res- were dealt with in an earlier OTA report Resi-
toration of Victorian homes in such cities as dential Energy Conservation. *
Savannah, Cincinnati, Pittsburgh, and Hartford. This report attempts to bridge the gap be-
Elsewhere, however, empty factories and tween urban and housing specialists, on the one
boarded up tenements in cities are reminders of hand, who understand such subjects as primary
economic stagnation and population shifts. and secondary mortgages, building codes, and
Some magnificent old buildings in cities stand the ins-and-outs of municipal bonds, and, on
crumbling amid pitted streets and recalcitrant the other hand, energy specialists who are ex-
ancient sewers, testimony to the faiIure to main- pected to understand building envelope effi-
tain the architectural and engineering legacies ciencies, heating system efficiencies, utility load
of the past. forecasting, and load management potential.
One contributor to the economic difficulties Both sets of specialists must understand some of
of buildings i n cities has been the rise in the cost the others’ expertise if sensible building energy
of energy. This study of the energy efficiency of policy (including deliberate nonintervention) is
buildings in cities has a double focus, arising to be made. The analysis is from the perspective
both from concern about the Nation’s cities and of various different actors i n the field with po-
the viability of their building stock and from tential impact on building retrofit—including
concern about the Nation’s energy future and the energy auditor or retrofit contractor, the real
the prospects for increased energy efficiency in estate financial analyst, and the city energy pro-
the building sector. gram director. The analysis attempts to assess
energy conservation opportunities in the con-
Looked at from the point of view of urban pol- text of real estate decision making.
icy this report deals with the energy efficiency of
Many aspects of the energy efficiency of
commercial and multifamily buildings because
buildings are not affected by the building loca-
such buildings are important in the building
tion—urban, suburban, or rural. This report
stock of U.S. central cities. Over half of the
treats buildings regardless of location in several
denser forms of housing–attached houses,
chapters: chapter 2, projections of building
small multifamily buildings with up to four
energy use; chapter 3, technical prospects for
apartments and larger multifamily buildings
—are located in central cities.
*Office of Technology Assessment, U.S. Congress, Residential
From an energy policy perspective, the build- Energy Conservation,, OTA-E-92 (Washington, D. C.: Government
ings that are the primary subject of this re- Printing Office, July 1 979).

4 ● Energy Efficiency of Buildings in Cities

improved energy efficiency of buildings; chap- the development of a national energy policy in
ter 7, private sector marketing of energy conser- recent years, such as national security consider-
vation; chapter 8, utility conservation programs; ations, balance of payments or conservation of
and chapter 9, State and Federal energy conser- capital resources. Nor does the report examine
vation programs. the basis for alternative projections of energy
use in the building sector, although it does pre-
On the other hand, an urban location does in- sent a simple projection of building energy use
fluence some aspects of real estate decision- for purposes of placing the more detailed exam-
making and local government policy. The dis- ination of the building sector in context. The
cussion of building owner motivation (ch. 4) is report assesses the practical potential for build-
based on interviews with owners of buildings in ing retrofit but does not itself set out to define
central cities. The description of local govern- the technically optimum degree of conservation
ment programs (in ch. 9) deals only with city investment. Rather it seeks to compare what
government and may not apply to suburban, seems practical and feasible for some actual
small town, or county government. The report buildings with what is likely to occur in the ma-
includes a set of case studies (ch. 10) drawn ex- jority of buildings.
clusively from central cities: Buffalo, N.Y.;
Jersey City, N. J.; Des Moines, lowa; Tampa, F1., Finally, the reader is cautioned against over-
and San Antonio, Tex. Finally, the chapter on generalization. In buildings, as in many other
district heating (ch. 6) describes a technology aspects of everyday life, there are many special
which is primarily suitable for cities, although it situations. Just as buildings differ widely in their
may be feasible elsewhere under the right cir- energy use and retrofit characteristics, many in-
cumstances. dividuals, companies and building owners will
vary in their choices of investment. The diversity
In order to avoid covering ground that has that characterizes the opportunities for conser-
been amply covered elsewhere, this report does vation makes it difficult to make universally ap-
not address, except in passing, several topics plicable statements. The report seeks rather to
which also have a bearing on the development explain and examine the many factors that un-
of national energy policy for the buiIding sector. derly that diversity, so that Federal policies may
The report mentions but does not discuss exten- take advantage of, rather than be thwarted by,
sively the many factors which have influenced these individual choices.

Overview Quads of these potential energy savings are like-
ly to come about because of investments in en-
Overall, OTA estimates that about 7 Quads* ergy efficiency made by building owners who
per year of energy savings is technically possible have personal or business reasons to invest
by 2000, through feasible** investments in the money in improved energy efficiency of their
improved energy efficiency of building types buildings.
covered in this report (see table 1). Nearly 3
*A Quad equals a quadrillion Btu of energy, a very large unit of The other 4 Quads of potential energy sav-
energy. It is equivalent to about 500,000 barrels of oil per day for a ings, on the other hand, may not occur be-
year, or about 50 million tons of coal, or the output of 18 cause building owners fail to make invest-
1,000-MW powerplants at average utilization. Seven Quads is
equivalent to the energy of more than two-thirds of the oil the ments in the energy efficiency of their build-
United States imported in 1981. ings. Part of the failure to retrofit is due to the
* *Feasible investments are defined as those which in 1981 are difficulty and costliness of improvements in
technically feasible and which would be cost effective over a
20-year lifetime, assuming no real increases in energy prices and a energy efficiency to some building types. Part of
3-percent real return on investment. the failure is due to building owners’ stringent
Ch. 1—Introduction and Summary of Findings ● 5

requirements for return on investments in owners and their implications for national
energy efficiency. The diversity of buildings and energy use is described below.

Table 1. —The Gap Between Likely Energy Savings Through Retrofit and
Technically Feasible Savings by the Year 2000: Building Types Covered
in This Report (quadrillion Btus of primary energy)

Projected Technical technical savings
energy savings Likely potential
use a potential savings c not realized
Multifamily buildings (all) . . . . . . . . . . . . 2.4 1.0 0.3 0.7
Commercial buildings (all). . . . . . . . . . . . 6.3 3.5 1.3 2.2
Low income single family (all). . . . . . . . . 1.6 0.8 0.2 0.6
Moderate and upper income single
family homes in cities . . . . . . . . . . . . . 3.5 1.8 0.9 0.9
Total buildings covered in this
report . . . . . . . . . . . . . . . . . . . . . . . . . 13.8 7.1 2.7 4.4
aproj~~t~d ~nergY “se in zooo a~~um~~ “. r~ductl~n from current energy use by these buildings and is based on a Set Of iKi.
sumptlons, that are described in the appendix to ch. 2, about demolition of existing buildings and construction of new build.
lngs needing retrofit A quadrillion Btu equals approximately 500,000 barrels of oil per day for a year.
%he technical savings potential IS defined as that resulting from all retrofits to these bulldlng types which as of 1981, are
technically feasible and which would be cost effect we over a 20-year Ilfetime, assuming no real Increases In energy prices
and a 3-percent real return on investment
CLlkely savings are those whlCh are Ilkely to come about from investments by bulldtng OWnW3 under Current conditions Of
availabl Ilty of capital, retroftt Information, and publlc programs.
SOURCE. Off Ice of Technology Assessment


Technical Description ● Wall and roof type.–Masonry or curtain
walls and flat roofs without attics or with
The national potential (estimated in table 1 ) very small crawl spaces are much more dif-
for increased energy efficiency of the building ficult to insulate than are wood frame walls
stock is the resuIt of physical changes to im- and roofs with attics and ample crawl
prove the energy efficiency of millions of build- spaces.
ings. For convenience, these physical changes ● Mechanical system (HVAC) type.– Phys-
are referred to as energy retrofits i n this report. ical changes to the way space heating or
While recognizing that each building is to some cooling is produced and circulated can
extent a unique problem, OTA did identify the provide significant increases in building ef-
major characteristics of buildings which influ- ficiency but vary with the type of heating
ence the types of energy retrofits that are likely ventilation and air conditioning (HVAC)
to be most effective. These are: system used by the building.
● Size.—Energy retrofits which improve the ● Building use.–Most commercial buildings
energy efficiency of the building envelope are used from 9 to 5 on weekdays (offices)
(walls, windows, and roof) are more impor- or 9 to 9 daily (shopping centers) and are
tant for small buildings than for large build- unoccupied outside these hours. This pro-
ings. On the other hand, certain kinds of vides opportunities for improved energy ef-
retrofits which bring about similar savings ficiency by careful control of temperature
in small buildings and large buildings will and lighting between operating and nonop-
cost relatively less per unit of energy saved erating hours. Opportunities also exist for
in large buildings because of economies of more efficient and task-specific lighting in
scale. commercial buildings. Finally, retrofits to
Ch. 1—Introduction and Summary of Findings Ž 7

the hot water system of multifamily build- water mechanical systems, and all commercial
ings can usually save considerable energy. buildings except the usually older commercial
buildings with water or steam heating systems
Capital Costs and window air-conditioners. Clearly the prob-
lem of financing retrofits for these buildings
OTA reduced 43 potential combinations of should be minimized by the fast payback (and
the four building characteristics described high return) of their retrofit options. Some of
above to 13 building types for which the lists of these fast payback retrofit options include wall
appropriate retrofit options are distinct (al- insulation in frame buildings, economizer
though there may be considerable overlap cycles which make greater use of outside air for
among them). The 13 building types are shown air-conditioning in commercial buildings and
i n table 2, OTA identified no major category of hot water flow restrictors in multifamily build-
building typically found in cities for which ings.
substantial savings were not available from ret-
For all of the remaining building types, on
rofits of low or moderate capital cost com-
the other hand, substantial savings are more
pared to savings.
likely to come from retrofit options of moder-
For some of the building types, a major part ate capital cost compared to savings, which
of the potential savings are likely to come from will payback in 2 to 7 years and whose real rate
retrofits of low capital cost compared to sav- of return can range from as high as 50 percent
ings (see table 3) in the sense that they will pay to as low as 13 percent per year over a 20-year
for themselves in energy savings in 2 years or retrofit life (also see table 3), These building
less and will earn real rates of return over the types include all small masonry rowhouses,
life of the retrofit (20 years on average) of more moderate or large multifamily buildings with
than so percent per year assuming no increase decentralized heating and cooling systems, and
in the real cost of energy. These building types older commercial buildings with water or steam
include all small frame houses, moderate or systems and window air-conditioners. For own-
large multifamily buildings with central air or ers of such buildings there may be significant

Table 2.—Thirteen Types of Buildings With Significantly Different Retrofit Options

Retrofit options
Low Moderate
Building type and Mechanical capital capital
wall type system type Cost a cost a
Small house with frame
walls (single family or 2-4 units) Central air system x
Same Central water system
Same Decentralized system x
Small rowhouse with masonry
walls (single family or 2-4 units) Central air system x
Same Central water system x
Same Decentralized system x
Moderate or large multifamily
building (masonry or clad walls) Central air system x
Same Central water system x
Same Decentralized system x
Moderate or large commercial
building (masonry or clad walls) Central air system x
Same Central water system x
Same Complex reheat system x
Same Decentralized system x
asee table 3 for a definition.
bOTA,~ a~~umption is that this b“lldlng type has a central water system and window air-conditioners,

SOURCE Off Ice of Technology Assessment.

8 ● Energy Efficiency of Buildings in Cities

Table 3.—Three Ways to Express the Relative Cost and annual real rates of return of less than 13
Effectiveness of Energy Retrofits percent per year (over 20 years). If Iifecycle
Annual real costing is used, such retrofits may in fact be less
return on expensive over the full life of the measure of the
Relative Simple pay back investment
capital cost a (in years) (percent) cost of the energy they would save. However,
Low capital costd. . . Less than 2 years More than 50°/0 per year their very slow payback and low annual rate of
Moderate capital return create serious financing obstacles. For
Cost . . . . . . . . . . . 2 to 7 years 13 to 500/0 per year
High capital costd. . 7 to 15 years 3 to 130/0 per year most of the building types OTA examined,
Cost of retrofit such high cost retrofits would save no more
exceeds savings . More than 15 years Less than 3°/0 per year
asee ch, 3 for a full definition. LOW capital cost is defined aS less than $14.00
than 20 percent of the full technical savings
per annual million Btu saved. Moderate capital cost is defined as $14.00 to potential. The three exceptions and the esti-
$49.00 per annual million Btu saved. High capital cost is defined as $49.00 to
$105.00 per million Btu saved. In all OTA’S calculations in ch. 3, all electricity
mated percentage of total savings from high cost
savings are multiplied by 2.46 to reflect the higher cost of electricity.
b Nu mb er of years for value of first year’S WM3rgy SaVingS to equal retrofit costs
retrofits are:
Assumes value of energy sawngs is $7.(NI per million Btu (approximately equal
to the average price of distillate fuel oil in 1960). ● Masonry rowhouse with a heating system
CAnnual real discount rate that equates costs and savings over a 20”Year meas”
ure lifetime. This assumes that fuel savings escalate at the same rate as infla-
using air (40 percent).
tion. ● Masonry rowhouse with a water or steam
‘Compared to savings.
‘Not cost effective. system (25 percent).
SOURCE: Office of Technology Assessment, • Large multifamily building with an air sys-
tem (30 percent).
Examples of some high cost retrofits which pro-
duce substantial savings in certain building
types include: wall insulation in masonry row-
houses and multifamily buildings and night-time
window quilts in multifamily buildings.

Importance of Solar Retrofits

Passive and active solar system retrofits can
reduce the energy requirements for space heat-
ing and hot water just as nonsolar energy retro-
fits can. OTA compared costs and energy sav-
ings of seven different kinds of solar retrofits to

Photo credit, Department of Housing and Urban Development

Single-family detached framehouses supply more than half

of all housing in U.S. Central cities

problems of financing substantial energy retro-

fits. Some examples of effective retrofits with
moderate capital cost include: roof insulation
and storm windows for masonry rowhouses,
hot water heat pumps for multifamily buildings
with decentralized systems, and replacing low
efficiency window air-conditioners with more
efficient models.
Photo credit: Department ot Housing and Urban Development
For most of the building types there are also
Adding wall insulation to masonry rowhouses
retrofit options of high capital cost compared saves substantial energy but is of high capital cost
to savings with paybacks of longer than 7 years compared to savings
Ch. 1—Introduction and Summary of Findings Ž 9

small and large residential building types. Many chosen strictly on the basis of capital cost and
solar retrofits are of high capital cost (slow pay- effectiveness, the nonsolar retrofits would prob-
back and low return on investment); a few are ably be chosen first, although there are many
of moderate capital cost and none are of low reasons including aesthetic ones for choosing
capital cost. For all building types and retrofits solar retrofits. Some cost-effective solar retrofits
examined there are nonsolar energy retrofits on some building types are identified in chapter
which save as much and cost the same or less, If 3.


While the general prospects for cost-effective tion) from 50 percent more than predicted to 80
retrofit are good they may be very unpredict- percent less than predicted. Such results are
able for particular buildings. Extensive research only suggestive. Carefully designed data collec-
and applied work on the retrofit of buildings to tion would be necessary to estimate more ac-
improve energy efficiency has only been under- curately the predictability of energy savings
way for the past few years and most of this work from different combinations of retrofit meas-
has focused on single-family housing. There are ures. The available data, however, are consist-
little data on the actual effects of building ret- ent with OTA’s finding that there are inherent
rofits, and for some types of buildings there characteristics of building retrofit which are
are almost no data. Few energy auditors or responsible for the substantial variation of likely
building owners have maintained and made savings from a particular retrofit from the pre-
available careful records of preaudit fuel con- dicted value. The variability can be reduced
sumption, cost and type of retrofit, and postret- from its present level but it will probably remain
rofit performance. A recent compilation of data substantially above zero.
on actual retrofits of commercial and larger mul-
tifamily buildings (see ch. 3) included data on Each structure is a unique combination of
222 buildings. Among these, there was only one design, siting, construction, and previous ret-
multifamily building, one shopping center, and rofits. The behavior of the building occupants
four hotels. Most of the rest were schools and and the climate will also affect energy savings
office buildings. These data on actual retrofits in unpredictable ways. These factors make it
confirm that, on average, considerable savings difficult to gather consistent data to determine
are possible from low and moderate cost retro- the actual (compared to the theoretical) results
fits. For almost 90 percent of the buildings of retrofit. Buildings with the same generic
surveyed with good cost data avaiIable, the cost design will use energy differently due to the
of the retrofit package installed paid back in location of the structure in relation to the Sun.
energy savings in 3 years or less. Further, buildings tend to vary in construction,
However, actual savings may be consider- even given the same design. Substantial
ably higher or considerably lower than pre- amounts of energy can be lost through openings
dicted for individual buildings. For the 60 in interior walls, through leaky duct systems,
buildings with data on savings predicted by an and in other ways not obvious to the observer.
audit as well as actual savings achieved by the
retrofit, actual savings varied in both directions While there are methods commonly used to
(more than predicted and less than predicted) calculate heating loads, cooling loads, and
by a wide margin. For a group of 18 similar other factors, these formulas best apply to a
community centers, for example, actual energy controlled situation rather than a real structure.
savings averaged 85 percent of the predicted As each energy retrofit is added to a structure,
amount but varied (within one standard devia- the system is changed, and very little is known
10 ● Energy Efficiency of Buildings in Cities

about how to predict the interaction of several In many buildings increased energy efficien-
retrofits on a given building. Differences from cy depends heavily on building operation and
building to building in the number of occupants maintenance. Some of the buildings described
and their living and working patterns (e.g., open in the survey above failed to save as much
windows v. air-conditioning) complicate the energy as predicted because of poor perform-
issue. In addition to behavior, microclimates ance by the equipment operator. For larger
and yearly weather changes will affect the ac- buildings, systematic improvements in opera-
tual amount of energy used. Thus, a researcher tion and maintenance are likely to save as much
trying to figure out the real building energy use or more energy as capital investment. An energy
i n a multifamiIy structure needs to know vacan- auditor can recommend these changes in prac-
cy rate and local weather conditions that year as tice but they are not permanent improvements
well as fuel use. Not all data are corrected for and wiII affect the degree to which actual sav-
climate, and not all climate correction tech- ings match predicted savings.
niques are the same. It is even less common for
data to be corrected for occupancy. The varia-
tion in data adds to uncertainty.


Given an investment with a probable high re- own also install retrofits with moderately long
turn but a possibility of partial or complete fail- expected paybacks (3 to 5 years). Nationally
ure (as well as a possibility of greater-than- syndicated partnerships also have generous
expected success), how are the owners of build- payback criteria.
ings in cities Iikely to respond to the opportuni-
Several other categories of building owners
ties to increase the energy efficiency of their
with access only to debt financing and tight
constraints on the building’s cash flow are
Energy is now important. After many years of only installing the most cost-effective retrofits
energy price increases the cost of energy is now in their buildings. Small business owner-occu-
sufficiently important for building owners in the pants and owner-occupants of multifamily
balance of income and expense of their build- buildings expect to hold their buildings for a
ings that steps have to be taken to control it. long time and would benefit from retrofit, but
This is a change from general building owner they are severely constrained by lack of access
opinion of several years ago. to capital and generally cannot tolerate losses in
cash flow. Individual and small partnership in-
Several categories of building owners with
vestor-owners of buildings require that energy
good access to equity capital, reliable profes-
retrofits pay back in 1 to 2 years. They have
sional advice on retrofits and a long holding
poor access to equity capital and poor access to
strategy for their buildings are retrofitting their
professional advice.
buildings and installing retrofits of low and
moderate capital cost compared to savings. in- The prospects for retrofit of commercial and
stitutional owners of buildings, such as insur- multifamily buildings differ. With the excep-
ance companies and pension plans, have set en- tion of flourishing markets in dynamic neighbor-
ergy efficiency goals for their property managers hoods in such cities as Washington, D. C., and
and routinely make capital investments in San Francisco, multifamily buildings have suf-
energy efficiency if they wiII pay back in less fered as a group from lagging rents and there-
than 5 to 7 years (see table 4). Large corpora- fore lagging resale value (except as condomin-
tions which generally occupy any buildings they iums) that reduces their likelihood of retrofit
Ch. 1—Introduction and Summary of Findings ● 11

Table 4.—Retrofit Payback Criteria, Holding Periods and Access to Financing, and
Advice for Different Types of Owners

Typical Building Expected In house

Building owner payback for own holding Access to professional
type criteria use? period capital advice
Large corporations . . . . . 3-5 years Yes Long Good Good
Small businesses . . . . . . 1 year Yes Long Poor Poor
Multifamily owner-
occupants . . . . . . . . . . 1-3 years Yes Long Poor Poor
Condominium . . . . . . . . . No Data Yes Long Mixed Fair
Institutional owners . . . . 5-7 years No Long Good Good
companies . . . . . . . . . . 1-3 years No Short Fair Good
syndicates . . . . . . . . . . 3 years No Short Fair Good
Local partnerships . . . . . 1-2 years No Short Poor Fair
Individuals . . . . . . . . . . . . 1 year No Mixed Poor Poor
NOTE Long holding period = more than 10 years Short holding period = 8 to 10 years
SOURCE Office of Technology Assessment.

Photo credit. Department of Housing and Urban Development

Net and passthrough leases reduce the incentives of owners of small retail and office buildings to retrofit their buildings
12 ● Energy Efficiency of Buildings in Cities

below that of commercial buildings owned by 24-month high-interest loans used for financing
the same owner. Where technically possible, construction projects. During much of 1980
owners of multifamily buildings have converted such loans were only available at variable inter-
them to tenant utility meters so that owners will est rates 2 percentage points above the prime
no longer be responsible for paying the utility rate.
costs. Owners of tenant-metered buildings have A building owner, unable to tolerate much
little or no current incentive to retrofit their reduction in the cash flow from a building,
buildings. Most believe that it will be a long cannot manage anything but a retrofit with a
time before owners of energy efficient multifam- very fast payback if his only financing option is
ily buildings can charge higher rents than own- a short-term high-interest loan. Figure 1 il-
ers of similar but inefficient buildings. lustrates this clearly. A 2-year payback retrofit
The most likely buildings to be retrofit are of- will generate more energy savings than it will
fice buildings, hotels, and department stores cost in debt service, even at 22-percent interest,
owned by a large corporation or institutional if it is financed with a 3-year loan or longer. A
owner. The least likely to be retrofit are tenant- 5-year payback retrofit, on the other hand, will
metered multifamily buildings owned by indi- cost more the first year in debt service than it
viduals or local partnerships. will generate in energy savings unless it is
financed for at least 10 years at interest rates of
Why Do Some Owners Forego the Large 10 or 13 percent, or for 20 years at an interest
rate of 16 percent. *
Potential Returns on Retrofit?
Impact of Risk
Most individual owners and many partnership
owners will not invest in energy retrofits even if The problems faced by a building owner
they payback in as short a period as 2 or 3 years. forced to finance a retrofit with short-term,
This unwillingness occurs despite the fact that a high-cost debt are made much more serious by
retrofit package with a 3-year payback will gen- the uncertainty of the return on retrofit for his
erate a very large return on investment—more particular building, even though, on the aver-
than 33 percent real return per year—over a age, the general prospects for retrofit are
20-year life of a retrofit installation. good. Based on the limited information cited
earlier on the accuracy of audits, it is possible
High Cost of Finance that savings from a retrofit could be 50 and even
70 percent below those predicted by an audit.
Much of real estate, including major develop- (There is an equal likelihood that actual savings
ment companies, is financed by debt not equity. will be above predicted. ) A predicted 3-year
In the terms of the industry, equity is “highly payback retrofit will turn into a 6-year payback
leveraged. ” A major portion of the financing for retrofit if actual savings are 50 percent below
purchase of a new or existing building almost the prediction, and it will turn into a 10-year
always comes from a mortgage. Additional fi- payback retrofit if savings are 70 percent below
nancing for expansion, rehabilitation, repair, or what is predicted.
retrofit of a building has traditionalIy come from First-year savings Payback
refinancing a building with a new bigger mort- Extent of savings from a $10,000 loan (in years)
Predicted by an a audit................. $3,300 3
gage at a similar rate of interest as the original 50 percent below prediction.............. $1,650 6
mortgage. The recent increase in interest rates 70 percent below prediction.................. 990 10

has effectively eliminated that option for most -- . — .

building owners. No one is likely to refinance years after the first year, Inflation in energy costs (even if no
faster than general inflation) will increase the value of energy sav-
a 7-, 9-, or 1 l-percent mortgage at 14- to ings relative to debt service. If energy costs increase at the rate of
17-percent interest in order to get funds for re- inflation, they will increase in current dollars and will be constant
habilitation or retrofit. The primary source of in real 1972 dollars, while fixed annual debt service payments are
constant in current dollars and decrease in real 1972 dollars over
funds other than mortgages for building owners time. Thus, any debt service payment in excess of fuel savings will
is a commercial loan. These are generally 18- or diminish over time.
Ch. 1—Introduction and Summary of Findings ● 13

Figure 1 .—Combinations of Loan Terms and Interest Rates

. Which Allow the Value of Energy Savings
to Exceed the Cost of Borrowed Money the First Year
Dollar value Dollar value Dollar value
of energy savings of energy savings of energy savings
= $5,000 = $2,000 = $1.000

3 7 101316 2022
Annual interest rate on loan Annual interest rate on loan Annual interest rate on loan
(percent) (percent) (percent)

Case 1: Energy savings from a 2 year Case 2: Energy savings from a 5 year Case 3: Energy savings from a 10 year
payback retrofit (maximum payback payback retrofit (criteria used by payback retrofit (maximum payback
considered by an individual or local corporations, insurance company criteria of any owner interviewed)
partnership owner) owners)


Cash flow loss the first year

❑ Cash flow increase the first year

SOURCE. Office of Technology Assessment

it would be devastating, especially to many hypothetical multifamily buildings to determine

small business owners, or investor-owners of whether a tax credit* or a financing subsidy
multifamily buildings, to carry the debt service might increase the ease of doing a retrofit and
for a major retrofit and fail to achieve the energy concluded from this analysis that a financing
savings necessary to keep their cash flow up. subsidy is more helpful in making retrofits possi-
Yet this is a realistic possibility given both the ble and less expensive than a tax credit. The
newness of the retrofit business and the individ- beneficial impact of a financing subsidy is
ual nature of building energy performance. greatest for a hypothetical low-rent high energy
cost building typical of the low-rent end of the
The Impact of Two Forms of Subsidies: multifamily market. An unsubsidized retrofit
Lower Financing Costs and Tax Credits — .
*It should be remembered that a tax credit for energy retrofit IS
only one of several tax provisions that affect energy use and
Until interest rates drop, various subsidies
energy retrofit. Energy expenses are fulIy deductible as a business
from public sources or private sources such as expense, while Investments In energy retrotit can be partly deduct-
utilities may be helpful. OTA analyzed some ible through deductions of Interest rates and depredation.
14 ● Energy Efficiency of Buildings in Cities

loan (16 percent interest for 5 years) for a 6-year General Prospects for Retrofit
payback retrofit virtually wipes out the cash of Buildings in Cities
flow of this building.
Public programs and private campaigns to
A subsidy of approximately 15 percent to market increased energy retrofits of buildings
lower the interest rate and extend the loan term must take into account the variety of motiva-
(13 percent interest for 10 years) restores the tions of building owners. Owners not likely to
cash flow of the building immediately and in- retrofit their buildings either lack financial
creases it noticeably by the fifth year following reason to do so, lack feasible means to do so, or
the retrofit. (This analysis of hypothetical multi-
both. The implications for public policy and
family buildings is described in ch. 4.) Of the private marketing are different for each
building owners interviewed, two-thirds pre- category.
ferred a financing subsidy to a tax credit. The
one-third that preferred a tax credit included The category of owners willing and able to ret-
some partnerships that welcomed increased tax rofit (labeled category A in table 5) do not need
shelters, and also included some corporations
that had adequate internal sources of finance
Table 5.—Owners Likely and Not Likely to
but would benefit from a tax shelter. Retrofit Their Buildings
Importance of reducing energy costs to
When the Building Owner Owners’ access owner’s goals
Is the Government to finance and
tolerance of risk
Important Not Important

A. Willing and B. Able but

Energy use in buildings owned by local, State, able to retrofit unwilling
or Federal government is significant. About 0.5 Owner can both ●Corporate owner- ●Large partnership
finance and occupants of owners of tenant-
Quad of energy was used by public buildings in absorb risk commercial metered multi-
1980 and about 1.5 Quads in educational build- buildings family buildings
● Institutional
ings, most of which are publicly owned. Much ● Well.financed
investor- owners of office
like the corporate or large institutional owner, owners of buildings and retail
commercial and buildings in tight,
governments and school districts have annual multifamily energy-insensitive
formal budgeting procedures which identify the buildings markets (large part-
nerships and
importance of energy cost increases and com- development
pare them from year to year. Governments and companies)
school districts have professional general prop- C. Willing but D. Unwilling and
not able unable
erty management department and often at least Owner can’t risk ● Owner-occupants ● Individual and
part-time energy advisors. and/or lacks of small multi- small partnership
financing family buildings owners of tenant-
Unlike the corporate or large institutional metered multi-
family buildings
owner, on the other hand, government owners ● Small business
of buildings have severe constraints on access to owner-occupants
● Individual and
capital due to constraints on annual budgets ● Individual and small partnership
and many kinds of limits on bonding authority. small partnership owners of office or
owners of master- retail buildings
The result (see ch. 9) is that government owners metered multi- with net or pass-
of buiIdings often implement effective operating family buildings through leases in
energy insensitive
programs of improved maintenance and energy markets
conservation practices by building occupants . Individual and
small partnership ● Owners of
but restrict their capital investment in buildings owners of office buildings in
to retrofits with 1 to 2 years payback. Only if the buildings in energy. marginal areas
sensitive markets
retrofit can be linked to other major repairs
Ž Government
(such as roof insulation with new roofs) or if owners of
paid for by a Federal grant, are longer payback buildings
periods allowed. SOURCE: Office of Technology Assessment,
Ch. 1—Introduction and Summary of Findings Ž 15

any additional public incentives to retrofit. ment in the resale value of the building. For
Many are prime targets for private marketing ef- such owners, an energy retrofit program is best
forts by companies that specify and/or install folded into a general neighborhood rehabilita-
retrofit products. Category B is able but unwill- tion program which combines concentrated pri-
ing to retrofit. This category of owners would be vate investment in one neighborhood with such
expected to respond to increased requirement public investment as improved sidewalks, storm
for energy efficiency in existing buildings. If re- sewers, and tree planting.
quired, they would have the means to carry out
There are insufficient data on either the
the retrofit.
physical nature of the building stock or patterns
Those owners that are willing and even anx- of ownership to allow anything but very rough
ious to retrofit but lack access to low-cost fi- estimates of the amount of energy that might be
nance and good technical advice and cannot saved by each of these categories of owners.
to/crate risk are labeled category C in table 5. OTA estimates that about 1 Quad of the 4-Quad
These owners would be prime targets for mar- gap in foregone energy efficiency retrofits is at-
keting by successful private companies orga- tributable to multifamily and commercial build-
nized to put up capital and absorb the risk of ing owners that are willing but unable to retrofit
retrofit. These owners are also likely to respond because they lack financing and/or access to
to public programs that reduce financing costs reliable information. Another 1.5 Quads of the
and lower the risk of retrofit. foregone retrofits would be due to building
owners that were unwilling to retrofit their
The most difficult to motivate are the owners
buildings because they could see insufficient
i n category D for they are both unwilling and
advantage in doing so. About two-thirds of
unable to retrofit. If local governments choose these owners also lack access to financing or
to require them to invest in the energy efficien-
professional advice.
cy of their buiIdings (through an energy efficien-
cy code for existing multifamily buildings, for The rest of the estimated 4 Quads of foregone
example) local government must also see to it retrofits would result from moderate and upper
that financing of at least moderately long terms income homeowners in cities unable or unwill-
is available, or these owners will not be able to ing to finance retrofits of moderate and high
comply with the requirement. Owners of build- capital cost compared to savings (about 1 Quad)
ings in marginal areas are unwilling to invest in and low-income homeowners (regardless of lo-
their buildings unless they believe the neighbor- cation) unable to finance any retrofits (about 0.5
hood is viable enough to recoup their invest- Quad).


District heating is a system for piping heat in Europe over the past three decades. District
the form of hot water (or steam) from a central heat also offers an opportunity to shift from
source of heat to individual buildings. Under premium fuels such as natural gas and distillates
the right conditions a well-managed district to coal or renewable resources (including
heating system may be an energy efficient way municipal solid waste) for supplying heat to
of supplying heat to city buildings. buildings. To building owners who are district
heating customers, it promises slower increases
i n energy prices. For local governments, district
From a national energy perspective, district heating can be a tool in the overall task of eco-
heating offers an opportunity to save fuel oil or nomic development since it uses local workers
natural gas by making use of the waste heat for construction and operation, helps attract
from electricity generation for space and water new development to central city locations, and
heating. Hot water district heating has been helps to stabilize energy prices for existing
widely and successfully introduced in Northern buildings.
16 ● Energy Efficiency of Buildings in Cities

For all the possible advantages of district heat- If general interest rates lower substantially or a
ing, however, the design, approval, construc- substantial financing subsidy is made available,
tion, and successful operation of a district heat- hot water district heating could become a sensi-
ing system is a formidable undertaking whose ble long-term investment that stabilizes fuel
complexity and difficulty should not be under- prices costs over the long run in one or two
estimated. To be successful, a district heating dozen U.S. cities. At current high interest rates
system must offer heat at prices that are low and without special subsidies, large-scale
enough to persuade owners of existing build- district heating may be feasible for those few
ings to abandon their buildings’ natural gas or U.S. cities with dense areas of customers using
fuel oil boilers or furnaces, retrofit their build- expensive fuel oil, and a long enough heating
ings to accept the hot water (or steam) from the season to make possible a reasonably high use
district heating system and continue to pur- of district heating capacity. This number is less
chase the district heat through the life of the sys- than five and may even be zero. However,
tem. Or the system must persuade owners of small district heating systems for a small number
new buildings of the long-term advantages of of large buildings located close together may be
foregoing the cost of their own heating system feasible even at current high interest rates.
and equipping their buildings to take district
heat rather than burn fuel directly.


In theory, there should be ample opportunity ital or absorbing the risk of retrofit. In part this
for private businesses to fill the gap between the is the result of the general difficulties en-
large potential return on investment in energy countered by all new businesses in a time of
efficiency and the slow pace of retrofit among high interest rates. Energy retrofit enterprises,
some types of buildings. Businesses willing to however, also face several special problems. It
provide the capital over a long term and willing is difficult to predict accurately energy savings
to absorb all or part of the risks of retrofits to in- from specific energy efficiency investments part-
dividual buildings ought to be able to realize ly because much retrofit technology has not yet
part of that return. been installed in many buildings. It can be diffi-
cult to come to a legally viable agreement on
Investors could lease energy efficient equip- what constitutes energy savings given variations
ment to building owners and claim the tax ben- i n energy use caused by changes i n weather, oc-
efits for themselves. They could install energy cupancy of a building, and occupant behavior.
efficiency measures and provide energy savings It can be difficult to agree on a definition of the
guarantees to building owners. Or they could equipment to secure the investment since much
take over responsibility for the energy costs of a energy efficient equipment becomes part of the
building as energy management companies. In building it is installed in.
the latter case the investors, in return for a
monthly energy management fee, would install OTA was also able to identify only a few co-
energy efficient equipment and assume all re- ops and nonprofit corporations involved in the
sponsibility for paying utilities. retrofit of buildings. Co-ops and nonprofit cor-
porations are hampered by lack of capital and
In practice OTA was able to identify only a the difficulties of managing a large-scale retrofit
handful of enterprises providing retrofit cap- program.
Ch. 1—Introduction and Summary of Findings ● 17


Rapid deterioration in the financial health and changed planned new capacity for planned cur-
future prospects for many electric and gas util- tailment of demand. The New England Electric
ities have created more than token interest in System ( NEES ) for example has announced a
developing energy retrofit programs. Customers program to assist in the retrofit of commercial
are increasingly vocal against utility rate in- buildings for load management, thus reducing
creases at rate hearings. In response to in- the need for new peak generating capacity. As
creased prices, customer demand for electricity now structured, the NEES program would not
and gas has grown more slowly than forecast a affect residential buildings much at all.
decade ago and in some utility areas has actu-
ally declined. In an era of growth in interest Theoretically, both slow-growing utilities, like
costs and inflation in construction and fuel NEES, which have time to plan and assess con-
costs, lags in utility ratemaking have led to servation, and fast-growing utilities, such as
utilities earning less than the designated rate of those in Florida who have to try everything to
return. in response to many of these problems, avoid falling short of meeting demand, could
some utilities have developed energy efficiency build energy retrofit programs into their strate-
improvement programs either to improve rela- gic planning. In practice, utilities who do this
tions with customers, earn a greater return, or must have the innovative leadership to develop
both. new products, new marketing techniques, new
customer relations, and new forecasting and
Some utilities have energy retrofit programs in
monitoring techniques. In a period when utili-
response to directives by their State regulatory
ties are struggling against very difficult finan-
commissions (e.g., Florida, New York, and Cal-
cial problems, OTA concluded that few may
ifornia) and others developed energy audit pro-
develop the leadership to undertake ambitious
grams on their own. In all, about 65 utilities
large-scale energy retrofit programs on their
offered residential energy audits as of the winter
own. A larger number of utilities may be willing
of 1977-78 before the Federal Residential Con-
to cooperate with State governments that are
servation Service (RCS) program was an-
promoting energy retrofit programs as in Florida
nounced. Even if such audit programs are no
and California. As electric utilities become in-
longer mandated by the Federal Government
creasingly interconnected across State bound-
under the RCS, many utilities are likely to con-
aries, there could be a role for the Federal Gov-
tinue them. Customer demand for utility audits,
ernment in encouraging cooperation among
however, is likely to remain limited unless the
State utility regulatory commissions as they in-
utility markets audits vigorously with an eye
tegrate conservation goals and planned new
to achieving measurable energy conservation
electric generating capacity. Utilities, however,
will continue to look to the State ratemaking
A few electric utilities have built energy retro- process for encouragement or discouragement
fit programs into their projections for future gen- of conservation programs since State level rate-
erating capacity and have deliberately ex- making determines utility return.


Potential Role of City Governments in local buildings and such broad goals as the
Urban Building Retrofit long-term viability of the housing stock, and
the long-term stability of regional income and
A few visionary leaders in a few cities have economic productivity. They have promoted
created a link between the energy retrofit of this view in speeches and reports and encour-
18 Ž Energy Efficiency of Buildings in Cities

aged citizens to be aware of energy and its role do not have active energy programs. Only 5
in the city or region. percent have full-time energy coordinators;
most of the part-time energy coordinators spend
In most cities, however, citizens’ worry less than 1 day a week on energy. The primary
about rising energy costs has been more di- energy concern of most mayors and formally
rected at the local utilities, and mayors and designated city energy coordinators is to reduce
city councils feel little pressure in city hall to the growing share of energy cost in the cities
do anything directly about energy. Most cities budgets.

Photo credit: OTA staff

For many cities, energy retrofit programs fit best in the context of programs to
promote general housing rehabilitation
Ch. 1—lntroduct/on and Summary of Findings ● 19

For some cities energy problems do reach Potential Role of State Governments in
city hall in the form of complaints about land- Urban Building Retrofit
lords’ failure to provide adequate heat. In New
York City, for example, the number of such Some States have active energy audit or ret-
complaints increased from 225,000 in 1978-79 rofit programs with potentially far-reaching re-
to 320,000 in 1980-81, In cities where a metro- sults. Florida and California typify one source of
politan oversuppply of housing softens the mar- motivation for States. Both States have rapidly
ket for rental housing in the center city, the growing populations and projected require-
rapid increase i n energy costs is sometimes per- ments for continued expansion of electrical gen-
ceived as a trigger for landlord abandonment of erating capacity. Both States have difficultly find-
buildings. Such abandonment has been re- ing large number of sites for new powerplants.
ported as severe in such smaller cities as Although their climates are mild and yearly
Rochester, N.Y., and Springfield, Mass. energy bills lower than States with colder
climates, both States face certain increases i n
Many cities have incorporated energy retrofit natural gas prices and possible sharp increases
into their housing rehabilitation programs. in electricity prices it powerplant capacity must
These are usually financed by Federal commu- be added very fast. Florida and California have
nity development block grants (CDBG) or other both required that utilities develop extensive
housing rehabilitation funds. Linking retrofit to energy audit programs, Iinked to slowdowns in
general housing rehabilitation has two advan- construction of new generating capacity.
tages. It makes possible general repairs in roof
or windows that are needed to make the energy New York, Minnesota, and Massachusetts on
the other hand have slowly growing or stable
efficiency measures work. It also addresses the
populations, State officials are not concerned
concern of property owners confronting a retro-
fit investment that the buiIding as a whole hate about utility construction plans since utilities in
resale value and that the neighborhood it is these States are likely to face economic prob-
lems caused by excess generating capacity
located in be economically stable. Housing re-
rather than the need to construct new generat-
habilitation programs in cities generally pro-
ing capacity. Rather, State officials are moti-
ceed neighborhood by neighborhood, often
vated by concern about the health of the hous-
combining support for private rehabilitation
with expenditures on such public works as ing stock and hardship caused by the combina-
sidewalks. A program that promotes energy tion of high energy prices and severe winters.
retrofit in the context of general property up- States seeking to bring about large-scale ret-
grading fits well with city government concern rofit have several possible tools to use. They
for the general health of the housing stock and may require high-powered utility audit pro-
the property tax base. grams (generally using the framework of the
Federal RCS audit program), bring effective
Cities have other ways to promote building management to bear on the Federal weatheriza-
retrofit besides their housing rehabilitation pro- tion program (Pennsylvania), require energy ef-
grams. They may promulgate energy efficiency
ficiency building code standards for new or ex-
building standards at time of sale (Portland), isting buildings (Minnesota), or occasionally
issue municipal bonds to subsidize private ret- provide their own subsidized financing for
rofit expenditures (Minneapolis and Baltimore), energy retrofit (New Jersey).
or manage Federal weatherization directly and
vigorously (Des Moines) rather than allow it to For every State, however, which has devel-
be administered by local nonprofit antipoverty oped programs to stimulate building retrofit,
agencies. there are many States with similar concerns
20 ● Energy Efficiency of Buildings in Cities

which have not developed active retrofit pro- sources. Thus, State stimulus of building retrofit
grams. Like cities, States have many other de- is likely to remain uneven, strong i n some States
mands on their economic and managerial re- and weak or nonexistent in others.


Many programs developed or implemented of community development programs. Federal
by States and local government actually orig- efforts to stabilize the economy, to allow accu-
inated with the Federal Government. After 7 rate energy price signals and to lower interest
years of steadily increasing Federal involvement rates are viewed as the only legitimate Federal
in energy conservation since the 1973 oil em- role i n accelerating retrofit opportunities.
bargo, a basic shift in emphasis is now under-
way, All but a few of the Federal energy conser-
vation programs have been substantially re- Option B: Small Federal Market
duced in the 1982 budget. Assistance Role
The current debates about the proper role of
Under this view, the private market must be
the Federal Government in energy conserva- assisted by the Federal Government because
tion, housing and community development pro- there is a strong national interest in higher
grams and assistance to the poor will affect the energy efficiency, and because it is possible that
nature of the Federal role in stimulating the ret-
the private market, by itself, is insufficient to
rofit of buildings in cities. The following discus-
satisfy national need and to maximize economic
sion of the Federal options for stimulating build- efficiency. On the other hand, according to this
ing retrofit reflects the broad range of Federal view, constraints on the Federal budget are
roles advocated by different parties to the
severe enough to prohibit all but a small Federal
debate. role.

Option A: No Intervention Even with a fairly low budget, however, the

Federal Government could develop a clearly fo-
The rationale for this option for the Federal
cused research, development, and information
role is that energy retrofit is best left to the
program to reduce the risks of retrofit. Such a
private sector. If managerial and legal problems
program is probably best modeled on private
can be solved, a wide variety of innovative tech-
sector efforts in order to ensure maximum infor-
nical and financial approaches will be devel-
mation exchange. Several restaurant chains
oped by the private sector over the next decade
have set up proprietary programs to test retrofits
to take advantage of the investment opportuni-
in different building types. Sears & Roebuck ex-
ties presented by retrofit. Efforts to reduce the
plicitly tested several kinds of retrofits in its
high risk of retrofit by more accurate documen-
stores before launching a multi million dollar ret-
tation of energy savings will eventually be better
rofit program. An ongoing Department of Ener-
undertaken by trade associations and other pri-
vate organizations with a stake in the results gy program to test retrofits to hotels and motels
and disseminate the results through the Amer-
than they would be by the Federal or other lev-
ican Hotel & Motel Association could be ex-
els of government.
panded to other trade associations and other
Under this option, State governments and city building types. The most urgent need is to docu-
governments would be free to develop energy ment retrofits within the multifamily building
retrofit programs of their own: States, as part of sector and publicize them through the several
their regulation of public utilities; cities, as part multifamiIy trade associations,
Ch. 1—Introduction and Summary of findings ● 21

Small-scale Federal retrofit subsidy programs, essential if all building owners are to take ad-
such as the schools and hospitals program and vantage of a financing subsidy and make the
the Solar and Conservation Bank (described in investment. Vigorous promotion of State and
ch. 9) would have the most impact if used pri- utility development of audit programs for all
marily to increase knowledge and reduce the building types and development of audit train-
risk of retrofit. Public housing modernization ing programs would also, under this approach,
funds used for energy retrofit of public housing help reduce the perceived risk of retrofit.
could also be used to document energy savings
from energy retrofits. Under this approach, pri- The Federal Government already provides a
vate building owners or public housing authori- major financing subsidy to single-family home-
ties receiving subsidies, would be asked to par- owners in the form of a residential energy tax
ticipate in a program to describe and document credit. About 4.8 million taxpayers used the
the results of the retrofit and disseminate it, credit in 1979 to make about $3.5 billion worth
through trade associations and chambers of of energy efficiency investments. The credit cost
commerce, to other building owners. the Treasury about $440 million. Multifamily
building owners currently have no effective ac-
cess to energy tax credits (although there is a
Option C: Large Active Federal Role narrowly defined business energy tax credit for
This Federal role would be consistent with improving the energy efficiency of industrial
both an activist philosophy of government and processes).
the view that reducing U.S. energy use over the
A new Federal effort to subsidize energy retro-
long run is an important national goal for
fit could either extend the energy tax credit to
reasons of national security, minimizing disrup-
multifamiIy and commercial building owners or
tion to the environment and maximum eco-
it could take the form of a program to subsidize
nomic growth and competitiveness. Under the
interest rates and extend energy retrofit loan
rationale for a high budget Federal role, if
terms to such owners. OTA estimated the ap-
energy retrofit is the path of least total cost and if
proximate size of a large-scale effort designed to
it is not likely to come about because of the
produce 2 Quads of annual savings through ret-
nature of the energy problem and private mar-
rofit at the end of 10 years. A subsidy used to
kets, then the Federal Government should en-
lower annual interest rates by 2 to 3 percentage
courage and subsidize energy retrofit to the
points and extend loan terms could subsidize
point where the major part of the cost-effective
about $4 billion worth of retrofits per year at an
retrofit actually occurs.
annual cost of about $600 million, a little more
This Federal approach should first and fore- than the current cost to the Treasury of the resi-
most include the risk-reducing activities de- dential energy tax credit (see table 6). (The as-
scribed i n the low budget approach above. A re- sumptions behind this estimate are described in
duction in the perceived risk of a retrofit is ch. 11 .)

Table 6.—Two Forms of Federal Subsidy

Estimated value of
Subsidy type Cost per year Energy impact savings (in dollars)
Subsidized $40 billion $600 million 2 Quads saved annually $14 billion to
in conventional loans after 10 years $30 billion per year
over 10 years for
energy retrofit
Ten district heating $600 million 0.3 Quad displaced $1.2 billion per year
systems allowed to annually from fuel oil or
use tax-exempt gas to coal, solid waste
financing ($1.5 billion or waste heat (after
each), constructed 10 years)
10 years
SOURCE Off Ice of Technology Assessment
22 ● Energy Efficiency of Buildings in Cities

An active Federal approach might also in- about $1 per gallon, or $20 billion to $30 billion
clude a financing subsidy for district heating, at the current estimated price of synthetic oil
most conveniently by permitting tax-exempt from coal in 1981 dollars. (See the forthcoming
bonds in magnitudes greater than the currently OTA report on synfuels for further discussion. )
allowed $10 million. A subsidy to pemit 10 sys-
tems of $1.5 billion each in 10 cities is likely to The value of savings from an equivalent sub-
cost annually about 4 to 5 percent of the system sidy to district heating is much less. If district
(in foregone taxes on tax-free bonds). The 10 heating primarily serves to shift demand from
systems could be expected to displace about premium fuels, such as oil and gas to coal, the
one-third of a Quad of fuel oil or natural gas and savings comes from the price difference be-
substitute coal, heat from solid waste or waste tween the two kinds of fuel, At $4 per million
heat from electricity generation. Btus, (about the current price differential be-
tween oil and coal for utilities), substituting 0.3
Two Quads of energy savings per year is a Quad of heat from coal for heat from oil would
substantial amount of energy. It is the equiv- be worth $1.2 billion.
alent of 1 million barrels of oil per day, or about
20 percent of all U.S. oil imports in 1981. It is It also may be possible, although OTA has not
also equivalent to about 36 electric generating analyzed this option, to achieve the same im-
plants of 1,000 MW each, at average utilization pact on energy retrofit not by subsidizing retrofit
rates. There are two ways of estimating the but by reducing or eliminating the tax deduc-
value of 2 Quads of energy savings in 1981 dol- tion of energy costs as a business expense, since
lars; they would be worth $14 billion at the this tax deduction has the effect of subsidizing
1981 average price for home heating oil of the inefficient use of fuel.
Ch. 1—Introduction and Summary of Findings Ž 23

Energy Conversion Factors

Multiply by
To convert Into approximately Exactly
Energy units used in national energy projections
1. Quads/year. . . . . . . . . . . . . . . . . . . . . . Millions of barrels of oil per day 0.5 0.4760
2. Quads . . . . . . . . . . . . . . . . . . . . . . . . . . Trillion cubic feet of natural gas 1.0 0.9872
3. Quads . . . . . . . . . . . . . . . . . . . . . . . . . . Million tons of coal 44.0 Depends on type of coal
4. Quads . . . . . . . . . . . . . . . . . . . . . . . . . . Billions of kWh 300.0 294.0000
5. Quads/year of primary fuela . . . . . . . . Number of 1,000-MW 18.0 Depends on specific
powerplants assumptions
Energy units used in building energy analysis
1. Million Btu/year . . . . . . . . . . . . . . . . . . Thousand kWh/year 300.0 294.0000
2. Million Btu/year . . . . . . . . . . . . . . . . . . Gallons of fuel oil 7.0 7.1400
3. Million Btu/year. . . . . . . . . . . . . . . . . . Thousand cubic feet of 1.0 0.9870
natural gas
4. Million Btu/year . . . . . . . . . . . . . . . . . . Therms of natural gas 10.0 10.0000
Energy units used in district heating analysis
1. Trillion Btu of annual Million kWh of annual output
thermal output. . . . . . . . . . . . . . . . . . . (thermal kWh) 300.0
2. Megawatts (thousand kilowatts) of Million Btu of annual Depends on specific
thermal b
capacity . . . . . . . . . . . . . . . . thermal output 8,800.0 assumptions about
3. Billion Btu of Kilowatts of peak capacity, etc.
annual c
output . . . . . . . . . . . . . . . . . . . thermal capacity 114.0
4. Million Btu/hour of peak Kilowatts of peak
thermal output. . . . . . . . . . . . . . . . . . . thermal capcity 300.0
Energy units used in powerplant analysis
1.1,000 megawatts of electric Trillion Btu of annual end-use
generating capacityd. . . . . . . . . . . . . . output of electricity 17.5
2.1,000 megawatts of electric Million Btu of primary fuel used Depends on specific
generating capacitye. . . . . . . . . . . . . . to generate electricity 58.0 assumptions about
3. Billion Btu of annual end-use Kilowatts of electric capacity utilization
electricity . . . . . . . . . . . . . . . . . . . . . . . generating capacity 57.0 and fuel conversion
4. Billion Btu of annual primary fuel Kilowatts of electric efficiency
used to generate electricity . . . . . . . generating capacity 18.0
NOTES: Assumptions used In conversions between annual energy output and peak capacity for dlstrlct heating and electrlc powerplants
alf one 1 O~.MW plant requires 56,555 bill Ion 6t U(year primary fuel consumption (see explanation e below) then 1 Quad/O 0565 Quad Per Plant 177 1,000”MW Plants

per Quad.
bl MW x 8,766 hours x 03 capacity factor = 2,632,000 kWh/300 kWh per mllllon Btu = 8,773 mllllon Btu
c 1 ,000 mllllon Btu (1 bllllon Btu) x 300 kWh per ml I lion Btu = 300000 kWh/ (8,766 hours per year x O 3 capacity factor) = 114.kW generating capacl ty
d l ,ooo MW ~ 6,766 hours x 0 G ~apac{ty factor = 5,260,000 kwfl per ~ear/sOO kwh per mllllon Btu = 17,532 bllllon Btu/year end.use eleCtrl City per year frOm one
1,000-MW plant.
e T o produce 17,532 b, ll{on Btu/year end.use ele~tr,clty from a 1,Ooo.MW pow~rplant – by 031 (efflclency of conversion from fuels to eleCt rlClty) = 5 6 , 5 5 5 btll Ion
Btu/year primary fuel consumption for one 1,000-MW powerplant
fone bllllon Btu of annual end.use electrlc,ty ~ 300 = 300,000 kwh annual output _ (8,766 flours per year x 06 capacity factor) = 57 kW of electrlc generating capacl.
90ne bllllon Btu of primary fuel used to generate electricity x 0,31 efficiency of conversion from fuels to electricity = 31(I mllllon Btu of endwse electricity x 300
kWh per mllllon Btu = 93,000 kWh end-use output - (8,766 hours per year x O 6 capacity factor) = 177 kW of capacity
Chapter 2
Importance of City Buildings in
National Energy Use: Will Energy
Efficiency Make a Difference?
. —


Page Page
Trends In Building Energy Use . . . . . . . . . . 27 9. Two Projections of Reduced Building
Energy Use in the Year 2000 . . . . . . . . 33
Central City Building Stock . . . . . . . . . . . . . 31
10. Likely Primary Energy Savings
Forecast Energy Prices . . . . . . . . . . . . . . . . 31 Compared to the Technically
Possible Savings for Building Types
Projections of Building Energy Use. . . . . . . 32
Covered in This Report . . . . . . . . . . . . 35
Projections of the Impact of Energy
Conservation on Building LIST OF FIGURES
Energy Use. . . . . . . . . . . . . . . . . . . . . . . . 32
Figure No. Page
Contribution of the Buildings in This 2. Trends in Primary Energy Use by
Study to Future Building Energy Use.... 33 Sector, 1960-80 . . . . . . . . . . . . . . . . . . . . . 28
3. History and Projections of End-Use
Energy Savings Potential and
Energy by Fuel Type: Residential and
Likelihood of Retrofit . . . . . . . . . . . . . . . . 34
Commercial Buildings . . . . . . . . . . . . . . 29
Chapter 2 Appendix—Assumptions 4. Trends in the Price of Delivered
Used in Calculating Projected Energy Electricity, 1960-80 . . . . . . . . . . . . . . . . . 29
Savings From Retrofit of Buildings . . . . . . 36 5. Trends in the Price of Delivered
Natural Gas, 1960-80 . . . . . . . . . . . . . , . 29
6. Trends in the Price of Delivered Home
Heating Oil, 1960-80 . . . . . . . . . . . . . . . 30
Tab/e No. Page 7. Trends in Real Energy Prices, 1960-80 . . 30
7. Primary Energy Consumption in 8. Primary Energy Use by Fuel and End-
Different Types of Buildings . . . . . . . . 2 7 Use for Residential Buildings, 1980 . . . . 30
8. ElA’s Projection of Primary Energy Use 9. Primary Energy Use by Fuel and End-
in Buildings in the Year 2000.. . . . . . . 32 Use for Commercial Buildings, 1980 . . . 30
Chapter 2
Importance of City Buildings in National
Energy Use: Will Energy Efficiency Make A Difference?

Residential and commercial buildings togeth- Table 7.—Primary Energy Consumption in Different
er account for about one-third of U.S. energy Types of Buildings (1975)
consumption. The buildings that are the pri- Percent of
Building type Quads building energy
mary subject of this report—multifamily build- 57.5%
Single-family residential . . . . . . . . . 15.3
i rigs, office buildings, retail buildings, hotels, Multifamily Iow density . . . . . . . . . . 0.7
Multifamily high density . . . . . . . . .
educational buildings, public buildings, and sin- Mobile homes . . . . . . . . . . . . . . . . . . 0.3 1.1
office . . . . . . . . . . . . . . . . . . . . . . . . . 1.4
gle-family homes inside central cities–together Retail/wholesale . . . . . . . . . . . . . . . . 8.3
Garage . . . . . . . . . . . . . . . . . . . . . . . . 0.3
used about half of all U.S. building energy in Warehouse . . . . . . . . . . . . . . . . . . . . 0.3 1.1
Educational . . . . . . . . . . . . . . . . . . . . 8.4
1980. Most of the rest of the building energy in Public. . . . . . . . . . . . . . . . . . . . . . . . . 1.5
Hospital. . . . . . . . . . . . . . . . . . . . . . . 0.7 2.6
the United States is used by single-family homes Religlous . . . . . . . . . . . . . . . . . . . . . 0.3 1.1
Hotel/moral . . . . . . . . . . . . . . . . . . . . 0.5 1.6
outside central cities. A previous OTA report, Miscellaneous . . . . . . . . . . . . . . . . . 1.1 4.1

Residential Energy Conservation, described at Total . . . . . . . . . . . . . . . . . . . . . . . . 26.6 100

NOTE: Pefcenlegee may not add to 1~% dw 10 rwmdlng
length the prospects for improved efficiency of
S O U R C E Alton J Penz, “Bu//d/ng Energy Eff/c/errcy The Motlvatton f o r
single-family homes. This report also discusses Change,” Institute for Bulldlng Sciences Research Report No 16,
Carnegie.Mellon Unlverslty, April 1981, table 2, p 10 These numbers
single-family houses but only in the context of were estimated from esflmates of numbers of bulldlngs, bulldlng
those building and owner types characteristic of square footage and energy use per square foot, for different bulldlng
categories (Details available from Mr Penz ) They are generally con-
central cities. Table 7 shows what share of U.S. sistent with but not precisely fhe same as estimates of commercial
energy use In Jerry Jackson, The Cornrnercfa/ Demand for Errergy A
building energy use is used by different building D/saggregated Approach, Oak Ridge, ORNLfCON.15, p 11, and
types. estimates of res~dentlal energy use In Eric Htrst, et al The ORNL
Eng/neer/rrg-Econorrr/c Mode/ of ffes/denf/a/ Energy Use, Oak Ridge,
ORN L/CON-24, appendix


Primary energy use in buildings essentially re- creased from 36 to 49 percent in commercial
mained constant from 1976 to 1980 despite buildings and from 31 to 48 percent in residen-
continued expansion of total square feet. The tial buildings.
long-term trends are shown in figure 2. I Since
These trends–overall slow growth i n t h e
1965, building energy use has increased at
energy use of buildings but a rapid increase in
about the same rate as energy for either trans-
the share of electricity—can be understood in
portation or industry. The most important
light of the trends in the prices of those fuels
source of increase in energy use in both com-
used by buildings. While the prices of all fuels
mercial and residential buildings has come from
increased rapidly in current dollars over the
their increasing dependence on electricity. As
decade from 1970 to 1980 (see figs. 4, 5, and 6)
can be seen in figure 3, the share of final de-
the real price of electricity (in 1972 dollars) in-
mand for electricity increased from about 9 to
creased quite slowly, by only 11 percent over
20 percent in the residential sector and from
the decade, while the real price of natural gas
about 13 to about 21 percent in the commercial
(in 1972 dollars) increased by 66 Percent and
sector. I n terms of primary energy (see footnote
the real price of fuel oil (in 1972 dollars) in-
1), electricity use by all buildings (1965-80) in-
creased by 153 percent. The contrast between
the slow increases in real electricity prices and
the more rapid increases in real natural gas and
fuel oil prices can be seen clearly in figure 7. To
be sure the price of electricity varies more from

28 Ž Energy Efficiency of Buildings in Cities

Figure 2.—Trends in Primary Energy Use by Sector,

1960-80 ‘- -

1960 1965 1970 1975 1980

NOTE Primary energy Includes energy used to generate electricity. Energy

consumption by electric utilities is allocated to the major end-use sec-
tors in proportion to electricity sales by privately owned Class A and B
electric utilities. These electric utilites accounted for 78 percent of
total electricity sales in 1979,

SOURCE Energy Information Admlnlstratlon, 1980 Anrrua/ Report to Congress,

April 1981

region to region than the price of natural gas or prices in the latter two utilities actually in-
fuel oil. A few utilities such as Long Island Light- creased slightly more slowly than the general in-
ing (1 5.5 percent growth per year from 1973 to crease in prices over the same period. J
1979) and Arizona Public Service (1 3.9 percent
per year) experienced rapid growth in prices.2 For both residential and commercial build-
The price increases by these utilities, however, ings, the biggest share of energy goes for space
were offset by slow growth in prices of electric- heat (see figs. 8 and 9). Space cooling and light-
ity by other utilities such as Cincinnati Gas & ing are the next most important uses of energy
Electric (6.9 percent per year) and Puget Sound for commercial buildings while hot water and
Gas & Electric (7.0 percent per year). Electricity cooling are for residential buildings.

‘Increases {n I?esdential Electricity Rates. Source: Electrical ‘Electrical World, op. clt.; G N P deflator increased at 7,4 percent
world, ~lrt,c tor} oi Elec tr{c U(I/ItIe$, 1974-75, 83d cd., 1974: and per year from 1973-79 (vol. 2: EIA, 1980 Annual Rc’/x)rt (t) (-f)n-
1980-81, 89th cd., 1980. (See table 1 In ch. 9 of this report. ) grm~, April 1981).
Ch. 2—Importance of City Buildings in National Energy Use: Will Energy Efficiency— Make a Difference? Ž 29

Figure 3.— History and Projections of End-Use Energy by Fuel Type:

Residential and Commercial Buildings
Residential buildings
Commercial buildings
[ History I Projections
History 1 Projections
8.6 112 11.1 I 10.6 10.7 10.6
76 81
100 5.4 77 77
100 —

90 —

80 -

70 70 —

60 [ 60 —

50 50 -
40 -

30 -

20 –

10 -

. 1990 1995 1965 1973 1978 1985 1990 1995
1965 1975 1978 1986
NOTES :(1) Number at top of bars are in quadrillion Btu
(2 I Assumes middle world oil pr!ce

Electricity Natural gas Other Residual

m Distillate Liquid gas

SOURCE Energy Information Admln!stratlon 1980 Arrrrua/ Report fo Corrgress, April 1981, pp 60-61

Figure 4.—Trends in the Price of Delivered

Electricity, 1960-80
Figure 5.—Trends in the Price of Delivered Natural
Gas, 1960-80

5.0 $4.00
$3.00 —
Residential sales
$2.00 —

$1.00 r

sales Commercial sales

\ 1 I I I
1960 1985 1970 1975 1980

1 9 8 0 Annua/ Report to congress. volume .?, DOE/EIA 0173 (80/2,

Energy Information Admlnlstratlon, U S D e p a r t m e n t o Energy
Washlngtoni D C , April 1981

30 ● Energy Efficiency of Buildings in Cities
— — . —

Figure 6.—Trends in the Price of Delivered Home Figure 8.—Primary Energy Use by Fuel and
Heating Oil, 1960-80 End-Use for Residential Buildings, 1980

Total = 170

S O U R C E 1980 Arrrrua/ Report to Congress, Vo/urne 2, DOE/EIA-.Ol73 (80)/2,

Energy Information Admlnlstratlon, U S, Department of Energy,
Washington, D C., Aprtl 1981.

SOURCES: 1980 Annual Report to Congress, Volume 2, DOEIEIA. 0173 (80)/2,

Energy Information Admlnlstratlon, U.S Department of Energy,
Figure 7.—Trends in Real Energy Prices Washington, D C , April 1981; Off Ice of Technology Assessment

(1972 dollars), 1960-80

Figure 9.— Primary Energy Use by Fuel and
End-Use for Commercial Buildings, 1980

SOURCES: 1980 Annua/ Report to Congress, Vo/ume 2, DOE/EIA-0713 (80)/2,

Energy Information Administration, U.S. Department of Energy,
Washington, D. C., April 1981; The Commerc/a/ Demand for Energy;
SOURCE: 1980 Annual Report to Congress, Volume 2, DOEIEIA-.O173 (80)/2, A LXsaggregated Approach, ORNUCON-15, Oak Ridge National
Energy Information Administration, Washington, DC., April 1981, Lab, April 1978; Office of Technology Assessment.
Ch. 2—importance of City Buildings in National Energy Use: Will Energy Efficiency Make a Difference? Ž 31


More than half of all the denser forms of hous- ministration (E IA) of the Department of Energy,
ing are located in central cities: 48 percent of all but it did not include data on the location of
attached housing, 50 percent of all multifamily buildings (central city, metropolitan area out-
housing buildings with two to four units, and 56 side central city, or rural). Rough estimates of
percent of all multifamily housing in buildings of commercial location could in theory be con-
five units or more.4 Only 21 percent of all single- structed from fire insurance maps for individual
family houses are located in central cities, but cities but this is time-consuming and difficult to
single-family houses, nonetheless, are a large make representative of the whole building pop-
fraction (43 percent) of all the housing units in ulation. Estimates can also be constructed from
central cities. employment data. This method is also subject to
considerable inaccuracy. s
OTA was not able to assemble national data
on the urban, suburban, or rural location of the 5Non rmlden tIa/ Bu lldfng~ Energy Consumptmn SU r~’e}f. Bu//dlng
4 million commercial buildings. The first survey Characterl$(l( $, March 1981, DOE/EIA-0246, Energy Information
Admlnistratlon. Estimating the location of the commercial
of the commercial building stock was published
building stock from employment data reported in Commerce
in March 1981 by the Energy Information Ad- Department reports on Couno Bu$lnes~ Patterns suffers from two
——. problems: employment data by county is not complete and there
‘Ann ua/ I lfwv ng .hr~w 1978: Part A Lcneral Houwng (_harac - is no accurate information on square footage per employee. Fur-
(erl~tlc ~, U ,S, Department of Commerce, Bureau of the Census, thermore, there is no way to estimate the size distribution of com-
and U.S. Department ot’ HOUSI ng and Urban De\(elopment. mercial buildings from employment data.


There is considerable uncertainty about fu- As in the past the price of electricity will vary
ture energy prices for different fuels. While most sharply from utility to utility. Some utilities will
published forecasts agree that the price of oil experience price increases considerably faster
will continue to increase rapidly (and they may than inflation; others will have electricity prices
also be equally wrong), there is no consensus falling relative to the general price level.
about the likely impact of price increases in ei-
There is equal uncertainty about the price
ther electricity or natural gas. On the one hand,
path of natural gas that is still regulated but
forecasts of relative stability in electricity prices
which is scheduled to be gradually increased in
(at least by the late 1980’s) in many parts of the
price until 1985. Full deregulation would in-
country are based on assumptions of the con-
crease the pace of price increases but it is not
tinued regulation of electricity prices (which
clear where the price of natural gas would settle
averages in high-priced electricity with low
relative to oil and electricity prices. Since nat-
priced). Other assumptions are a gradual shift in
ural gas competes with efficient use of electric-
electricity generation away from high-priced oil
ity in buildings and industry there is some spec-
and natural gas and a slowdown in the addition
ulation that the price of gas may eventually sta-
of new generating plant with its expensive debt
bilize if the price of electricity stabilizes. On the
service. On the other hand, continued depend-
other hand, it may increase to full parity with oil
ence on oil and gas and further rapid additions
of new generating plant could lead to continued
substantial increases in the price of electricity.
32 ● Energy Efficiency of Buildings in Cities


In the most recent forecast of energy use pre- on which to base a projection of residential
pared by EIA, and shown in table 8, primary energy use than for a projection of commercial
energy use by buildings (including the fuel used building energy use. The U.S. Census collects
to generate electricity), is projected to increase regular data on numbers of dwelling units by
by about 35 percent between now and the year type and location and on new construction and
2000. Commercial floorspace is projected to in- demolition of dwelling units. Until this year
crease by 2.4 percent per year and residential (when EIA completed a survey of commercial
dwelling units are projected to increase by 2 buildings), there were no such comprehensive
million units per year, or about 2.5 percent per data on the U.S. commercial building stock.
year. For both residential and commercial Based on data obtained in the survey, EIA esti-
buildings, increased primary energy use is large- mated the current stock of commercial and in-
ly due to a projected increase in the share of dustrial buildings at 52 billion ft 2, a much higher
end-use electricity (see fig. 3). figure than the 32 billion ft 2 of at least one
previous estimate.6 There are very incomplete
The accuracy of such projections is limited by
data on annual demolitions or annual new con-
the fact that there are far better data available
struction of commercial buildings, so there are
as yet no data on which to base an estimate of
Table 8.—EIA’s Projection of Primary Energy how fast the commercial building stock is likely
Use in Buildings in the Year 2000
to increase.
Primary energy use
(quadrillion Btu)
1980 2000 Percent change 6Nonres/dentta / Bu/ld/ngs Energy C’onsumptlon 5urie}/ F u e l
Character/st/cs and ConscriJt/on Practices, fig. 1, p. 4 . E n e r g y in-
Residential. . . . . . . 17.0 20.9 + 230/o
Commercial . . . . . . formation Administration, June 1981. one prior estimate was
10.4 16.0 + 54
made by Oak Ridge as reported in A User Gujde to the C)F?NL
Total combined 27,4 36.9 +35 Commercla/ Energ) Use Mode/, R. W. Barnes, C. J. Emerson, Ken-
SOURCE 1980 Annua/ Report to Congress, Energy Information Admlnlstration, ton R. Corum, ORNLICON-44, Oak Ridge National Laboratory,
April 1981, p 142, Mid. Level 011 Price Project Ion May 1980, p. 40.


There are two different approaches to estimat- EIA, this results in a modest reduction from
ing the impact of energy conservation on build- trend energy use of 6 percent in residential
ing energy use and both of these are illustrated buildings and 10 percent in commercial build-
in table 9. Both assume that strenuous efforts ings by 1990. Applying these same percentages
are made to induce energy conservation be- to 2000, as has been done in table 9, gives a
yond what is likely to be induced by an increase modest reduction of 3 Quads from trend energy
in energy prices. The impact of energy prices use. Even if the percentage impact in 2000 were
alone is incorporated in a base case or trend double what was estimated for 1990 by EIA the
energy projection. reduction would only be about 6 Quads.
One approach is to assume that high conser- Another approach, also illustrated in table 9,
vation policies increase the relative energy effi- is to calculate the technical feasibility of differ-
ciencies of different appliances and heating and ent improvements in energy efficiency and as-
cooling systems but that the increased efficien- sume that all of them which fall within some de-
cies are offset by increased use of these more ef- fined limit of cost effectiveness will be carried
ficient appliances and systems. As calculated by out. This approach was used by the Solar Energy
Ch. 2—importance of City Buildings in National Energy Use: Will Energy Efficiency Make a Difference? ● 33

Table 9.—Two Projections of Reduced Building Energy Use in the Year 2000
Projected building energy use in the year 2000
(quadrillion Btu of primary energy)
Energy Information
Definition of projection Administration SERI
Trend or base case . . . . . . . . . . . . . . . . . . . 36.9 35.3
Assuming all technically feasible
improvements in energy efficiency. . . . — 18.3
Projection assuming “high conservation”
Federal policies . . . . . . . . . . . . . . . . . . . 33.6a —
Reduction in energy use . . . . . . . . . . . . . . 3.3 17.0
a@Plj~~ ~~rC~nta~~ ~@ @lOn~ ,n ~~sldentl al anrj commercial use i n “high cOn Serval Ion use” In 19W to the Prolectlon of
trend energy use In 2000
SOURCE 1980 Annual Report to Congress, Energy Information Agency, p 65 and A New Prosperlfy Bu//dlng a Susfalrrab/e
Energy Future The SE R1/SOLAR Conservation Study (Andover, Mass Brick House Publlsh!ng. 1981), p 13

Research Institute (SERI) for its report Building a tions in energy use calculated in this way is
Sustainable Energy future. SERI calculated the much greater than the reductions projected by
cost of retrofits to several prototypical buildings EIA, 17 Quads instead of 3. The difference be-
assuming the retrofits would be paid for in an- tween these two projections is a measure of the
nual payments on a loan of 3-percent real inter- range of controversy about how much of the
est rates over the lifetime of the measure (gener- technically feasible reductions in building
ally 20 years). Any retrofit costing less per Btu energy use are likely to come about within the
saved (on this basis) than the current (1980) cost framework of the decisions made by those re-
of fuel oil or electricity would be considered sponsible for buildings.
cost effective. The technical potential for reduc-


This study looks more closely at some residen- From table 7 energy use for the primary build-
tial and commercial building types to examine ing types covered in this report are obtained.
how much cost-effective retrofit might actually They are as follows:
occur given the motivation of different owners
Multifamily . . . . . . . . . . . . . . . . . . . . . .........2.3 Quads
to invest in retrofit. The analysis that follows Off Ice buildings. . . . . . . . . . . . . . . . . . . . . .. ...1.4 Quads
draws on the detailed analysis in the rest of the Retail/wholesale . . . . . . . . . . . . . . . . . . . . . .2.2 Quads
report but relies on some simplifying assump- Hotel/motel . . . . . . . . . . . . . . . . . ..0.5 Quad

tions consistent with that analysis. It also ignores In addition to these building types, owner
some subtleties important for designing retrofit motivation and public policies are analyzed for
strategies for particular cities but not important three other building types:
when analyzing national energy use two dec-
E d u c a t i o n a l b u i l d i n g s 1.7 Quads
ades from now. The overall analysis presented Public buildings. . . .. .0.4 Quad
here is designed for simplicity and clarity. Single-family homes owned by
Readers should be aware that the main objec- low-income people’. ., ... . . .1.6 Quads
tive of the whole report was not to perform a na-
tional energy forecast but to clarify the com-
plexity of the building sector that is one of the
most inherently local of all economic sectors in
the way in which decisions are made about ‘See a p p e n d i x t o t h i s c h a p t e r for assurnpttons used In
growth and investment. calculating energy use by Iow-income people.
34 . Energy Efficiency of Buildings in Cities
—. —. —— - .—————— .

The technical potential and owner motivation though the technical potential for retrofit and
for all these categories of building types is owner motivation for retrofit of such buildings
assessed regardless of where they are located, was thoroughly analyzed in OTA’s previous re-
on the grounds that such building types make port on Residential Energy Conservation, this
up a large fraction of buildings in central cities new report sheds some additional light on pub-
but that city/suburban boundaries do not make Iic and private programs to stimulate retrofit in
an important difference in the retrofit potential these buildings. Single-family houses in cities
of such buildings. use a large fraction of city building energy use:
The study, however, devotes some brief atten- Single-family houses in cities. . . . . . . . . . . ., 3.5 Quads
tion to another group of buildings only to the
All of these building types taken together used
extent they are located in central cities. These
half the building energy use in 1975.
are single-family houses owned by families of all
income classes, but located in central cities. Al-


The analysis of the likely energy savings com- ● Likely savings (either fast payback retrofits
pared to the possible energy savings for the only or maintenance and use savings only).
building types covered in the report uses a set of ● The gap between technically possible sav-

simple assumptions consistent with the results ings and likely savings.
of the detailed analysis described in the rest of ● What share of the gap is represented by fast

the chapters of the report. payback savings that are not likely to be
The detailed assumptions used in the analysis
Since the projection is meant to illustrate the
are described in the appendix to this chapter implications of the findings in the study if they
and include assumptions about: were carried forward, the calculations assume
● The rate of demolition of the current build- current energy prices in estimating the tech-
ing stock. nically feasible retrofits (as did the SERI projec-
The rate of addition of new energy ineffi- tion described above) and current costs and ac-
cient buildings (since these will require ret- cessibility of capital in estimating the likely re-
rofit to become energy efficient). sponse of building owners. No attempt to fore-
● The technical potential for retrofits of differ- cast changes in real energy prices or changes in
ent types of buildings. the cost of capital was made. If real energy
● The likelihood that different types of own- prices on average were to increase significantly
ers will actually retrofit their buildings. the amount of technically feasible ret refit would
● The share of commercial buildings that are increase slightly, and if the cost of capital were
owner occupied. to fall significantly, the motivation of building
Ž The share of residential dwelling units that owners to retrofit should increase. Readers of
are occupied by low-income people. this report may take these two possibilities into
account in judging the implications of OTA’S
Using these assumptions, OTA calculated for projections.
each building and owner type:
Potential and likely savings are shown for
● Projected trend energy use in 2000 (same each building type i n table 10. The results for all
as 1975 because of cumulative effect of buildings needing retrofit between now and
changes due to demolition or additions of 2000 and covered in this report can be summar-
energy inefficient buildings). ized as follows:
● Savings if all technically feasible, cost-effec- ● For the building types covered i n this
tive measures were installed. report, the total trend energy use i n 2000 of
Ch. 2—importance of City Buildings in National Energy Use: Will Energy Efficiency Make a Difference? ● 35

Table 10.—The Likely Primary Energy Savings Compared to the

Technically Possible Savings for Building Types Covered in This Report

Year 2000
Trend Technical Gap: technical Gap: fast-
energy savings Likely potential saving payback savings
Building types use a potential savings not realized not realizedb
Residential (quads of Btus)
Single-family buildings
● Low income . . 1.6 0.8 0.2 0.6 (0.2)
● Moderate and upper

income in cities . 3.5 1.8 0.9 0.9 o

● Moderate and upper income

outside cities (not dealt within

report) . . . . . . . . . . . . . . . . . . . (10.2) (5.1) (2.5) (2.5) 0
Ž MobiIe Homes . . (0,3) unknown unknown unknown unknown
Multifamily buildings
● Low-income . . . 0.6 0.2 0.1 0.1 (0.1)
● Moderate and upper income

master-metered . . . . . . . . . . . . 0.9 0.4 0,1 0.3 (0.1)

● Moderate and upper income

tenant-metered. . . . . . . . . . . . . . . . . 0.8 0.4 0.1 0.3 (0.1)

Total residential energy dealt
with in this report 7.4 3.6 1.4 2.2 (0.5)
Not dealt with in this
report. . . . . . . . . . . . . . . . . . . . . . . . . (10.5)
Total residential primary energy 17.9
Commercial buildings
Office buildings
● O w n e r - o c c u p i e d . 0,7 0.4 0.2 0.2
. Investor-owned. . . . , . 0.7 0.4 0.1 0.3
Retail buildings
● O w n e r - o c c u p i e d . 1.1 0.6 0.3 0.3
● I n v e s t o r - o w n e d . . 1.1 0.6 0.1 0.5
● Owner-occupied . 0.3 0.2 0.1 0.1
● I n v e s t o r - o w n e d . 0.3 0.2 0 0.2
Educational buildings . . . . . . . . . . 1.7 0.9 0.4 0.5
Public buildings . . . . . . . . . . . . . 0.4 0.2 0.1 0.1
Commercial energy dealt with in this
report. . . . . 6.3 3.5 1.3 2.2
Not covered in this report:
Hospitals . . . . . . . . (0.7)
Warehouses . . . . . . . . . . . (0.3)
Religion. ... . . . . . . . . . . . . . . . . . . (0.3)
Miscellaneous . . . . . . . . . . . . . . . . . (1,1)
Total . . . . . . . . . . . (2.4)
Total commercial primary energy 8.7
Total energy covered in this
report. . . 13,7 7.1 2.7 4.4 (0.9)
Total building energy . . . . . . . . . . . . . . 26.6
a*~~ume~ 2000 ~nergY use by Ineff{clent bulldlmj 1975 Use (see ‘ext)
bFast.paybaCk sav{ngs not reallzed are included In figures on total savings not reallzed In column at left

SOURCE Off Ice of Technology Assessment

buildings in existence in 1980 plus the frac- ● Only 2.7 Quads of savings of this amount
tion of buildings built between now and are actually likely to be saved because of
2000 that are energy inefficient (about 33 stringent criteria applied to energy retrofits
percent) is projected to be 13.7 Quads (out placed by building owners of different
of a total building energy use for existing kinds and described in chapter 4 of this
buildings and new energy-inefficient build- report.
ings of 26,6 Quads). ● Of the estimated 4.4-Quad gap between
● Of this energy use, technicalIy feasible and the technical potential for savings from ret-
cost-effective (see p. 4 for definition) retro- rofit and likely savings from retrofit, about
fits could produce 7.1 Quads of savings. 0.9 Quad are very cost-effective retrofits
36 Ž Energy Efficiency of Buildings in Cities

(fast payback retrofits) that will not be in- cost more compared to the savings they
stalled because some owners totally lack fi- bring about but would still be considered
nancial means (low-income owners) or mo- cost-effective investments by an investor
tivation (owners of tenant-metered multi- with a long perspective. Of these about 2.5
family buildings) or both, The rest of the Quads are from retrofits of moderate pay-
gap, 3.5 Quads, represents the retrofits that back.


The assumptions used in constructing table 10 on the further assumption that 13 percent of single-
were as follows: family owners are low income (125 percent of pov-
Trend Energy Use in the Year 2000 of Building erty) and they use 80 percent of the energy used by
Types Covered in This Report That Are Also Can- moderate and upper income. For multifamily rent-
didates for Retrofit.–For simplicity this is assumed ers, 30 percent are assumed to be low income, also
to be the same as the breakdown shown in table 7 using 80 percent of the energy used by moderate
for 1975. This result comes about because a set of far and upper income people.
more complicated assumptions have the overall ef- Master and Tenant Metering of Multifamily
fect of canceling each other out. The more detailed Buildings.–OTA assumed that half of all multifamily
assumptions are as follows: buildings are master metered and that this propor-
1980 building energy use is 3 percent higher tion will not change between now and 2000.
than 1975 energy use. Technical Potential of Retrofit of Commercial
Residential buildings in existence in 1980 will be Buildings.–Based on the analyses of retrofit poten-
demolished at 1 percent per year until 2000 tial described in chapter 5, it is assumed that if all
leaving 82 percent of the 1980 buildings stand- cost-effective measures were installed in commercial
ing. Commercial buildings will be demolished at buildings, the average energy savings would be 50
1.25 percent per year leaving 74 percent of the percent of trend energy use.
1974 buildings still standing. Technical Potential for Retrofit of Residential
New residential buildings will be constructed Buildings.– From the analysis in chapter 5 multifam-
between 1980 and 2000 equivalent to 50 per- ily buildings, on average, have less retrofit potential.
cent of the 1980 building stock. One third of OTA assumed a potential savings of 40 percent of
these, or about 17 percent of the 1980 building trend energy use. For single-family buildings OTA as-
stock will be energy inefficient and will need sumed a technical retrofit potential of 50-percent
retrofit. savings.
New commercial buildings will be constructed Owner Occupancy of Office, Retail, and Hotel
between 1980 and 2000 equivalent to 60 per- Buildings.–OTA assumed that 50 percent of these
cent of the 1980 building stock. One third of buildings are owner occupied. This is consistent
these (or 20 percent of the 1980 building stock) with the data in the March 1981 survey of nonresi-
will be energy inefficient and will need retrofit. dential buildings (see footnote 5 for reference). EIA
Compared to the 1975 stock the result of these data shows that the proportion of owner occupancy
assumptions is that trend building energy use averages 48 percent and does not vary greatly by
for those buildings needing retrofit in 2000 will type of commercial building or size of building.
be 102 percent of 1975 energy use for residen- Savings Achieved by Fast-Payback Retrofits.–
tial buildings and 97 percent for commercial Based roughly on the technical analysis described in
buildings. This is too close to 1975 energy use to chapter 5, OTA assumed that 20-percent savings can
make any difference in OTA’s crude calcula- be achieved by fast payback retrofits in multifamily
tions of savings potential and so the 1975 energy buildings and that 30-percent savings can be
was used as a starting point. achieved by fast payback retrofits in commercial
Low-Income Share of Single-Family and Multi- buildings and single-family buildings.
family Housing.–OTA assumed that 10 percent of Savings Achievable by Changes in Maintenance
all single-family energy use is low income and 25 and Behavioral Practices.—OTA assumed that
percent of all multifamily energy use. This is based 10-percent savings is achievable in all building types
Ch. 2—Importance of City Buildings in National Energy Use: Will Energy Efficiency Make a Difference? Ž 37

without capital investment but with changes in use do more is offset by the reluctance of the
and maintenance practices. poorly financed owner-occupants to do any
Willingness of Owner Types To Do Retrofits.– retrofits.
Based on the analysis of building owner motivation — Owners of educational and public buildings.
in chapter 6, OTA made the following assumptions — Moderate and upper income owners of
about average owner willingness to retrofit their single family buildings in cities.
build buildings: — Master-metered multifamily buildings.
● Willing to invest in a full set of technically feasi- ● Unwilling to retrofit but achieving savings due to
ble retrofits. None as a group although small changes in use or behavior.
categories within some groups. — investor-owners of office buildings, retail
● Willing to invest in fast payback retrofits only. buildings, and hotels.
— Owner-occupants of office buildings, retail — Owners of tenant-metered multifamily build-
buildings and hotels. The willingness of the ings.
better financed owners of these buildings to – Low-income owners of single-family homes.
Chapter 3

Technical Potential for Improving the

Energy Efficiency of Buildings in Cities

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . ..... 41 Site-Specific Nature of Building Retrofit. . . . . . 80
Unpredictability of Savings From
A Few Characteristics of Buildings Building Retrofits. . . . . . . . . . . . . . . . . . . . . . 84
Influence Their Retrofit Potential. . . . . . . . . . 43
Implications for Retrofit of Buildings in Cities. . . 87
An Overview of the Retrofit Potential of Energy Retrofit Business. . . . . . . . . . . . . . . . . . 87
Different Building Types. . . . . . . . . . . . . . . . 44 Problems and Opportunities of Urban Retrofit 89
Building Stock of Cities. . . . . . . . . . . . . . . . . . . . . 47 Urban Retrofit: Mass production or
Small Wood Framehouses. . . . . . . . . . . . . . . . 48 Custom Work?. . . . . . . . . . . . . . . . . . . . . . . . 89
Small Solid Masonry Houses. . . . . . . . . . . . . . . 52 Retrofit, Rehab, or Demolish?. . . . . . . . . . . . . . 91
Moderate- and Large-Size Multiamily
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 LIST OF TABLES
Moderate and Large Commercial Buildings. . . 56
Table No. Page
Effectiveness of Individual Retrofits for 11. Thirteen Types of Buildings With
Different Building Types. . . . . . . . . . . . . . . . 61 Significantly Different Retrofit Options. . . . . 44
Retrofits to the Building EnveIope. . . . . . . . . . . 61 12. Types of Housing Found in Central Cities. . . 48
Retrofits to the Mechanical System. . . . . . . . . . 68 13. Housing Stock With and Without
Retrofits to the Domestic Hot Water System. . 77 Wall Insulation and Roof Insulation. . . . . . . 50
Retrofits to the Lighting Systems. . . . . . . . . . . . 78 14. Housing Stock With and Without
Conclusion–variation in Retrofit Storm Windows. . . . . . . . . . . . . . . . . . . . . . . 50
Applicability by Building Type. . . . . . . . . . . . 80 15. Small Framehouse: Sample List of Retrofit. . 51
Energy Savings for Particular Buildings May Be 16. Small Masonry Rowhouse: Sample
Both Site Specific and Unpredictable. . . . . . 80 List of Retrofit options. . . . . . . . . . . . . . . . . .52
Table No. Page Figure No. Page
17. Multifamily Building: Sample List of 15. Square Footage of Commercial Buildings. . . 58
Retrofit Options. . . . . . . . . . . . . . . . . . . . . . . 56 16. Relative Sizes of Various Types of Commercial
18. Characteristic Sizes of Commercial Buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Buildings in Downtown Baltimore. . . . . . . . 59 17. Heating and Air-Conditioning Systems for
19. Large Commercial Buildings: Sample Commercial Buildings by Year of
List of Retrofit Options. . . . . . . . . . . . . . . . . . 60 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 59
20. Calculated Capital Cost of Window 18. Adding Wall Insulation to Existing Frame Walls
Retrofits in Buffalo and Tampa. ....., . . . . 65 and Existing Masonry Walls. ... , . . . . . . . . . 63
21. Calculated Capital Costs of Energy 19. Calculated Costs and Savings:
Efficiency Retrofits Compared to Wall Insulation. . . . . . . . . . . . . . . . . . . . . . . . 64
Active and Passive Solar Retrofits. . . . . . . . . 67 20. Calculated Costs and Savings:
22. Calculated Capital Cost of Retrofits to Roof Insulation. . . . . . . . . . . . . . . . . . . . . . . . 64
Air and Water Mechanical Systems . . . . . . . 74 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
23. Calculated Capital Costs of Four Retrofits to 22. One Active and Two Passive Solar
Commercial Lighting Systems . . . . . . . . . . . . 79 Devices for Heating Buildings. . . . . . . . . . . . 66
24. Energy Use Per Square Foot in Buildings of 23. Five Systems for Adjusting the Amount
Downtown Baltimore . . . . . . . . . . . . . . . . . . 81 of Heat and Cooling to Different Zones
25. Documented Energy Savings by Type in a Commercial Building. . . . . . . . . . . . . . . . 69
of Commercial Building. . . ., . . . . . . . . . . . 84 24 Sample Retrofits to CentraI Air Heating
26. Summary of Findings From Survey of and Cooling Systems. . . . . . . . . . . . . . . . . . . 72
Commercial Building Retrofits . . . . . . . . . . . 85 25, Sample Retrofits to Water-Based Heating
3A. Building Types for Which Retrofit Lists Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Were Developed. . . . . . . . . . . . . . . . . . . . . . 92 26. Calculated Capital Costs of a Modulating
3B. Retrofits Assessed by the Office Aquastat–Three Building Sizes. . . . . . . . . . . 74
of Technology Assessment. . . . . . . . . . . . . . 93 27. Calculated Capital Costs of Four Mechanical
3C. Characteristics of the 12 Building Types. . . . 94 System Retrofits–Three Buildings Sizes. , . . 75
30. Assumptions About the Mechanical 28. Calculated Capital Cost of Replacing Window
System Types Used in OTA’s Analysis Air-Conditioners in Tampa, St. Louis, and
of Retrofit Cost-Effectiveness. . . . . . . . . . . . . 95 Buffalo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
29. Calculated Capital Costs of Solar Hot Water
FIGURE Heaters and Three Other Hot Water Retrofits 78
30. Diagram of Heat Pump Hot Water Heater. . 78
Figure No. Page
31. 80
10. Heating Systems Found in Owner- 32. Simple Payback Period : : : : : : : : : : : : : : : : : : 85
and Renter-Occupied Housing Stock 33. Categories of Completed Retrofits: Summary of
in U.S. Central Cities. . . . . . . . . . . . . . . . . . . 50
Commercial Building Retrofits . . . . . . . . . . . . 86
11. Heating Systems in Central Cities
Housing Stock by Region. . . . . . . . . . . . . . . . 50
12. Air-Conditioning in Central Cities LIST OF BOXES
Housing Stock by Region. . . . . . . . . . . . . . . . 50
13. Small, Medium, and Large Multifamily Buildings Page
in Central Cities: U.S. Total and Northeast. . 54 A. The Energy Auditor’s Work. . . . . . . . . . . . . . 41
14. Electricity Used for Heat in Single-Family and B. The Cost Effectiveness of Energy
Multifamily Buildings. . . . . . . . . . . . . . . . . . . 55 Retrofits: Four Definitions. . . . . . . . . . . . . . . 46
Chapter 3
Technical Potential for Improving the
Energy Efficiency of Buildings in Cities

The building stock of U.S. cities is inherited these will be called energy retrofits in this re-
from eras of energy use that were very different port. The analysis used methods of calculation
from the one that the country faces over the of costs and savings that are somewhat more so-
next two decades. Some buildings date from the phisticated than those of many energy auditors
mid-19th century when the only building fuel (see box A) but are generally simpler than
was firewood and the average home consumed calculation methods used in some elaborate
17 cords per year.1 Many buildings still have old computer programs. For some retrofits and
coal furnaces in their basements, later con- some building types there have been individual
verted to burn oil. The shiny glass office
buildings of the 1960’s and early 1970’s were
built in the expectation of cheap electricity get-
ting cheaper. Box A.-The Energy Auditor's Work
How well are these buildings likely to survive
The energy auditor’s work has two compo-
as energy prices continue to increase in nents: a theoretical component and a site-spe-
response to the increasing scarcity of oil and cific component. In the theoretical compo-
gas? TO be sure, those who work and live in nent, the auditor takes a small number of facts
old buildings will have the option of using them about a building’s walls, windows, roof, light-
the way their ancestors did with closed off ing, and mechanical systems and applies a
rooms and lowered temperatures in the winter, series of formulas to estimate the amount of
windows open, shirtsleeves, and long cool energy savings that might result from each of
drinks in the summer. serveral retrofit measures. He estimates the
cost of the components, also based on stand-
To what extent, however, can the buildings ard cost information.
themselves be made more energy efficient in
response to higher prices? What specific The auditor subsequently, or simultaneous-
changes can be made to walls, windows, and ly, inspects the building and discusses it with its
heating equipment of different kinds of city owner in order to take into account several ad-
buildings to make them more efficient? At what ditional factors which are peculiar to the build-
ing and the owner’s plans for it. The auditor, in
cost compared to savings in energy? With what
this site-specific component will:
degree of uncertainty? Are there types of build-
ings that will never be even moderately frugal in ● make a precise assessment of the efficien-
their energy use and so will be prime candidates cy of the current mechanical system com-
for abandonment if their energy costs become ponents;
the dominant expense? ☛ identify any peculiar features of the
building that waste energy, such as cracks
To answer these questions OTA conducted a around vents that release heat to the out-
systematic survey of physical changes that could side;
be made to different kinds of buildings to im- ● identify any peculiar local variationsin the
prove their energy efficiency. For convenience, cost of labor or materials; and
● take into account the owner’s plans for
renovating or repairing such features as
1 Energy In the Amw/can Economy, 1850- 1975: An Economic
the roof or mechanical systems that would
Study of Ifs HJsfory and Prospecb, Sam H. Schurr and Bruce Net-
scherf, with Vera F. Eliasberg, Joseph Lerner, Hans H. Landsberg, be affected by a retrofit.
Resources for the Future, Inc., 1977, p. 49.

42 Ž Energy Efficiency of Buildings in Cities

studies that provide more detail than the com- fits to buildings, and to some inherent lack of
prehensive survey of retrofits described in this predictability for a technology applied in hun-
chapter, but these do not provide ways to comp- dreds of thousands of buildings each with its
are retrofits across building types. Where ap- own special characteristics. The chapter is orga-
plicable these studies are referenced or de- nized to present the information to demonstrate
scribed i n the text and in footnotes. z these two overall conclusions. The first part of
the chapter is devoted to the theoretical differ-
The data on actual retrofits are skimpy and do
ences among buildings that systematically influ-
not permit any conclusions comparing savings
ence their retrofit potential. The second part of
from one category of retrofits to another or
the chapter describes the reasons why energy
comparing one building type to another. These
savings for a particular building may be unpre-
data are reported on later in the chapter.
The data on the nature of the building stock
The chapter also discusses key differences
are also skimpy. Although much is known about
among the retrofit potential of building types
the location, size, structure, and heating sys-
that should be taken into account in designing a
tems of the housing stock and the rate of new
focused public or private retrofit program.
construction and demolition, until this year vir-
Three of the critical differences are:
tually nothing was known about the commer-
cial building stock. Now, thanks to a survey of 1. Which aspects of the buildings type are most
nonresidential (mostly commercial but a few in- susceptible to retrofit?—The retrofit busi-
dustrial) buildings* something is known about ness is still fragmented. Different businesses
the size, use, and heating and cooling systems specialize in insulation, storm windows,
of commercial buildings but still very little about improvements to the mechanical system,
their location (in central cities, suburbs, or rural improvements to the hot water system, and
areas) or the rate at which they are being con- improvements to the Iighting systems. A de-
structed or demolished. This chapter, where signer of a retrofit program should know
possible, relates data on characteristics of the which businesses should be dealing with
building stock, which are expected to affect its which building types.
retrofit potential. 2. Is the building type capable on average of
substantial/ reductions in energy use? —This
On the average, retrofits to existing buildings helps determine possible targets of retrofit
of most types are practical, feasible, and have
programs. All programs, public or private,
a low capital cost compared to savings. At the
can benefit from early success and satisfied
same time, however, there is a large margin of
customers. Aiming a retrofit program first at
uncertainty and risk about the savings achiev-
those building types that are most likely to
able in a particular building. This is due both to
be capable of substantial reductions in en-
the early stage of development and use of retro-
ergy use is one way to build the credibility
of retrofits,
Some examples of computer programs to assess retrofits in- 3. Can a large fraction” of the potential energ y

clude DOE-2 (formerly Department of Energy), E CUBE (Southern savings of the building type be achieved
California Gas Co. ) and BLDSIM (Honeywell). For more informa-
tion see article and bibliography T. Kusuda “Comparison of Ener-
with retrofits of low capital cost relative to
gy Calculation Procedures, ” ASHRAE journal, August 1981. Two savings ?—For building types with a retrofit
notable studies of the retrofit potential of different categories of potential with this characteristic, financial
buildings are: 1 ) A Stud}, O( Energ} Gonser\a[lf)n in Rental /fou\-
Ing, prepared by Ritter, Suppes, Plantz, Architects, Ltd. for the
assistance with the retrofit should not be as
Minnesota Housing Finance Agency, January 1979; and 2) Energ}, necessary as for building types with a large
Cc)rrw’rva(lon In Exktirrg off~ce BuI/ding\, Syska and Hennessy and fraction of potential savings likely to come
Tishman Research for the U.S. Department of Energy, New York,
June 1977.
from retrofits of moderate capital cost rela-
* Published by the Energy Information Administration of the tive to savings or a large fraction of retrofits
Department of Energy in April 1981. with high capital cost relative to savings.
Ch 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities Ž 43


The variety of city buildings may seem in- produced and circulated can provide significant
finite: from the small brick rowhouses of increases in building efficiency but vary with the
Baltimore and wooden Victorians of San Fran- type of heating, ventilation, and air-condition-
cisco to the towering offices of downtown ing (HVAC) system used by the building. Air sys-
Atlanta. To the trained eye of the energy tems that circulate centrally heated and cooled
auditor, however, there are only a few impor- air in various ways provide many opportunities
tant characteristics of a city building that will for improved efficiency. Decentralized systems,
determine the kinds of energy retrofit measures on the other hand, use individual space heaters
that should increase that building’s energy effi- and air-conditioning units and generally have
ciency. Three of these characteristics are usually improved efficiency only by replacing the indi-
visible from the outside of the building: size, vidual units at considerable expense. Mixed
walI and roof type, and building purpose (resi- water-based systems, typical of older buildings
dential or commercial). A fourth, equally impor- that heat with circulating hot water and steam
tant but invisible to the outside, is mechanical through radiators but cool with window air-con-
system type. Each of these characteristics will af- ditioners, can be retrofit in the central system
fect the list of retrofit options as follows: but share with decentralized systems the prob-
lems of retrofitting the air-conditioners. Finally
Size. –Energy retrofits that improve the tight- complex reheat systems, typical of newer com-
ness of the building envelope are more impor- mercial buildings can have their efficiency
tant for small buildings than for large buildings.
greatly improved by changing from a very
Wall insulation, roof insulation, and window
energy inefficient “reheat” way of maintaining
treatments such as storm windows save more
constant temperature to a more efficient one.
energy for small buildings than large ones
because in small buildings there is more outside Building purpose.–Most commercial build-
surface through which heat and cooling can ings are used from 9 to 5 (offices) or 9 to 9 (shop-
escape compared to the useful floor area of the ping centers) and are empty outside these
building. On the other hand, certain kinds of hours. This provides opportunities for improved
retrofits to central heating and cooling systems energy efficiency by careful control of tem-
or domestic hot water systems are less expen- perature and lighting between operating and
sive for the same savings in large buildings than nonoperating hours. Greater ventilation re-
in small because of economies of scale in equip- quirements and cooling loads in commercial
ment size. buildings permit energy savings from careful use
wall and roof type. –Masonry or clad walls of outside air and opportunities also exist for
(steel frame with brick, concrete, steel, or glass more efficient and task-specific Iighting in com-
veneer) and flat roofs without attics or with very mercial buildings. Multifamily buildings on the
small crawl spaces are much more expensive to other hand use a lot of hot water; retrofits to the
insulate than are wood frame walls and roofs hot water system can usually save energy. Since
with attics and ample crawl spaces. Many build- muItifamily buiIdings must be comfortable tem-
ings characteristic of cities—cinderblock bunga- peratures at night, there are significant oppor-
lows, brick rowhouses, large clad-wall apart- tunities for preventing heat loss through win-
ment buildings, or stone or brick commercial dows at night.
strip buildings-cannot improve the energy effi-
The age of a building was not added to this set
ciency of their structures through insulation ex-
of four critical characteristics because by itself it
cept at great expense.
does not directly influence the list of retrofits
Mechanical system (HVAC) type. –Physical that is appropriate to the building. The age of a
changes to the way space heating and cooling is building is, rather, an indicator of the other
44 ● Energy Efficiency of Buildings in Cities

characteristics of the building which will direct- An older building is also somewhat more likely
Iy affect its retrofit potential. Older buildings are to have inefficient heating systems and poorly
more likely to have solid masonry walls and fitting window frames subject to infiltration.
central water or steam heating systems. Rather However, old buildings may also be carefully
than central air-conditioning they are likely to maintained, and equipped with upgraded heat-
have window air-conditioners, or none at all. ing equipment and newly fitted windows,


There is a List of Practical Retrofit Options The retrofit lists were constructed from a total
for Each Distinctive Building Type. Most ener- list of almost 40 retrofits. The 13 distinct build-
gy auditors prepare their work in the form of a ing types consist of:
list of retrofit options that show the cost of each ● three types of small framehouses of one to

option, estimated savings, and expected pay- four dwelling units (distinguished by their
back. Although retrofit lists were initially con- mechanical systems);
structed for over 40 combinations of the four ● three types of small masonry rowhouses

building characteristics described above, it was also distinguished by their mechanical sys-
found that 13 sets of building characteristics (see tems;
table 11) were enough to explain most of the ● three types of moderate or large multifam-

the variation among the retrofit lists. Some sam- ily buildings; and
ple lists for some building types are presented ● four types of moderate or large commercial

later in the chapter (tables 15, 16, 17, and 19). buildings.

Table 11 .—Thirteen Types of Buildings With Significantly Different Retrofit Options

More energy
savings from
Low Moderate
capital capital
cost cost
Building type and Mechanical retrofit retrofit
wall type system type package a package a
Small house with frame
walls (single family or 2-4 units) Central air system x .
Same Central water systemb x —
Same Decentralized system x —
Small rowhouse with masonry
walls (single family or 2-4 units) Central air system — x
Same Central water system — x
Same Decentralized system — x
Moderate or large multifamily
building (masonry or clad walls) Central air system x —
Same Central water system x —
Same Decentralized system — x
Moderate or large commercial
building (masonry or clad walls Central air system x .
Same Central water — x
Same Complex reheat system x —
Same Decentralized system x —
asee app, E at the end of the report for details on retrofit packages for the different building tYPeS.
bOTA’s assumption is that this building type has a central water system and window air-conditioners.
SOURCE: Office of Technology Assessment.
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 45

A complete listing of the full set of building than 13 percent but less than 50 percent in an-
types and of the full list of retrofits analyzed can nual real return per year over 20 years. If
be found at the end of the chapter in appen- annualized at a capital recovery rate of 25 per-
dixes 3A and 3B. cent (corresponding to a 5-year loan at the fairly
low interest rate of 10 percent) these retrofits
For Almost All of the 13 Building Types the
would cost between $3.50 and $12,75 per an-
Retrofit Lists Contain Predominantly Retrofit
nual million Btu saved. Some retrofits of moder-
Options of Low Capital Cost Compared to Sav-
ate capital cost compared to savings include:
ings. OTA classified retrofits on each list into
storm windows for small buildings, shading
low, moderate, and high capital cost compared
devices for commercial buildings, and window
to savings. To accommodate several common
insulation at night for multifamily buildings.
methods used by energy and housing analysts
to express cost effectiveness, OTA has translated There are also a few retrofits with high capital
its definition of low capital cost compared to cost compared to savings on each list but they
savings into three other ways of expressing cost are only important for a few building types.
effectiveness (see box B). The retrofit options of High capital cost retrofits pose very serious
low capital cost on the retrofit lists are those that financing problems. They are not expected to
cost less than $14 for each annual million Btu payback for 7 to 15 years and are expected to
that they save, which are expected to pay back earn less than 13 percent per year real return on
in less than 2 years, earn an annual real return investment. An outstanding example of a high
of at least 50 percent per year for 20 years, and capital cost retrofit that achieves substantial
cost less than $3.50 per million Btu saved at a energy savings is wall insulation for masonry-
capital recovery rate of 25 percent. Any way walled buildings.
that one looks at their cost effectiveness, such
retrofits are very good investments and are not When Individual Retrofit Options Are Com-
likely to pose serious financing problems. bined Into Retrofit packages, the Cumulative
The sample retrofit lists for each of the 13 Savings is Significantly Less Than the Sum of
building types are shown in appendix A at the the Savings From Individual Retrofits. Many of
end of this report. A number of very powerful the low and moderate capital cost retrofits
low-cost retrofits are responsible for a large (which are the first that any cost-minded build-
share of the low-cost energy savings on each ing owner is likely to install) reduce the poten-
list: roof insulation for small buildings, wall in- tial for savings for some or all retrofits installed
sulation for frame buildings, reduction of ven- later. For example, storm windows reduce the
tilation and economizer cycles for commercial amount of heat that escapes from windows. Sav-
buildings with air systems, conversion from in- ings from nighttime insulating window shades
candescent to hybrid fluorescent lamps in those will be greater if installed on windows without
commercial buildings still equipped with in- storm windows than on those already equipped
candescent lights, and flow controllers and hot with storm windows.
water system insuIation in multifamily buiIdings.
For this reason savings from individual retro-
All of the retrofit lists have on them substantial fits on the retrofit option lists cannot be added
numbers of retrofits of moderate capital cost together. The energy savings produced when
compared to savings. Such retrofits pose more these retrofits are combined into packages is sig-
serious financing difficulties for buiIding owners nificantly less than the sum of what savings each
no matter how the capital cost is expressed. would be expected to produce by itself. Be-
Using OTA’s definition and three other ways of cause of the dozens of ways in which individual
expressing capital cost (see box B) moderate retrofits can be combined, each of which will
capital cost retrofits cost between $14 and $49 produce a separate estimate of cumulative sav-
for each annual million Btu saved and would ings, most auditors generally calculate com-
pay back in 2 to 7 years. They would earn more bined savings for one or a few retrofit packages.
Simple payback
OTA’s method assuming

cost of retro - Value of Value of
Capital cost fit per annual energy savings energy savings
compared million Btu = $7 per =
$4.50 per
to savings saved
million Btu million Btu
Low $ 7.00 1 Yr. 1 ½ Yrs.
capital cost $ 1400 2 Yrs. 3 Yrs.

Moderate $ 2100 3 Yrs. 4 ½ Yrs.

capital cost $ 35.00 5 Yrs. 8 Yrs.
$ 49.00 7 Yrs. 11 Yrs.

High $ 70.00 10 Yrs. 15½ Yrs.

capital cost $10500 15 Yrs. 23 Yrs.

Real return on
OTA's method Investment assuming.

cost of retro- Measure Measure
Capital cost fit per annual lifetime = lifetime =
compared million Btu 5 years 20 years
to savings saved d (annual percent)
Low $ 7.00 97% 100!%0
capital cost $ 14.00 41% 50%
Moderate $ 21.00 20% 33%
capital cost $ 35.00 0 19%
$ 49.00 Loss 1 3%

High $ 7000 Loss 8 %

capital cost $10500 Loss 3%

Cost of conserved
OTA’s method energy assuming

cost of retro- Capital Capital
Capital cost fit per annual recovery recovery
compared million Btu rate of 067 rate of O 25
to savlngs saved d ($ per million Btu)

Low $ 700 $0.47 $ 175

capita 1 cost $ 1400 094 350

Moderate $ 21.00 141 515

capital cost $ 35.00 2.35 8.75
$ 49.00 328 1225

High $ 70.00 470 1750

capital cost $10500 704 2625

tikassuntia#e& @u &&trf&”savings & mu@)lti@r 2.46, ~tima@@&?tW&em#

tikastpertilion m ~fbatatt? pergallti (S7pef milfion 6tu)
and ekcwkny at SfLOs pm kWh W per million atu).
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities Ž 47

To illustrate the difference between lists of the total potential energy savings. These three
retrofit options and retrofit packages, the sav- building types and the expected contribution of
ings from packages of retrofits for each of the 13 high capital cost retrofits are:
distinct building types is calculated. These are ● small masonry rowhouse with an air system
shown in appendix B at the end of this report.
(high-cost retrofits would contribute 40 per-
For Five of the Building Types the Bulk of cent of the total);
Potential Savings is Likely to Come From Retro-
● small masonry rowhouse with a water or
fits of Moderate Cost Compared to Savings. steam system (high-cost retrofits would
The owners of such buildings must cope with contribute 25 percent of the total); and
the difficulties of financing retrofits in order to
● multifamily building with an air system
achieve substantial savings. These building (high-cost retrofits would contribute 30 per-
types and the estimate of potential savings from cent of the total).
moderate cost retrofits are (see also table 11): For all these building types wall insulation is the
most important element of the high capital cost
● masonry rowhouse with air system (30 per- retrofit package. It costs a lot but also saves a lot.
cent), For these buildings, public or private programs
● masonry rowhouse with water system and to facilitate the long- term financing of high-cost
window air-conditioners (55 percent), measures would help to realize the substantial
● masonry rowhouse with decentralized sys- savings available from high-cost retrofits. For the
tern (70 percent), other 10 building types analyzed, high capital
● large commercial building with water sys- cost measures would contribute little enough
tern and window air-conditioners (50 per- that they can be ignored if financing is not easily
cent), and avai I able.
● Iarge multifamily building with decentral-
ized system (50 percent). The Total Savings Potential of Large Build-
ings Appears To Be Greater Than That of Small
Only a Few Building Types Are Expected to Buildings. According to OTA’s analysis of total
Have Substantial Savings From Retrofits of savings potential from retrofit packages, multi-
High Capital Cost Compared to Savings. For family and commercial buildings have the po-
most of the 13 building types a high-cost retrofit tential to save .50 to 60 percent of their initial
package would contribute less than 20 percent energy use while smaller framehouses and row-
of the total savings. This is fortunate because, as houses have the potential to save 30 to 40 per-
box B makes clear, the payback on a high-cost cent. For those commercial buildings still heav-
retrofit is very slow. ily dependent on incandescent lights, the sav-
ings potential from retrofit packages that in-
However, for three building types a high-cost clude a shift to more efficient fluorescent lights
retrofit package compared to savings would be may go as high as 70 percent of initial energy
expected to contribute more than 20 percent of use.


What then are the prospects for improved en- ry rowhouses, moderate to large multifamily
ergy efficiency in the building stock of U.S. buildings, and moderate to large commercial
cities? Each of the sections that follows de- buildings. A few additional types of buildings,
scribes the nature and general retrofit potential e.g., freestanding masonry houses and very
of one of the four major categories of the city small commercial buildings, are also dealt with
building stock: small framehouses, small mason- briefly.
48 Ž Energy Efficiency of Buildings in Cities

The four categories of buildings include all 13 type of housing is that the wood studs of the
building types shown in table 11. Each of the building frame provide a cavity into which wall
four structural types (e.g., small framehouse) is insulation can be blown. Since the wood frame
further subdivided into mechanical system can be used to support a variety of wall types
types because it is the mechanical system types the external appearance of a wood framehouse
which, especially in larger buildings, influence may vary. The outer wall is most commonly of
the retrofit potential of the building, wood siding but it may also be of brick or stone
veneer, or concrete blocks with and without
Small Wood Framehouses stucco finish—a housing structure common in
the South and southwest regions of the country.
Contrary to common perceptions about
cities, the most typical building in a U.S. central The lists of retrofits most effective for such
city is the small wood framehouse. More than buildings are also influenced by their type of
16 million (see table 12) of the 25 million hous- heating and cooling system. Retrofits for small
ing units in U.S. central cities are single-family wood framehouses with central air heating and
detached houses (about 11 million) or are in cooling wilI differ from those with central water
buildings of two to four apartments (about 5 mil- or steam heat and window air-conditioners and
lion). of these, it is estimated that a very large also differ from those with decentralized heating
majority (80 to 90 percent) are buildings of and cooling systems (electric baseboard heaters,
wood frame construction, although there is no heat pumps, gas heaters, wood stoves, or fire-
precise breakdown of the housing stock be- places), The likelihood of finding different types
tween wood frame and solid masonry. In four of heating and cooling systems i n different types
out of five of the case study cities visited—Buf- of housing is shown in figures 10, 11, and 12.
falo, N. Y.; Des Moines, lowa; Tampa, Fla., and Warm air heating systems are more common in
San Antonio, Tex.–the basic housing stock is of owner-occupied housing (mostly single-family
wood. only in a fifth case study, Jersey City, detached) and in regions outside the Northeast.
N. J., is masonry construction important, Half of Water and steam systems provide the heat in
the dwelling units in Buffalo’s wooden houses more than two-thirds of the housing units of the
are found in buildings of two to four apart- Northeast. Room air-conditioning units are still
ments. the dominant form of cooling except in the
South. More than half of all the housing units in
OTA found that the lists of retrofits applicable the Northeast and West have no air-condition-
to such buildings is influenced by their small
ing at all.
size (arbitrariIy defined at less than 4,000 ft2) and
wall construction. From an energy auditor’s OTA’s list of typical retrofits for wood frame-
point of view the important characteristic of this houses assumes that the retrofits are applied to

Table 12.—Types of Housing Found in Central Cities

Central city housing stock U.S. housing stock

Number of units Percent of Number of units Percent of
Type (millions) total (millions) total
detached. . . . . . . . . . . 10.9 43 ”/0 52.4 630/o
attached . . . . . . . . . . . 1.5 6 3.1 4
2-4 unit buildings . . . . . . 5.3 21 10.8 13
Buildings with five or
more units . . . . . . . . . 7.2 29 12.9 16
Mobile homes. . . . . . . . . 0.2 1 3.7 4
Total . . . . . . . . . . . . 25.2 100% 82.8 100 ”/0
NOTE: Details may not add to total due to rounding.
SOURCE: HUD, ,4rtrrua/ Hou.wrrg Survey, 1978,
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 49

Photo credits: OTA staff

More than half of the housing stock of U.S. central cities are small detached framehouses. These come in many
forms: bungalows (as in Tampa, Fla., upper left), triple-deckers (as in Waterbury, Corm., lower left), set close
together (as in San Francisco, Calif., upper right) or set well apart (as in Des Moines, Iowa, lower right). Lists of
retrofit options will be similar for framehouses with similar heating and cooling systems

an uninsulated house. While more than half of central water (or steam) system for supplying
the housing stock as a whole has wall insulation heat and window air-conditioners for cooling.
(50 percent), roof insulation (59 percent), and The most powerful retrofits on this list would in-
all windows covered with storm windows (41 crease the efficiency of the building envelope.
percent), there is reason to believe that the These are roof and wall insulation and storm
older central city building stock is less well- windows. Retrofits to the mechanical system are
insulated than the building stock as a whole. also powerful—setback thermostat, stack heat
Two-thirds of the buildings with two to four reclaimer, vent damper, etc.
units, which comprise about one-third of the
Sample retrofit lists for two other types of
Central city building stock, either don’t have
small framehouses—with central air system and
wall or roof insulation or don’t know if they
with decentralized heating and cooling—can be
have (see tables 13 and 14).
found in appendix A at the end of this report.
A sample retrofit list for one type of small Envelope retrofits are also the most powerful
framehouse is shown in table 15. This type has a retrofits on these two lists. I n addition, the
50 ● Energy Efficiency of Buildings in Cities

Figure 10.— Heating Systems Found in Owner-

and Renter-Occupied Housing Stock in
U.S. Central Cities

Owner- Renter-
occupied occupied

SOURCE: Energy Information Administration, Characteristics of the Housing

Stock and Households: Preliminary Findings From the National hr-
SOURCE: Energy Information Administration, C/raracter/st/cs of Me Housing terim Energy Consumption Survey, October 1979.
Stock and Households: Preliminary Findings From the National in-
terim Energy Consumption Survey, October 1979.

Table 13.–Housing Stock With and Without Wall

Insulation and Roof Insulation (in percent)

Yes No Don’t know

Figure 11.— Heating Systems in Central Cities
Building has wall insulation
Housing Stock by Region All housing units 1-4 units . . . . . . . . . 50°/0 270/. 22 ”/0
Single-family detached. . . . . . . . . . . . 54 17
Northeast North Central South West Single-family attached . . . . . . . . . . . . 44 28
Buildings with 2-4 units . . . . . . . . . . . 28 27 44
Building has roof insulation
Ail housing units 1-4 units . . . . . . . . . 69 19 12
Single family detached. ., . . . . . . . . . 77 17 6
Single family attached . . . . . . . . . . . . 53 26 21
Buildings with 2-4 units . . . . . . . . . . . 35 29 36
SOURCE: EIA Survey of Residential Energy Consumption, February 1980.

Table 14.—Housing Stock With and Without

Storm Windows (in percent)
All Some No
windows windows windows
covered covered covered
● All housing units
1-4 units. ., . . . . . . . . . . 41 % 20 ”/0 39 ”/0
Ž Single-family
detached . . . . . . . . . . . . 41 22 37
● Single-famiIy

attached . . . . . . . . . . . . 55 11 34
● Buildings with
SOURCE: Energy Information Administration, Characteristics o/ the Housing
Stock and Households: Preliminary Findings From the National lrr- 2-4 units. . . . . . . . . . . . . 39 18 43
terim Energy Consumption Survey, October 1979. SOURCE: EIA Survey of Residential Energy Comsumption, February 1980,
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 51
— —

Table 15.—Small Framehouse:a Sample List of Retrofit Options

Total Capital cost per

retrofit Total energy annual million
cost savings b Btu saved
Retrofit Category (dollars) (million Btu) (dollars)
Low capital cost
Roof insulation . . . . . . . . . . . . Envelope 565 40 Low (13)
Wall insulation . . . . . . . . . . . . Envelope 650 110 LOW ( 6 )
Weatherstripping . . . . . . . . . . Envelope 110 9 Low (12)
Setback thermostats . . . . . . . Mechanical 135 25 Low ( 6 )
Modulating aquastat . . . . . . . Mechanical 250 25 Low (10)
Hot water flow controls . . . . . Hot water 20 15 Low ( 1)
Insulate hot water storage. . . Hot water 30 7 Low ( 4)
Moderate capital cost
Storm windows . . . . . . . . . . . . Envelope 990 40 Moderate (25)
Vent damper . . . . . . . . . . . . . . Mechanical 225 10 Moderate (25)
Replace burner . . . . . . . . . . . . Mechanical 880 20 Moderate (46)
Stack heat reclaimer . . . . . . . Mechanical 875 25 Moderate (36)
Replace room air-
conditioners . . . . . . . . . . . Mechanical 890 55 Moderate (16)
Hot water vent damper. . . . . . Hot water 150 6 Moderate (25)
High capital cost
Window insulation . . . . . . . . . Envelope 910 15 High (61)
NOTE: Savings should not be added. See app. B for estimates of cumulative savings.
a2 OOCI ftz bulldlng With frame walls and central water or steam system with window alr-condttloners lfl the St LOUIs Cllmate.
b~lectrlclty sa v l n g s are multiplied by a factor of 246 ref Iect the difference between the cost Of fuel (oil) at $7 Per mllllon Btu
and the cost of electricity at $17 per mllhon Btu for electrlcltY priced at $0.06 Per kwh
SOURCE Off Ice of Technology Assessment

retrofit list for the building with the air system tion to an uninsulated houses Under these con-
has several retrofits suitable only to an air sys- ditions, adding roof insulation is a moderate
tem (and does not include retrofits suitable to capital cost retrofit rather than a low-cost retrofit
water systems). Because all retrofits to the house compared to savings.
with decentralized (electric) heating and cool-
Another type of small framehouse not strictly
ing save expensive electricity, they are each
covered in the lists of retrofits, is the house with
more cost effective than comparable retrofits to
decentralized heating systems using oil or gas
the other two types of small framehouses. rather than electricity. These are a large fraction
Because of specific assumptions used in com- of the housing units especially in the West and
piling the list of retrofits for the three types, two South (see fig. 11). The list of retrofit options
important additional types of small framehouse would be similar to the list for houses with de-
are not directly covered in the above lists of centralized electricity but since saving oil or gas
retrofits. One type is the partially i n s u l a t e d is worth less money than saving electricity,
wood framehouse. For most such houses it is fewer retrofits for this type of building would be
probable that more roof insulation can be of low or moderate capital cost compared to
added and possible that more wall insulation savings.
can be added. In one recent estimate, adding
insulation to a partially insulated roof was calcu-
‘Solar Energy Research I nstltute (SERI ), /?eport on Bu/ki Ir?g a 5-ui-
lated to cost about three times as much for each kilnab/e Future, ~ol. 2, published by the U.S. House of Represent-
annual million Btu saved as adding roof insula- atives Committee on Energy and Commerce, April 1981, p. 96.
52 Ž Energy Efficiency of Buildings in Cities

Small Solid Masonry Houses type that has no cavity into which wall insula-
tion can be inserted. Furthermore, rowhouses
Only about 1.5 million buildings in U.S. cen- often have flat roofs with crawl spaces that are
tral cities are single-family attached houses and somewhat harder to insulate than the peak roofs
almost half of these are in the central cities of common in wood framehouses. The lists of ret-
the Northeast. 4 Virtually all rowhouses are rofits are also influenced by the three types of
made of solid brick or stone walls to prevent the heating and cooling systems that were distin-
spread of fires. A large fraction of the buildings guished above for small wood framehouses.
with two to four housing units are also masonry
attached buildings; such buildings form the bulk A sample list of retrofit options for a small
of the building stock in the case study city, masonry rowhouse is shown in table 16 for a
Jersey City, N.J. A much smaller fraction of the building with central air heating and cooling.
single-family detached houses are also of solid Several things are worth noting in this list.
masonry walls. Brick or stone rowhouses are Envelope retrofits are still very powerful but less
typical of the building stock in the Mid-Atlantic cost effective than similar retrofits for frame
States, in such cities as Philadelphia or Reading, buildings. Roof insulation costs substantially
Pa. Both detached masonry houses and mason- more per annual million Btu saved, although it
ry rowhouses can be found i n the older cities of still fits within the low capital cost category.
the Southeast and detached houses of solid cin- Wall insulation is a high capital cost retrofit for
derblock construction are common in the South this type of building. Because of the relative ex-
and Southwest. pense of envelope retrofits, retrofits to the hot
water and mechanical systems for this building
From an energy auditor’s point of view the look relatively more attractive.
main characteristics of these buildings that af-
fect the list of retrofit options available to them Retrofit lists for two other types of masonry
are their small size and the wall construction rowhouses—one with a water heating system
and window air-conditioners and one with
‘In the central cities of the Northeast there are 743,000 attached decentralized heating and cooling–are shown
houses. Source: HUD AnnuJ/ / lc)uiIng Sur\q, 1978. in appendix A, They are simiIar to the list in

Table 16.—Small Masonry Rowhouse:a Sample List of Retrofit Options

Total Capital cost per

retrofit Total energy annual million
cost savings b Btu saved
Retrofit Category (dollars) (million Btu) (dollars)
Low capital cost
Weatherstripping . . . . . . . . . . Envelope 60 7 Low ( 9)
Roof insulation . . . . . . . . . . . . Envelope 690 50 Low (13)
Setback thermostats . . . . . . . Mechanical 135 15 Low ( 9)
2-speed fans . . . . . . . . . . . . . . Mechanical 80 15 Low ( 5)
Hot water flow controls . . . . . Hot water 20 15 Low ( 1)
Insulate hot water storage, . . Hot water 30 7 Low ( 4)
Moderate capital cost
Storm windows . . . . . . . . . . . . Envelope 450 20 Moderate (21)
Vent damper . . . . . . . . . . . . . . Mechanical 225 6 Moderate (38)
Hot water vent damper. . . . . . Hot water 150 6 Moderate (25)
High capital cost
Wall insulation . . . . . . . . . . . . Envelope 4,700 40 High (1 14)
Window insulation . . . . . . . . . Envelope 420 8 High ( 53)
Insulate ducts . . . . . . . . . . . . . Mechanical 810 15 High ( 54)
NOTE: Savings should not be added. See app. B for estimates of cumulative savings.
az 000 ft~ b Idi ng with frame walls and central water or steam system with window alr-conditioners in the St. Louis Cllmate.

b~]ectrlclty Savings are rnultiplled by a factor of 2,46 to reflect the difference between the costof fuel (011) at $7.(IO per rnllllon
Btu and the cost of electricity at $1700 per mllllon Btu for electricity priced at $0.061kWh,
SOURCE: Off Ice of Technology Assessment.
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 53

Photo credit: OTA staff

Masonry rowhouses can come plain (as in Lancaster, Pa.) (upper left), or fancy (as in Bridgeport, Corm.) (right), and
are typical of the central city housing stock in the middle Atlantic States. One-story detached cinderblock of
masonry houses (such as this one in Gainesville, Fla.) (lower left) are characteristic of cities in the South. Lists of
retrofit options will be similar for small masonry houses with similar heating and cooling systems

table 16 in that wall insulation is very high rather than oil or natural gas. A hot water heat
capital cost and roof insulation costs more per pump is an especially effective retrofit for this
million Btu saved than in frame buildings. The kind of building.
differences among the lists are similar to those These lists of retrofit options for masonry
explained above for the small framehouse. The rowhouses are not precisely applicable to small
list for the building with the water system and detached masonry houses of cinderblock, stone,
window air-conditioners has some retrofits suit- or brick. With four unattached walls instead of
able to that mechanical system type. For the two, the energy demands for heating and cool-
building with decentralized (electric) heating ing detached buildings will be greater. Wall in-
and cooling, hot water retrofits are relatively sulation, however, will still be a very expensive
more cost effective because they save electricity retrofit.
54 Ž Energy Efficiency of Buildings in Cities

Moderate= and Large-Size Figure 13.—Small, Medium, and Large Multifamily

Multifamily Buildings Buildings in Central Cities: U.S. Total and Northeast

Multifamily buildings with more than 10 units

provide slightly less than one-half of all central
city housing in buildings with more than one
family, and less than one fifth of all housing in
U.S. central cities. There are no data on the size
of multifamily buildings. Using data on the size
of the average apartment, it is estimated that
multifamily buildings of 10 to 19 units average
10,000 ft2 and those of more than 50 units aver-
age 44,000 ft2. There appear to be fewer very
large multifamily buildings than commercial
buildings. Buildings with more than 50 units
provide 18 percent of all multifamily central city
housing in the United States as a whole but a
much greater fraction of the multifamily housing
of the Northeast (27 percent) (see fig. 13).
For purposes of developing lists of retrofits,
the important characteristics of multifamily
buildings of this type are their size (arbitrarily
defined as more than 10,000 ft2) and use. Multi-
family buildings compared to commercial build- 9.7 million 3.4 million
ings of the same size require more heating and
cooling at night and use a lot more energy for OTA’s estimate of average square
hot water. Because of these characteristics, lists feet of buildings in group
of retrofits for dormitories and hotels will resem-
2 to 4 units 2,500 ft2
ble those for multifamily buildings. Lists of retro- 5 to 9 units 5,000 ft2
fit options for condominium buildings will be 10 to 19 units 10,500 ft2
20 to 49 units 22,500 ft2
the same as lists of options for the same building More than 50 units 44,500 ft2
types occupied by renters.
A third important characteristic is wall type.
Included in this type are multifamily buildings SOURCE: Off Ice of Technology Assessment
with so/id masonry walls characteristic of the
older densely settled parts of major cities such
as Chicago and New York and c/ad walls (steel both rental units in central cities and housing in
frame with concrete or brick veneer) character- the central cities of the Northeast are much
istic of many new large high rises in the down- more likely to have a water or steam system.
towns of U.S. cities (as well as the close-in Since large multifamily buildings are a substan-
suburbs). tial fraction of both rental units and of Northeast
rental housing it is estimated that at least 20 to
The type of heating and cooling system is also
30 percent of large multifamily buildings have
important for developing the lists of retrofit op-
central water or steam heat.
tions for multifamily buildings. There are no
complete data on types of heating systems for A sample list of retrofit options for a large
larger multifamily buildings. More of them, multifamily building with decentralized (elec-
however, use electricity for heat (31 percent) tric) heating and cooling is shown in table 17.
than do smaller buildings, as shown in figure 14. Such buildings are characteristic of the most
Data shown earlier (figs. 10 and 11) indicate that recently constructed multifamily buildings in
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 55

Figure 14.—Electricity Used for Heat in

Single-Family and Multifamily Buildings

Single- Single- Building Building

family family with 2 to 4 with more
detached attached units than 5 units

Electric heat

U.S. cities partly because they facilitate in-

dividual metering of utilities so that electricity
bills can be paid by apartment tenants rather
than the building’s owner (see the discussion of
tenant-metered buildings in ch. 4). Because all
retrofits save electricity, all savings for this
building have been increased by a multiplier to
reflect the higher cost of electricity. (The multi-
plier has been applied to electricity savings for
other building types as well as is explained in
the footnotes to tables 15, 16, 17, and 19.)

Owners of large buildings think of retrofit

costs in cost per square foot and this list reflects
Photo credit. OTA staff that convention. Roof insulation for this build-
Large multifamily buildings with masonry clad walls (such ing at $0.30/ft 2 would actually cost about
as this condominium in Tampa, Fla.) (top), or middle-sized $30,000 for a building of this size (100,000 ft2).
solid masonry walkups (such as these in Hoboken, N. J.)
(bottom) will have similar lists of retrofit options if they have Roof insulation is estimated to save about 7,000
similar heating and cooling systems Btu/ft2/year or about 700 million Btu per year.
56 . Energy Efficiency of Buildings in Cities

Table 17.—Multifamily Building:a Sample List of Retrofit Options

Capital cost per

Total Energy annual million
cost/ft 2 savings/ft 2 Btu saved
Retrofit Category (dollars) (thousand Btu)b (dollars)
Low capital cost
Roof spray . . . . . . . . . . . . . . . . Envelope 0.03 15 Low (3)
Setback thermostats. . . . . . . . Mechanical 0.04 7 Low (6)
Flow controls . . . . . . . . . . . . . . Hot water 0.02 31 Low (0.5)
Insulate hot water storage . . . Hot water 0.03 34 Low (1)
Hot water vent damper . . . . . . Hot water 0.01 8 Low (0.5)
Hot water heat pump . . . . . . . . Hot water 0.14 40 Low (3)
Hybrid lamps . . . . . . . . . . . . . . Lighting 0.09 15 Low (6)
Moderate capital cost
Roof insulation . . . . . . . . . . . . Envelope 0.30 7 Moderate (41)
Weatherstripping , . . . . . . . . . . Envelope 0.05 1 Moderate (39)
Window insulation . . . . . . . . . . Envelope 0.25 8 Moderate (31)
Install heat pumps . . . . . . . . . . Mechanical 1.08 22 Moderate (50)
Replace room air-
conditioners . . . . . . . . . . . . . Mechanical 0.40 15 Moderate (26)
High capital cost
Wall insulation . . . . . . . . . . . . . Envelope 2.16 27 High (81)
NOTE: Savings should not be added.
aLarge floo,ooo ft~) multlfam I Iy building with masonry wal Is and decentralized system [n the S1. Lou Is c1 imate.
bElectrlclty energy savings are multiplied by 246 to reflect the difference between the cost of fuel (011) at $7.00 per mllllOn
Btu and the cost of electricity at $17.00 per mllllon Btu for electricity at $0.06 /kWh.
SOURCE: Off Ice of Technology Assessment.

At $7 per million Btu that is worth about $4,900 whether the lists of retrofit options would be
per year. dominated by retrofits to the building envelope
(as with small wood frame and masonry houses)
Because hot water use is intensive in multi-
or would be dominated by retrofits to the hot
family buildings and because hot water retrofits
water and mechanical systems (as for the large
for this type of building save electricity, these
multifamiIy buildings). Careful analysis and/or
are the most powerful and cost effective retro-
systematic retrofitting of such buildings would
fits–all of low capital cost compared to savings.
be needed to make the determination.
Lists of retrofit options for the two other types
of multifamily buildings—one with a water sys- Moderate and Large Commercial
tem and window air-conditioners and one with Buildings
central air heating and cooling—may be found
in appendix A. Hot water retrofits are also im- Of the approximately 4 million commercial
portant on these lists but not as powerful be- buildings in the country as a whole, less than 25
cause they do not save expensive electricity. percent are 10,000 ft2 or larger but these con-
Retrofits to the mechanical system (as appropri- tain more than 60 percent of all the commercial
ate to either air or water systems) are also very building square footage (see fig. 15). Commer-
cost effective, cial buildings used for education or lodging
tend to run bigger than the average (see fig. 16)
one category of multifamily house that the
whiIe buiIdings used for retaiI or services, or
lists of retrofits does not explicitly cover are the
food sales tend to run smaller. Office buildings
multifamily houses of in-between size (five to
follow the size distribution of all commercial
nine units). There are about 1.7 million dwelling
units in these types of buildings in U.S. central
cities. Many are likely to be of wood frame con- The number and relative size of commercial
struction; others are likely to be attached ma- buildings located in central cities is not known
sonry buildings. OTA did not calculate lists of (see ch. 2). It is possible to speculate that larger
retrofits for these buildings and it is not known commercial buildings can be found inside cen-
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 57

Photo credit: OTA staff

Lists of retrofit options will be similar for diverse types of moderate- and large-sized commercial buildings with
similar heating and cooling systems, including: large curtain-wall office buildings (such as these in Wilmington,
Del.) (left and top right), middle-sized masonry retail buildings typical of older shopping areas in U.S. cities, or
large commercial buildings converted from solid masonry factories and warehouses (such as this shopping
center converted from a cigar factory in Tampa, Fla.) (bottom right)

tral cities, Most metropolitan areas have a dis- From the energy auditor’s point of view the
tinct downtown area of large office buildings, characteristics of commercial buildings that af-
hotels, retail buildings, and government build- fect the list of retrofit options available to them
i rigs. Large buildings are somewhat more com- are:
mon i n the Northeast which has only 17 percent 1. moderate or large size which diminishes
of all commercial buildings but almost 30 per- the importance of measures to improve the
cent of the buildings of more than 100,000 ft2. building envelope;
OTA identified one survey of commercial build-
2. commercial use which means the building
ings i n downtown Baltimore, that showed that
uses a lot of energy for lighting and is not
commercial buildings come in all sizes and for
normally occupied at night; and
many types of buildings the characteristic size is
small (less than 5,000 ft2 ) (see table 18). 3. wall type.
58 ● Energy Efficiency of Buildings in Cities

Figure 15.—Square Footage of Commercial Buildings

1,000 1,001 5,001 10,001 25,001 50,001 Over

or to to to to 100,000
Less 5,000 10,000 25,000 50,000 100,000

❑ Percent of total buildings

~ Percent of total square footage

NOTE: Includes about 250,000 industrial buildings out of 4,2 million nonresidential buildings, All the rest
are commercial buildings.
SOURCE: Energy Information Administration, Nonresidential Buildings Energy Consumption Survey,
Fuel Characteristics and Conservation Practices, June 1981,

Figure 16.—The Relative Sizes of Various Types of Commercial Buildings


SOURCE: Energy Information Administration, Survey of Nonresidential Buildings: Building Characteristics, and the Office of Technology Assessment
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 59

Table 18.—The Characteristic Sizes of Commercial large-size commercial buildings are of solid
Buildings in Downtown Baltimore masonry wall construction (typical of low-rise at-
Characteristic size tached commercial buildings in older parts of
Total Percent U.S. cities) or of clad wall construction (steel or
Categories range (ft2) Range (ft2) in range concrete frame with a brick, concrete, steel, or
Office buildings. . . . . . . . 500-552,200 500-4,000 49 glass veneer).
Motels/hotels . . . . . . . . . 1,000-235,000 None —
Theaters. . . . . . . . . . . . . 500- 13,500 None —
Small (general) stores. . . 500- 26,000 500-4,000 85 For commercial buildings, the lists of retrofits
Department stores . . . . . 500-142,000 None —
Drug stores . . . . . . . . . . . 1,000- 19,500 1,000-3,500
options are influenced most decisively by the
Food stores . . . . . . . . . . 500- 10,000 500,1,500 : type of heating and cooling system in the build-
Restaurants . . . . . . . . . . . 500- 14,500 500-4,000 82
Banks . . . . . . . . . . . . . . . . 500- 31,500 500-3,500 61
ing. Retrofits options will differ substantially for
Personal . . . . . . . . . . . . . . 500- 8,000 500-2,000 66 commercial buildings with: central air heating
SOURCE. Hittman Associates, “Physical Characterlstlcs, Energy Consump- and cooling systems, complex reheat systems,
tion and Ffelated Inst(tutlonal Factors (n the Comrnerclal sector “ A
report for the Federal EnergyAdmlnlstration, February 1977, p, 51 central water or steam heat with window air-
conditioners, or decentralized heating and cool-
Although there are no good data available on ing systems. The distribution of heating and
the structure of commercial buildings, it is con- cooling systems among commercial buildings
cluded from observation that there are very few built in different eras is shown in figure 17. Cen-
wood frame commercial buildings of moderate tral air systems are used in more than half the
or large size. Virtually all of the moderate- and commercial buildings built since 1946. Central

Figure 17.— Heating and Air-Conditioning Systems for Commercial Buildings a

by Year of Construction

Heating (percent of all buildings)

25 50 75 100
Pre-1945 Water/ ~ Other/
(1.6 million) Air
steam none

1946-1970 Other/
Air W/S E
(1.9 million) none

Since 1970 Air E

(800,000) none

W/S E = Electric baseboard

Air-conditioning (percent of all buildings)
25 50 75 100

Pre-1945 Central b Window None

1946-1970 Central Window None

Since 1970 Central None

alncludes about 250,CKKI m!xed commercialhndustr lal bu{ldlngs
blnclude~ ~u~tom.made central, package and comblnatlonlother

SOURCE Energy Information Admlnlstratlon, Survey of Nonresldentlal Bulldlngs E n e r g y C o n s u m p t i o n :

Bulldlng Characterlstlcs, and the Off Ice of Technology Assessment
60 Ž Energy Efficiency of Buildings in Cities

water or steam systems are likely to be found Compared to the other sample lists this list is a
only in buildings built before 1945 where they long one. There are a large number of low capi-
provide heat to 23 percent of the buildings. De- tal cost retrofits to the mechanical system. The
centralized electric systems are rare among most powerful of these is a conversion from the
commercial buildings as a group but can be energy wasteful terminal reheat form of control-
found in 4 percent of the buildings built since ling the temperature of a multizone building to
1970. The data do not explicitly show complex the variable air-volume method. (Both of these
reheat systems. It is concluded from discus- systems are explained in fig. 23, pp. 70-71.) If
sions with energy auditors that these systems are this building is still equipped with incandescent
used in large commercial buildings built since lights, conversion of fluorescent lights is the
1960. Figure 17 also shows that the share of cen- most powerful retrofit of all. It saves expensive
tral air-conditioning has increased to over so electricity both for lighting and for cooling. If
percent in buildings built since 1970. Window the building is already equipped with fluores-
air-conditioning provides cooling to 25 percent cent lights, a shift to high-efficiency fluorescent
of the buildings built before 1945 but only 10 lights is cost effective but not nearly as powerful
percent of the buildings built since 1970. as the shift from incandescent. For commercial
buildings the most effective envelope retrofits
A sample list of retrofit options for a large are those which improve the energy efficiency
commercial building with a complex reheat of the windows. Hot water retrofits are of low
type of mechanical system is shown in table 19. capital cost but are insignificant i n impact.

Table 19.—Large Commercial Building: a Sample List of Retrofit Options

Capital cost
per annual
Total Total million Btu
retrofit cost energy savingsb saved
Retrofit Category (dollars/ft 2 ) (thousand Btu/ft 2 ) (dollars)
Low capital cost
Roof spray . . . . . . . . . . . . . . . Envelope 0.04 10 Low ( 4)
Replace burner . . . . . . . . . . . Mechanical 0.05 20 Low ( 2)
Vent damper . . . . . . . . . . . . . Mechanical 0.02 8 Low ( 3)
Stack heat reclaimer . . . . . . Mechanical 0.05 28 Low ( 2)
Boiler turbolators . . . . . . . . . Mechanical 0.09 9 Low (10)
Setback thermostats . . . . . . Mechanical 0.04 9 Low (10)
Convert reheat to variable
air volume . . . . . . . . . . . . . Mechanical 0.14 45 Low ( 3)
Hot water flow controls . . . . Hot water 0.01 1 Low ( 0.5)
Hot water vent damper. . . . . Hot water 0.01 2 Low ( 1)
Fluorescent hybrid lamps . . Lighting 0.76 132 Low ( 6 )
fluorescent . . . . . . . . . . . . Lighting 0.13 10 Low (13)
Moderate capital cost
Weatherstripping . . . . . . . . . Envelope 0.06 1 Moderate (44)
Double glazing . . . . . . . . . . . Envelope 0.65 13 Moderate (48)
Window insulation . . . . . . . . Envelope 0.38 11 Moderate (36)
. Shading devices . . . . . . . . . . Envelope 0.25 15 Moderate (17)
Insulate ducts . . . . . . . . . . . . Mechanical 0.50 15 Moderate (23)
Insulate hot water storage . Hot water 0.01 1 Moderate (17)
High capital cost
Roof insulation . . . . . . . . . . . Envelope 0.30 4 High (73)
Water-cooled condenser . . . Mechanical 0.32 4 High (86)
Task lighting . . . . . . . . . . . . . Lighting 0.68 13 High (52)
NOTE: Savings should not be added. See app. B for estimates of cumulative savings.
aloo,ooo ft~ commercial building with clad walls and a complex reheat central heating and COOlin!J SySteM In the St. LOu Is
climate zone.
bElectrlcity energy savings are multiplied by 246 to reflect the difference between the Cost Of fuel (011) at $7.00 per tlllllloll
Btu and the cost of electricity at $17.00 per mllllon Btu for electricity at $0.061kWh.
SOURCE: Off Ice of Technology Assessment.
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 61

Three other sample retrofit lists for other types lights (for the relatively few commercial build-
of commercial buildings—with air systems, with ings with incandescent lights) as well as less
water systems and window air-conditioners, powerful and less cost-effective lighting
and with decentralized heating and cooling measures.
—are shown in appendix A. The retrofit lists for
commercial buildings with air or water systems OTA did not specifically develop a list of
also have large numbers of retrofit options to retrofits for the 40 percent of commercial build-
the mechanical systems although the specific ing square footage i n small commercial build-
retrofits differ from system to system. For a com- ings (less than 10,000 ft ). Based on discussions
mercial building with a decentralized system on with energy auditors, OTA concludes that a list
the other hand, the only cost-effective retrofit to of retrofits for such buildings would also stress
the mechanical system is the moderate cost ret- lighting retrofits and retrofits to the mechanical
rofit of replacing all the window air-condition- systems (differing by type of system) but would
ers with more efficient models. Improvements also include storm windows and roof insulation
to the energy efficiency of windows are more because such measures are feasible and effec-
cost effective for commercial buildings with tive in small buildings. Among smaller commer-
decentralized systems because the electricity cial buildings, a substantial (but unknown) per-
saved is so expensive. The lists for all four com- centage are wood frame construction, for which
mercial buildings include the very powerful op- wall insulation should be of low or moderate
tion of shifting from incandescent to fluorescent capital cost compared to savings.


From the analysis of the effectiveness of spe- cised in estimating its savings potential and cost.
cific retrofits for different building types in four The full lists of building types and retrofits ana-
climate zones, there are several general obser- lyzed and some of the critical assumptions
vations about the extent to which some retrofit about structural and mechanical system types
measures are effective in almost all buildings, are listed in appendix tables 3A through 30 at
some measures are only physically applicable to the end of the chapter. The sources for costs
some building types and not to others, and and savings estimates for each retrofit are listed
some measures, while physically applicable to in appendix D. Finally, a full set of assumptions
alI building types are far more effective for some is to be published separately i n a working paper
building types than to others. These observa- as a second volume to this report.
tions are discussed in this section.
The observations about the relative effective-
In the analysis that follows, the costs and ness of retrofits for different building types
measures of cost effectiveness are approximate based on the calculations and occasional other
and should be used as rough guides only to dis- studies are summarized below i n four sections:
tinguish among measures that are very cost ef- ● Retrofits to the building envelope.
fective and those that are not. For any given ● Retrofits to the mechanical systems.
building, detailed analysis of costs, estimated ● Retrofits to the domestic hot water system.
savings, and cost effectiveness of measures may ● Retrofits to the Iighting systems.
differ substantially from these, based on local
conditions, building conditions, and more de- Retrofits to the Building Envelope
tailed methods of estimating. Appendix C, at the
end of the report, gives a brief description of Wall Insulation for All Masonry-Bearing and
each retrofit and the caution that must be exer- Clad-Wall Buildings Can Be More Than 10
62 Ž Energy Efficiency of Buildings in Cities

Times as Expensive for the Same Energy Sav- the other roof types, typical of all multifamily
ings as Wall Insulation in Cavity Wall Build- and commercial structures, because there is
ings. Cavity wall structures can be retrofitted almost never an available cavity. Therefore, the
with blown-in insulation at relatively low cost, only practical way to add insulation is to reroof,
and with no materials other than the insulation adding rigid insulation beneath the new layer of
itself and a small amount of material for patch- roofing material.
ing and replacing interior or exterior wall cover-
A sample of the calculations of the costs of
ing, to cover up the holes through which the
roof insulation are shown below (fig. 20). The
insulation is blown in (see fig. 18). Masonry-
costs for insulating the concrete slab roofs in-
bearing and clad-wall buildings, by contrast,
clude the cost of a new roof. It was assumed
seldom if ever have any available cavity through
that the flat roofs already had a thin slab of roof
which to add insulation. The contractor must
deck insulation. It was also assumed that the
either create cavities through the addition of a
peaked roof attic of the small house was insu-
stud wall inside the existing wall, which can re-
lated–an assumption that excludes the large
ceive blown or batt insulation, or must add rigid
share of partially insulated houses in the hous-
insulation outside or inside the wall, and pay
ing stock (see previous section). If the same in-
the cost of completely new exterior or interior
sulation were added, for example, to an attic
wall covering, with corresponding window and
equipped already with 2 inches of somewhat
door trim.
compacted rock wool insulation, it is estimated
The calculations of the costs and savings of that savings would be only about 60 percent of
wall insulation for a wood framehouse and a those in the uninsulated attic,
masonry wall rowhouse are shown below (see Storm Windows and Double Glazing (Re-
fig. 19). The particular calculations are not strict- placing Existing Single Pane Glass With New
ly applicable to detached masonry houses since Double-Glazed Units) are Applicable and Cost
both costs of wall insulation and savings would Effective for Different Window Types. Storm
be greater in a building with four exposed walls, windows can be used with wood or metal frame
but the relative cost effectiveness should be the double-hung windows and cannot be used with
same. Similar results in calculations of the cost commercial or residential casement windows.
effectiveness of wall insulation for moderate- Double-glazing, on the other hand, costs less
sized buildings were obtained. than half as much for commercial casement
windows ($6/ft2 of window area) as it does for
Roof Insulation is Several Times More Expen-
double-hung wood frame windows ($13.50/ft2
sive for Buildings With Flat Roofs and No At-
of window area). Storm windows are generally
tics or Crawl Spaces Than It is for Buildings
cost-effective retrofits for small single-family and
With Pitched Roofs That Enclose Attics.
multifamily buildings while double glazing is
Although insulation of approximately the same
cost effective for commercial buildings and
thermal qualities is added to all building types,
large clad-wall multifamily buildings.
the estimates of cost effectiveness vary signifi-
cantly. The retrofit cost per annual million Btu Most Window Treatments are Cost Effective
saved is lowest for the insulation work done in in Cold Climates and Prohibitively Expensive
attics beneath pitched roofs because of the ease in Hot Climates. Storm windows, double glaz-
of accessibility. For the cost estimates described ing, and night insulation reduce the thermal
here, it was assumed that the attics were un- transmission of windows and are most effective
finished, either with no floor or, at most, with when there is a big differential between inside
rough floorboards; access to these is relatively and outside temperature, especially in cold
straightforward. Costs increase slightly for climates in the winter. Sunscreens and reflective
single-family homes typical of rowhouses in films (see fig. 21) are designed to block the solar
cities, with flat roofs that still have an accessible gain through windows. Some types are also
crawl space between the roof decking and the designed to reduce thermal transmission in the
ceiling of the room below. Costs are higher for winter.
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 63

Figure 18.—Adding Wall Insulation to Existing Frame Walls

and Existing Masonry Walls

The illustrations below compare the relatively inexpensive technique for adding wall insula-
tion to a frame building (blown-in insulation) with three different, and relatively expensive,
techniques for adding wall insulation to solid masonry walls. Similar techniques would also
be required for adding insulation to clad walls.

16 inches Wall insulation for frame walls (left)
apart Barrel of To insulate existing frame walls with substantial cavities
loose fiberglass or formed by studs, cross-braces, exterior and interior walls,
cellulose insulation 2“ holes are drilled in each cavity (approximately 2 per stud
per floor) and loose fiberglass or cellulose fill is blown. The
\ holes are then plugged with wooden plugs.

Wall insulation for masonry walls (below)

There are three ways to add insulation to masonry
walls, all of which are expensive. The first w a y
(shown at left) is to add 2 inches of rigid insulation
(usually a polystyrene compound with insulation
value of R10 to R14) to the outside of the wall and
cover it with some acceptable exterior wall finish
such as a cement compound with a stucco-like ap-
pearance. The second way (middle illustration) is to
add 2 inches of rigid insulation on the inside and
cover it with drywall. The third way (shown at the
right) is to construct an interior wall with 3-5 inch
cavities into which batt or loose fill insulation can be

Cross- 1 l\
, Old drywall

fill insulation

‘ 2 inch rigid
New insulation
T \
finish /
2 inch rigid Old drywall
SOURCE. Office of Technology Assessment
64 ● Energy Efficiency of Buildings in Cities

Figure 19.—Calculated Costs and Savings:b The calculations of the cost effectiveness of
Wall Insulation various window treatments for multifamily and
$88 per $6 per annual
annual million million Btu commercial buildings in Buffalo and Tampa are
Btu saved saved shown in table 20. The particular models of
shading device and reflective film analyzed
were only applicable to commercial buildings
Total 4,000 -
annual and did block thermal transmission as well as
cost In million reduce solar gain. The shading device analyzed
(in dollars) Btu
3,000 -
is a fiberglass screen that acts as a storm window
on the window (see fig. 21). It is installed on all
windows in the summer and on all windows ex-
2,000 - cept those on the south in the winter, and is
more cost effective in Buffalo than Tampa.
1,000 -
Shading devices that only reduce solar gain
were not analyzed, but are likely to be less cost
effective in Buffalo than Tampa. Similarly the
Small Small
particular reflective films analyzed are more
wood frame
cost effective i n cold climates than hot because
house house
they are designed to block thermal transmission
as well as solar gain.
aSmall houses with water systems In St LouIs chmate
bAlf electricity energy sawngs have been multiplied by 246 to refleCt the dlf.
ference between the cost of fuel (011) at $7 CO per mllllon Btu and the cost of For All Active and Passive Solar Retrofits to
elecmclty at $1700 per mllllon Btu ror electricity at $0 06/kWh
All Types of Buildings There are Retrofits to the
SOURCE: Office of Technology Assessment. Detailed soufces for retrofits in
app. G. Building Envelope With Comparable Savings at

Figure 20.—Calculated Costs and Savings:

Roof Insulation
$13 per annual $15 per annual $50 per annual
million Btu million Btu million Btu
saved saved saved
1.00 25




Wood Masonry Moderate-size

framehouse rowhouse multifamily
pitched crawl concrete
roof space deck

NOTE: Buildings w!th water systems. St Louis climate

SOURCE: See app. G.

Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities . 65

Figure 21.—Three Window Retrofits

, Valence



Thermal shade
Quilted, polyester fiber-fill lined window
shade with a track or magnetic fastening
system to maintain a good air seal be-
tween the shade and the window.

Table 20.—Calculated Capital Cost of Window calculations to compare the cost effectiveness of
Retrofits in Buffalo and Tampa several passive solar and active solar retrofit
(approximate investment cost per annual million Btu measures with the cost effectiveness of wall in-
saved is shown in parentheses)c
sulation, roof insulation, and various conserva-
Buffalo Tampa
tion retrofit measures for windows. The results
Retrofits for a moderate-sized
multifamily buildinga
(shown in table 21) are only suggestive, but they
Weatherstripping Moderate ($20) High ($60) are consistent with several other studies.
Storm windows Moderate ($20) High ($75)
Window insulation Moderate ($35) Not cost For a wood frame single-family house, under
effective ($300)
Double glazing High ($70) Not cost OTA’s assumptions, wall insulation is by far the
effective ($140) most cost-effective retrofit and has much lower
Retrofits for a moderate-sized
commercial buildingb capital cost than any solar retrofits. Two passive
Shading device Moderate ($15) Moderate ($20) solar retrofits, however, are of moderate capital
(see illustration)
Reflective film Moderate ($25) High ($40) cost and comparable to roof insulation or storm
(designed to also block windows for such a house. One of these retrofits
thermal transmission)
Double glazing Moderate ($40) High ($60) is very simple. It wouId add 100 ft2 of glazing on
a 15,rXXI ft2 masonry bu Ildlng with alr sYstem the south side of the house and provide insula-
bl 5,1)ocI ft2 clad wall bulldlng with air Systems
CAII etectrlclty savtngs have been multtpl ied by 2.46 to reflect the 9reater ex. tion for this area at night. In a variation of this
pense of electricity
retrofit, glazing would also be added but water
SOURCE Off Ice of Technology Assessment.
wall storage would be used behind part of it to
the Same or Less Cost. Passive solar retrofits are store the heat to provide heat at night. 6
retrofits designed to use the heat of the Sun For a masonry wall rowhouse, adding glazing
(solar gain) through windows or glazed walls to (with insulation) is far less expensive than wall
provide heat to a building. By definition they insulation and comparable to roof insulation
are systems that have no moving parts and as and storm windows. It is also substantially less
such are simpler and usually less expensive than expensive for the savings than another passive
active solar systems (which must use pumps or solar retrofit considered suitable to masonry
fans to transfer heat from liquids or air heated buildings–the Trombe Wall (see fig. 22). For
by the Sun–see fig. 22).5 OTA did some simple this retrofit, the wall is painted black and
For further d Iscusslon of active anci passive solar systems see 60TA’s calculations did not include the cost of savings for night
two previous OTA stucfles: ApplIc atlon of Sc)lar Tec hnok)~} to To- insulation in acid ltlon to the storage. Night insulation would in-
d a y ’ s Enwg) Ne~d~, vol. 1, OTA-E-66, June 1978; Resfdentlal crease both the cost and savings with an indeterminate impact on
Energy Cf)nwr\at/on, VOI. 1, OTA-E-92, jUly 1 9 7 9 . cost effectii’eness.
66 Ž Energy Efficiency of Buildings in Cities

Figure 22.—One Active and Two Passive Solar Devices for Heating Buildings

The illustrations below show two passive solar devices for providing space heat to
buildings—a thermosiphoning air panel and a Trombe wall. Also shown is an active solar col-
lector which provides both hot water and space heat.

Warm air
to room

Single black
layer Cool air
of from room

Thermosiphoning air panel (above)

Where masonry walls do not exist, metal panels painted
black and covered with glazing can be attached to the
south wall. As for the Trombe wall, there are thermocircula-
tion vents at the top and the bottom of the panel.

Trombe wall (above)

For this retrofit. a south-facing masonry wall is painted a
dark color and covered with glazing to minimize heat loss.
Thermocirculation vents at the top and bottom provide a
flow of air that draws hot air into the room at the top and
draws cold air out of the room at the bottom. Dampers are
closed at night to prevent backdraft losses.

Active solar space and domestic hot water heater

Flat plate collectors are installed in the roof. The solar-
heated liquid circulates through a heat exchanger in a cen-
tral tank of hot water. This water in turn runs through a heat
exchanger into the domestic hot water tank and through
another heat exchanger into an air handling unit for space


SOURCE’ Office of Technology Assessment.

Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 67

Table 21.— Calculated Capital Costs of Energy Efficiency Retrofits Compared

to Active and Passive Solar Retrofits

Estimated total annual Capital cost category (dollars per

energy savingsa annual million Btu of savings)
Energy efficiency Solar Energy efficiency Solar
ret refit retrofit retrofit retrofit
(million Btu)
Small wood framehouseb
Roof insulation. . . . . . . . . 42 Moderate (15)
Wall insulation . . . . . . . . . 108 L OW (6)
Storm windows . . . . . . . . 31 Moderate (30)
Add 100 ft 2 of glazing
with night insulation . . 30 Moderate (20)
Add glazing with
thermal storage . . . . . . 35 Moderate (40)
Add thermosiphoning
wall panel . . . . . . . . . . . 17 Not cost
effective (120)
Moderate masonry rowhouse
Roof insulation. . . . . . . . . 47 Moderate (15)
Wall insulation . . . . . . . . . I53 High (1 10)
Add glazing with night
insulation , . . . . . . . . . 30 Moderate (20)
Glaze masonry wall
(Trombe wall) . . . . . . . . 43 High (65)
Large masonry multifamily
building b
Roof insulation. . . . . . . . . 637 High (50)
Night insulation on all
windows . . . . . . . . . . . . 631 Moderate (40)
Flat plate collectors for
space heat and hot
water . . . . . . . . . . . . . . . 1,480 High (80)
Add glazing with
thermal storage . . . . . . 480 High (70)
Add glazing with night
insulation . . . . . . . . . . . 520 Moderate (30)
NOTE: Savings should not be added. For detailed sources see app. D.
aAll ~avlng~ of el~~t~l~lt~ have been multlp[led by 2,46 to reflect the greater expenSe of e(eCtrlCltY,
b2,000 ft,, 15,000 ft], and 100,000 ft~ bulldlngs with water systems in the St. Louis climate zone.
SOURCE: Office of Technology Assessment

glazed. Ventilation openings cut in the wall out in the preceding section, however, retrofits
allow heated air to rise in the space between to the building envelope in general are less cost
metal panel and glazing and flow into the room. effective for large multifamily buildings than are
By OTA’s calculations, this retrofit is of high retrofits to the domestic hot water system and to
capital cost for the savings. the mechanical system.
For a large multifamily building, roof insula-
tion is high capital cost (compared to savings) The results are consistent with the results of
and walI insulation is not cost effective at all. several other studies of solar retrofits and solar
The calculated high capital cost of an active flat features in cities. A careful architectural analysis
p/ate system for providing space heat and hot of the optimum balance of insulation, passive
water (see fig. 22) is at least comparable to these and active solar features for rehabilitated and
measures. The only envelope retrofits of moder- retrofitted buildings in the low-income Man-
ate capital cost are adding night insulation on all chester neighborhood of Pittsburgh came to a
windows (conservation retrofit) or adding glaz- preliminary conclusion that the best combina-
ing on the south side equipped with night in- tion is likely to be either thorough insulation
sulation (passive solar retrofit). As was pointed and blocking of infiltration alone or a combina-
68 Ž Energy Efficiency of Buildings in Cities

tion of thorough insulation and large windows and use of building. In a few cases the precise
on the south side for increased solar gain. ’ list of retrofits is more applicable to the specific
system modeled than it is to other systems of the
An analysis of low-cost solar options in the
same general type. Appendix table D to this
Boston area concluded that many passive solar
chapter describes the basic mechanical systems
retrofits (such as solar porches, sunspaces and
modeled for each type and identifies the most
greenhouses, wall collectors, thermsiphoning
important differences i n the lists of retrofits for
wall panels—see fig. 22—and night insulation
other systems of the same type. The general
applied to increased window size) are only
conclusions from the analysis are described
competitive with the costs of conventional fuels
if labor is contributed free or at reduced cost, if
the retrofit cost is amortized over the life of the The Most Effective Retrofit to a Building
measure and if a tax credit or other subsidy is With a Complex Reheat System is to Convert
provided. These are very stringent criteria in the Reheat System to a Variable Air Volume
light of the impact of financing difficulties and System. (See fig. 23 for diagrams of a terminal
high interest rates described in chapter 4. of all reheat system, variable air volume system, and
the measures analyzed, only homemade insu- three other mechanical systems suitable for
lating shades provide a payback that would large commercial buildings with several zones,)
categorize the measure as of moderate capital Complex systems with terminal reheat features
cost .8 are extremely wasteful; their name derives from
the fact that they operate by centrally cooling all
For climates that are more favorable than
air to be used in the building to a single tem-
those of Boston, the cost effectiveness of passive
perature, typically around 55° F. This chilled air
solar retrofits appears greater although very is then distributed to the various zones of the
variable. In a survey by the Tennessee Valley
building through ducts, and just before being in-
Authority (TVA) of costs and savings of passive
troduced into the conditioned space, the air is
solar retrofits, the retrofit cost per annual reheated to the desired temperature, Used
million Btu saved ranges from $14 per annual
almost solely in commercial buildings, a ter-
million Btu saved to $140 for a Trombe Wall,
minal reheat system provides very precise
from $28 to $190 for south windows, and from
temperature control. In addition, it neatly
$27 to $360 for a solar greenhouse.9 handles the conditioning problem that occurs in
commercial buildings with large “core” areas,
Retrofits to the Mechanical System i.e., interior areas of the building, where,
because of the amount of heat generated by
For many building types, especially larger
people, lights, and office equipment, air-
building types, retrofits to the mechanical
conditioning is required year round. On a cold
system are likely to be the most effective of all
retrofits, although specific retrofits and their day in January, in this type of building, a ter-
relative cost effectiveness differ substantially minal reheat system can send cooled air
without reheat to the core areas of the building,
among the four mechanical systems analyzed
and send cooled air which is then reheated at
for this report. OTA developed lists of retrofits
the perimeter areas near the windows, where
for each mechanical system type for each size
relatively heated air is needed. This type of
system uses energy twice to achieve a single
‘Energy Guldellnes for an Inner-CIt}/ Neighborhood, Travis O.
Price Ill & Partners and Volker Hartkoff, Naomi Yoran, and Law. desired temperature; first using energy to cool,
rence Hoffman of Carnegie Mellon University. Proceedings of (he then to heat air. As a result, the total heating
Fifth Nat/ona/ Pawve 50/ar Conference. Published by the Amer- load of commercial buildings with complex
ican Section of the International Solar Energy Society, Inc., a
workbook based on this analysis is due to be published in 1981. systems is more than twice that of comparable
8Boston Solar Retrofits: Stud/es of Solar Access and Economics. buildings with air or water systems. Reheat
Michael Shapiro (with Shauna Doyle), Kennedy School of Govern- mechanical systems can generally be converted
ment, December 1980.
9Bu//d/ng a Susta/nab/e Future, vol. 2, SE RI, published by the to variable air volume systems, a type of air
House Committee on Energy and Commerce, April 1981, p. 171. system, with little difficulty. Variable air volume
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 69

systems supply air at constant temperatures for passes through the boiler. A boiler turbolator
each set of hot air and cool air requirements reduces stack heat losses before heat goes up
and satisfies the needs for different zones by the stack by improving the exchange of heat be-
varying the volume of air supplied. Such tween the hot combustion gases and the water
systems require central air-handling controls to be heated.
which are usually already installed for reheat
Several devices improve efficiency by taking
systems. Installing such controls is estimated to
better advantage of variations in outside tem-
add about 30 percent to the cost. Some tem-
perature with the change of seasons. For water
perature control is sacrificed, but the savings are
systems, a modulating aquastat regulates the
so great that they equal the cost of the retrofit
temperature of the water in the boiler according
very quickly. In the particular calculation done
to the outdoor temperature. On very cold days,
for a building of 100,000 ft2, the retrofit would
the boiler temperature is allowed to rise. On
cost about $0.14 ft 2 ($1 4,000 total) and save
milder days, it is kept lower. For air systems with
about 45,000 Btu/ft 2 which would be worth
central air-conditioning a similar retrofit varies
about $0.32 ft2 for heating oil at $1 /gal. The sav-
the temperature of chilled water according to
ings in this case would equal the cost of the
the outside temperature, setting it coldest on
retrofit in less than a year (see table 19).
the hottest days. Also for air systems a two-
Lists of Retrofits are Different for Air Systems speed fan motor sets the fan to blow faster for
and Water Systems But They Perform Similar the peak cooling load and slower for the heating
Functions. Some retrofits to improve the effi- load which usually requires a smaller air vol-
ciency of air (including reheat systems con- ume. An economizer damper control, also for
verted to variable air volume systems) and water air systems, makes possible the automatic use of
mechanical systems are described in figures 24 outside air for cooling when outside air is cooler
and 25. The calculations of costs and savings for than that inside, Most of these retrofits are low
some of them are shown in table 22. Some ret- or moderate capital cost compared to savings.
rofits improve the combustion efficiency of the
Many Retrofits to Mechanical Systems Bene-
central heat source: replacing the burner for
fit From Economies of Scale and Cost Signifi-
both air and water systems (see fig. 25 for a de-
cantly Less per Annual Million Btu Saved in
scription of the source of improved efficiency),
Large Buildings Than in Small Ones. The cost
replacing the entire boiler for a water-based sys-
of many retrofits to mechanical systems is only
tem or replacing the furnace for an air system. [n
somewhat greater for large buildings than small,
the particular set of calculations shown in table
but the savings can be many times greater. This
22, it was assumed that an old boiler of slightly
point can be illustrated with the calculations of
over 50-percent combustion efficiency (the ratio
the costs and savings for a modulating aquastat
of Btu of usable heat to Btu of fuel) was replaced
(the device that increases boiler water tempera-
by a new boiler of almost 75-percent combus-
ture when the outside air is colder, and vice ver-
tion efficiency. The costs of a new boiler are
sa). As shown in figure 26, the cost of the mod-
estimated to be large but savings are great
ulating aquastat for a 100,000 ft2 multifamily
enough that it falls into the category of moder-
building is about double the cost of one for a
ate capital cost compared to savings.
small 2,000 ft2 rowhouse, but the savings are 40
Vent dampers improve the efficiency of both times as great. Figure 27 illustrates the same
water and air systems by preventing heat from phenomenon for four other retrofits to mechan-
escaping up the flue when the burner is not fir- ical systems. Replacing a boiler, for example, at
ing. An electrically activated damper automati- $50 per annual million Btu saved would be a
cally closes when the burner is cycled off. A high capital cost retrofit for a small rowhouse in
stack heat reclaimer is a device for water Buffalo, but is a low capital cost retrofit (at $12
systems that uses the heat that escapes up the per annual million Btu saved) for a large multi-
stack from a boiler to preheat the water that family building.
70 ● Energy Efficiency of Buildings in Cities

Figure 23.—Five Systems for Adjusting the Amount of Heat and Cooling
to Different Zones in a Commercial Building

The illustrations below and next page show five different heating and cooling systems designed to handle the complex re-
quirements of large commercial buildings. In such buildings, core areas and machine rooms with high heat loads require less
heat and more cooling than peripheral areas of the building. An effective but energy-inefficient way to handle these mixed re-
quirements is using any of a number of systems with reheat features: terminal reheat or rnultizone or variable air volume which
may or may not include reheat. In reheat systems the air may be cooled below the temperature needed and then reheated for
purposes of dehumidification as well as zone control. A variable air volume system with no reheat feature is far more energy
efficient than any of the systems with reheat. Induction and fan-coil systems also eliminate simultaneous heating and cooling.
In OTA’s classification, terminal reheat and multizone are classified as water systems. (See app. table 3D for a more com-
prehensive list of systems in each type.) Retrofits which are appropriate to such systems are generally determined by their
general type.

SOURCE: Office of Technology Assessment.

Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 71

Figure 23.—Five Systems for Adjusting the Amount of Heat and Cooling
to Different Zones in a Commercial Building (Continued)
~ ~ Variable air volume box

orifice in the variable air volume box. Terminal reheat sys-

tems can usually be converted to variable air volume sys-
tems for low to moderate capital cost compared to savings.

units A
Induction system
This system uses both water and air to provide heat to dif-
ferent zones in a commercial building. For heat, hot wafer
is circulated through pipes from a boiler to auxiliary heating
cooling coils inside induction units in each zone. These
units are also supplied with heated or cooled air from a cen-
tral air handling unit. The air is ejected at high speed from Cooling
nozzles within each unit, inducing room air to be drawn
across the heating coil. For cooling, cold water from a coil //
chiller is circulated to the induction units. )’

Hot water, d

Zone thermostat
m 4 room
~, air

Central =
air w u- -
handling unit
~ Heating
-l c o i l

supply air
Fan-coil system Induction unit
In a fan-coil system, the hot or cool water is circulated from
a central source to the coils in a fan-coil unit in each zone.
Within each unit, a fan propels air over the hot coil (for heat)
and out into the room while cooler air from the room is
drawn into the fan coil unit to be warmed. For cooling, air
from the room is cooled by a similar process.
SOURCE: Office of Technology Assessment
72 ● Energy Efficiency of Buildings in Cities

Figure 24.—Sample Retrofits to Central Air Heating and Cooling Systems

The illustration below shows a single-zone air heating and cooling system and several of the
retrofits that might be applicable to such a system.

Outside temperature
and humidity
~ sensor - Return

Enthalpy control (left)

This retrofit consists of a sensor that measures the
temperature and the humidity of the outside air. When the
outside air is sufficiently cool to help meet the cooling de-
mand of a building (usually a commercial building) with
high internal heat loads, an automatic damper reduces the
opening in the return air duct and another damper opens
the outside air intake. Another sensor in the ducts meas-
ures and regulated the temperature and humidity of the
mixed air going into the building.

Mixed air

Heating coil Cooling coil I I I

Replace burner (not shown)

This retrofit replaces an old inefficient burner on either a
furnace that heats air or a boiler that heats water or steam
for the heating coil in the air handling unit shown above. lm-
proved burner efficiency is due to more efficient fuel disper-
son and fuel-air mixing.
SOURCE: Off Ice of Technology Assessment.
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 73

Figure 25.—Sample Retrofits to Water-Based Heating Systems

The illustrations below show five different retrofits appropriate to water systems. All three
heating sources shown are boilers.

recovery Vent damper (not shown)
unit An electronically-controlled vent damper closes the stack
when the burner is not firing in order to reduce the loss of
heat up the stack.

Stack heat reclaimer (left)

This device recaptures heat by circulating water (for boiler
feedwater) or air (for combustion air) through the stack heat
reclaimer, thus transferring heat from the flue gas to the
water or air.

/ unit

Replace burner
This retrofit replaces an old inefficient burner with a new
burner of greater efficiency due to more efficient fuel dis-
persion, and fuel-air mixing,



Modulating aquastat (above)

This device consists of an outside temperature sensor and
a control system that automatically resets boiler water
temperature to match the outside temperature: hotter
water for colder outside temperatures and vice versa.


~– boilers already have turbolators.

SOURCE. Off Ice of Technology Assessment
74 ● Energy Efficiency of Buildings in Cities

Table 22.—Calculated Capital Costs of Retrofits to

Air and Water Mechanical Systems

Relative capital cost

(number in parentheses is retrofit
Total cost per cost per annual million Btu
Retrofit installation saved)
Applicable to both air and water systems
—Vent damper . . . . . . . . . . . . . . . . . $1,300 Low ($7)
—Replace burner . . . . . . . . . . . . . . . 2,900 Moderate ($35)
Applicable to air systems only
— Economizer damper control (to
use temperate outside air) . . . . . . 2,000 Low ($2)
—2 speed fan motor ... , . . . . . . . . . 500 Low ($4)
—Vary temperature of chilled
water. . . . . . . . . . . . . . . . . . . . . . . . 2,200 Moderate ($24)
—Replace furnace . . . . . . . . . . . . . . (Not estimated)
Applicable to water systems only
—Stack heat reclaimer (to
pre-heat boiler water) . . . . . . . . . . 1,200 Low ($12)
—Modulating aquastat . . . . . . . . . . 400 Low ($5)
—Replace boiler . . . . . . . . . . . . . . . . 4,500 Moderate ($35)
—Boiler turbolator . . . . . . . . . . . . . . 1,800 High ($90)
NOTES: Calculations were done for a hypothetical 15,000 ft’ multifamily building in St. Louis. See app. C for a description of
each measure and app. D for sources on costs and savings,
SOURCE: Office of Technology Assessment.

Figure 26.—Calculated Capital Costs of a Modulating

Aquastat—Three Building Sizes

$12 per annual $2.70 per

million Btu annual million $0.60 per annual
saved Btu saved million Btu saved .900
I 1
I I 100
I I ’00
I I 600
I I 500
I I 400
I I 300
I I 100
Small Moderate Large
rowhouse multifamily multifamily



SOURCE: Office of Technology Assessment, See app. D for detailed sources on retrofits.
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities Ž 7 5

Figure 27.—Calculated Capital Costs of Four Mechanical System

Retrofits-Three Building Sizes

[50 I I
38 38 I I
i I
I 32 I

I I 20
1 12
Small Moderate Large
rowhouse multifamily multifamily

NOTE: Buildings of 2,000 ft], 15,000 ft’, and 100,000 ft’ with water systems in Buffalo climate.
SOURCE Office of Technology Assessment See app D for detailed sources for individual retrofits

The Installation of Setback Thermostats is Setback thermostats can also reduce cooling
Very Cost Effective, If Used Properly, in All loads, but it was assumed for this analysis that
Building Types and All Climate Zones Except the cooling load is already kept to a minimum
the Very Warmest. This retrofit measure, by by maintaining the daytime temperature at 78°
now well-known and well-documented, is and turning off the cooling system in commer-
adaptable both to small family homes and large cial buildings at night. OTA did not analyze the
commercial buildings. At its simplest, it reduces substantial benefits of more complex energy
the temperature of specific rooms or zones management systems that are being successfully
overnight or when unoccupied. Timers lower installed in many commercial buildings. Such
the temperature automatically and may be set systems, using central or microcomputers, can
to raise it again before the room or zone will be manage lighting systems, ventilation, and the
occupied in the morning. The savings estimated temperature of circulating water as well as
for this analysis assume that the daytime tem- space thermostat settings.
perature is 65° and nighttime temperature is
55 o, and that the daytime temperature was
maintained around the clock before the setback The estimates of the retrofit cost per annual
thermostat was installed. There will be no sav- million Btu saved range from low ($5) for set-
i rigs, except in labor costs, if maintenance crews back thermostats installed in a large multifamily
already performed the setback function manual- building in Buffalo, to moderate ($25) for the
ly. same building in Tampa.
76 . Energy Efficiency of Buildings in Cities

For Buildings With Decentralized Systems, small framehouse and a large multifamily build-
There are Few Cost Effective Retrofits to the ing, it is assumed that room air-conditioners
Mechanical Systems. Decentralized systems with a seasonal efficiency of 1.5 (coefficient of
heat and cool with individual air-conditioners, performance–the ratios of Btu of cooling to Btu
individual gas heaters, or occasionally with in- of input electricity) were replaced with new air-
dividual heat pumps. By definition, there are no conditioners with a seasonal efficiency of 2.3.
ducts or pipes, nor is there complex interaction Savings are greatest in hot climates and thus the
among ventilation, heating, and cooling. Effi- retrofit has a much lower capital cost (per an-
ciency improvements cannot be achieved by nual million Btu saved) in Tampa than it does in
modifications to a single central plant. In most Buffalo. It is assumed that the cost of each unit
cases, efficiency can only be improved by re- air-conditioner is the same for large buildings as
placing all less efficient individual units with for small and that the cooling load per square
more efficient individual units. foot is somewhat lower. So under these assump-
tions, replacing the air-conditioners has a higher
Under some circumstances, savings can be capital cost in a larger building than in a small
considerable by replacing all air-conditioners in one. If a discount were available for a bulk pur-
a building with more efficient air-conditioners. chase of new air-conditioners for a large build-
The calculations of the costs and savings from ing, however, this retrofit might be equally cost
such a retrofit are shown in figure 28. For both a effective in large buildings,

Figure 28.—Calculated Capital Cost of Replacing Window

Air-Conditioners in Tampa, St. Louis, and Buffalo

35 I
I I 25
St. Louis
I Tampa
Tampa I

Small Large
frame house multifamily building

Buffalo St. Louis ❑ Tampa

NOTES: The ortglnal ratios of cost to savings In end-use Btu are multiplied by 0.4 to reflect the dif-
ference between the cost of fuel (oil) at $7,00 per million Btu and the cost of electricity at
$1700 per m!lllon Btu (equals $0.06 per kWh).
SOURCE: Off Ice of Technology Assessment.
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 77

OTA also estimated costs and savings for re- tial and commercial, in warmer climates (since a
placing both the electric resistance heaters and smaller fraction of energy goes for heat).
air-conditioners with heat pumps that perform
Several retrofits to the hot water system are
both heating and cooling. Heat pumps currently
very cost effective in all climates and to all
on the market tend to be more efficient at
residential building types. The most cost effec-
heating than electric resistance heaters but less
tive are also cost effective for commercial
efficient at cooling than conventional window
buildings. A vent damper that shuts automati-
air-conditioners. The calculations reflect this
cally when the heater is off reduces heat losses
assumption. Installing heat pumps is a retrofit of
when the hot water heater is not heating. Flow
moderate capital cost, compared to savings, for
control devices on faucets and shower heads
a large multifamily buiIding in Buffalo, St. Louis
use the available water pressure more efficiently
and Memphis, but actually uses more energy in
to disperse the water better and create a higher
Tampa where the cooling load is far more im-
apparent pressure for less actual water use. in-
portant than the heating load. Newer heat
sulating the hot water storage tank with a 1 ½
pump technology with higher efficiencies for
inch thick insulation blanket reduces heat losses
both heating and air-conditioning should prove
from the storage tank.
to be an effective retrofit in Tampa as well as in
colder climates. Further improvements in air- All three retrofits benefit from economies of
conditioning technology could also increase the scale and should cost less for the savings they
cost effectiveness of replacing existing air-condi- achieve in a bigger building than in a small
tioners with more efficient ones. ’” building. A hot water heater vent damper, for
example, costs only 25 percent more in a mod-
Retrofits to the Domestic erate multifamily building than it does in a
Hot Water System single-family house (according to OTA’s cal-
culations), but it saves more than 10 times as
Many Retrofits to Improve Hot Water System much energy. The calculations of retrofit costs
Efficiency are Very Cost Effective in All Types per annual Btu saved are shown in figure 29.
of Residential Buildings in All Climates. The
There are two other much more expensive
energy used for domestic hot water is a signifi-
retrofits to the hot water system which each
cant fraction of single-family and multifamily
save about as much energy (under OTA’s as-
energy use and a much smaller fraction of the
sumptions) as installing water flow controllers.
energy use of most commercial buildings. This
The active solar hot water heater according to
can be illustrated with the calculations of the
OTA’s calculations would be a retrofit of high
fraction of energy for domestic hot water used
for several types of buildings in Buffalo and capital cost (compared to savings) for both a
Tampa. single-family detached house and a multifamily
building in Buffalo, if it were used to save
Hot water as a percent of
total bullding energy use energy in the form of fuel (see fig. 29).
Small framehouse . . 7
Small rowhouse. ., . 11 When used to save electricity, however, both
Large multifamily buildlng. 25 the solar hot water heater and another retrofit,
Large commercial bulldlng. 6 the air-to-water heat pump (see fig. 30) fall into
Furthermore domestic hot water is a bigger frac- the category of moderate capital cost retrofits.
tion of the energy use of all buildings, residen- The air-to-water heat pump is now available in
small and medium sizes. OTA assumed that a
OTA's assumptions about relative seasonal efficiencies were as set of them (five medium and one small) could
a. Heat pump cooling efficiency: 85 percent of conventional
be used to heat hot water for a large multifamily
window air-conditioner—1.5 instead of 1.8 Instantaneous building. Because medium-sized heat pumps
coefficient of performance (COP) and 1.3 Instead of 1.5 sea- cost somewhat less per unit of heat produced,
sonal COP.
there would probably be some economies of
b. Heat pump heat/rig efficiency: Seasonal COP: Buffalo , 1.3;
St. Louis 1.55; Memphis 1.8; Tampa 2.15. scale i n using heat pump hot water heaters for
78 ● Energy Efficiency of Buildings in Cities

Figure 29.–Calculated Capital Costs of Solar Hot Figure 30.—Diagram of a Heat Pump
Water Heaters and Three Other Hot Water Retrofits Hot Water Heater
90 I
90 -

I -.
80 -

I Hot II
70 - water
I to tank
60 “ Air from
50 “
40 - I
30 “ I
25 *
20 “

10 “ /
3 3 4 Evapor a t o r ’ Compressor water w
coil from
Small Moderate tank
detached multifamily SOURCE: Office of Technology Assessment.
house house
standards, offices had an average of 2.8 W/ft 2 o f
Solar hot water heater
~ Hot water vent damper
installed lighting while multifamily buildings
~ Insulate storage tank had only 1.6 W/ft2. The sample also demon-
Water flow controllers
strated the variation in lighting practice in office
NOTE: 2,000 ft’ and 15,000 fty building with water systems in Buffalo buildings. Thirteen percent had less than 2 W/ft 2
SOURCE: Office of Technology Assessment. See app. D for sources for
individual retrofits, installed capacity while 17 percent had over 4
larger buildings than for a small house. Further Many Types of Lighting System Retrofits for
technical developments that produced large- Commercial Buildings are Expensive, But are
sized heat pump hot water heaters should in- Included in the Low or Moderate Capital Cost
crease the potential for economies of scale. Category Because They Save Expensive Elec-
Solar hot water heaters are most cost effective in tricity. The most powerful of these would re-
areas of greatest insolation. By OTA’s calcula- place incandescent lights with far more energy-
tions, a solar hot water heater would cost about efficient fluorescent lights. Since much of the
30 percent less per unit of heat produced in energy used for incandescent lights is used (and
Tampa than in BuffaIo. wasted) as heat rather than light, this category of
retrofit has two important side effects—it greatly
Retrofits to the Lighting Systems reduces cooling requirements in a commercial
building and increases heating requirements.
Lighting absorbs a large share of the energy OTA found no information on the number of
used by commercial buildings in the form of commercial buildings that still use incandescent
electricity—the most expensive form of energy. lights; from observation, it appears that most
For buildings built in 1975-76, and sampled in ——— .- ———
the Department of Energy survey in preparation 11 ReSUltS from the BEPS phase I analysis of sample buildings
for developing building energy performance were reported in SERI, op. cit., VOI. 2, p. 365.
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 79

use fluorescent lights already. For multifamily table 23 and requirements for increased heating
buildings and single-family houses, however, a are subtracted from the total.
shift to fluorescent lighting could still produce
substantial savings. For completeness, OTA has Install fluorescent hybrid lamps (see fig. 31). In
included this category of retrofits in its list of this variation on the same retrofit, any of several
retrofit options for commercial buildings, but it makes of fluorescent lights that fit into incandes-
has not been included in the estimates of cumu- cent sockets are substituted for incandescent
lative savings from retrofit packages. lights. Calculating the costs and benefits of this
retrofit is tricky. OTA assumed an initial cost of
Lighting retrofits will have an impact on the installing the lamps at 15 times the cost of in-
interior appearance of a building more than any candescent bulbs, and savings of about 55 per-
other kind of retrofit except passive solar retro- cent for the same brightness. The lamps are
fits, sunscreens, or reflective film (all of which estimated to last 7,500 hours, or about 10 times
affect daylighting). The tone, intensity and form as long as conventional lamps (more than 3
of the light can all be changed. For this reason, years for 45 hours a week use). Using these
planning a lighting retrofit can require some assumptions over a 10-year period (assuming
assistance from an interior designer. Four light- electricity at an average of $0. 10/kWh over the
ing retrofits analyzed are described briefly be- period) the 10-year savings (net of lamp replace-
low. Their costs and savings are compared in ment cost) from a 100-W lamp installation
table 23. (Other types of lighting retrofits—such would be $121 per lamp.
as sodium vapor lights (for gymnasiums) or in-
stallations to maximize daylighting—can be very Use high-efficiency fluorescent lamps. In this
effective in particular buildings but their general retrofit 40-w fluorescent lamps are replaced
cost effectiveness cannot be analyzed.) with lamps of 32 to 35 W. The capital cost is as-
sumed to be the cost of changing all the lamps
Change incandescent fixtures to fluorescent at once. The cost can be spread out over a peri-
fixtures. Fluorescent lights use only about one- od of time by replacing original fluorescent
third as much energy as incandescent lights, but lights as they burn out.
they normally come in different shapes and
have a cooler light. This retrofit will generally Use low wattage task lighting. This retrofit
change the shape of fixtures from round to rec- reduces overall wattage per square foot by in-
tangular and lighting tone from warm to cool. stalling fixtures designed for each task area. This
Cooling savings are added to lighting savings in saves energy in two ways. It permits lower watt-

Table 23.—Calculated Capital Costs of Four Retrofits to Commercial

Lighting Systems (large commercial buildinga)

Costs and savings from Capital

the retrofit/ft2 cost category
Dollars per annual
costs Savings million Btu of
Retrofits (dollars/ft 2) (thousand Btu/ft2 ) energy b
Replace incandescent fixtures
with fluorescent . . . . . . . . . . . . . . $2.30 214 Low ($1 1)
Install fluorescent hybrid
lamps . . . . . . . . . . . . . . . . . . . . . . . 0.75 205 Low ($4)
Install task lighting. . . . . . . . . . . . . . 0.70 26 Moderate ($26)
Install high-efficiency
fluorescent lights . . . . . . . . . . . . . $0.15 16 Low ($0)
NOTE: Savings should not be added,
aE~timate~ are for ~ ~lad.~all commercial building with an alr system In the St. LO U IS Climate
bRetrofit ~05t per annual mlllL~n Btu of energy saved IS adjusted by a fuel factor 0,46 times end-use Btu tO reflect the differ.
ence between fuel 011 at $7 per mllllon Btu and electricity at $17 per mllllon Btu for electricity at $006 per kWh
SOURCE Off Ice of Technology Assessment
80 ● Energy Efficiency of Buildings in Cities

Figure 31.– Hybrid Lamps Are Fluorescent Bulbs age for the same illumination in the task areas
That Fit in Incandescent Sockets since the fixture usually brings the light closer to
the work being done, and it permits lower levels
of general illumination outside the task area.
This retrofit probably requires the most careful
design work in order to retain the maximum
flexibility for future changes in the arrangement
of task locations.

Conclusion—Variation in Retrofit
Applicability by Building Type
This long section of the report has laid out
OTA’s assessment of the variation in the retrofit
potential of different building types. The anal-
ysis has shown that a relatively small number of
building characteristics systematically affect the
likelihood that a particular retrofit will be gener-
ally effective. The next section of the report
describes the site-specific nature of building
retrofit, i e., those aspects of particular buildings
which affect their individual potential for energy

SOURCE: Energy works and Office of Technology Assessment.


This section of the report describes two inter- The Site-Specific Nature
related characteristics of building retrofits. The of Building Retrofit
first is that, for many reasons, the site-specific
aspects of a building’s susceptibility to retrofit Many aspects of a building will affect its ener-
may outweigh the systematic aspects derived gy use and prospects for retrofit–its regional
from its structure, size, use, and mechanical sys- Iocation, orientation to the Sun and wind, con-
tem type. The second characteristic of building dition of structure and equipment, intensity of
retrofit is that energy savings are difficult to pre- occupancy, carefulness of management, and
diet now and because of the site-specific nature many other factors. Compared to the small
of much effective retrofit, there is a limit to the number of factors that affect the energy per-
future predictability of building retrofits even formance of an automobile, many more factors
with far better data on retrofit performance than must be taken into account in assessing the
exists now. energy performance of a building.
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 81

one of the few surveys to date of energy use warm air may be wasted as it flows up i n spaces
i n different kinds of commercial buildings, i n along party walls of attached buildings or in
the Baltimore central business district, found spaces created by later additions to buildings.
that energy use varied strikingly for buildings Such thermal bypasses can often be identified
used for similar purposes. As can be seen from by careful three-dimensional analysis of build-
table 24, office energy use ranged from a low of ings, taking note of dead space and passages
21,000 Btu/ft2 to a high of 432,000 Btu/ft 2 (more from floor to floor. If significant leaks or by-
than 20 times as much). The most energy- passes are blocked, savings can be significant
extravagant banks use five times as much and cost low.
energy as the least extravagant; the most
Energy Management System Controls. Com-
energy-extravagant department stores use six
puterized controls can go well beyond thermo-
times as much energy as the least. In this survey
stat setbacks and can be used to ‘manage ven-
only some of the variation could be explained
tilation dampers, heating system pressure
by general characteristics such as glass area,
valves, and temperature settings. These controls
type of heating and cooling, or building height.
take advantage of existing equipment. Savings
will depend on the specific nature of existing
There are several effective retrofits that are
equipment and may also include labor savings
highly dependent on individual characteristics
as well as energy savings. Such computerized
of buildings and are so site specific that their ap-
systems are often designed to include security
plicability cannot be easily predicted by type of
and fire-safety features.
building. Some of these retrofits are described
below. Cogeneration. For certain very large commer-
cial and multifamily buildings in cities with high
Blocking Thermal Leaks and Thermal By- electricity rates, it may make sense to produce
passes. Techniques developed at Princeton and both heat and electricity using any of several
elsewhere have proved effective in locating types of building-size cogenerators. Several
such leaks as warm air leaking into unheated at- large buildings in New York City, where elec-
tics and cold air leaking into basements. Such tricity rates are the highest in the country, have
leaks are found typically in single-family de- taken this step. The economic and technical
tached houses. Instruments that have proved feasibility of cogeneration for a variety of uses is
helpful in locating such leaks include a blower to be analyzed in detail in a forthcoming OTA
to be installed in the door or window of a house report lndustrial and Commercial Cogeneration,
to pressurize it to find the leaks and an infrared to be published by the summer of 1982.
scanner to identify differences in temperature Daylighting. There are several devices avail-
where air is leaking. For other building types, able to increase the use of daylight as a substi-
tute for electric lighting. “Lighting shelves” in-
stalled in or near windows can reflect light up to
Table 24.— Energy Use per Square Foot in reflective panels on the ceiling and reflect day-
Buildings of Downtown Baltimore light deep into a building. Outside reflecting
panels can also be used to increase daylighting.
Thousand Btu/ft2 The savings from such retrofits may be consider-
Range minimum able but are highly dependent on the availabil-
Median to maximum
ity of light outside the building, the configura-
Offices . . . . . . . . . . . . . . . . . . 90 20-430
Department stores . . . . . . . . 70 55-360
tion of windows, the configuration of walls in-
Hotels/motels . . . . . . . . . . . . 145 100-235 side the building and the nature of computer-
Small stores . . . . . . . . . . . . . 90 15-725 ized or other controls that control switching
Banks . . . . . . . . . . . . . . . . . . . 130 50-250
Restaurants. . . . . . . . . . . . . . 340 65-900 between daylighting and electric lighting.
SOURCE: Hlttman Associates, February 1977. “Physical Characteristics, Adjustable Radiator Vents. Steam systems in
Energy Consumption, and Related Institutional Factors in the Com-
mercial Sector” (fig 16), p. 73. older buildings frequently have problems with
82 Ž Energy Efficiency of Buildings in Cities

overheating on floors away from the space ther- heat from freezers and refrigerators and is thus
mostat that controls the flow of steam to the useful in supermarkets and restaurants. There
radiator. Adjustable air vents can be installed to are two sources of savings. Energy is saved that
control this problem. The amount of savings would otherwise be used to heat the water and
may be considerable if the overheating is con- the cooling system works more efficiently be-
siderable and if the adjustable vents are actually cause the temperature of the condensor is low-
used to control radiator heat (rather than the ered. The potential for such a retrofit in a par-
more typical method in such buildings of open- ticular building depends on the relative loca-
ing the windows). A somewhat more expensive tions of cooling equipment and water-heating
retrofit adds thermostats to the adjustable valves equipment and the cost of transporting heat
and controls the radiator temperature automat- from one to another.
In addition to these particular retrofit meas-
Whole House Fans. A powerful fan installed ures that are site specific, there are two general
in the attic or upper floor of a small building is categories of steps that are often very important
designed to ventilate the whole house by draw- in determining energy savings.
ing cooler air in from the outside. Such a fan
Operations and Maintenance Steps. F o r
permits air-conditioning systems to be turned
some buildings there is a lot of wasted energy
off when outside air is cool enough. The effec-
that could be eliminated, before any retrofit in-
tiveness of this retrofit is dependent on the loca-
vestments are made, simply by careful mainte-
tion of the building in terms of the likelihood of
nance of equipment. There are several conveni-
cooler outside temperatures and is also depend-
ent lists and explanations of such steps. 13 Some
ent on the tolerance of the occupants for the
examples of them are: clean air-conditioning
higher humidity of unconditioned air.
condenser coils, clean and repair steam traps,
Reducing Orific (Nozzle) Sizes. Boilers and remove excess lamps (delamp), repair steam
furnaces often have firing rates well in excess of and water leaks, and repair ventilation dampers.
the peak heating load requirement, and there- Energy savings will be greatest from such meas-
fore operate inefficiently all of the time, with in- ures when the building and its equipment have
creased flue and standby losses. This can be a been least well managed. Prospects for savings,
particular problem where building envelope however, depend on the prospects for better
conservation measures have greatly reduced management of the equipment in the future. in
the heating requirements. The firing rate can be some cases this may require a change in staffing
reduced by adjusting the fuel/air mixture and or supervision of maintenance crews.
reducing the fuel orifice or nozzle size to
Auxiliary Repairs. Many smaller buildings
reduce the overall fuel volume. This problem
that lack energy efficiency features such as
was very evident in a recent survey of the retrofit
storm windows and roof and wall insulation,
options for multifamily buildings in Min-
also have more basic problems such as struc-
neapolis. Out of six buildings, four had over-
tural weaknesses in roof or floor or poorly fitting
sized furnaces. For these buildings downsizing
basic windows. Although the data on specific
was a top priority retrofit.12
problems that affect energy use is poor, the ex-
Refrigeration Heat Reclaim To Heat Hot tent of the problem can be judged by the fact
Water. Special heat exchangers can be installed
on the condenser side of an air-conditioning
I jRecommended operations and maintenance steps can be
system to extract condenser heat for heating hot found in: Tota/ Energy Management: A Practica/ Handbook on En-
water. This measure can also be used to extract ergy Conservation and Management, National Electrical Contrac-
tors Association (NECA) and National Electric Manufacturers’
Association (NEMA) 1976, 2d cd., 1979. An evaluation of opera-
‘ ’’ Final Report on Energy Conservation Modifications: Build- tions and maintenance steps recommended in hospital audits can
ings 2-8, 2-9, 2-10, 2-181, 2-18B and 2-22” Chasney Associates, be found in: Eric Hirst, et al., Ana/ys/s of Energv Audits in 48
presented to the Minneapolis Housing and Redevelopment Au- Hospitals, Oak Ridge National Laboratory, July 1981. (Both reports
thority, May 15, 1979. also assess capital investments in energy efficiency. )
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities Ž 83

that more than half of all detached houses lack- dews are already reducing heat loss through a
ing roof insulation, storm windows, and storm building’s windows. Wall insulation, attic in-
doors, also are substandard, while substandard sulation, and storm windows, on the other
housing is only 3 percent of all housing.14 This hand, all improve resistance to heat loss (and
problem is discussed in more detail in chapter 7 cooling loss) of different features of a building
because it greatly affects the implementation of envelope and savings of these should be addi-
the weatherization program. For buildings with tive.
basic deficiencies these must often be corrected
Measures To Improve Mechanical System Ef-
before or during a basic energy retrofit. Primary
ficiency May Have a Mutually Reducing Effect.
windows must be repaired or replaced before
Replacing the burner, for example, with a more
storm windows will perform the function of cre-
efficient burner will increase combustion effi-
ating an air barrier to block heat transfer. The
ciency and reduce the amount of heat going up
roof may be repaired as it is being insulated.
the stack. If a stack heat reclaimer is installed
Interactive Effects Among Retrofits after the increase i n burner efficiency it wiII save
less because there will be less stack heat to re-
Are Site Specific
claim. A vent damper on the other hand should
Savings from individual retrofits can be esti- not be so affected by an increase in burner effi-
mated by careful testing of retrofits one-at-a- ciency because it prevents heat loss up the line
time, When combined into packages, however, when the burner is not firing.
the savings from the package will be different
from the sum of the savings from the individual Improving the Building Envelope Efficiency
retrofits. If retrofits are installed as a series the May Decrease the Seasonal Efficiency of the
savings contributed by each will depend on Heating System. If better insulation reduces the
how many retrofits have been already installed. heating load of the building, the boiler or fur-
For these reasons, cumulative savings for an in- nace will operate less time each day in order to
dividual building must be estimated for that par- heat the building. This reduces the overall effi-
ticular building taking into account the package ciency of the heating system because of heat
of retrofits or series of packages of retrofits that loss while the system is off and because more
the owner wishes to install. An auditor cannot fuel must be used to fire up a cold boiler or fur-
possibly compute in advance cumulative sav- nace than a hot one. A combined retrofit pack-
ings from all the possible combinations of retro- age that can achieve more savings than the sum
fits so that the owner may choose among them, of individual retrofits would downsize a heating
but must get some input from the owner on his system to match the new more efficient load. If
preferences first. the heating system was oversized before (as is
frequently the case) this package will both re-
Some of the most important interactive effects
duce the load and increase the efficiency of the
are described below. In a few cases interactive
effects may actually increase energy savings equipment,
from a package of retrofits over what savings are Domestic Hot Water Measures May Reduce
available from individual retrofits. More often, Each Others’ Effects. Flow controls and storage
the impact of interactive effects is to reduce sav- insulation reduce the hot water load which in
ings below the simple sum of the individual ret- turn reduces the effect of an efficiency impro-
rofits in the package. ving measure like a vent damper.
Measures That Act on the Same Feature of Improved Lighting Efficiency May Increase
the Building Envelope Will Combine To Save the Heating Load and Reduce the Cooling
Less Than the Sum of Each Alone. For example,
Load of a Building, Inefficient lighting due to
window insulation will save less if storm win- either excessive illumination for the tasks in-
. — volved or excessive wattage for the illumination
I ~AndreaSSl, et al,,
The /mpac( of Resdent/a/ Energ\ COn$umP-
required (such as happens when incandescent
tmn on HouwhcJd~, the Urban Institute, Washington, D. C., June
1980. A more complete discussion of this data can be found in lights are used instead of fluorescent lights) will
ch. 5. give off more heat than efficient lighting.
84 . Energy Efficiency of Buildings in Cities

A careful energy audit will take all these fac- information to allow a full cost benefit analysis.
tors into account when recommending an opti- The distribution of building types is scarcely
mum package of retrofits. An audit that does representative of urban building types. Over
not, may recommend acceptable retrofits but half the buildings are schools, and about a fifth
not a package that will produce the most sav- are large office buildings. There is only one
ings for the money as a group. shopping center, one multifamily building, one
small office building, and four hotels. There are
Unpredictability of Savings From no small stores or department stores (see table
Building Retrofits 25).

There is ample evidence that energy savings Individual private retrofit efforts for such
from retrofits to buildings on average are likely buildings as restaurants, retail store chains, and
to be significant and cost effective, However, supermarkets have also been documented but
the results are considered proprietary and are
savings are unpredictable for particular build-
not available for use by other building owners.
ings. This characteristic of building retrofit con-
cerned many building owners interviewed for Data beyond the Ross and Whalen survey have
the analysis of building owner motivation in also been assembled by Lawrence Berkeley Lab-
chapter 4. While this situation should improve oratory and by a group analyzing 40 building
with the maturity of retrofit technology and reporting retrofit results i n the Energy User
News. Data from these sources also are very
practice, the site-specific nature of building ret-
rofit described above will make it difficult, for skimpy on retrofits to multifamiIy buildings and
example, to achieve the predictability of gas to small office buildings and stores. 16
mileage performance for different models of Available Data on Retrofits Show Energy
automobile. The reasons for this situation are Savings are Variable and Unpredictable, The
described below. Ross and Whalen data confirm the general pre-
dictions of theoretical analyses of energy retro-
Poor Documentation of Retrofit Results. De-
fits to buildings as a group. The results of their
spite considerable theoretical analyses and
survey are shown in table 26. The survey also
thousands of audits, there is still very little docu-
shows, however, that savings vary greatly from
mented information on the results of actual ret-
building to building including a significant prob-
rofits on different types of buildings. In the big-
gest survey of documented retrofits to date, 16H, P. Misuriello and R. M. Bily, Jr., “A Study of Actual Metered
Howard Ross and Sue Whalen collected energy Energy Savings for Energy Conservation Retrofit Measures Re-
savings and retrofit information on 222 build- ported for Commercial Buildings., ’ April 1981, cited in Hirst, op.
cit., A. H. Rosenfeld, et al,, Comrmw /a/ Bu//dlng Retroi/f Surve}
ings. 15 Only 65 of these buildings had complete draft September 1980.
—. —--—
15The 19 Sma I Ier surveys of bu i Id i ngs from which data was com-
piled for this study included: 1 ) 21 public schools retrofitted for Table 25.—Documented Energy Savings by Type
the Maine Advancement Programs; 2) 14 office buildings included of Commercial Building
in the total Energy Management Research Report by NECA and
NEMA; 3) 11 office buildings for which data was provided by Site Source
Hagler, Bailly & Co.; 4) 15 buildings owned by the State ot New Average Average
York; 5) 7 office buildings for which data was provided by Flack percent of Sample percent of Sample
and Kurtz of New York City; 6) 9 bul Id i ngs for which data was pro- Building category savings size savings size
vided by EBASCO Services, Inc. of New York City; 7) 10 buildings Elementary . . . . . . . . . . . . 24°/0 72 21 % 72
owned by Ohio State University; 8) 10 school buildings analyzed Secondary . . . . . . . . . . . . 30 38 28 37
i n Savfng .Sc/Joo/ House Energy sponsored by the American Assn. Large office . . . . . . . . . . . 23 37 21 24
of Schools Administration; 9) 10 buildings owned by the State of Hospital . . . . . . . . . . . . . . 21 13 17 10
New Jersey; 10) 80 schools monitored by the Buffalo Board of Edu- Community center. . . . . . 56 3 23 18
Hotel , . . . . . . . . . . . . . . . . 25 4 24 4
cation; 11) 24 community buildings for which data was collected
Corrections. . . . . . . . . . . . 7 4 5 4
by the Columbia Association of Columbia, Md.; several other Small office . . . . . . . . . . . 33 1 30 1
reports on individual buildings. From: “Conservation progress in Shopping center. . . . . . . . 11 1 11 1
Commercial Buildings. ” Bullcifng Errerg} Use Comp//atmn and Multifamily apartment. ., 44 1 43 1
Ana/ys/s: Part C. Howard Ross and Sue Whalen, unpublished
SOURCE: Ross and Whalen, “Building Energy Use Compllatlon and Analysis—
report. May 1981 (revised August 1981) to be published i n Energy part C: Conservation Progress in Commercial Building,” draft, May
and Bu//d/ngs Magazine, Lansanne, Switzerland. 1981 (revised August 1981),
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 85

Table 26.-Summary of Findings From Survey of Figure 32.—Simple Payback Period

Commercial Building Retrofits
N = 65 (does not include 3 buildings which failed to save)
Average Range size 35
Savings including 22 failed 32
retrofits . . . . 190/0 1.5-36,5% 195
Savings excluding failed
22 % 173 30
retrofits . . . . . . . . . 7-37%
Electricity savings . . . . . . . 80/0 156
Fossil fuel savings. . . . . . . . . 28°/0 151
2 2
Average cost of retrofit . . . . . $0.65/ft $0.13-$1.17/ft 77
awlthln one standard deviation
bprlmary energy lncludlng energy used to generate eleCtrlCltY
CExC(UdeS bullcilngs for which primary energy savings could not be estimated
SOURCE “Bu\ldlng Energy Use Compllatlon and Analysls—Part C, Conserva.
tlon Progress [n Commercial Bulld!ngs “ Draft Howard Ross and Sue 20
Whalen May 1981. and Off Ice of Technology Assessment

i n c r e a s e d energy use. Further the

ability of
survey shows that savings also vary substantially
from what was predicted for those buildings for
which predictions are available. The specific 10
findings of the study are as follows:
On average, retrofits saved considerable
energy and were low in capital cost. —Savings 5
for 173 buildings out of a subsample of 195
buildings with decreases in energy use following
the retrofit averaged 22 percent of preretrofit 0
<1 1-2 2-3 3-4 4-5 5-1o >10
energy use. For almost 90 percent of the retro- Payback period (years)
fits, the cost of the retrofit could be recovered in
SOURCE Ross and Whalen, “Buildlng Energy Use Compilation and Analysls—
a 3-year payback or less17 (see fig. 32). Part C: Conservation Progress In Commercial Building, ” draft, May
On the other hand, savings were very variable.
percent more than predicted. Several other
Twenty-two of the 195 buildings failed to save
any energy at all following a retrofit and some groups described by Ross and Whalen experi-
actually increased their energy use. The ex- enced equal or more savings than predicted. A
perience of the buildings that did save energy group of Maine schools had predicted 5-year
ranged from a low of 7-percent savings to a high paybacks, for example, and achieved 3-year
of 37-percent savings. paybacks. On the other hand, actual savings for
the nine school buildings retrofitted by the
Actual savings differed considerably from pre- American Association of Schools Administration
dicted savings. A set of 60 buildings out of the were far less than predicted by computer simu-
full sample had some information on predicted lation. An analysis of the poor retrofit perform-
savings as well as actual savings. One group ance was done for each school, and identified
within the 60—a set of 18 community centers errors in selecting retrofits, installing them and
from Columbia, Md.–illustrates the variation maintaining them afterward. I n one school, for
from predicted to actual savings. For this group example, maintenance personnel allowed a
actual savings on average were only 85 percent blown steam trap to remain in service, although
of predicted savings. Six buildings had higher a new one would have paid off in weeks. Apart
savings than predicted while 12 had lower sav- from these 60 buildings reported on by Ross and
ings. Savings ranged (within one standard devia- Whalen, OTA found no study comparing actual
tion) from 80 percent less than predicted to 50 to predicted savings.

1 ~he Ross and Whalen results are reported for different sample Many buildings gradually increased their sav-
sizes out of the 222 buildings in order to get consistency of data. ings in the years following the retrofit, but some
86 Ž Energy Efficiency of Buildings in Cities

decreased their savings. Out of 15 buildings with energy management systems. No buildings in
more than 1 year of data on energy savings fol- the survey had installed some of the more “in-
lowing the retrofit, 9 buildings increased their novative” retrofits described earlier in the chap-
savings following the retrofit, but 6 buildings de- ter—night insulation, passive solar additions,
creased their energy savings over time. waste heat recovery systems or automatic day-
Iighting control systems. It was not possible to
Retrofits were limited to simple, cheap and
draw any conclusions on the relative effective-
we//-known measures. Improvements in oper-
ness of individual measures from the survey. It is
ations and maintenance and lighting measures
evident that owners are cautious in their choice
(including delamping) were the most frequent
of retrofits and are sticking to those that are both
retrofits (see fig. 33). Only 76 buildings or about
inexpensive and well known.
one third of the total installed more complex
and expensive retrofits to the mechanical Improved Data Should Increase the predict-
system or windows, or installed insulation or ability of Building Retrofit Up to a Point. lm-

Figure 33.—Categories of Completed Retrofits: Summary of

Commercial Building Retrofits





Operations .- HVAC Windows Insulation Weather- Energy
and stripping Management
maintenance + caulking System
Retrofit measure

SOURCE: Ross and Whalen, “Buildina Energy Use ComMatlon and Analvsis—Part C: Conservation Progress
in Commercial Building,” d~aft, M~y 1981, “
Ch. 3—Technical Potential for /reproving the Energy Efficiency of Buildings in Cities ● 87

proved data of several kinds would certainly im- predictability of energy savings for particular
prove the predictability of savings from building buildings. The limit arises out of the site-specific
ret refits. nature of building retrofit described above. In
collecting data on retrofit results for a group of
improved data on the results of individual
buildings an analyst must:
retrofits. While there are now substantial data
on savings from installing the more common ● Allow for differences in the combinations
retrofits such as energy management systems, of retrofits which will affect the behavior of
there are still very little data on actual installa- individual retrofits due to the interactive ef-
tions of some of the most effective retrofits iden- fects described above.
tified in testing and computer simulation such ● Allow for differences in hours of occupancy
as: night insulation for multifamily buildings or and vacancy among the buildings.
heat pump hot water heaters replacing electric ● Allow for weather conditions if the data are
resistance hot water heaters. from several years. This is especially true
for any solar retrofits for which hour-by-
Improved data on t h e results of retrofit
hour data are often necessary.
packages. These data would result from system- ● Take into account the impact of very site-
atic retrofit of categories of buildings with simi-
specific retrofits described above, such as
lar uses, sizes and mechanical systems. Multi-
blocking thermal bypasses or recovering
family buildings are one category of buildings
waste heat from cooling equipment.
for which there are almost no data on system-
atic retrofits. Technical data could be obtained By the time these factors have been taken into
from retrofits of condominiums, which appear consideration the analysis has become very
to be more likely than other multifamily types to complex and the power of generalization from
be retrofit. large numbers has been reduced.
Data on actual savings compared to pre- OTA’s conclusion is that predictability of
dicted. Systematic studies of actual savings com- building retrofit could certainly be increased
pared to savings predicted in an energy audit through improved data beyond the fragmentary
should be able to identify categories of retrofits data available in 1981. However, a certain
for which savings tend to be overestimated and amount of variation in actual savings from that
those for which savings are usually underesti- predicted by a retrofit will probably always be
mated. A carefuI examination of the reasons for characteristic of building retrofit, and this vari-
differences in actual savings could identify ability will have an impact on the motivation of
categories of retrofits which are particularly those building owners, especially smaller build-
susceptible to errors in installation or subse- ing owners whose financial situation does not
quent maintenance. allow them to absorb risk. (These are discussed
in ch. 4.)
There is a limit, however, on the precision
with which data can be gathered to improve the


This analysis of the systematic and site-specific plicable to buildings in general, wherever they
nature of the retrofit of buildings has some im- may be located,
placations for the actual practice of building
retrofit in cities through private enterprise and Energy Retrofit Business
public programs. This section summarizes some
observations about the nature of large-scale One of the reasons why actual building ret-
retrofit in cities, some of which is also ap- rofits have lagged behind the identification of
88 Ž Energy Efficiency of Buildings in Cities

ample opportunities for retrofit (as described conservation work. This may change as more
earlier in the chapter) is that the energy retrofit people come to understand the benefits of com-
business, as a business, is still in the process of bining conservation retrofits with active or
organization. Although some parts of the busi- passive solar retrofits.
ness—such as home insulation and energy man-
agement systems for large buiIdings—have con- Many retrofits to the mechanical systems are
siderable track records by now, it still is difficult cost effective even in small buildings and these
to find a single place for the owner of an existing cannot usually be performed by insulation con-
building to go to for advice and action. There tractors with carpentry skills. A retrofit contrac-
has been a lot of talk about a “one-stop” type of tor usually must subcontract out the installation
organization that would serve such a need in of a new burner, hot water heat pump, vent
the private sector. Why are there so few now? A damper, or modulating aquastat. Some natural
partial answer is that retrofit of a building is gas utilities and larger fuel oil dealers maintain
complex. A building’s energy ailments must be service departments which perform these func-
diagnosed first, then cost-effective solutions tions. otherwise, they are carried out by me-
proposed, then the retrofit work must be per- chanical system specialists in furnaces, boilers,
formed. Retrofits may affect almost every aspect and air-conditioners. A few retrofits can be
of a building: structure, hot water, lighting, and done directly by the small building owner, such
mechanical system. Such a task may require a as installing a clock thermostat or faucet and
set of building services that is almost as complex shower flow controllers.
as that used to construct the original building.
In the retrofit of larger buildings, the full range
of building trades (including sprinkler system
For small buildings, especially frame build-
ings, the most cost-effective retrofits will be in- specialists for roof sprays), gets involved. With
the higher intensities of lighting and inherent
sulation and improvements in window efficien-
wastefulness of many of the HVAC systems in-
cy. This requires little more than light carpentry
stalled on larger buildings, this study has shown
skill but is demanding work to organize and
the tremendous cost effectiveness of a much
maintain of high quality. Insulation crews often
broader range of retrofits on larger buildings
work in semiaccessible places; it takes care to
than on smaller ones. Large buildings have
see that gaps in insulation are avoided and
more complex central plants, and require more
peculiar structural features in the walls are
highly trained and experienced people to retro-
taken care of. Such work is difficult to stream-
fit them. In addition, retrofit of the distribution
line; it is exceedingly labor intensive. Separate
portion of the heating and cooling system is lim-
companies often specialize in window retrofits
ited to insulation of pipes and ducts for small
and insulation.
buildings, whereas specialists are needed in
large buildings who can change ventilation set-
A separate specialty is developing in the tings, install outside air controls, or make the
retrofit of small buildings—solar specialist. switch from a terminal reheat system to a vari-
Active solar domestic hot water heating is an able air volume distribution system. Work on
enterprise requiring carpentry, and licensed the lighting system is much more intense in
plumbing and electrical work. passive solar larger buildings, and electricians are required to
retrofit requires carpentry skills that are upward make the shift to task lighting, or change over
extensions of the skills currently in use by in- incandescent fixtures to fluorescent or sodium
sulation and storm window contractors, but vapor. Large buiIdings often have engineers or
which are not typically in the portfolio of those maintenance personnel with skills enough to
organizations. The current trend has been perform the simpler retrofits themselves.
toward further disaggregation of the small
building retrofit industry as contractors Offsetting all this large building complexity is
specializing in renewable retrofit start up prac- the fact that envelope retrofit plays a much
tices without regard to the lower technology smaller role except in major renovations. In ad-
Ch. 3—Technical Potential for /reproving the Energy Efficiency of Buildings in Cities Ž 89

dition, the construction industry which caters to ing storm sash, calking, replacement sash, wall
the large building is as a whole much more used insulation, or any other envelope retrofit meas-
to packaging diverse construction operations ure above the third floor has the choice of erect-
under a single general contract. Therefore, the ing scaffolding or disturbing the occupants of
large building is much more likely to be system- the building. Either tactic adds cost to the job.
atically retrofitted than the small one, even
The opportunity for renewable retrofit is dif-
though the job requires higher skill levels.
ferent in cities. There are plenty of masonry-
walled structures appropriate for passive solar
Problems and Opportunities of retrofit strategies, and acres of flat roofs
Urban Retrofit available for the mounting of active solar collec-
tors or small wind energy conversion devices.
The construction business in urban areas has
On the other hand, urban buildings may be so
always operated differently than in rural areas.
close together that they shade one another’s
What particularly is different about retrofitting
sun or obstruct one another’s wind.18 In addi-
in the city?
tion, urban particulate pollution degrades col-
Because of the high proportion of relatively lector efficiency more rapidly than in relatively
old buildings in urban areas, a lot of retrofit can- unpolluted locations. Vandalism, or the threat
not occur at all without a certain amount of of vandalism, discourages any solar retrofit that
restorative work occurring first. For instance, will place a breakable panel, passive or active,
people working in weatherization programs in within stone’s throw of the street.
our cities are familiar with having to patch holes
There is more crime in urban areas. This in-
in walls before performing the wall insulation
creases the cost of doing retrofit business by
itself. This characteristic of urban buildings
raising insurance costs, both for retrofit vehicles
(discussed more extensively in ch. 5) tends to in-
and equipment and for the business location
crease costs of retrofit above those presented in
itself. In addition, vandalism can degrade the
this report, which consider only the costs of the
performance of more than just solar collectors.
retrofit itself, not those of any repair which may
Heating and air-conditioning thermostats, storm
be necessary beforehand.
windows, and reflecting trim are also subject to
What makes a city a city is its density. Urban intentional damage, with the resultant elimina-
density can result in economies of scale, but tion of the energy savings these improvements
high density a/ways drives up construction costs were designed to cause.
associated with access problems. The kinds of
economies of scale that can result from high
density include reduced travel time to any given Urban Retrofit: Mass Production or
retrofit site, an important cost consideration for Custom Work?
many small retrofit jobs, for which travel is a
large percentage of total job costs. For any step Based on the results of this report, can a gen-
prior to retrofit, such as a sales call, an estimat- eral set of retrofit measures be confidently rec-
ing visit, or an onsite energy audit, costs of ommended for a given building type without
travel are an even larger fraction of the total cost further site analysis of actual individual build-
of the activity. Access problems associated with ings? The results suggest that it would be tempt-
urban construction sites include increased ing to do this, but a poor risk.
travel times and parking fines caused by streets It is attractive to consider that retrofit could be
congested with either traffic or snow, difficult performed without site-specific consideration in
ladder access because ladders must rest on an the form of an energy audit. The total cost of
adjacent property or a public sidewalk, and retrofitting urban buildings is not just the cost of
tremendously increased costs associated with
accessing any kind of exterior retrofit location I aAn an Jly51S Of hours of exposure to su nl Ight for build Ings of d If-
above ladder access level. The retrofitter install- ferent helght~ In Boston 1~ described in Shapiro, op. cit.

. 1, -1, 1, - - . - : I
90 Ž Energy Efficiency of Buildings in Cities

the construction service itself, but also the cost mendation of window weatherstripping, regard-
of the energy audit. Depending on how close less of the severity of the heating or cooling
the energy audit comes to being a construction climate, unless the condition of the existing
estimate that the retrofitter can work from, the prime window and storm window (if any) is
energy audit can make up 2 to 10 percent of the known. But RCS is by no means a program cus-
typical cost of retrofit. Avoiding some of this tomized to each home. The regulations that
cost would help. Some “class action” retrofit have governed RCS specify that the auditor shall
occurs now in the form of two Federal pro- make estimates of cost and savings for a limited
grams, “no cost/low cost” and the Residential set of energy-conserving measures.19 Flame re-
Conservation Service (RCS). “No Cost/Low tention oil burners are included, but modu-
Cost” recommends a set of conservation meas- lating aquastats are not. Under the original RCS
ures without hesitation in a brochure that uni- regulations, as long as a home audited under
formly recommends the same action to a home- RCS has an oil burner that is not of the flame
owner in Minneapolis as it does to a home- retention variety, the auditor must make an
owner in Los Angeles. This is possible because estimate. No matter how appropriate the home
the improvements recommended, such as flow is for installation of a modulating aquastat on
restrictors for shower heads and faucet aerators the hot water space heating system, the auditor
are so cheap that it is practically impossible for a may not take any recommendations for it
poor recommendation to be made. Domestic (unless the particular state in which a home is
hot water usage is almost completely independ- located has applied for, and secured approval
ent of climate, and even if a h o m e o w n e r to consider that energy-conserving improve-
doesn’t heat the home’s domestic hot water at ment). So for RCS, some judgments were made
all, water bill savings are sufficient to pay for in advance of the promulgation of the program
flow restrictors in less than a year. Besides, the as to which energy-conserving improvements
first flow restrictor comes with the “No were sufficiently applicable to make their con-
Cost/Low Cost” brochure anyway. This is not to sideration a cost-effective use of the energy
say that “No Cost/Low Cost” is completely in- auditor’s time. Implicit criteria included com-
capable of causing a homeowner to make a mercialization of the measure (it had to exist in
mistake, that is to invest money foolishly. For the marketplace, and there had to be evidence
example, the program recommends that the that a fair number of people were in business
temperature cutoff on hot air furnaces be ad- who could reliably install the measure), as well
justed downward to make the most of the heat as evidence of energy-conserving performance.
contained in the furnace itself. A certain num- Under regulations proposed in the winter of
ber of people are going to pay a serviceperson 1981 which would extend the RCS concept to a
to come to their homes to make the tempera- Commercial and Apartment Conservation Serv-
ture adjustment only to discover that the adjust- ice it was recognized that commercial buildings
ment has been made. The designers of “No and apartment buildings are far more varied
Cost/Low Cost” find this an acceptable risk, and than small houses. The regulations required
rightly so. Far more money would be wasted only five measures to be evaluated for every
having energy auditors tell people whether their building and a much longer list of measures to
hot air furnaces needed adjustment than just go- be considered for evaluation if appropriate.20
ing ahead and adjusting them.
There is sufficient predictability of applicable
RCS is a partial “class action” program. measures by building type to support a RCS-
Under RCS, energy auditors visit homes, collect type program (whether Federal, State, or utility
site-specific data, and then make projections of directed) for buildings other than single-family
cost and fuel savings that may accrue from the
implementation of a variety of individual lsThe rigidity of these regulations was reviewed by the Reagan
measures, from small wind energy conversion administration and new more flexible regulations have now been
issued (see ch. 9).
systems to weatherstripping. This makes sense, Zoproposed Regulations for Commercial and Apartment Conser-
because it is foolish to make a blanket recom- vation Service, February 1981.
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 91

houses in which onsite auditors are asked to standard per square foot price for attic in-
consider certain kinds of measures for certain sulation. Many RCS audit procedures cur-
building types. The predictability of retrofits, on rently mislead building owners by present-
the other hand, is not universal or consistent ing relatively uniform costs for attic insula-
enough to justify a “No Cost/Low Cost” style tion, whereas site-specific conditions such
program for larger buildings. For instance, for as required access and ventilation can in-
climates in cities like Buffalo, nearly half of fluence cost by a factor of 50 percent, and
the energy-conserving measures considered fall site-specific conditions such as air leakage
into the category of low capital cost under the into the attic or amount of ventilation pro-
assumptions used for these calculations. But posed can influence projected savings by a
variations specific to individual buildings will be similar amount. only an onsite auditor has
sufficient to cause some of these measures to be the ability to make the judgment calls that
of moderate capital cost compared to savings. are essential to deliver a responsible level
of accuracy to the owner.
There are other powerful reasons for making ● Optimum package of retrofits. –Taking into
onsite judgments even after a particular set of
account the interaction among retrofits, an
retrofit measures have been identified as usually
auditor can come up with an optimum
physically applicable and potentially cost effec-
package for that building which might in-
tive when applied to a particular building type.
clude, for example, recommendations on
The advantages of onsite auditing are that the
down-sizing of equipment to accommo-
auditor can properly account for the special
date a better insulated building envelope.
conditions of use and of building condition
when considering a measure or measures for
Thus, this report does lay some important
recommendations, and also when making esti-
groundwork for anyone considering a retrofit
mates of costs and savings. Trained auditors are
program for a single building or entire group of
able, in their examination of the building itself
buildings by providing concrete lists of retrofit
and of the way in which the building is used, to measures worth consideration for particular
account for:
combinations of building types and climates.
● Special conditions of use. —These include
unusual hours of operation, portions of the Beyond this, however, “class action” retrofit,
building unused during particular times of or retrofit without detailed site analysis, is to be
day or season, portions of the building avoided because of the individual variation,
which can be zoned to different tempera- both in costs and in savings, that occurs as the
ture ranges, and usage patterns allowing result of site-specific conditions. Lastly, if audits
cutoff of domestic hot water to lavatories. are to be performed at the site, their computa-
● Long-term strategy for the building. —Many
tion methods must make fewer approximations
retrofit strategies often depend on what than those made in the algorithms in this report
future remodeling plans are in the works in order to be marginally more accurate than
and certainly influence the owners’ level of the projections given here.
● Esthetic consideration. —Many envelope,
Retrofit, Rehab, or Demolish?
lighting, and renewable retrofit measures
have major effects on the appearance of Each prospective building owner or devel-
the building. Only an auditor at the site can oper picks one of four strategies when consider-
tell if the owners are willing to live with a ing a property for acquisition: do nothing,
passive solar wall collector on the front of repair, rehab, or demolish. With the addition of
their building. energy costs to the factors to take into account
● Site-specific conditions affecting costs and in this strategic decision, the question is
savings. —There is no such thing, even for a changed only slightly: do nothing, retrofit,
given building type in a given location, as a rehab, or demolish?
92 ● Energy Efficiency of Buildings in Cities

The advantages of retaining the basic struc- ity) wall to achieve the same improvement in
ture of an urban building are increasing, and energy efficiency. Sooner or later, if the only
range from historical significance to architec- buildings available to developers can be made
tural quality to the avoidance of skyrocketing energy efficient only at very high costs, demoli-
new construction costs. The financial factor is a tion will occur more frequently.
key to all development decisions, and, from the
This report cannot consider a critical factor in
energy point of view, the developer must exam- the decision to demolish or rehab, which is the
ine the energy element of the projected oper-
energy efficient qualities given a building at the
ating statement of a building with new respect,
time it was built, which no amount of retrofit or
and must attempt to answer two difficult ques-
rehab can change. Those “hereditary” qualities
tions: 1) How low can energy costs be brought
can change drastically on the same site accord-
before major rehab is required? 2) How low can
ing to the structure’s built-in characteristics,
energy costs be brought, even after major
notably, surface-to-volume ratio and orienta-
tion. Buildings that can profitably absorb large
This report shows that some buildings in some amounts of retrofit, but which were poorly sited
climates have far higher potential than others. and which have very complicated shapes, may
Consider, for example, a developer in a city never approach the low levels of energy con-
with a climate like Buffalo’s who is looking at sumption which are possible with reasonable
two small commercial properties that are equal investment in new construction. And on the
except that one is of frame (cavity) wall con- other hand, buildings that are well sited and
struction, the other of clad-wall construction. whose shape approaches that of a cube may
The buildings are roughly similar in energy effi- well be capable of being retrofitted to lower
ciency; neither is insulated to begin with, but levels of energy consumption at far less total
the developer must rehab the clad wall at far cost, than a building constructed from scratch
greater cost than he can retrofit the frame (cav- on the site.

Table 3A.—43 Building Types for Which Retrofit Lists

Were Developed
Mechanical Mechanical
Size and use Wall type system type — Size and use Wall type system type
Small residential Cavity . Air ● Decentralized
(2,000 ft2) . Water Ž Complex reheat
. Decentralized Clad ● A i r

Masonry ● A i r ● Water

. Water ● Decentralized

● Decentralized ● Complex reheat

Moderate residential Cavity ● Air Large commercial Masonry ● A i r

(15,000 ft2) . Water (100,000 ft2) . Water

● Decentralized ● Decentralized

Masonry ● A i r ● Complex reheat

● Water Clad ● A i r

● Decentralized ● Water

Clad ● A i r . Decentralized
● Water Ž Complex reheat
. Decentralized Large residential Masonry ● Air
Moderate commercial Cavity Air ● (100,000 ft2) ● Water
(15,000 ft2) . Water ● Decentralized

● Decentralized Clad ● A i r

● Complex reheat ● Water

Masonry ● A i r ● Decentralized

● Water
— — - — — —— — — — — — — — — —
SOURCE: Office of Technology Assessment.
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 93

Table 3B.—Retrofits Assessed by Office of Technology Assessment a

Costs and
savings of
retrofit not
Retrofit applies specifically
only to: analyzed by OTA
Envelope retrofits
Roof/attic insulation
Wall insulation
Storm Windows
Replacement double glazing
Window and door weatherstripping
Window insulation
Reflective insulation
Shading devices
Roof sprays
Mechanical system retrofits
Replace burner and controls
Replace boiler/furnace
Install vent damper
Stack heat reclaimer Water systems
Replace electric resistance heater with
heat pumps Decentralized
Boiler turbolator Water systems
Modulating aquastat Water systems
Setback thermostats
Enthalpy control/economizer Air systems
Replace room air conditioners Decentralized
Replace central air conditioning Air systems
Vary chilled water temperature
Convert terminal reheat to variable air
volume Complex reheat
Reduce ventilation volume Air systems
Evaporative cooling system
Replace air-cooled condenser with water
Fog cooling (evaporator coil spray)
Insulate ducts Air systems
Insulate pipes Water systems
Two-speed fan motors Air systems
Adjustable radiator vents Water systems x
Reduce orifice size on furnace/boiler x
Install multifuel boiler x
Whole house fan x
Condenser coil spray x
Chiller bypass system x
Hot Water Retrofits
Summer domestic hot water boiler
Flow control devices
Insulate hot water storage
Vent damper on heater
Hot water heat pump
Refrigeration heat reclaim for hot water x
— —.—
Lighting retrofits
Replace incandescent light with
Install fluorescent hybrid lamps
Use low wattage task lighting
Use high-efficiency fluorescent lamps
Maximize use of daylighting x
Solar retrofits
Solar hot water heater
Active solar combined space and hot water
Glaze masonry wall (trombe)
Add wall panel without storage
Add glazing without storage but with
night insulation
Add glazing with storage but without
night insulation
aEach retrofit IS described In appendix

SOURCE Off Ice of Technology Assessment

94 ● Energy Efficiency 01 Buildings in Cities

Table 3C.—Characteristics of the 12 Building Types

(as determined for analysis of retrofit measures)

type Size Walls Roof Windows
Single-family 2,000 ft 2
“Cavity” wood Wooden, peaked
detached 2 stories frame with wood roof with double hung
or brick siding attic
Single-family 2,000 ft2
Brick or stone Flat or slightly Wooden,
masonry 2 stories bearing walls, pitched with double hung
rowhouse two walls crawl space
Small frame 15,000 ft2 Wood frame with Flat wooden Wooden,
apartment 18 apartment wood or brick roof double hung
house units, 3 stories siding
Small masonry 15,000 ft2 Brick or stone Concrete slab Wooden,
apartment 18 apartment bearing wall roof double hung
house units, 3 stories
Small clad wall 15,000 ft2 Prefabricated Concrete slab Metal frame,
apartment 18 apartment masonry panels double hung
house units, 3 stories attached to
metal frames
Small clad wall 15,000 ft2 Wood frame with Flat wooden Wood frame,
commercial 3 stories wood or brick roof double hung
building siding
Small masonry 15,000 ft2 Brick or stone Concrete slab Metal frame,
commercial 3 stories bearing wall double hung
Small clad wall 15,000 ft2 Prefabricated Concrete slab Metal frame,
commercial 3 stories masonry panels commercial
building attached to casement
metal frames windows
Large masonry 100,000 ft2 Brick or stone Concrete slab Metal frame,
commerical 8 stories bearing wall double hung
Large clad wall 100,000 ft2 Prefabricated Concrete slab Metal frame,
commercial 8 stories masonry panels commercial
building attached to casement
metal frames
Large masonry 100,000 ft2 Brick or stone Concrete slab Metal frame,
apartment 8 stories, bearing wall residential
house 150 apartments casement
Large masonry 100,000 ft2 Prefabricated Concrete slab Metal frame,
clad apartment 8 stories, masonry panels residential
house 150 apartments attached to casement
metal frame
SOURCE: Office of Technology Assessment,
Ch. 3—Technical Potential for Improving the Energy Efficiency of Buildings in Cities ● 95

Table 3D.—Assumptions About the Mechanical System Types Used in OTA’s

Analysis of Retrofit Cost Effectiveness
(see illustrations of mechanical systems in chapter text)
Air systems
Basic system modeled Variations in retrofit options for other systems
Heat ● For gas-fired burners. Some retrofits save
Single zone without reheat. Oil-fired fewer Btus (vent dampers) because less
burner cycles in response to single heat escapes up the flue.
thermostat. ● Variable air volume (VAV). Systems without

Cooling reheat are somewhat more energy efficient.

For small and moderate size buildings a Some retrofits save fewer Btus on VAV
direct expansion (DX) split system. For systems than on single zone system.
large buildings a reciprocating chiller
making chilled water. Outside air is
used for cooling and ventilation only for
commercial buildings.
Complex reheat systems
Basic system modeled Variations in retrofit options for other
Heat reheat systems
Single duct terminal reheat system. Air . For gas-fired boilers. No difference in
is circulated to all zones at the retrofit cost effectiveness except that
temperature required by the zone with resulting from lower fuel cost.
the least heat requirements and then . Dual-duct systems. Hot and cool air are car-
heated at zones with higher heat re- ried in different ducts and duct insulation
quirements by a terminal coil with hot might be more effective.
water or steam from a central oil-fired . Multizone and variable air volume (VAV). Are
boiler. Outside air is used to cool the more efficient. Thus, the same retrofits to
return air (at room temperature) down these systems would be somewhat less cost
to temperature required by the zone effective.
with the least heat requirement. ● Terminal reheat provided by electric
Cooling resistance heater. Converting to variable air
Air is circulated at the temperature re- volume would be even more cost effective.
quired by the zone with the most cool-
ing requirement and then reheated to
meet the temperature requirements of
other zones.
Water/steam systems
Basic system modeled Variations in retrofit options for other systems
Heat ● Systems with steam radiators. Pipe insula-
Single zone hot-water baseboard radia- tion would be more important for the higher
tion with single water temperature set- temperatures. A steam pressure reset would
point. Boiler cycles in response to be used instead of a modulating aquastat to
single space thermostat and circulation relate temperatures inside the boiler to
pump responds to system water those outside (hotter temperatures inside
temperature. for colder temperatures outside).
Cooling ● Two-pipe fan coil and induction systems.
Window or wall air conditioners con- Use various methods to heat air in each
trolled room-by-room (coefficient of per- zone from the centrally-heated water or
formance 1.8). steam. If each zone has a thermostat
multizone setback thermostats may be ap-
● Four-pipe fan coil and induction systems.
Circulate centrally-chilled water as well as
hot water or steam. The heating retrofits
identified by Office of Technology Assess-
—— ment would apply to the heating system.
Decentralized systems
Basic system modeled Variations in retrofit options for other systems
Heat ● Systems with all-electric wall units pro-
Electric resistance baseboard radiation vialing heating and cooling. Retrofits will be
which cycles in response to room ther- the same in cost effectiveness for a
mostats, combination window unit with the same
Cooling coefficient of performance as the room air
Window or wall air conditioners (coeffi- conditioner. If the wall unit takes in a large
cient of performance 1.8). amount of outside air retrofits will be more
cost effective.
. Gas space heaters. No difference in building
envelope retrofits except for that resulting
from lower fuel cost. A retrofit to improve
the efficiency of the space heaters (e.g., by
installing high-efficiency room-sized pulse
boilers) would substitute for retrofits to im-
prove the efficiency of electrical systems.
Chapter 4

Will Building Owners Invest in the

Energy Efficiency of City Buildings?


introduction . . . . . . . . . . . . . . . . . . . . . . . . . 99 Potential for Increasing the Rate of Retrofit
by Building Owners. . ..............127
Context for Building Owner
Decisionmaking in 1980-81..........101 Information: Diminishing the Risks of
Retrofit . . . . . . . . . . . . . . . . . . . . .. ....132
Who Owns What?. . ..................104
Impact of Less Costly Financing on the
Impact of Ownership on Building Retrofit. .107
P a c e of Retrofit. . ..................133
Impact of Building Types on the Likelihood
of Retrofit. . . . . . . . . . . . . . . . . . . . . . .. 116
Likelihood of Retrofit in Multifamily
Buildings . . . . . . . . . . . . . . . . . . . . . . . . 117 Table No. Page
27. Likelihood of Retrofit by Building Type
Likelihood of Retrofit in Commercial
and Owner Type. ., . ..........-....100
Buildings . . . . . . . . . . . . . . . . . . . . . . . . 121
28. Types of Building Owners Interviewed. 101
Potential for Retrofit in Marginal 29. Building Types Covered in Building
Neighborhoods . ..................126 O w n e r Interviews. . ................101
Table NO . Page Table No.
30. Energy’s Share of Operating Costs. .. ..162 45. Building Owner Preferences for Tax
31. Ownership Types Believed To Be Most Credits or Financing Subsidies. . . . . . . . 139
Characteristic of Various Building Types 105
32 Ownership of Office Buildings–
Atlanta, 1974, . . . . . . . . . . . . . . . . ., ..105 LIST OF FIGURES
334 Holders of Residential and Commercial
Mortgages. . . . . . . . . . . . . . . . . . . . . .. .106 Figure No. Page
34. Retrofit Payback Criteria, Holding 34. Comparison of Prices of Natural Gas
Periods, and Access to Financing and and the Prime Rate, 1970-81 . . . . . . . . . 103
Advice Among Different Types of 35 Frequency of Major and Minor Energy
Owners . . . . . . . . . .................109 Retrofit Among Building Owners
35. Annual Heating Fuel Costs in Interviewed .. .. ... .. ...... . . . . . 108
Apartment Buildings. .. .. ... ... ... ..118 36 Frequency of Retrofits Among Building
36. National Distribution of Metering Types Covered in Building Owner -
Types of Rental Units . . . . . . . . . . . ....119 Interviews. ..,.. . ...............,.116
37. Landlords’ Ranking of Reasons for 37. Apartment Operating Revenues and
Disinvestment. . .. .. .. .. ... ... .,.$.126 Expenses, 1970-76. . . . . . . . . . ......118
38. Thirteen Types of Buildings With 38. Combinations of Loan Terms and lnterest
Significantly Different Retrofit Options. 128 Rates Which Allow the Value of Energy
39. Typology of Small Multifamily Savings to Exceed the Cost of Borrowed
Buildings According to the Likelihood Money the First Year. .. .. ... ... ... ..I34
of Major Improvement in Energy 39. Cash From Operations for an 18-Unit
Efficiency . . . . . . . . . . . . . . . . . . . . . . . . 128 Apartment Building With and Without
40. Typology of Large Multifamily an Energy Retrofit. . ................136
Buildings According to the Likelihood 40. impact of Energy Retrofit Subsidies on
of Major improvement in Energy Pretax and Aftertax Cash Flow for a
Efficiency . . . . . . . . . . . . . . . . . . . . . . . . 129 Prototypical Apartment Building. ..137
41. Typology of Small Commercial 41* lmpact of a Retrofit on Pretax and
buildings According to the Likelihood Aftertax Cash Flow for Two other
of Major Improvement in Energy Prototypical Apartment Buildings. ....138
Efficiency. .. ..... . . . . . . . . . . . . . . 130
42. Typology of Large Commercial
Buildings According to the Likelihood BOXES
of Major Improvement in Energy
Efficiency ..,.... . . . . . . . . . . . . . . . . . 131 C. Permanent Financing: Roles of
43< Percentage of Apartment Building Mortgage Banks and Insurance
Owners Who Perceived Measures They Companies . . . . . . . . . . .............,106
Installed To Be Effective. . ...........132 D. Corporations: Taxes and Accounting....... 106
44. Impact of uncertainty on Expected E. A Question of Value: How the Appraiser
Annual Energy Savings From a Sees It. . . . . . . . . . . . . . . ............113
Retrofit Costing $10,000. . ...........133 F. Role of the Property Manager. ... ... ...113
Chapter 4
Will Building Owners Invest in the
Energy Efficiency of City Buildings?

Virtually all types of city buildings (as is clear of retrofit range from good if it is an owner-
from ch. 3) can be retrofit to save a substantial occupied building in an up-and-coming neigh-
portion of their energy. Some can be retrofit borhood to very poor if it is owned by an absen-
easily and cheaply. Others can be retrofit only tee landlord, and is located in a declining neigh-
with difficulty and at considerable expense but borhood.
nonetheless in such a way that the expense
A curtain wall office building with a decentral-
would be justified by energy savings over the
ized heating system of electric baseboard heat
building’s lifetime.
and window air conditioners has much poorer
The question remains, however, will these prospects for inexpensive easy retrofit than the
buildings be retrofit? The answer given by this small frame steam-heated building. In most
chapter is that city buildings will not be retrofit cases, only expensive retrofits are available for
unless several more conditions are met beyond such a building, replacing the electric resistance
the fact that the building is cost effective to ret- heaters with heat pumps or installing double
rofit. glazed window panels. Nonetheless, because of
the potential goals of its owners and their re-
If a building that can be retrofitted is to be ret-
sources the chances that such a building wiII ac-
rofitted three additional conditions must be
tually be retrofit range from good for a corpor-
ate headquarters or office building owned by an
● the building’s energy inefficiency must insurance company or pension fund to poor if it
cause a noticeable loss i n present or future is owned by a smalI local partnership for tax
return from the building, shelter purposes.
● an investment in improved energy efficien-
The likelihood that a building will be retrofit
cy is consistent with the building owner’s
depends both on its type of owner and on the
goals, and
importance of energy costs for the purpose the
● the building owner has the means—ade-
owner uses the building for. Table 27 illustrates
quate information, decisionmaking ability,
in a schematic way the general prospects for ret-
time, and financial resources—to make the
rofit for different combinations of buildings and
invest ment.
owners. In general, the chances that a building
Furthermore, even if the building owner is will be retrofit are less likely for multifamily than
willing and able to make such an investment, it for commercial buildings, less likely for build-
wiII not happen unless there are businesses ings owned for investment than for buildings oc-
ready to recommend and install the retrofit. The cupied by their owners, and less likely for build-
state of the energy retrofit business is mentioned ings owned by individual owners or local part-
briefly in this chapter but is discussed more nerships than for those owned by institutional
completely in chapter 7. owners such as pension funds and insurance
companies, or national partnership syndicates.
For example, it should be easy (given the anal-
ysis in ch. 3) to prescribe a set of very cost-effec- In fact real estate is not quite so simple as
tive retrofits for a small frame multifamily build- table 27. The rest of the chapter explains some
ing with an old inefficient steam system in a city of the complexity of investment for energy effi-
with a cold climate. Yet for the identical build- ciency in buildings. To date little specific re-
ing with identical retrofit potential the chances search work has been done on the subject of

100 ● Energy Efficiency of Buildings in Cities

Table 27.—Likelihood of Retrofit by Building Type and Owner Type

Decreasing likelihood
Multifamily Multifamily
master- tenant-
Owner-occupants Office Hotel Retail metered metered
Decreasing Corporation . . . . . . . . . L L L x x
Likelihood Individual . . . . . . . . . . . M M M M P
Condominium. . . . . . . . X x x M M
Decreasing Institutional (pension,
insurance). . . . . . . . . L L L L M
Likelihood Development
company . . . . . . . . . . M M P P u
National partnership . . M M M M P
Local partnership. . . . . P P P P u
Individual . . . . . . . . . . . P P u P u
L = Likely.
M = Moderate.
P = Possible.
U = Unlikely.
X = There are none or very few examples of such building types owned by these owners.
SOURCE: Office of Technology Assessment

the motivation to invest in energy efficiency per interviews, supplemented by extensive reading
se although there is voluminous Iiterature on in- in real estate trade literature, in-house RERC ex-
vestment i n real estate.1 The chapter relies heav- pertise, and OTA staff research form the basis
ily on work done for OTA by the Real Estate Re- for this chapter.
search Corp. (RERC) a Chicago-based consult-
This chapter focuses on privately owned, ur-
ing firm specializing in the investment analysis
ban commercial, and multifamily buildings–of-
of real estate and in appraisal.
fices, retail facilities, hotels, and small, medium,
RERC conducted a comprehensive literature and large apartment houses—partly because
review, and interviewed buildings owners i n four these form the bulk of the urban building stock
case study cities (Buffalo, N.Y., Des Moines, and partly because these have been woefully
Iowa, Tampa, Fla., and San Antonio, Tex.) as neglected i n the literature on investment in
well as “national” real estate owners with energy efficiency. The chapter does not specif-
holdings in all parts of the country. RERC also ically address the motivation for investment by
analyzed prototype multifamily buildings to owners of single-famiIy houses. This subject was
evaluate the impact of rising energy costs and fully covered in the previous OTA study on Resi-
energy retrofits financed in several alternative dential Energy Conservation, and other litera-
ways. In total, RERC talked to 96 building ture, 2 and is addressed to some extent in other
owners representing different types of owners chapters of this report Chapter 5, Retrofit for the
and different building uses. (The breakdown of Housing Stock of the Urban Poor and Chapter 9,
interviews is shown in tables 28 and 29. ) These The Public Sector Role in Urban Building Energy
Conservation. Under some conditions the moti-
1 Several other useful sources on real estate decisions and energy vation of single-family home owners parallels
conservation include: Hittman Associates, PhysIca/ Charac (er-
that of the owner-occupants of small multifam-
IstIcs, Energy Consumption and /7e/ated /nstI tut/oncJ Facfor$ fn the
Cornrnercla/ SeC tor, DC)E report, February 1977; Proceedlng~ oi ily buildings and this will be pointed out in the
the Mu/tl/am//} and Rental Housing Work$hop, Dec. 4, 5, and 6, text.
1980, Washington, D. C., sponsored by the Federation of Amer-
ican Scientists Fund prepared by Deborah L. Blevis; Alice Levine, 2 A comprehensive analysls of the potential for energy conserva-
and Jonathan Raab, So/ar Energ}, Conwrvatlon and Renta/ Hous- tion in single-family houses are the final report and working
ing, Solar Energy Research Institute, March 1981; Mu/t/-Faml/y papers of the Res/dentla/ Energ}’ Ef(Ic Ienc} Standards Study sub-
Energy Conwrvatlort: A R e a d e r , C o a l i t i o n o f N o r t h e a s t mitted to Congress by the Department of Housing and Urban De-
Municlpallties, July 1981. velopment In July 1980.
Ch. 4—Will Building Owners Invest in the Energy Efficiency of City Buildings? ● 101

Table 28.—Types of Building Owners Interviewed a

Owner status Buffalo Des Moines Tampa San Antonio National

Individual . . . . . . . . . . . . . . . . 8 4 1 3 6
Partnership , . . . . . . . . . . . . . 7 5 4 4 5
Corporate . . . . . . . . . . . . . . . . 3 4 1 2 4
Institutional . . . . . . . . . . . . . . 0 1 0 0 10
Development company . . . . . 3 0 0 1 4
Bank . . . . . . . . . . . . . . . . . . . . 4 2 4 3 —
Condominium . . . ... , , . . . . 0 0 1 1 1
Total . . . . . . . . . . . . . . . . . . 25 16 11 14 30
asom~ owners trrterV@W@ f-rad multiple ownership posltlons (e g., as Individual owners and members of partnerships)
Owners were tabulated on the basis of the!r prlnclpal ownership role
SOURCE Real Estate Research Corp

Table 29.—Building Types Covered in Building Owner Interviews

Building type Buffalo Des Moines Tampa San Antonio

Multifamily . . . . . . . . . . . . 10 9 3 7
Retail. . . . . . . . . . . . . . . . . 2 3 3 2
Shopping centers
Department stores
Retail strip
Offices . . . . . . . . . . . . . . . 8 6 4 6
Hotels . . . . . . . . . . . . . . . . 1 1 0 2
Total . . . . . . . . . . . . . . . 21 19 17 10
NOTE, The number of bulldlng types WIII not exactly correspond to the number of owner types due to multlple ownershtp and
the fact that banks were not Interviewed as owners In all cases
SOURCE, Real Estate Research Corp

The decision to make energy improvements headquarters building to the retired couple
in response to rapidly rising energy costs is holding onto their small three-story walkup as
above all a real estate investment decision. Like their nest egg. The conditions under which real
other real estate decisions it is affected by estate decisions are made can change drastical -
overall investment strategy, tax laws, market- Iy from year to year. The rapid increases in infla-
ability of the property, lease terms, cost and tion and interest rates of the last few years have
availability of financing, perception of risk, and had profound consequences for decisions made
many other considerations for a particular by all kinds of real estate owners. (More recent-
building. Furthermore, real estate is a complex ly, the 1981 tax law has made sweeping changes
and diverse industry. Markets vary sharply from in the importance of real estate as a tax shelter
city to city and even from neighborhood to for other income.) The chapter treats each of
neighborhood. ownership runs the full range these influences on a building’s prospects for
from the giant corporation that owns its own retrofit.


Although the general goals of investment in work was done, had its particular features,
real estate remain the same over years and dec- many of which continued into 1981.
ades, the specific concerns of building owners
are significantly influenced by the structure of Energy is Now Important. First of all, after
costs and opportunities in a particular place and many years of energy price increases, energy
time. The year 1980, when most of the survey began to be, for many building owners, a seri-
102 ● Energy Efficiency of Buildings in Cities

ous concern in 1980. It was widely perceived, greater share of costs in 1979 than it was in the
as reported to RERC, as having crossed a early 1970’s. (Vigorous conservation by hotels
threshold of importance within the overall appears to be responsible for holding the
balance of income and expense for particular energy share down. ) Further rapid increases in
buildings. In its annual national survey Emerg- energy prices since 1979, especially in heating
ing Trends in Real Estate 1981, RERC described oil, help account for the obvious concern about
this change in consciousness of energy by energy which was evident i n the interviews with
building owners:3 building owners in late 1980.

In 1979, their attitude was that increased costs The energy retrofit business scarcely existed
would simply be passed on to consumers; but a few years ago, and is still in the process of get-
this year’s comments are less cavalier. Lenders ting organized in response to the increasing in-
are examining the energy efficiency of buildings terest in controlling energy costs. A few long-
being purchased or developed; investors are established companies offer specialized energy
concerned about absolute operating costs, and retrofits such as energy control systems. Many
not just those they will pay themselves; and ten- other companies already expert in the installa-
ants are seriously evaluating energy costs when tion and maintenance of heating, ventilating,
considering space alternatives.
and air-conditioning systems are acquiring ex-
Although some of the building owners inter- perience and are recommending and installing
viewed for OTA did not share this perception, energy retrofit measures. There are still only a
most did and echoed the concern of the mana- few general retrofit companies that have both
ger of a downtown office tower in Buffalo: experience with mechanical systems and expe-
“That electric bill is incentive enough, believe rience with such envelope retrofits as double
me!” glazing, blockage of air infiltration or insulation.
The current embryonic state of the private mar-
For most categories of building operations
ket ability to prescribe and install retrofits is de-
and businesses, the rapid increases in energy
scribed in more detail in chapters 3 and 7.
prices (described in ch. 2) have been faster than
Nonetheless, observers of this process believe
increases in other costs of doing business such
that it will take a few more years for enough
as labor or property taxes. For all except hotels
businesses to acquire solid reputations in this
(see table 30), the cost of energy was a far
field, so that the building owners’ interest that is
Real Estate Research Corp., “Emerging Trends in Real Estate: now manifest will be matched by a private
1981 ,“ Chicago, Ill., October 1981. market response.
The current state of knowledge about the
Table 30.—Energy’s Share of Operating Costs
(in percent) demonstrated effects of retrofit on energy use is
1970 1975 1979
as embryonic as the energy retrofit business. Al-
though proprietary information is now being
Downtown office(1) . . . . . . . . . . 18.90% 19.1% 23.80/o
Center city hotel (2) . . . . . . . . . . NA 7.9 7.5 developed on retrofit results for such businesses
Neighborhood shopping (3) . . . . 5.9 (1972) 4.2 9.1
Elevator multifamily (4):
as restaurant chains and department stores,
Heating fuel . . . . . . . . . . . . . . 5.5 NA 13.4 there is still very little published information, in
Electricity . . . . . . . . . . . . . . . . 6.9 NA 13.8
Gas . . . . . . . . . . . . . . . . . . . . 1.3 NA 2.7
a few years there should be more publicly avail-
Low-rise (12-24 units) (4): able information on actual retrofits from sur-
Heating fuel . . . . . . . . . . . . . . 13.1 NA 18.9 veys, from demonstration projects and from
Electricity . . . . . . . . . . . . . . . . 2.8 NA 8.9
Gas . . . . . . . . . . . . . . . . . . . . . 1.3 NA 2.7 such programs as the federally funded program
NA = Not available. to retrofit schools and hopitals. Improved
SOURCES: 1980, 1976, 1971, Downtown Office Experience Exchange Report, knowledge of retrofit results, coupled with
Building Owners and Managers Association (BOMA), Washington,
DC.; Laventhol and Horwath, U.S. Lodging Industry, 1976, 1979, longer track records of the now-forming energy
1980 reports; Dollars and Cents of Shopping Centers, 1972, 1975,
1978 ULI — The Urban Land Institute, Washington, D. C.; /n-
retrofit companies will reduce the element of
corne/Expense Ana/ysis: Apartments, Institute of Real E s t a t e
Management (19S0 and 1975 editions). All figures are national
uncertainty that still looms large in any decision
averages. to invest in building energy efficiency.
Ch. 4—Will Building Owners Invest in the Energy Efficiency of City Buildings? ● 103

Leasing Trends. Offsetting increasing owner estimate of the energy savings from tenant me-
concern with energy costs, is an increasing tering in multifamily buildings is 5 percent for
tendency for leases to be written so as to pass all heating costs (more for electric heat, less for gas)
or most energy costs to the tenants. The differ- and 20 percent for other energy costs,4 How-
ent types of leases and their implications for ever, for those buildings for which substantial
energy use are described below in sections on investments in energy retrofits such as new
each building type. In multifamily buildings lighting systems or more efficient central boilers
owners are converting master-metered build- would increase their energy efficiency, the prev-
ings to tenant metering if technically feasible alence of net and passthrough leases clearly re-
and introducing prorata billing systems for duces the immediate incentive of the owner to
energy costs when it is not technically feasible. invest.
In office buildings new leases are written with
Over the longer term the owner of a building
passthrough clauses in a variety of forms. In the
with net leases may still invest in its energy effi-
last decade, retail buildings (especially shop-
ciency but will take into account the competi-
ping centers) have almost entirely converted
tive importance of an energy efficient building
from gross to net leases in which not only
to his tenants in the overall market that they
energy costs, but maintenance and cleaning
operate in. The variations among office, hotel,
costs, taxes, and a prorata share of the common
retail, and multifamily tenants in their concerns
space are passed on to tenants.
about the energy efficiency of their buildings
Net leases, and passthrough leases encourage will be described below.
tenant responsibility for sensible use of energy
in their rented space. Although little has been Lou McLelland, “Encouraging Energy Conservation in Multi-
Family Housing: RUBS and Other Methods of Allocating Energy
documented of the impact of these types of Costs to Residents, ” Executive Summary, 1980, Institute of
leases on energy use in commercial space, one Behavioral Science, University of Colorado, p. 8.

4 ~

2 “
I I I I t I I I 1 -
1970 1972 1974 1976 1977 1978 1979 1980 1981
SOURCE : Federal Reserve Board; Department of Energy, Energy Information Administration, Annua/ ‘t
Repel to Congress,
1980, p 119, Morrthly Energy Review, August 1981, p. 16.
104 ● Energy Efficiency of Buildings in Cities

Costs of Financing. Energy isn’t the only cost Some shorter term alternatives to refinancing
of doing business that has increased in the past and second mortgages for buiIding improve-
few years. Since 1977, the cost of financing–for ments—such as commercial bank loans, lines of
buildings, equipment, inventories, and energy credit, signature loans or borrowing against per-
retrofits—has increased just as fast. Since 1970 sonal assets—are generalIy avaiIable at the same
(as can be seen in fig. 34), the prime rate is seen interest rate as construction loans, floating 2
to increase as fast as the price of natural gas. points over prime (21 percent in both the sum-
Most energy retrofits substitute capital for mer of 1980 and spring of 1981). To be sure,
energy. The high cost of financing has been a banks may lend below prime to preferred cus-
serious disincentive to retrofits. tomers but these generally must maintain large
deposits in exchange for prefered treatment on
Traditionally, major building improvements
loans. At such high financing rates, virtually all
including energy retrofits were financed by refi-
building owners will postpone building im-
nancing (remortgaging) the entire building, Al-
provements including energy retrofits unless
ternatively, second mortgages might be used at
they can be financed internally (see the later dis-
premium, but not prohibitive, rates. In the cur-
cussion of the availability of internal funds).
rent climate neither is practical. Refinancing a
fixed rate mortgage issued 5 years ago at 9 per- Overall Context. To sum up, the year 1980-81
cent with a note of 14 to 17 percent or higher is finds several contradictory influences on the
neither sensible nor affordable. Furthermore, in likelihood of energy retrofit investment in
response to persistent high inflation, most finan- buildings. Building owners’ newly recognized
cial institutions are moving away from fixed concerns about energy costs, the gradual im-
rate, long-term mortgage loans, which in late provement in the organization of the energy ret-
1980 were virtually unavailable. Instead they rofit business, and the knowledge of the impact
are developing 5-year renegotiable mortgages, of energy retrofit all tend to increase the amount
variable rate financing methods and equity par- of retrofit that is likely to occur. Strongly offset-
ticipation. As a banker interviewed in Tampa ting these influences, however, is the growing
put it: “This last round of madness in money tendency toward net and passthrough leases
markets has destroyed the conventional means and the very high cost of financing.
of financing income property. Now they say
‘give me a piece of it’. ”


The prospects for energy retrofit to a parti- ture and the expertise of real estate analysts and
cular building depend on both what a building operators. There is virtually no detailed data on
is used for and who owns it. Although all kinds ownership. In some States such as Illinois,
of buildings, large and small, commercial and moreover, ownership is hidden by various de-
residential, are owned by individuals or local vices permissible under State law. I n only a few
partnerships, other organizations active in real cities for a few particular markets, office build-
estate, such as insurance companies or national ings, multifamily, etc., have there been surveys
partnership syndicates, tend to specialize in of types of owners.
only a few building types, Before proceeding to
The consensus of conventional wisdom in
a discussion of the impact of owner types, or
real estate on who owns what is shown in table
building types on retrofit, it is important to
31. Small buildings are usually owned by indi-
know who owns what.
viduals and partnerships, and small business
Most of what is known about ownership of corporations. Large buildings may be owned by
buildings is known from real estate trade litera- individuals and partnerships as well, but may
Ch. 4—Will Building Owners Invest in the Energy Efficiency of City Buildings? Ž 105

Table 31.— Ownership Types Believed To Be Most Characteristic of Various Building Types
Owner-occupants Investor-owners
dual or National Develop- Local
Corpo- small Condo- lnstitu- partner- ment partner-
ration business minium tional ship company ship Individual
Small buildings:
(2-9 units). . . . . . . . . . . . . . . x x x
Office buildings . . . . . . . . . . . x x x
Retail strip stores . . . . . . . . . x x x
Large buildings:
Multifamily (more
than 10 units. . . . . . . . . . . . x x x x x
Office buildings . . . . . . . . . . . X x x x x x
Shopping centers. . . . . . . . . . x x x x
Department stores. . . . . . . . . X x
Hotels . . . . . . . . . . . . . . . . . . . x x x x
SOURCE” Off Ice of Technology Assessment

also be owned by insurance companies, pen- Although local partnerships are still the domi-
sion funds, major corporations, national part- nant form of partnership in real estate, national
nership syndicates, or development companies. syndicates of partnerships (such as JMB, Robert
MacNeil, and Balcor) have become increasingly
Partnerships are believed to be the most com- important in the last half decade. They are listed
mon form of real estate ownership, because of
with the Securities and Exchange Commission
the real estate tax advantages a partnership has
and their sales are handled by such brokerage
over a corporation. in a survey of office build-
firms as Merrill Lynch and E. F. Hutton. National
ings in the city of Atlanta (table 32), partnerships
syndicates select their investments with an eye
and corporations were not distinguished. If, to future appreciation. A few (such as Robert
however, partnerships were the bulk of the
MacNeil) specialize in multifamily properties;
owners, as predicted by conventional wisdom, others favor the generally higher returns from
then they accounted for more than half of all of-
owning and leasing office buildings, shopping
fice buildings in the city.
centers, and hotels.
Development companies, when they own real
Table 32.—Ownership of Office Buildings—
Atlanta, 1974 estate as welI as buiId and develop it, also prefer
office buildings, shopping centers, and hotels
Number of and tend to avoid the smaller returns of smaller
Type of ownership buildings
commercial buildings and multifamily build-
Corporations and partnerships. . . . . . . . 216
Savings and loans . . . . . . . . . . . . . . . . . . 19 ings. So do the increasingly important institu-
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 tional investors such as insurance companies,
Individuals. . . . . . . . . . . . . . . . . . . . . . . . . 50 and pension funds. These latter have traditional-
Labor unions . . . . . . . . . . . . . . . . . . . . . . 3
Real estate companies . . . . . . . . . . . . . . 13 ly provided the permanent financing for larger
Insurance . . . . . . . . . . . . . . . . . . . . . . . .... . 26 multifamily and commercial buildings, general-
Real estate investment trusts . . . . . . . . . 3 ly through the brokerage of a mortgage bank
Nonprofit organizations . . . . . . . . . . . . . 8
Uncertifiable . . . . . . . . . . . . . . . . . . . . . . . 8 (see box C). Increasingly, however, these insti-
tutions are becoming more active in the equity
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ownership of buildings themselves. For pension
NOTE Survey Included urban structures of at least 10,000 ft’ and suburban
structures of at least 30,000 ftz, all wlthl n the vlclnlty I Imlts funds, recent changes in the Employment Re-
S O U R C E Cornrnercia/ Space POIICY Ana/ys/s of Profltablllty of Retrofit of tirement and Security Act (ERISA) have per-
Energy Consewat/err, Metro Study Corp , Washington, D C , June
1976 mitted a more aggressive direct role in real

[, -1, , . —.
106 . Energy Efficiency of Buildings in Cities

estate. As of 1979, the eight biggest life insur-

ance companies had about $3.8 billion in real
estate purchases, joint ventures and income
property construction, out of total assets of $215
billion including about $64 billion in
mortgages. 5 Institutions are a small but increas-
ing share of building owners.
Corporations tend to own buildings for their
own use partly because corporate tax laws dis-
courage the use of building losses to shelter
other income (see box D). They commonly own
office buildings, hotels, and department stores,
more rarely shopping centers and almost never
apartment buildings.
As a group, the o w n e r s o f m u l t i f a m i l y
buildings are the smallest and least organized of
all owners. About 2.7 million owners occupy
one or more apartments of multifamily building
they own.6 The Urban Institute found in a 1976
— — - —
sCrittenden Financing, Inc., 1980.
‘W .S. Bureau of the Census, General Housing Character/st/cs,
U.S. and Regions 1977, 1978.
Ch. 4— Will Building Owners Invest in the Energy Efficiency of City Buildings? ● 107

study of Boston that 60 to 70 percent of the Many commercial buildings are small and oc-
multifamily buildings were owned by individuals cupied by their small business owners, who may
who owned less than 30 units. Only 10 to 15 be individuals, partners, or small corporations.
percent held buildings with 150 units or more. Based on information in a recently published
These findings are consistent with findings from Energy Information Administration survey of
Baltimore and Newark.7 commercial buildings, as many as 60 percent of
the smallest buildings of up to 5,000 ft 2 are likely
Condominium ownership of multifamily units
to be occupied by their owners. 9
has not yet made a large dent in the overall
rental market but has become significant in a The structure of ownership is significant for
few cities where escalating property values en- the prospects for energy retrofit. In general, as is
courage conversion. According to a 1979 De- explained in the next section, the largest, most
partment of Housing and Urban Development financially independent and best advised own-
(HUD) study, only 1.3 percent of all rental units ers (corporations, national partnership syndi-
had been converted to condominiums from cates, development companies, insurance com-
1970-79. In Washington, D. C., however, 6.8 panies, and pension funds) tend to own the
percent had been converted and in Denver and large commercial buildings. The smaller and
Boulder, Colo., 8.8 percent. In such cities as least organized owners tend to own multifamily
New York where cooperative apartments are buildings.
traditional, there was a large number of conver-
sions to cooperatives, rather than to condomin-
i u m s .8
— -—-—
La rry oza nrw ancj Ray Struyk, / Iouvng From tlw ExI}tf ng S[CJC k,
The Urban In$tltute, 1976, pp. 107-108. The Information was ob-
tained by Struyk from interviews with large property managers In
Boston. Results from Newark are reported in George Sternlleb,
The Tenement Landlord, Rutgers University Press, 1966, and re- 9E nergy I nformat ion Ad ml nl str~tl on, Non -Re\Id(m tJa I BUI ld~ ngj
su Its from Baltl more are reported i n Michael Stegman, / I(juv ng /n- Energ}’ Con~umptl(m Sunm, 1981, table 23 B. It is harder to be
~e~tmwrt In the Inner CJ(Y, MIT Press, 1972. precise about larger buildings because EIA asked tt hulldlng~ were
‘Department of H OUSI ng and Urban Development, ThLI (-cm \er- occupied by the owner or his agent. SI nce larger bu I Id I ng~ may be
von ()( Rt’n tal I Iou \f ng (() (-ondoml nl urn$ and (’o(~pefa [ I Ie$ A INa - occu pled by a manager agent of the owner, they are not tru Iy
[l~mal Stud} c)t 5( [Jpe, ( auwj and /mpac (, 1980. owner-occupied


Among the types of owners interviewed, what they said about their motivation and re-
there were striking differences in the extent to sources to carry out a retrofit.
which they had made major energy investments
in some or all of their buildings, minor energy The retrofit experience of the owners inter-
investments (including significant operational viewed is shown in figure 35. The top level
improvements), or, no energy investments or shows the “national ” owners with holdings
operational changes at all. The survey of build- across the country; the bottom level shows the
ing owners was not constructed to be a statis- owners interviewed i n the four case study cities.
tically valid sample of building owners and for The differences among types of owners is strik-
this reason only tentative and suggestive conclu- ing. Out of 22 interviewed, only one individual
sions can be drawn from the results; nonethe- owner, of any kind, had made a major energy
less the pattern of retrofits reported by the differ- investment, although 8 had made minor invest-
ent types of building owners is consistent with ments. On the other hand, 10 “national” insti-
108 ● Energy Efficiency of Buildings in Cities

Figure 35.— Frequency of Major and Minor Energy Retrofit

Among Building Owners Interviewed

Interviews ith large owners with nationwide



Individual Partner- Institutional
owners ships Condominiums
11 - I Buffalo, Des I Moines, Tampa,

10 —
9 —

8 -

7 -

6 -

5 -
4 -
3 -
2 -


NOTE: Minor energ investments cost little enough that they could be handled as “expenses” and not “capital in-
vestments, ”

SOURCE: Real Estat Research lnterwews for OTA

tutional owners interviewed had made major ations interviewed, none had made major ener-
energy investments in their buildings. National gy investments.
partnership syndicates, national corporations,
The results of the interviews cannot be com-
and development companies all had either
pared with any statistically valid survey data be-
made major or at least minor energy invest-
cause none has been conducted by owner type.
The. interviews did make clear, however, the
Significant numbers of the local individual thinking that goes into a building owner’s deci-
owners and local partnerships had done noth- sion to retrofit or not retrofit and why it is likely
ing to their buildings in response to increasing to be different for different types of owners. The
energy prices. Of the four condominium associ- rest of this section explains how owners differ i n
Ch. 4— Will Building Owners Invest in the Energy Efficiency of City Buildings? Ž 109

the motivation to make energy investments in burner or boiler replacement, complex energy
their buildings, and, equally important, in the fi- management systems, full window retrofits, and
nancial and managerial resources they can call even replacement of less efficient window air
upon to make an investment. conditioners with more efficient air condition-
ers (see ch. 3 for a full discussion). A payback re-
The Differences Among Owners’ Payback
quirement of a year or less, on the other hand,
Criteria for Retrofits. In their interviews, differ-
eliminates all but operational improvements
ent types of owners were explicit and quite con-
and small investments such as flow restrictors,
sistent in their criteria for how fast an energy ret-
clock thermostats, or more efficient light bulbs.
rofit should “pay back” i n energy savings.
Almost all owners used simple payback as the The rest of table 34 helps explain why differ-
criterion, namely how many times would the ent types of owners had such varied” criteria.
first year’s savings have to be multiplied to owners with longer payback criteria have
equal the cost of the retrofit. Only banks (who longer expected holding periods for their build-
were generally not interviewed as building ings as well as much better access to financing
owners, but as financiers) reported using a dis- and professional advice. The owners with
count rate, their borrowing cost from Federal shorter payback criteria expect to hold their
funds. Although building owners expected in- buildings for shorter periods of time and also
creases in fuel and electricity cost over the pay- have problems getting adequate financial or
back term and took this into account in a gen- professional advice.
eral fashion, most of them cited payback terms
Among owners, there is a major distinction
so short that fuel escalation would not make a
among owner-occupants and investor-owners.
substantial difference. For business owner-occupants (large corpora-
The payback criteria used by owners, shown tions and smaller businesses) energy costs are
in table 34, varied from the fairly long paybacks one of the many expenses of doing business.
of 5 to 7 years used by institutional owners to Because these costs are rising so rapidly, they
the very short payback requirement of 1 year or have become a major concern, but cost con-
less used by individual investor-owners. The tainment is only one of many possible uses of
longer paybacks would permit more compre- their available funds. owner-occupants hold
hensive retrofits to more buildings such as real estate principally for their own use, though

Table 34.—Retrofit Payback Criteria, Holding Periods,

and Access to Financing and Advice Among Different Types of Owners

Typical Building Expected In house

payback for own holding Access to professional
Building owner type criteria use? period capital advice
Large corporations . . . . 3-5 yrs. Yes Long Good Good
Small businesses . . . . . 1 yr. Yes Long Poor Poor
Multifamily owner
occupants . . . . . . . . . 1-3 yrs. Yes Long Poor Poor
Condominium . . . . . . . . No data Yes Long Mixed Fair

Institutional owners . . . 5-7 yrs. No Long Good Good
companies . . . . . . . . . 1-3 yrs. No Short Fair Good
syndicates . . . . . . . . 3 yrs. No Short Fair Good
Local partnerships . . . . 1-2 yrs. No Short Poor Fair
Individuals . . . . . . . . . . . 1 yr. No Mixed Poor Poor
NOTE Long holding period = more than 10 years, short holdlng period = 8-10 years.
SOURCE: Office of Technology Assessment.
110 Ž Energy Efficiency of Buildings in Cities

tax benefits may be enjoyed and appreciation in as business facilities and, in some cases, the
real estate value hoped for. Residential owner- extent to which they enhance the corporate
occupants who live in one unit of a small apart- image.
ment building and condominium owners do
Corporate owners of their own office facilities
not use their real estate to conduct a business
or downtown retail stores or hotels reported in
but share with business owner-occupants the
interviews that they base energy improvement
point of view that the primary purpose of the
decisions on expected business return not on
building is for their own use and real estate
real estate return. If energy-efficiency results in
return is secondary. Investor-owners, on the
lower business operating expenses, greater em-
other hand, are not interested in buildings for
ployee productivity, enhanced attractiveness to
their usefulness as buildings but for the many
patrons or better business image, improvements
forms of economic return they may obtain from
are likely to be considered in competition with
holding them. The rest of this section describes
alternative corporate investments in marketing,
the motivation for energy retrofit of each of the
expansion or inventory control. The dilemma of
owner-occupants and investor-owners included
choices among business investments was well
in table 34.
expressed by the president of a department
Large Corporate Owner Occupants. Large store in Buffalo: “we make energy improve-
corporations almost always occupy any build- ments to help control our operating costs, but
ings that they own. Corporations are inhibited there’s a limit. Remember capital for energy im-
from owning real estate for investment purposes provements does not increase sales.” At the
by aspects of corporate tax status that reduce same time, for owner-occupants, there is no
the return to corporations from real estate be- way to escape the burden of energy costs which
low what is available to individuals and partner- investor-owners can duck with passthrough
ships (see box D). Thus, the chief economic leases. The president of a national motel chain
benefit of corporate buildings is their efficiency in San Antonio said he expected to see energy

Photo credit: Steve Friedman

Energy efficient features of this building in Tampa, owned by a corporation,

include double glazing, and controls on outside air mixing
Ch. 4—Will Building Owners invest in the Energy Efficiency of City Buildings? Ž 111

costs exceed mortgage costs i n the near future, Compared to large corporate owners of their
“1 increase my return by controlling my buildings, small businesses have much less ac-
costs—now, not later. ” cess to internal funding for energy improve-
ments and usually limited access to outside cap-
Large corporations have good access to cap-
ital at reasonable rates. Such owners are partic-
ital for energy improvements. Most moderate to
large-sized corporations have formal capital ularly dependent on maintaining reasonable
cash flow from their businesses. Energy invest-
budgeting procedures and routinely make cap-
ments with high initial costs and burdensome
ital investments drawing on financing from a va-
debt service due to high interest rates, short
riety of sources: retained earnings, corporate
loan terms, or both (see discussion in the last
debt issues, lines of credit, and commercial
loans. Of the five local and three national cor- section of this chapter) are serious obstacles to
energy conservation investments.
porate owners interviewed, who had made ma-
jor retrofit investments, all had been financed Small business owners also lack the time and
with internal funds. financial resources to obtain good professional
advice about energy investments. Because of
Large corporate owners also have good ac-
their dependence on adequate cash flow the
cess to professional advice. They have profes-
risks of a mistake are also much greater than for
sional faciIity managers as part of corporate
the large corporation. For all these reasons,
headquarters staff. They often can afford to
small business, especially individual proprie-
employ internal experts in energy conservation
tors, appear to limit energy investments to those
or can retain consultants. The basic corporate
that will pay back in 1 year or less.
planning cycle encourages explicit considera-
tion of energy investments. Owner-Occupants of Multifamily Buildings.
The corporate owners interviewed all men- This category of owner is very similar to the
tioned 3- to 5-year paybacks as the criteria they small business owner, lacking time or profes-
apply to energy investments. In contrast to sional advice to learn about energy improve-
many types of investor-owners this period is not ments and lacking sufficient cash flow to fund
related to their holding period for the building energy investments from internally generated
but rather to a corporatewide business standard funds but with very limited access to outside fi-
of return for nonmanufacturing facility invest- nancing at reasonable interest rates. However,
ments. Unlike smaller owners, corporations because these owners also live in their building
have both financial and professional resources and pay some of its energy costs as part of their
to make energy investments based on these cri- own household expenses, there is a slightly
teria. greater chance that they will consider retrofits
with paybacks of up to 3 years. Of the very small
Small Business Owner-Occupants. Small number of multifamily buildings reported as ret-
businesses may be individual proprietorships, rofitted in the building owner survey, two were
partnerships, or small corporations. Like large owner-occupied small buildings in Buffalo.
corporations, they own the buildings to use in
their businesses. Said a San Antonio shopping Condominium-Owners. Owners of condo-
center owner of the typical small shoestore minium apartments are responsible for energy
“they’re in business to sell first and in times like improvements to their own units, but the im-
this, it’s tough to do everything you might like provements to the buildingwide systems are the
or should do. ” responsibility of the condominium association.
Condominium association fees have been rising
Information on the motivation of small busi-
at rapid rates and condominium trade associa-
nesses is scanty. A few interviews were con-
tions have recognized the importance of rising
ducted directly with small business owners,
energy costs.
mostly individual proprietorships. Further in-
sight was provided by several brokers of small Nonetheless, for a systemwide energy im-
business properties. provement to be made, the condominium asso-
112 . Energy Efficiency of Buildings in Cities

ciation, in a collective process, must agree on It). Appraisers usually use 3 years average
the improvement’s value and pay for it from net income to make this determination. A
replacement reserves, debt finance, or a pro- recent energy retrofit without 3 years’ im-
portionate assessment to each owner. The four’ pact on net income may not have much im-
condominium associations interviewed re- pact on resale value.
ported mixed experience with lenders. Collat-
The main types of investor-owners—insti-
eral is a problem for some because the condo-
tutional, development company, partnership,
minium association does not hold title to the
and individual—emphasize different elements
building. For some associations their authority
of the return on real estate and thus have
to levy special assessments on owners has been
distinctly different motivation for energy retrofit
sufficient to obtain loans. None of the four asso-
to their buildings. The building owner types also
ciations interviewed had made a major retrofit
differ in the financial and professional resources
investment but two had made minor invest-
they can bring to bear on energy investments.
ments. In general, condominium owners ap-
pear motivated to consider energy retrofits but Institutional Owners. Insurance companies
are handicapped by the awkwardness of their and pension funds are the major form of institu-
form of ownership from making commitments tional owners. Typically they hold buildings for
to longer payback investments. holding periods of 12 years or more, emphasiz-
ing the healthy cash flow in the buildings over
Investor-Owners: General. Investor-owners
the long term. For this reason, energy retrofit
own buildings only for the economic return
which promises to increase cash flow over the
they bring as real estate. Investor-owners
long run is viewed as sensible. Such owners
neither live in their buildings nor do they use
have the longest payback criteria of all owners,
them primarily to house their businesses, al-
5 to 7 years.
though for convenience they are likely to have
their own offices in one of the buildings they Insurance companies and pension funds have
own. For an investor-owner an investment in extensive financial capacity to fund building im-
the energy efficiency of the building must con- provements internally. They also support a pro-
tribute to one or more of the three forms of eco- fessional management and property investment
nomic return in real estate: staff to recommend and carry out investment
and management practices to increase income
● Cash flow. Energy retrofits may decrease
from a property and improve its long-term
expenses in buildings where the owner
value. Property managers (see Box F: The Role
pays all or part of the energy expenses. For
of the Property Manager) and in-house property
buildings with net or passthrough leases,
planning staff for institutional owners have
energy retrofits only increase cash flow if
clearly defined job performance objectives, in-
they allow higher rents to be charged or re-
centives, and capital budgets. Cost conscious-
duce vacancies.
ness is rewarded. operational improvements to
● Tax benefits. Many energy retrofits can be
save energy have been a property management
depreciated and used to shelter taxable in-
task since 1975 and annual energy audits and
come. Interest on loans to pay for energy
building energy system inventories a regular
retrofits can also be deducted from taxable
routine, All 10 national institutional owners in-
income. Tax credits from Federal or State
terviewed had made major capital investments
governments may also be available to own-
in their buildings including full replacement of
ers for specific energy investments.
boilers and air conditioning systems and in-
● Resale value. An energy retrofit that in-
stallation of sophisticated computerized energy
creases a building’s net income will have a
timing and control systems.
direct effect on its resale value as the net in-
come is capitalized by appraisers at some Development Companies. The four national
rate typical for that type of building and and four local development companies inter-
location (see Box E.–As the Appraiser Sees viewed varied in their expected holding periods
Ch. 4—Will Building Owners Invest in the Energy Efficiency of City Buildings? ● 113
—————. . — .

Box E.-A Question of Value: How the Appraiser Sees it

Do energy improvements enhance a property’s value? To appraisers, the answer is not at
all clear. But what is clear is the importance of their response to this question in a go/no-go
retrofit investment decision. The appraiser’s consideration of the impact of energy improve-
ments on value can be crucial to some lending decisions if loan-to-value ratios are close to ac-
cepted limits and can also be important to the return assessment of owners if the improvement
is capitalized into the value of the building.
Professional appraisers should, in theory, consider the improvement to value that results
from a reduction in energy costs. In income properties, this would occur through the capital-
ization of the resulting higher net income. The appraiser normally does this by examining 3
years’ operating results on the building understudy and operating results of comparable build-
ings to arrive at stabilized income and expense data. Comparability of energy equipment
among other things should be considered in selecting buildings for comparison.
At present, several factors make it difficult for appraisers to conform to this procedure.
Few buildings exist with 3 years of results of energy improvements, either to use as com-
parable, or to appraise. Hence, there is little experience to use in judging indirect or direct
impact on market value. As yet, no other standardized methods for incorporating energy con-
cerns have been developed. The appraisal division of a commercial bank in San Antonio in-
stituted Iifecycle costing as a nonstandard way to approach the issue and to serve as a proxy
for acceptable comparable.
In the face of limited information, many appraisers have responded to rapidly increasing
energy costs by, in effect, incorporating the increased risk in their valuation judgments. This
has occurred by raising capitalization (which lowers the effective multiplier applied to income
to arrive at value). The higher rate reflects many factors, but the recent rates of inflation in in-
terest rates, operating costs and energy prices are considered to be among the major factors
that result in higher risks.
Efforts have been made by appraiser professional associations to improve their members’
skills in evaluating energy conservation in real estate. In addition, many appraisers are active
in local building owner and manager associations, which have become very concerned about

Box F.-Role of the Property Manager

Professional property managers play an im- ways to cut costs. The presence of professional
portant role in building operations for many managers has led to widespread adoption of
owners, particularly institutions and partner- operational improvements in larger office
ships. Property managers have the discretion buildings and to more active consideration of
to identify and make operational energy im- energy measures elsewhere. This is true re-
provements, but only limited authority to gardless of who owns the property. In addi-
make capital improvements. For example, at tion, professional managers interviewed were
one large office building in a case study city, by far the most knowledgeable about energy
the manager’s authority was limited to im- costs and technical options. They felt that there
provements costing $5,000 or less. was a steep dropoff in awareness and knowl-
Managers can, and often do, identify both edge among the less professional managers
operations and capital possibilities for reducing and owners who were not themselves active
energy costs. In some cases, such as hotels, the full-time managers. There appears to be less
compensation formula is based on net income, knowledge and less conservation where there
which actively encourages managers to seek are no professional and/or full-time managers.
114 . Energy Efficiency of Buildings in Cities

for buildings but on the whole their holding National syndicates maintain professional
periods were shorter than those of institutional management staffs in-house and onsite. As part
owners and their payback criteria for energy of the syndication, reserves are set aside for
retrofits were correspondingly shorter (1 to 3 building expenses sufficient to fund most im-
years). Short payback criteria can be explained provements including moderate energy retrofits
partly by the greater difficulty of development without returning to the investors for extra equi-
companies in financing retrofits. Their invest- ty capital. For these partnerships, energy or
ments have been traditionally highly leveraged other building improvements are an aggressive
with a very high ratio of debt to equity (although way to increase building value and create more
they are now moving more toward equity fi- return for investors than passive management
nancing). This leaves very little flexibility to add would create. As the head of a national syn-
further debt. Development companies have dicate’s property management department ex-
also tended to specialize in owning shopping plained: “Any new value we create is a selling
centers with fully indexed net leases, so that the point to our customers (investors), old or new.
incentive to retrofit is somewhat less than that of The sophisticated investors we deal with want
owners of other commercial buildings (see dis- quality in their product not just shelter.”
cussion of commercial buildings below). of the
Of the five national partnership syndicates in-
eight owners interviewed, four had made major terviewed, three had made major energy invest-
retrofits, two had made minor retrofits and two
ments in their buildings and the other two had
had done nothing.
made minor investments. The national syn-
partnership: General. The popularity of the dicates agreed on a 3-year payback as a suitable
partnership, now the most common form of real criteria for retrofit.
estate ownership, is in part due to the tax status Local partnerships. Local partnerships may
of this form of ownership and in part due to the be formed with a general partner and limited
small capital requirements for entry. The part- partners or with conventional (equal) partners.
nership is itself not a taxable entity but a tax They almost always have far more limited finan-
conduit which passes on the tax advantages of cial and managerial resources than the national
real estate ownership fully and directly to the partnership syndicates. Reserves set aside at the
partner/investor. While partnerships are inter- time of creation of these partnerships are gener-
ested in the cash flow and resale impact of an ally insufficient to cover major building im-
energy retrofit, they are very concerned about provements such as energy. It is usually very dif-
leaving intact or enhancing the tax benefits of a ficult to raise further equity capital from the
property. Since partnerships are formed only for original partner investors. Said a San Antonio
purposes of owning a particular piece of proper- general partner: “Thirteen can put the new
ty, it is often difficult for the partners to agree on money up but two others (partners) don’t have
further capital investment once the particular the cash on hand; so I can’t do it; we are simply
deal has been struck. The tax benefits to a part- talking group dynamics.”
nership diminish after 7 to 10 years as interest
and depreciation deductions diminish and at Of the 20 local partnerships interviewed, only
this point, the property is frequently sold. four had made major energy investments, eight
had done nothing. One or two years was the
National partnership Syndicates. These are standard payback criteria for retrofits, cor-
the most sophisticated of the partnerships and responding to the short (7 to 10 year) holding
bear some resemblance to the institutional own- period typical of partnerships. If they are done
ers. All syndicates have a general partner, at all, energy retrofits are done early in the prop-
responsible for managing the property held by erty’s holding period. As the San Antonio gener-
the syndicate, and many limited partners who al partner explained, “After the sixth year, I’m
buy into the syndicate either privately or by pur- looking at another building purchase and syndi-
chasing publicly placed security investments. cate setup, not the one I’m about to get out of. ”
Ch. 4—Will Building Owners Invest in the Energy Efficiency of City Buildings? ● 115

Individual Investor-Owners. Most individual living would; it is a thing to be kept and kept up,
investor-owners, like individual owner-occu- not improved for investment reasons,
pants, are owners of small amounts of property With today’s high cost and inaccessibility of
and this constrains their ability to make energy debt finance, the cash flow of an individual’s
investments in their buildings. Because most in- property is threatened by substantial energy in-
dividual owners lack financial depth, maintain- vestments. Most of those individual owners in-
ing a building's cash flow is usually far more im- terviewed set 1 year as their maximum energy
portant than sacrificing current cash flow for the retrofit criteria. This extremely short payback re-
sake of future resale value. Many individual flected their uncertainty about the risks of an
owners also lack sophisticated property invest- energy investment and their fears of a mistake as
ment advice that would help them evaluate the much as insistence on a high rate of return. A
resale potential of their property. A large Buffalo few individuals personally concerned about
broker of small property observed: energy efficiency accepted higher. paybacks
Resale value is important but requires some than this; one as long as 10 years.
sophistication to be appreciated. Your Mom Conclusion. In today’s climate of high cost of
and Pop single investor or owner who thinks his
finance and continued uncertainty about the
single unit or two is going to support his retire-
ment or give him financial security is not going risks and benefits of energy retrofit, building
to think in terms of future value, It’s hard to get owner types—institutional owners, corpora-
them to think of real estate as an investment tions, national partnership syndicates, and de-
. . . the way an investor where real estate is his velopment companies—with good access to in-

Photo credit Steve Friedman

The individual who owns this office building in a Northern city has made low capital cost investments
in calking and boiler efficiency. The owner is currently unable to finance a new boiler
116 ● Energy Efficiency of Buildings in Cities

ternal capital funds and professional informa- professional advice about retrofit. Despite these
tion are far more likely to retrofit their buildings handicaps there is somewhat more chance that
than owners—individual and local partnerships smaller owners will retrofit their buildings if they
—who are constrained by their building’s cash occupy them than if they hold them as investor-
flow from taking on the high debt service cost of owners.
outside finance and who have poor access to


It is not only the owner type that affects the far the most frequently retrofitted, followed by
likelihood that a building will be retrofit, it is retail buildings and hotels (see fig. 36). Multi-
also the building type—office, retail, hotel, or family buildings were retrofitted much less fre-
multifamily. Each building type has its own quently than the other types. Out of 29 multi-
characteristic market response to energy costs, family buildings covered in the interviews, only
leasing structure and balance between income four had been retrofitted at all, only one of these
and expense and these all affect the likelihood with a major retrofit. This imbalance between
that a particular type of owner will retrofit that retrofits of office buildings, multifamily build-
building rather than another type of building. ings and other buildings is also echoed in a re-
cent survey of buildings with documented retro-
Of all the types of buildings covered in the fits and energy savings by Howard Ross and Sue
building owner survey, office buildings were by Whalen. Out of 220 buildings with documented

Figure 36.— Frequency of Retrofits Among Building Types

Covered in Building Owner Interviewsa

24 -
20 -

16 “ r 1

12 “

8 “

4 -

Multifamily Office Retail Hotel

Key Owner-
m No retrofit

alnterviews in Buffalo, Des Moines, San Antonio, and Tampa.

SOURCE: Office of Technology Assessment.

Ch. 4— Will Building Owners Invest in the Energy Efficiency of City Buildings? ● 117

retrofits, 38 were office buildings, four were ers—individuals and local partnerships—who
hotels, while there was only one shopping cen- require very short paybacks to make any retrofit
ter and one multifamily building.10 at all and who frequently do nothing to their
buildings in response to rising energy costs.
part of the explanation is that multifamily
However, the problem of retrofits to multifamily
buildings tend to be owned by the types of own-
buildings goes beyond ownership. The sections
Howard R OSS and Sue Whalen, ‘‘Building Energy Use Com- that follow discuss the particular market charac-
pilation and Analysis: Part C: Conservation Progress in Commer- teristics of multifamily and commercial build-
cial Buildings” (unpublished), May 1981, revised August 1981. To
be published in Energy and Buildings magazine, Lausanne,
ings that affect their prospects for retrofit.


The problems of the owner types who own in the 1970’s. “Generally, the evidence suggests
the bulk of multifamily buildings explain much operating cost increases of 8 to 10 percent an-
of their very low rate of retrofit. Individual nually, compounding to between 115 and 160
owners lack access to capital and are con- percent for a decade in which rents rose by 74
strained by their dependence on the buildings percent and vacancy rates (which also affect
cash flow from taking on high debt service to revenue) changed only slightly.’” This trend
pay for retrofit. Local partnerships may put capi- leads to diminished rates of growth in net oper-
tal into retrofit at the time of purchase, but it ating income, and results both in relatively less
becomes increasingly difficult to obtain funds money available for debt service and in lower
from the partners after that. Both categories of market values. In the face of recent increases in
owners lack information on retrofit oppor- mortgage interest rates, this creates a cash
tunities and risk and both have much to lose squeeze for any new owner or a relative
from a mistake. Multifamily buildings owned by diminution of value for a potential seller.
better financed and informed owner types such
Energy cost increases have been a major con-
as insurance companies, pension funds, and na-
tributor to this cash squeeze. As figure 37
tional partnership syndicates are somewhat
shows, increases in fuel and utility costs alone
more likely to be retrofit than those owned by
outpaced average rental adjustments by more
individual owners and local partnerships.
than 2 to 1 (98 to 39 percent) between 1970 and
The type of owner, however, does not explain 1976. The trend continued from 1976 to 1979,
all of the low rate of multifamily retrofit. according to data from the Institute of Real
Owners’ problems are exacerbated by overall Estate Management (I REM). Heating costs per
problems in the market for multifamily build- square foot increased over 3 years anywhere
ings. from 62 percent for elevator apartments to 120
percent for low-rise small buildings (see table
Squeeze on Cash Flow. More than owners of
other building types, multifamily building
owners have been caught in an income squeeze Average rental adjustments for multifamily
both because of rising costs and their inability to buildings have not kept pace with increases in
raise rents. The latter is attributable to several energy costs for reasons that elude the experts
factors, including rent control, consumer re- although many explanations have been given.
sistance, and management efforts to minimize One is that traditional renters such as newly-
turnover in tenancy. Using operating indexes I I 1 ra s, Lowry, d r a f t rePort I “Rental Housing in the 1970’5:

from actual special samples of properties in one S e a r c h i n g for the Crlsls, ” the Rand Corp., No\fember 1980;
presented at HUD Conference In Rental Housing, No\. 14, 1980.
area, a Rand Corp. study of multifamily units un- !5ee also Da\id Scott Lindsay and Ira S. Lowry, Rent lnflat~f)n In St.
derlines the expense-revenue gap that emerged j(lwph Count}, Indiana, 1974-78, the Rand Corp., 1981.
118 ● Energy Efficiency of Buildings in Cities

Figure 37.—Apartment Operating Revenues and lower income renters have increased the quality
Expenses 1970-76 of their housing over the decade without in-
creasing their average rent. Finally, some of the
lag in rents can be explained by a preference of
some multifamily building owners to reduce
vacancy ratios and retain long-term tenants by
holding back rent increases. Some observers
practicing strict market economics believe that
z : “ - , ‘7
the overall explanation for the possibility of a
lag in rents relative to expenses may be that
II there is an oversupply of multifamily houses. 12
Careful studies have shown that this indeed may
be a cause of abandonment of multifamily
houses in certain areas (see discussion in ch. 5).
The potential for rent adjustment to cover
utility costs varies greatly from strong rental
120.0 housing markets to weaker ones. Among the
case study cities, owners in Buffalo and Des
Moines perceived the rental market to be
1970 1972 1974 1976 weaker and the potential poor for raising rents
Year sufficiently. Several owners expressed a strong
NOTE: Data from 189 properties.
sense of crisis in the interviews, foreseeing grim
futures as real estate apartment owners unless
SOURCE: Touche Ross & Co. using data from Booz, Allen & Hamilton (May
1 9 7 9 ) . Ach/evmg E n e r g y Corrservdtion In Ex/stlrrg Apartment they “got out soon” at a decent sales price or by
Buildings: Append\x D.
converting to condominiums even when they
acknowledged that the market for condomini-
ums was poor in their cities. Apartment owners
Table 35.—Annual Heating Fuel Costs
in the stronger markets of Tampa and San An-
in Apartment Buildings
tonio were more optimistic. Even in these
Heating cost markets, however, institutional owners and na-
(dollars/ft 2 o f tional syndicates expressed an intention to
area) Percent reduce the amount of investment in multifamily
Apartment building type 1976 1979 change property.
Elevator . . . . . . . . . . . . . . . . . . . . $0.21 $0.34 62%
Low-rise (24 units +). . . . . . . . . . 0.14 0.23 64 Most important of all, an apartment owner’s
Low-rise (12 units). . . . . . . . . . . . 0.15 0.33 120 ability to avoid the squeeze on cash flow
Garden . . . . . . . . . . . . . . . . . . . . . 0.13 0.23 77 described above depends directly on whether
NOTE: Only buildings reported for 4 consecutive years, the owner pays for heat and electricity or
SOURCE. /ncome Expense Ana/ysis. Apartments 1980 Editton, Institute of Real
Estate Management. whether tenants do.
Prospects for Retrofit When Tenants Pay
weds, single households, and empty-nestors, in Utilities. Almost one-half of the multifamily
response to rapid appreciation in property val- apartment units in the country are fully tenant-
ues and the tax-deductible status of mortgage metered (see table 36). If structurally feasible,
interest, have been shifting to single-family or multifamily owners have converted to tenant
condominium ownership for investment as well metering as the first and often final response to
as housing, and are leaving the rental market to
lzThis debate is set forth in several papers prepared for the No-
a larger proportion of lower income people, vember 1980 HUD Conference on Rental Housing, Anthony
who are less able to adjust to increases in rent. Downs, “The Future of Rental Housing–Overview;” Ira Lowry,
There is also some evidence, however, that “Rental Housing in the 1970’s: Searching for the Crisis. ”
Ch. 4— Will Building Owners Invest in the Energy Efficiency of City Buildings? ● 119

Table 36.—National Distribution of Metering Types tion policy law.14 Five out of seven apart-
of Rental Unitsa ment owners interviewed in San Antonio
Type of rental unit Percent of total
had tenant-metered buildings partly be-
19 ”/0
cause it is required by law.
Master (full) . . . . . . . . . . . . . . . . . . . . . . .
Tenant (full) . . . . . . . . . . . . . . . . . . . . . . . 46
Mixed (tenant pays electric but not
Owners interviewed in both the case study
heat or hot water) . . . . . . . . . . . . . . . . 29 and national interviews described little negative
Miscellany b . . . . . . . . . . . . . . . . . . . . . . . 6 market impact as a resuIt of conversion. Tenants
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ”/0 have not reacted against tenant-metered build-
or more units
Two ings during sellout or in existing buildings dur-
bSy5tems too mixed to Categorize
ing remetering. To the contrary, some owners
SOURCE Natlorral Inferfm Energy Consurrrpflon Survey 1978.79, Department
of Energy, Off Ice of Consumption Data. noted that tenant metering successfully trans-
ferred to the utility companies the “bad guy”
image that owners formerly bore for energy in-
escalating energy costs, even though conver-
sion costs were clearly capital investments creases in gross rent.
(costing from $125 to $1,600 per apartment unit In the opinion of most landlords interviewed
with a median of about $1 ,600). ’ 3 Yet payback for the study, tenant metering has created
is very rapid, depending on how the base rent is greater and more reliable savings in energy con-
adjusted: paybacks of 1 year or less are not un- sumption than any other improvement they
usual, although the average simple payback is 1 could have made because tenants make behav-
to 2½ years. There are several benefits of ioral adaptations as a result. Savings from tenant
tenant-metering, in addition to sheltering the metering have also been documented. A best
landlord from the full impact of energy in- estimate is 5 percent for heating and as much as
creases: 20 percent for other energy.15 At the same time,
tenant metering may result in higher per unit
● Many buyers, particularly national syn-
dicates and institutional investors, are un- energy costs for tenants i n utility areas where
large users pay significantly lower rates than
willing to consider purchase of multifamily
property unless tenants pay the full cost of small individual users. (See ch. 5 for more
utilities. Conversion to tenant metering, discussion of this point.)
therefore, creates resale value in itself. For all its advantages in inducing energy con-
● Banks are more willing to refinance or lend servation behavior by tenants, tenant metering
to tenant-metered building owners. provides virtually no incentive for apartment
● professional journals, particularly the wide- owners to invest in greater efficiency of their
ly read Journal of Property Management, buildings. There is no incentive to improve in-
have taken an advocacy stance toward ten- sulation levels, add storm windows, or improve
ant metering with clearcut articles describ- heating system efficiencies (usually of decen-
ing investment return mechanics and own- tralized systems since central heating and cool-
er benefits, including resale value, from ing systems cannot be tenant metered except
tenant metering. There is practical advice with great difficulty and expense). None of the
on such topics as tenant counseling tech- owners of tenant metered buildings had made
niques during remetering. energy investments except to make operating
● Many States, particularly in the South and
1 dMeterlng: States banning al I master metering include Califor-
Southwest, have made tenant electrical
nia, Florida, Maryland, Michigan, North Carolina, oklahoma,
metering in new buildings and sometimes Rhode Island. States banning master metering for electricity in-
existing ones a mandate of State conserva- clude Louisiana, Massachusetts, Minnesota, New Jersey, New
York, Oregon, and Texas. Source: Steven Ferrey & Associates,
Fo>ter~ng fquj(} jn Urban Conservation. Utf//ty Me[er/ng and UfJ/-
I ]jeffrey M . Sel sler~
“Escaping the Energy Bite: Converting Jty Fjnarrclng, to be published as a working paper to this report.
Master Meters,” journal o(Property Management, May/June 1980. 15LOU MC Lelland, op. cit.
120 ● Energy Efficiency of Buildings in Cities

improvements in the heating and cooling and aware of and concerned about rising energy
lighting of the building’s common areas. costs. They have a strong incentive to contain
costs that are rising faster than other expenses
In theory, energy conservation investments
and threatening to become uncontrollable,
can enhance the value of the property by per-
However, they are limited to actions which can
mitting the owner to charge a higher rent,
be paid for within the confines of their own cash
allowing for the lower utility cost to the tenant.
flows since financing is either too costly and/or
In theory, if everyone else in the market also
unavailable. An individual owner of over 200
made energy efficiency investments, or there
apartment units in Buffalo commented: “I
were substantial new energy-efficient competi-
would normally want to spend $5,000 to save
tion from new buildings, an owner would be
$2,000 a year, but not when I can’t afford to
forced to improve in order to compete. Also in
theory, if no one else improves, the owner service the $5,000. ” A large apartment owner
and broker in the Southwest bluntly summa-
could improve his competitive position if he
rized a basic constraint for city apartment own-
could market the necessarily incremental rent
ers in today’s economic environment: “Apart-
ment managers must conserve capital in the
To obtain the higher rent, however, requires
both a sound market and marketing skill. The
tenant must be convinced that the total oc-
cupancy cost will still be comparable to the
lower rent competition. Given the fragmented
nature of multifamily ownership, levels of pro-
fessionalism, traditional tenant-landlord rela-
tionships and tendency to hold rents down to
reduce turnover, it is unlikely that this logic will
be readily adopted by the typical multifamily
building owner. Some sophisticated national
syndicates and management organizations in-
terviewed for the study, however, are making
the link between conservation and value. It is
conceivable that over the long run, the adop-
tion of such a strategy by a few large operators
i n each market or the advocacy of such an eco-
nomic rationale by one of the trade information
sources might stimulate such a perspective.
Prospects for Retrofit If the Owner Pays the
Utilities. Although multifamily owners are con-
verting to tenant metering whenever possible as
a reaction to the rising cost of energy, it is not
possible to convert all types of heating systems,
(especially central air systems, central steam
and hot water systems, ) to tenant metering ex-
cept at great expense. As the above table 36
showed, more than one-half of all rental units
are fully master metered or master metered for
heat and hot water and tenant metered for elec-
tricity. Photo credit: Steve Friedman

Retrofits to this HUD-subsidized apartment building for

Multifamily owners whose buildings have not the elderly in Tampa included improved chiller efficiency
been or cannot be fully tenant metered are and a shift from incandescent to fluorescent lights
Ch.4—Will Building Owners Invest in the Energy Efficiency of City Buildings? ● 121

early years. They are not going to want to touch an energy investment for return “down the
the cash flow. ” Only if the building owner has road .“ The concept of future return through
access to government property rehabilitation enhanced resale value as a result of energy im-
funds (see ch. 9) is he likely to be able to service provement seems nebulous. In multifamily mar-
the debt within the building’s cash flow. kets with many weak spots, such as Buffalo and
Des Moines, a building’s future, even if viable
For most multifamily building owners, the
now, might be uncertain.
only benefit of energy retrofit is cost savings.
There is no discernible marketing advantage; To sum up, although an owner of a master-
the level of tenant demand for rental units that metered multifamily building has strong motiva-
are energy efficient (and which might therefore tion to curb the increase in his expenses by con-
have more controlled future rent increases) is trolling energy costs, the constrained cash flow
low. The tenants’s rental decision is first linked of many multifamiIy buildings (coupled with un-
to location and the size and appearance of the certainty about retrofit results) makes it ex-
apartment, regardless of energy features. tremely hard to expect to pay for a retrofit out of
retained earnings or to service a loan to pay for
Energy retrofit for resale value is also not an
it. The uncertain long-term viability of multi-
important motivation for the large share of
family buildings constrains an owner’s motiva-
muItifamily buiIding owners who are individual
tion to invest in the energy efficiency of multi-
owners, especially those with small amounts of
family buildings for its resale value.
property. Such owners do not generally have
the planning time, staff or perspective to make


Commercial buildings have been retrofit far their own buildings and by institutional and na-
more frequently than multifamily buildings, ac- tional partnership syndicate owners. Retrofits
cording to the partial data available. To some mentioned included installation of task lighting,
extent this is explained by the better financed, heat pumps, new boilers and timing and control
better informed owner types which own com- systems. Two of the retrofits of corporate head-
mercial buildings. Many commercial buildings quarters buildings were carried out as part of
—office, retaiI and hotel—are occupied by their overall modernization programs. In both mod-
owners which are large corporations, able to ernization cases, in Des Moines and Buffalo, the
plan and carry out a retrofit. directors of facility planning reported that such
energy improvements might have been made
Within the category of commercial buildings,
anyway, but “only very gradually. ”
however, there are significant differences
among office buildings, shopping centers, de-
For other kinds of owners, limits on energy in-
partment stores, and hotels in the sensitivity of
vestments in office buildings are typically set
owners and tenants to rising energy costs, the
within the constraints of the buiIding’s cash flow
rewards for retrofit and the resources for making
because the extremely high cost of outside fi-
energy investments. The sections which follow
nancing eliminates the possibility of borrowing
describe these differences.
to pay for a retrofit. Fortunately office buildings
Office Buildings. Office buildings appear to offer many opportunities for low-cost/no-cost
have been retrofit in greater numbers than other retrofits (see Chapter 3: The potential for
building types. Out of 27 interviews with office Building Retrofit). Many building owners inter-
building owners in the case study cities, 20 had viewed had made low-cost investments such as:
retrofit their buildings. Retrofits by and large installing timer devices to turn systems and
were carried out by corporations who owned lights off from 6 p.m. to 7 a.m. when the build-
122 ● Energy Efficiency of Buildings in Cities

Des Moines observed: “The building costs

$40,000 a year in total energy bills. No matter
what I think about the future, I have a hard time
laying out a capital investment costing more
than my bill, which is what a window retrofit
would do to me. ” The office owners inter-
viewed for this study acknowledge they are
basically on the “last round” of the low-cost/no-
cost improvements for controlling energy cost
and would have to make capital improvements

passthrough Lease Disincentive. For investor-

owners of office buildings, by far the greatest
disincentive to retrofit is the prevalence of the
passthrough lease in existing class A and most
class B offices. passthrough lease terms vary.
Escalators include direct operating costs, aver-
age of costs i n other buiIdings, operating cost in-
creases above the base year, and CP1-indexed
leases. In class B offices, some gross leases still
exist, but owners are gradually rolling them
over to passthrough leases that include an
energy escalation clause. Lease terms for small
tenants are also getting shorter, down from an
average of 7 to 10 years in older office buildings
to an average of 3 to 5 years.
passthrough leases allow the owner to recov-
Photo credit: OTA Staff er utility and other expenses but are usually
written to prohibit passthrough of debt service
Retrofits to this office tower owned by a bank in Tampa
included elimination of mixed cooling and reheat, to cover the capital expense of an energy retrofit
reflective film, computerized temperature controls, investment. With passthrough leases the chief
and high-efficiency fluorescent lights incentive for energy retrofit by an investor-
owner is to curb the costs of energy for the com-
ing is not in use; reducing lighting levels and in- mon spaces that can average 40 percent of the
stalling more efficient bulbs and making many total energy bill for a high-rise office building.
different adjustments and improvements to the
There are signs, however, that new kinds of
building’s heating ventilating and air-condition-
passthrough leases are being developed to per-
ing systems. mit energy efficiency investments. Large owners
Mentioning the need to stay within the build- such as insurance companies are starting to in-
ing’s cash flow, several building owners said stitute a new uniform passthrough in their
that any capital investment in energy retrofit less leases, This provision would allow the owner to
than 25 cents per square foot would be consid- pass through to the tenant the capital costs of
ered feasible. A 25- to 50-cent-per-square-foot energy improvements that benefit only the ten-
improvement cost would bring more scrutiny. ant until the investment is paid back by energy
Fifty cents per square foot was the basic cost cost savings. At that time, any future savings
cutoff point for the office owners interviewed. benefits would accrue directly to the tenant.
Alternatively, another cutoff measure was the Owners pioneering this type of lease feel that
building’s total energy bill. An office owner in although tenants need to be convinced of the
Ch. 4— Will Building Owners Invest in the Energy Efficiency of City Buildings? Ž 123

merits, such a lease adjustment would give the competitive pressures on existing offices.
owner an incentive that does not now exist, As yet, there has been little overbuilding,
while offering tenants a saving that a standard but with the economy weak, in some cities
passthrough Iease never would. None of the in- offices may become temporarily overbuilt.
stitutional owners interviewed had as yet in- If this occurs, it will put a downward pres-
troduced this type of lease into their buildings. sure on rents and hence provide greater in-
centive to control costs (and therefore total
Energy Retrofit to Improve Marketing. In
rents) to keep or attract tenants.
current markets for office buildings, tenants ● Office owners and managers generally un-
rarely seem concerned about total occupancy
derstand that the long-term value of the
costs including energy passthroughs although a
property can be enhanced or at least pre-
few office owners in Buffalo mentioned a grow-
served by controlling energy costs.
ing tendency for lease competition to be based
on quoting comprehensive rent including utili- In summary, operational improvements and
ties. More typical is the situation cited by an low-cost investments are the main response to
executive for a national housing firm. “Tenants rising energy costs in office properties. While
don’t seem to care in general; they still look, as large corporate owner-occupants (and to some
they have traditionally, to the quoted rent, not degree, banks) may make capital improve-
the escalators. ” ments, other office owners are less motivated
and prefer to pass energy costs on to the tenant.
All office owners acknowledged that tenant
For those with the interest, poor access to fi-
concern about the energy costs in passthrough
nancing and good technical information con-
leases might become a market factor in the
tinues to be a substantial barrier.
future especially in a stagnant economy where
office users would tend to be more zealous Retail Owners and Energy Investments. Ex-
about every cost-cutting opportunity (despite cept for some owner-occupied department
the relatively small cost energy represents to a stores and small stores, most retail buildings are
typical office user). Even owners with short owned by investor-owners. Shopping centers
holding periods would probably invest in ener- within cities are commonly owned by real es-
gy efficiency if the market called for it. Owners tate development corporations that may or may
interviewed cited four market conditions which not be subsidiaries of major retail corporations,
might spur such a change. by institutional owners and by large partner-
ships, including national syndicates. Urban
● For tenants “shopping” with expectations
retail strips or freestanding small retail stores are
of rising costs, lower cost will improve an
generally owned by individuals or small local
owner’s marketing position. Managers are
partnerships. Downtown department stores are
aware of this.
owned by their corporate owner-occupants, as
● Significantly improved energy efficiency of
are generally the department store anchors of
new buildings can reduce the effective rent
shopping centers. Type of retail ownership is a
spread between new and energy efficient
factor in decisions to retrofit, but the most criti-
existing buildings, especially in a soft
cal variable for retail owners is lease standards.
market. Managers of older buildings may
have to look for ways to protect their com- Except for owner-occupants of freestanding
petitive position, especially vis a vis some department stores, owners of retail buildings to-
new hotels and office buildings that are day generally charge their tenants rent on a net
benefiting from subsidized financing or lease basis with a duration, except for those of
other government programs such as indus- anchor stores, often averaging 3 to 5 years. In
trial revenue bonds, tax abatement and ur- older shopping centers or retail strips in cities,
ban development action grants. gross lease standards and longer term contracts
● New office construction i n many down- of the past still exist but for retail owners the net
towns has been substantial, creating strong lease has become standard at lease-up or re-
124 ● Energy Efficiency of Buildings in Cities

newal. In fact, one of the ways a buyer can add

value to an older shopping center purchase is to
convert gross leases outstanding to net leases.
The net lease has made a shopping center one
of the most valuable and coveted real estate in-
vestments because of the long-term security it
Net leases operate essentially like pass-
through leases in offices; a wide range of total
net costs are charged to tenants, but energy
costs in a retail lease are generally borne by the
tenant. The owner is responsible for whatever
common area energy costs may exist, such as
mall or arcade lighting and HVAC. The net Photo credit:. Steve Friedman

lease, according to retail owners in case study For owner-occupied department stores, energy savings are
and national interviews, is the single key invest- direct business savings
ment disincentive for energy retrofit of these
buildings by the owners. It is a bigger disincen- products could be pretested before national ap-
tive for retail owners than the passthrough lease plication. Its overall energy conservation pro-
is to office owners. I n contrast to office tenants, gram was estimated to save the nation’s largest
retail tenants on whom the passthrough burden retailer $37 million annually. Another nation-
falls cannot “shop around” and exert market wide retailer with many urban outlets regularly
pressure on owners. Retail tenants have to go directed stores to examine energy savings de-
where the goods will sell, first and foremost. vices. It too has local tests of equipment before
ordering widespread use.
None of the small number of investor-owners
of retail buildings interviewed had made opera- For owner occupants of downtown stores in-
tional improvements in older city retail shop- terviewed for the report, energy improvements
ping centers and retail strips on net leases. have been funded in conjunction with the an-
Although new centers are being outfitted with nual capital budget. Improvements are Iinked to
energy efficiency components such as compu- payback and to demands on capital for other
terized energy management systems as a mar- purposes. The 3-year payback period for one
keting lever, this type of retrofit for an older cen- chain was the same as that traditionally used for
ter or strip is very costly, and difficult to imple- labor saving devices. Improvements such as
ment architecturally without disturbing the ten- lighting level adjustments are limited to those
ant. In these retail buildings, lighting reductions consistent with the competition as well. For the
and savings in the common areas are the prin- most part, the level of investment per store ap-
cipal response to the energy conservation issue, pears to be in the 25 to 50 cents per square foot
with tenants making whatever improvements range or less ($25,000 or so). This level has not
they see fit and find affordable for their own resulted in problems of competition for capital,
stores. but higher levels have not yet been tested.
For retail owner occupants, such as down- Hotel Owners and Energy Investment. City
town department chain stores, on the other hotel ownership has changed over the last
hand, energy savings are direct business sav- decade as hotel chain corporations have fre-
ings. Energy costs have been targeted by down- quently sold their buildings to private investors
town department store chain owners as an area while maintaining a franchiser and sometimes a
for cost-cutting. Sears recently reported at an management role. The private owners typically
energy conference that it had set up demonstra- are partnerships of various sizes. Recently, in-
tion stores in which potential energy retrofit stitutional owners have begun to increase hotel
Ch. 4—Will Building Owners Invest in the Energy Efficiency of City Buildings? ● 125

holdings in their portfolios, partly because of

the hotel industry’s ability to adjust rates
somewhat to counter rising costs brought about
by inflation

Despite a shift to investor ownership, hotels

are being retrofitted for improved energy effi-
ciency. In hotel operations, energy costs are ex-
perienced directly by the operators and energy
savings directly enhance net income margins.
The standard contract for hotel managers in-
cludes a bonus incentive for net income per-
formance. Hotel owners and managers find a
definite economic incentive for energy invest-
ment in this type of city building and the result
can be dramatic. “My costs per room this year
are less than last year due to energy improve-
merits, ” a motel chain president emphasized.

Hotel operators analyze energy investment in

the context of their primary business objec-
tive—renting rooms and other facilities—and
the alternative investments owners make to im-
prove rent revenues—such as promotional cam-
paigns. Hotel owners will not consider an im-
provement that causes significant tenant dis-

The degree of energy improvement is usually

Photo credit: OTA staff
dependent on the hotel’s capacity to fund them
from internal moneys. Outside financing is con- Retrofits to this hotel building in a Northern city included
sidered neither feasible nor traditional. Hotel improved boiler efficiency, a shift from incandescent to
fluorescent lights and radiator valves
owners and operators are often uncertain about
what could be done technically to a hotel in
order to save energy i n a cost-effective manner. To sum up, hotel buildings are likely to be
This energy information problem is now being retrofitted because energy costs directly affect
tackled by the hotel industry’s main trade asso- profit margins and hotel operators are given in-
ciation, the American Hotel & Motel Associa- centives to reduce them. Office buildings are
tion, which is using a Department of Energy likely to be retrofit to a low level which can pro-
(DOE) grant to study prototypical hotels and duce substantial savings given the usage pat-
consumption patterns and to disseminate in- terns of the building. Retrofits beyond a low
structional and technical information resulting level will occur in owner-occupied office build-
from the study to the industry. ings and in tenant occupied buildings if market
conditions change to make total occupancy
The consensus of hotel owners concerning costs important. Finally, retail shopping centers
energy retrofit investments is nevertheless a are unlikely to be retrofit beyond a low level of
clear one: energy savings and owner expense retrofit to the common areas. Owner-occupied
savings have a one-to-one relationship despite large stores are likely to be retrofit within the
the theoretical prospect that rates could be ad- limits of cash flow, competition and client com-
justed daily to recover costs. fort.
126 . Energy Efficiency of Buildings in Cities


For owners of both commercial and multifam- altogether, the tenants leave the building or
ily buildings in low-income and risky neighbor- withhold their rent in response, and the land-
hoods, increases in energy costs create severe lord finds his income stream drying up. Such
economic pressure. Although property taxes vicious cycles have been described by city offi-
and debt service on such properties are low, cials in New York City, Jersey City, and Hart-
rents are even lower and there is no cash flow ford. The issue of abandonment of housing
margin to absorb the escalating energy costs. An is discussed further in Chapter 5: Retrofit for
owner faced with such a situation must choose the Housing Stock of the Urban Poor.
among a series of bad alternatives: covering the
escalating energy costs by undermaintaining the Despite the severe economic pressure caused
building in other ways, providing inadequate by energy costs, there are many reasons why
heat and utilities to the building, obtaining owners of commercial and multifamily build-
enough funds in some way to retrofit the build- ings in marginal neighborhoods are unlikely to
ing, or abandoning the building altogether. retrofit their buildings, The most important of
these is that owners are reluctant to “throw
There is considerable evidence that rapidly in- good money after bad” if the property has little
creasing energy costs are the last straw on top of cash flow, if tenants and market rents in the area
a set of burdens that causes owners to “disin- will not support recovery of costs, and if neigh-
vest” in their buildings. Studies of disinvestment borhood conditions do not promise at least
behavior among owners in the South Shore area stable property values. The problem is a little
of Chicago, Cleveland, and Newark explicitly different in revitalizing neighborhoods where
show the importance of energy costs to owners owners, expecting future improvement in prop-
in their ranking of “disinvestment variables” erty values, may defer minor improvements un-
(see table 37). In both 1975 studies, energy costs til they are ready to make a major investment or
were ranked as important immediate causes of until they sell to another owner for rehabilita-
disinvestment, while in the 1971 study of tion.
Newark (before the 1973 oil embargo) energy
was not a factor. It is important to note that in It is unlikely that owners of buildings in
the South Shore study, energy cost increases declining neighborhoods will be able to raise
ranked equal to tenant and neighborhood prob- rents to recover energy retrofit costs. Such
lems. Under the pressure of severe winter de- owners also face much more severe financing
mands for regular oil heat deliveries it is easy for problems apart from the economics of their
a vicious cycle to begin in which the landlord buildings. Historically, lenders have tended to
cuts back on heat, or fails to heat the building limit their role in such areas because of their

Table 37.—Landlords’ Ranking of Reasons for Disinvestment

South Shore
Chicago, 1975( la) Cleveland, 1975(2a) Newark, 1971(2a)
Energy cost increases Tenants Tax level
Tenants a Neighborhood problems Neighborhood problems
Neighborhood problemsa Tenants
Maintenance Energy cost increases Building inspection
Tax level Building inspections Mortgage costs
Insurance Tax level Insurance
Janitorial costs Insurance
Lack of housing programs
and bank financing
Ranked equally.
SOURCES: 1“) Management Firm Interviews, 10 sample properties from Robert Giloth, Dish’westrnent in South Shore’s
Large Rental Properties, June 1978.
2“) Real Estate Research Corp. Rea/ Estate Review, spring 1976, p. 65.
Ch. 4—Will Building Owners Invest in the Energy Efficiency of City Buildings? . 127

perception of high risks. Both strict qualifying mortgages. This makes investments in improve-
terms and higher rates are often used to dis- ments all the more costly and risky.
courage borrowing. Insurance rates for housing
In short, energy conservation retrofit in mar-
or commercial structures in marginal areas have
ginal areas is part of the broader issue of reha-
likewise been very high; coverage often is avail-
bilitation and reinvestment in marginal neigh-
able only through high risk pools.
borhoods. Simply because energy costs are the
Typically owners of properties in such margi- “last straw” does not mean that energy-caused
nal areas may be unable to afford to service new disinvestment is inevitable. If a particular owner
debt and if they refinance, it is often to convert would have otherwise retained the property, if
long-term equity into cash. Because they lack the neighborhood is stable or revitalizing, or if
access to more conventional financing, such significant public actions are under way to
owners often have to buy and sell using extra- stabilize the area, it may be possible to facilitate
institutional personalized securities, such as investment in energy conservation.
contract-for-deed and seller/purchaser money


Some buildings are relatively easy to retrofit; Given these physical types of buildings and
some buildings can be retrofit only with con- the owner types discussed in this chapter it is
siderable difficulty and expense. As has been possible to classify buildings into those that are
clear from this chapter some owner types are very likely to be retrofit, those that are moder-
willing to retrofit their buildings even at con- ately likely and those that are very unlikely.
siderable expense; others are not motivated to Sooner or later the market will take care of a
install even low-cost energy conservation retro- building that can be retrofitted at low capital
fits. The likely pace of retrofit for a particular cost by an owner who is strongly motivated to
building, whether rapid or slow, depends on retrofit. The prospects are dim indeed for a
both the building’s physical characteristics and building that requires moderate capital cost in-
on the resources and motivation of its owner. vestments for any substantial energy savings by
an owner who is unwilling to retrofit.
The significant differences among physical
characteristics of buildings are summarized in
table 38 based on the extensive analysis in Small Multifamily Buildings. Three owner
chapter 3. Buildings for which substantial en- types and two physical types can account for a
ergy savings are available for low capital cost large share of the small multifamily buildings in
(less than 2-year payback) include all types of U.S. cities (see table 39). The most likely small
small framehouses, moderate or large multi- multifamily building to be eventually retrofitted
family buildings with central air or water sys- for improved energy efficiency is the owner-
tems and commercial buildings except those occupied frame building with a central air or
with central water systems and window air- water system. Such buildings are common in all
conditioners. On the other hand, retrofits of New England cities, and many cities elsewhere
moderate capital cost compared to savings (2 to in the United States. The long-term perspective
7 years payback) are required for substantial of the owner and his need to pay his own ener-
savings in small masonry rowhouses, moderate gy costs, coupled with the relatively low cost
or large multifamily buildings with decentral- and ease of insulating such buildings and im-
ized heating and cooling systems and commer- proving the efficiency of their heating systems
cial buildings with central water systems and all make it likely that market incentives will
window air-conditioners. eventually bring about a retrofit.
128 ● Energy Efficiency of Buildings in Cities

Table 38.—Thirteen Types of Buildings With Significantly Different Retrofit Optionsa

Retrofit options
Low Moderate
Building type and Mechanical capital capital
wall type system type Cost b Cost c
Small house with frame
walls (single family or 2-4 units) Central air system x
Same Central water systemd x
Same Decentralized system x
Small rowhouse with masonry
walls (single family or 2-4 units) Central air system x
Same Central water system x
Same Decentralized system x
Moderate or large multifamily
building (masonry or clad walls) Central air system x
Same Central water system x
Same Decentralized system x
Moderate or large commercial
building (masonry or clad walls Central air system x
Same Central water x
Same Complex reheat system x
Same Decentralized system x
asee Ch. 3 for a discussion of retrofit OptiOnS.
bcompared t. savings, See ~h, 3 for a definition, Approximately defined as retrofits with a 2.year payback Or 10SS.
ccompared t. savings, Approximately defined as retrofits with a 2- to 7-year payback.
dOTA,s assumption is that this building type has a central water system and air-conditioners.

SOURCE: Office of Technology Assessment.

Table 39.—Typology of Small Multifamily Buildings According to the Likelihood of

Major Improvement in Energy Efficiency

Retrofit options
Likelihood Owner’s
of major willingness Low Moderate
Owner type/ Building improvement in to invest capital capital
meter type type energy efficiency in retrofit Cost a Cost a
Owner-occupant Frame Moderate Willing— x
type low capital
cost only
Owner-occupant Masonry Unlikely Willing— x
wail low capital
cost only
Absentee owner Frame Unlikely Unwilling x
master-metered wall
Absentee owner Masonry Unlikely Unwilling x
master-metered wall
Absentee owner Frame Unlikely Very x
tenant-metered wall unwilling
Absentee owner Masonry Very unlikely Very x
tenant-metered wall unwilling

Compared to savings.
SOURCE: Office of Technology Assessment.
Ch. 4—Will Building Owners Invest in the Energy Efficiency of City Buildings? ● 129

The least likely building to be retrofit is the ful- systems owned by institutions such as pension
ly tenant-metered masonry-walled rowhouse funds or insurance companies. (As explained
owned by an absentee landlord. Such buildings earlier in the chapter, institutions are trying to
are the dominant form of urban housing in the reduce their holdings of multifamily property or
Middle Atlantic States and are also quite com- at least to give preference to tenant-metered
mon in cities of the Southeast. Usually moder- build ings.) The least likely to be retrofit are large
ate paybacks are required for substantial savings buildings with tenant-metered decentralized
in such buildings. With tenant metering, systems owned by individuals or local partner-
absentee landlords under most circumstances ships. Such buildings can be retrofit only if own-
have no incentive to retrofit them, regardless of ers are willing to accept moderate paybacks.
the payback. Under current conditions of capital cost and
retrofit uncertainty such owners are willing to
Owner-occupied masonry-walled buildings
invest only in retrofits of very low capital cost
and absentee-owned frame buildings are inter-
with very fast paybacks.
mediate cases, the former because retrofit is fair-
Iy expensive, offering only moderately fast pay- Between the extremes, decentralized build-
back and the latter because the owner is likely ings owned by condominiums and institutions
to be fairly unwilling to retrofit even with low are only moderately likely to be retrofit because
capital cost measures offering a fast payback. of the expense. Central system buildings owned
Both of these categories might be susceptible to by individuals and local partnerships may offer
private or public programs which reduce the opportunities for substantial retrofit but such
risk and financing cost of retrofit. owners generally require extremely fast pay-
Large Multifamily Buildings. Two physical
types and three owner types can explain much Small Commercial Buildings. Four combina-
of what is likely to happen i n the retrofit of large tions of owner and physical types can character-
multifamily buildings (see table 40). The most ize most small commercial buildings (see table
likely buildings to be retrofit are the relatively 41). Most of such buildings in cities have mason-
rare buildings with central air or water heating ry or curtain walIs which are expensive to in-

Table 40.—Typology of Large Multifamily Buildings According to the Likelihood of

Major Improvement in Energy Efficiency
Retrofit options
Likelihood Owner’s
of major willingness Low Moderate
Owner type/ Building improvement in to invest capital capital
meter type type energy efficiency in retrofit Costa Costa
Institution Central air or Very likely Very willing x
master-metered water
Institution Decentralized Likely Willing x
tenant-metered system
Condominium Central air or Likely Willing— x
master-metered water low capital
system cost only
Condominium Decentralized Unlikely Willing– x
tenant-metered system low capital
cost only
Individual or small Central air or Moderate Willing– x
partnership water low capital
master-metered system cost only
Individual or small Decentralized Very unlikely Unwilling x
partnership system
wompared to savings.
SOURCE: Office of Technology Assessment
130 . Energy Efficiency of Buildings in Cities

Table 41.—Typology of Small Commercial Buildings According to the Likelihood of

Major Improvement in Energy Efficiency

Retrofit options
Likelihood Owner’s
of major willingness Low Moderate
Building improvement in to invest capital capital
Owner type type energy efficiency in retrofit Costa Costa
Owner-occupant Air system or Moderate Willing— x
decentralized low capital
system b cost only
Owner-occupant Water systemc Unlikely - Willing— x
low capital
cost only
Absentee owner Air system or Unlikely Unwilling x
system a
Absentee owner Water systemb Very unlikely Unwilling x
%ompared to savings.
bElectrlc resistance baseboard heat and window air-conditioners. S00 ch. 3.
cwater or steam central heat and window air-conditioners. S00 ch. 3
SOURCE: Office of Technology Assessment.

sulate. Retrofit opportunities are limited to among large commercial buildings (see table
heating and cooling systems and lighting. Most 42). There are many opportunities for low
small commercial buildings are owned by an in- capital cost retrofits among commercial build-
dividual or local partnership. ings with central air systems, complex reheat
systems, or decentralized systems; if they are
The most likely building type to be retrofit is owned by owners with long holding peri-
occupied by its owner and has a central air
ods—corporate owner-occupants or institu-
heating and cooling system or decentralized
tional investors—it is likely that retrofit has
heating and cooling. Such owners are willing to
already occurred.
invest in low capital cost retrofits because the
energy savings can directly increase their On the other hand, older commercial build-
business profits. Buildings with central air ings with central water or steam systems and
systems or decentralized heating and cooling window air-conditioners are fairly expensive to
can achieve substantial energy savings with retrofit. If such buildings are owned by individ-
retrofits of low capital cost. uals or local partnerships with short holding
The least likely building to be retrofit is owned periods, constraints on cash flow and poor ac-
by an absentee owner and has a water or steam cess to financing and information, they are very
heating system and window air-conditioners re- unlikely to be retrofit. Other large commercial
quiring at least moderate capital investment for buildings fall between these extremes either
substantial energy savings. Individual or local because they are fairly difficult to retrofit or
partnership absentee owners, short of cash and because their owners are unwilling to under-
with little access to good information on retrofit take retrofit regardless of the payback.
potential, are very unlikely to retrofit, but in- As with all simplifications, readers should
stead will try to avoid the burden of energy costs avoid applying the categorization described
by passing them on to tenants using net or above to any particular building. Any given
passthrough leases. building may easily have prospects quite dif-
Large Commercial Buildings.–Due to the ferent from these for quite individual reasons.
greater variety of owner types, six combinations These categories are to help distinguish the
of owner type and physical type are necessary buildings most likely to be retrofit from those
to explain much of the predicted variation least likely and identify the large group in the
Ch. 4—Will Building Owners Invest in the Energy Efficiency of City Buildings? . 131

Table 42.—Typology of Large Commercial Buildings According to the Likelihood of

Major Improvement in Energy Efficiency
Retrofit options
Likelihood Owner’s
of major willingness Low Moderate
Owner type/ Building improvement in to invest capital capital
meter type type energy efficiency in retrofit Costa Costa
Owner-occupant Air, complex Very likely Very willing x
or institutional reheat or
investor b decentralized
Owner-occupant Water system Likely Very willing x
or institutional
National partner- Air, complex Likely Willing— x
ship or develop- reheat or low capital
ment company decentralized cost only
National partner- Water system Moderate Willing— x
ship or develop- Iow capital
ment company cost only
Individual or local Air, complex Unlikely Unwilling x
partnership reheat or
Individual or local Water system Very unlikely Unwilling x
Compared to savings.
bE * pension fund, Insurance company.

SOURCE: Office of Technology Assessment

middle which are most likely to be influenced due both to owner unwillingness and difficulty
by aggressive marketing and outreach by pri- of retrofit include:
vate sector entrepreneurs or public sector pro-
●Small masonry walled multifamily build-
ings by absentee owners.
Buildings that are likely to be retrofit within Ž Large tenant-metered multifamily build-
current private sector practices include: ings owned by individuals or local partner-
Ž Large commercial buildings with central ● Small commercial buildings owned by
air, complex reheat or decentralized heat- absentee owners.
ing and cooling systems owned by cor- ● Large commercial buildings with central
porations, other large owner-occupants, water or steam heat and window air-
institutional owners, national partnership conditioners owned by individuals or local
syndicates, and development companies. partnerships.
Ž Large master-metered multifamily build-
ings owned by institutional owners and All of the other building types have prospects
national syndicates. for retrofit that are less than very likely and
● Small owner-occupied commercial build-
more than very unlikely. Whether they are actu-
ings with central air or decentralized heat- ally retrofit will depend in part on the owner’s
ing and cooling systems. knowledge of retrofit opportunities and the risk
of retrofit and also on the owners access to fi-
Buildings which are very unlikely to be retrofit nancing, Each of these is discussed below.
132 ● Energy Efficiency of Buildings in Cities


For all building types, in all locations, a major Table 43.—Percentage of Apartment Building
constraint on investment is the uncertainty Owners Who Perceived Measures They Installed
about the performance of energy conserving To Be Effective
measures. Except for a few small studies there is Percentage of owner-
almost no data on the actual performance of installers perceiving
retrofits. This is especially true for buildings the measure to be
Measure installed effective a
other than single-family houses.
Insulation , . . . . . . . . . . . . . . . . . . . 540/0
This lack of information is a substantial barrier Furnace modification . . . . . . . . . . 50
Individual metering or
to retrofit for smaller owners who lack the submetering. . . . . . . . . . . . . . . . 43
technical capacity to evaluate conservation Storm windows . . . . . . . . . . . . . . . 39
alternatives and the financial wherewithal to ex- Clock thermostats. . . . . . . . . . . . . 38
Weatherstripping . . . . . . . . . . . . . 31 %
periment. For smaller operators–the dominant aThe Sum of the percentages is greater than 100 because OwnerS couid Identify
group of real estate owners—there is not more than one measure as being effective,
enough leeway in a building’s cash flow to be SOURCE. National Apartment Assoclatlon Survev and Booz, Allen & Hamilton.
op. cit., exhibit D-6.
able to afford a costly mistake. And although
larger owners have resources at their disposal
they also want to be very sure that energy con- s a v i n g s r a n g e d ( w i t h i n a s t a n d a r d d e v i a -

servation is indeed the best use of their invest- 7 to 37 percent.

tion) from

ment funds. The most sophisticated owners ● For 60 buildings for which predictions of
with the best engineering staffs at their disposal savings were available as well as savings,
said in interviews that they test the equipment there was a substantial difference between
first to establish its performance in actual ap- predicted and actual savings. Sometimes
plications. They reported that much of the ex- savings were much better than predicted (a
perience with these tests has not matched either group of schools in Maine), sometimes they
manufacturers’ or official expectations owing to were much worse (another group of
the effects of previous measures or operational schools) and sometimes they varied widely
limitations. within a similar group of buiIdings (a group
of community centers in Columbia, Md.).
Building owners who have installed retrofit ● For 15 buildings, with more than 1 year’s
measures report mixed results. I n a 1979 survey data after the-retrofit, 60 percent saved
by Booz Allen of apartment building owners, more in the years following the first year
only half the owners, who had installed energy after the retrofit, but 40 percent saved less.
efficiency measures, were satisfied that insula-
tion and furnace modifications were effective On the other hand, the Ross and Whalen
measures and only a third were satisfied that survey is evidence that, on average, energy
weatherstripping was effective (see table 43). retrofit brings a large return on investment. For
65 buildings with good retrofit cost data, almost
In the most comprehensive survey of docu- half had paybacks of less than 1 year. All but
mented retrofits done to date, (described in ch. seven had paybacks of 3 years or less.
3) researchers Ross and Whalen obtained data
on retrofit results in 222 buildings,16 Their data To be effective, information on actual retrofits
illustrates the uncertainty of predicting savings is most useful when available through the chan-
from a retrofit: nels which building owners turn to for advice.
One of the best are trade associations, The pro-
. 10 percent of the buildings failed to have gram referred to earlier between DOE and the
any savings at all. American Hotel & Motel Association to retrofit
. Although those buildings which saved and document six different types of buildings is
energy saved an average of 22 percent, the an excellent example. Restaurant trade associa-
16ROSS and Whalen, op. cit. tions might be able to do the same kind of
Ch. 4— Will Building Owners Invest in the Energy Efficiency of City Buildings? ● 133

testing in conjunction with various restaurant Table 44.—impact of Uncertainty on Expected An-
chains. Another possible channel is the local nual Energy Savings From a Retrofit
chamber of commerce which might cooperate Costing $10,000
with local energy retrofit businesses to make in- Annual Expected
formation available on documented retrofits. savings payback
Case 1: 3-year payback
Impact of Risk on Building Owner’s Payback Predicted by an audit . . . . . . . . . . . $ 3,300 3 years
Preferences. For many reasons discussed in this 50°/0 below prediction . . . . . . . . . . 1,650 6 years
chapter some owner types, especially individ- 70°/0 below prediction . . . . . . . . . . 990 10 years
50°/0 above prediction . . . . . . . . . . 4,950 2 years
uals and small partnerships, cannot tolerate
Case 2: 5-year payback
large cuts in the cash flow from their buildings. Predicted by an audit . . . . . . . . . . . $ 2,000 5 years
The next section illustrates the cash flow cuts 50°/0 below prediction . . . . . . . . . . 1,000 10 years
caused by retrofits with moderate paybacks of 70°/0 below prediction . . . . . . . . . . 600 17 years
50°/0 above prediction . . . . . . . . . . 3,000 3½ years
6, 7, and 9 years. Given the uncertainty of at-
Case 3: l-year payback
taining audit predictions of savings, such own- Predicted by an audit. . . . . . . . . . . $10,000 1 year
ers must avoid moderate payback retrofits be- 50°/0 below prediction . . . . . . . . . . 5,000 2 years
cause of the risk that they will turn into very 70% below prediction . . . . . . . . . . 3,000 3½ years
50% above prediction . . . . . . . . . . 15,000 8 months
long payback retrofits with devastating impact
on the building’s cash flow. SOURCE Off Ice of Technology Assessment

Table 44 illustrates the impact of predictable

deviations in savings from audit results. A 5-year
payback retrofit will become a 17-year payback predictions. As table 44 shows, for an owner
retrofit if actual savings are 70 percent below unable to tolerate more than a 5-year payback,
predicted, a figure perfectly consistent with the an improvement in downside risk from 70 per-
comparison of audits and actual savings above. cent to 50 percent will allow that owner to
A building owner unable to cope with an actual make a predicted 3-year payback investment.
payback longer than 3 years must avoid all
Better documentation of safe retrofits which
promised paybacks longer than 1 year, if he
reduces the risk of a retrofit would be of most
wishes to allow for the risk that savings might be
70 percent less than predicted. use to cash-starved individual owners and small
partnerships. With reliable information in hand,
Improved private sector or public sector infor- they might be willing to consider retrofits with
mation on retrofits could reduce the likely risk paybacks beyond the strict 1-year payback they
that actual savings would be less than audit now insist on.


For some building types, long-lasting retrofits both would be sound long-term investments for
are available which will, if successful, earn a building.
substantial returns in improved net income and
A major obstacle to making such investments
building resale value over the life of the meas-
attractive to many building owners without in-
ure. Two such measures are installing more effi-
ternal sources of funds is the high cost of debt
cient air-conditioners in a large building with
service in the early years as a result of the tradi-
cooling from window air-conditioners, and
tion of amortizing loans in equal annual pay-
replacing the roof of a flat-roofed building and
ments of interest and principal repayments.
adding roof insulation. Such measures would
not be expected to payback for 6 to 10 years. Simple Relationship Between Debt Service
Since they will last 20 years or more, however, and Payback. Without examining all the com-
134 ● Energy Efficiency of Buildings in Cities

plexities of real estate finance with depreciation would keep debt service costs the first year
schedules and tax deductions of energy costs below energy savings.
and interest, it is useful to examine the simple
For most building owners interviewed who
relationship between debt service and energy
lacked access to internal funds for retrofits, the
retrofit payback, shown in figure 38. For energy
only option for borrowing money was a com-
retrofits with a 2-year payback, there are many
mercial loan at 2 points over the prime rate
combinations of interest rate and loan term that
(which in the summer of 1980 and the spring of
would allow energy savings to exceed the cost
1981 was 21 percent). The best available out-
of borrowed money the first year. The financing
side financing mentioned was a 5-year loan at
options are far fewer for a retrofit with a 5-year
16 percent.
payback. Only 10-year loans at interest rates of
less than 10 percent per year or 20- or 30-year Given such financing options, especially with
loans with interest rates as high as 18 percent the very short terms of loans available from

Figure 38.-Combinations of Loan Terms and Interest Rates Which Allow the Value of Energy Savings to
Exceed the Cost of Borrowed Money the First Year

Dollar value Dollar value

of energy savings of energy savings
= $2,000 = $1.000

3 7 10 13 16 2022 3 7 10 13 16 2022
Annual interest rate on loan Annual interest rate on loan
(percent) (percent)

Case 1: Energy savings from a 2 year Case 2: Energy savings from a 5 year Case 3: Energy savings from a 10 year
payback retrofit (maximum payback payback retrofit (criteria used by (maximum payback
payback retrofit
considered by an individual or local corporations, insurance company criteria of any owner interviewed)
partnership owner) owners)

Ch. 4—Will Building Owners Invest in the Energy Efficiency of City Buildings? Ž 135

commercial banks (often less than 2 years), it is expense and income data in particular localities
not surprising that only 2 of the 33 major build- as well as appraisal data.18 The prototypes illus-
ing retrofits reported i n the building owner in- trate some of the variations in income and ex-
terviews were financed through outside bor- penses in multifamily buildings: large and small,
rowing. All the rest were funded from internal master and tenant metered, low rent structure,
capital resources. It furthermore is no surprise and moderate rent structure.
that a building owner, without internal funding
For one such building analyzed, a medium
and with limits on the extent to which he can
small building with 18 units, in a cold climate
cut into a building’s cash flow, would limit con-
typical of St. Paul, Minn., but in a moderate rent
sideration of retrofits to those with short pay-
area where both rental income and taxes are
backs of 1, 2, or 3 years.
substantial, a specific retrofit investment was
The term of a loan matters more than the in- simulated. It was a fairly large package of retrofit
terest rate in reducing annual debt service costs measures, costing $22,303 or $1.45 per square
below energy savings. For retrofits with long foot. It saved 30 percent of the buildings energy
lifetimes such as new boilers, air-conditioners, use or about $2,500 the first year. Such a retrofit
new lighting fixtures, or new insulation all of would be typical for a masonry-walled building
which should be expected to last 20 years or for which wall and roof insulation is expensive,
more, building owners might well accept fairly and would payback in 9 years, well beyond the
long-term financing, even at moderate to high planning horizon of the building owners inter-
interest rates, if it were available. viewed for this study.
Unfortunately, two programs that help make There would be substantial benefits to the
long-term property improvement loans avail- owner from such a retrofit. After all tax benefits
able to single-family homeowners have not from interest and depreciation were taken into
been available to owners of multifamily or small account there would be a substantial increase in
commercial buildings. Title 1A loan insurance net income from the building.
has helped stimulate 7- to 10-year property im- First year Fifth year
provement loans for single-family homes (1 to 4 Energy savings. . . . . . . . . . . . . . . . $2,500 $4,480
units) since World War Il. However, its com- Increased net Income. . . $1,459 $4,452
panion program, title IB, for multifamily such an increase in a building’s net income
buildings has been very little used. Similarly, should be translated directly into increased
the Federal Home Loan Mortgage Corporation resale value for the property, if general eco-
launched in 1981 a pilot program to purchase nomic conditions for the building remain the
home improvement loans for single family same. For a building in a stable neighborhood
homes from savings and loan associations. The with the moderate rent structure described
loans must be secured by a second trust and above, an appraiser would capitalize the net in-
may be on amounts up to $30,000 and have come at 9½ or 10 times in order to assess the
terms of up to 15 years. There are no plans to building’s resale value (see box E above). After 5
create a secondary market for property im- years such a building should have an increased
provement loans for multifamily or commercial resale value more than $40,000 higher than
buildings.17 with no retrofit.
Adding Complications: Return on a Retrofit Fifth year value without retrofit. . . . . ... .. .$402,133
for a Prototypical Building. For a more realistic Fifth year value with retrofit. ... ... . .$442,601
Increased value. . . . . . . . . . . . . . . . . . . . . . . + $40,468
appraisal of the impact of a retrofit on particular
Percent increase in value. . . . . . . . . . . . . . . . . . . . . + 10.4%
buildings, OTA developed information on six
prototypical buildings from published average Such an increase in value would be almost dou-
. ble the cost of the retrofit.
1 zTh~ i “format Ion in rhj5 Pdrdgrdptl is based on presentations by
Michael Ehrman of HUD and Mark Shaefer of the Federal Home I13A descrj ~ltlon of the methods used to analyze the prototypical
Loan Mortgage Corporation at a community energy workshop buildings and presentation of the results will be published in work-
meeting on flnanclng held at HUD on Oct. 29, 1981. i ng papers to th IS report.
136 Ž Energy Efficiency of Buildings in Cities

Although there are clear long-term benefits to sidy, are of comparable cost to the Treasury.
the owner of such a building from undertaking a The first of these is a tax credit of 30 percent that
retrofit with a fairly long payback, there are OTA (somewhat arbitrarily) defined as substitut-
serious short-term reductions in the building’s ing for the first 30 percent of depreciation taken
cash flow as a result of the high cost of conven- on the retrofit. The cost to the Treasury of such a
tional debt service. If the retrofit is paid for with subsidy would be $6,690 the first year but it
a 16 percent 5-year loan (which was the most fa- would be offset over the first several years by a
vorable conventional financing available to any reduction of the same amount in depreciation
building owner interviewed) there is a sharp deductions. For building owners in the 50- per-
drop in cash from building operations from the cent income tax bracket such a depreciation
first year all the way through the fifth year (see deduction would be worth $3,345 over several
fig. 39). If the building owner survives until the years of depreciation deduction. Thus, the net
sixth year, debt service to pay for the retrofit tax loss is only half of the $6,690 or 15 percent
ends and the increase in net income is com- of the retrofit cost.
pletely retained.19
The other subsidy, of approximately equal or
Subsidy Options. Given the loss in building slightly less cost, is a loan subsidy designed both
cash flow from a substantial retrofit financed to reduce the effective interest rate on the
with a 16-percent interest loan, OTA compared retrofit loan and to increase the loan term. The
the impact of two different financing subsidies interest rate subsidy is straightforward. A lump-
on the building’s cash flow. The two subsidies, sum payment of about $2,200 deposited in a
one a tax credit and the other a financing sub- bank in the first year of a loan is the present
I gFor a discussion of the impact on cash flow of an even longer
value equivalent of a reduction in interest from
payback solar retrofit see Arthur J. Reiger, “Solar Energy: The Mar- 16 to 13 percent and an increase in loan term
ket Realities,” Rea/ Estate Rewew, vol. 8, winter 1979. from 5 to 10 years. This amount is only about 10
percent of the cost of the retrofit. A significantly
larger subsidy, however, would be needed to
Figure 39.—Cash From Operations” for an 18-Unit actually induce banks to increase loan terms.
Apartment Building With and Without an Energy This could take the form of loan insurance
Retrofit b
(about 2 percent of a loan’s value) and adminis-
trative and financial support for a secondary
market for retrofit loans. For this reason OTA
estimates the total cost as comparable to the 15
percent of retrofit cost for the net impact of the
tax credit.

The impact of the two subsidies is compared

in figure 40. The tax credit restores or slightly in-
creases aftertax cash flow the first year but
leaves a large reduction in the pretax cash flow.
The fifth year, however, both pre and aftertax
cash flow are reduced from their no retrofit
level. With the loan subsidy, the building’s pre-
tax and aftertax cash flow are both slightly
reduced the first year from the no retrofit situa-
1979 1980 1981 1982 1983 1984 1985
tion, but by the fifth year, both pretax and after-
tax cash flow exceed the no retrofit situation.
apretu ~hll~ functioning as a tax shelter and after tax once it starta Oener-
atlng an after-tax profit. Impact of Retrofit on Two Other Prototypi-
bRetrof~t ~osting $22,3cQ with about a 9Year payback
cal Buildings: Low Rent and Tenant Metered.
SOURCE: Office of Technology Aaeessment. Two other prototypical buildings illustrate some
Ch. 4—Will Building Owners Invest in the Energy Efficiency of City Buildings? Ž 137

Figure 40.— Impact of Energy Retrofit Subsidies on Pretax and

‘Aftertax Cash Flow for a Prototypical Apartment Building
Building A: 18-units, moderate rent, moderate taxes, master-metered

retrofit No – subsidy

Retrofit n subsidy
$15,0001- 1


First year Fifth year
(aftertax cash flow (pretax cash flow
exceeds pretax cash flow) exceeds aftertax cash flow)
Pretax cash flow
w Aftertax cash flow
SOURCE: Office of Technology Assessment.

interesting variations on the kind of impacts de- Building C (also shown in fig. 41) is at the op-
scribed above. Both are illustrated in figure 41. posite extreme from building B. This large build-
ing is tenant metered with moderate rents and
Building B is a small multifamily building with
taxes based on income and cost structures
low rents and low taxes and substantial energy
found in Tampa, Fla. The owner makes a retrofit
costs, based on rent and cost structures found in
only to save on energy costs in the common
St. Louis. A retrofit costing $34,809 is simulated.
areas, which are a small fraction of building ex-
It saves $4,979 in energy costs the first year for a
pense. The energy retrofit costs the owner
simple payback of 7 years. This building has
$41,794 and saves $6,975 in energy costs the
very poor cash flow to begin with. The first year
first year for a simple payback of 6 years. Such a
pretax cash flow is essentially wiped out by a
retrofit is neither very important t o t h e
retrofit with a 7-year payback. Aftertax cash flow
building’s resale value which increases by only
the first year suffers considerable but less
3.9 percent, nor is it very important to the build-
damage than pretax cash flow; it is reduced by
ings pretax or aftertax cash flow which does not
about half. By the fifth year an unsubsidized
change much with either an unsubsidized or
retrofit or one subsidized with a tax credit has
subsidized retrofit. Such a building has ade-
still reduced aftertax cash flow way below what
quate cash flow to cover this retrofit easily.
it would have been. A retrofit with a financing
subsidy on the other hand has increased both A conclusion to be drawn from this compari-
the building’s pretax and aftertax cash flow. Al- son of prototype analyses is that a retrofit is most
though a retrofit is very damaging to this build- beneficial to the overall return of a low-rent
ing’s cash flow, it also has a very beneficial im- building with high energy use but it is also most
pact on its resale value which increases by devastating to its cash flow. Under such circum-
almost 27 percent. stances, a financing subsidy (as opposed to a tax
138 ● Energy Efficiency of Buildings in Cities

Figure 41 .—Impact of a Retrofit on Pretax and Aftertax Cash Flow

for Two Other Prototypical Apartment Buildings

] Building B: small, low rent, I 1— Retrofit 1

I low taxes, master-metered
t R e t r o f i t No

First year Fifth year

C: large, moderate ~ Retrofit 1

No Tax Finance
Retrofit subsidy credit subsidy

subsidy credit subsidyl

First year Fifth year

_ Pretax cash flow
= Aftertax cash flow
SOURCE: Office of Technology Assessment.

credit) will have a most beneficial impact to pre- assist the building’s cash flow at all the first year
vent sharp cash flow losses the first year and and actually decreases the aftertax cash flow
even increase cash flow by the fifth year. after 5 years.
Building Owners’ Preferences for Subsidies. The not quite 25 percent of the building own-
Building owners interviewed in the four case ers interviewed who preferred tax credits, did
study cities preferred subsidized financing of so because tax benefits were important to them
retrofits to a subsidy in the form of a tax credit in the return from their real estate holdings.
by a 3 to 1 ratio for reasons that are consistent Most of these owners were partnerships. A few
with the prototype analysis (see table 45). A fi- were corporations which had adequate internal
nancing subsidy assists the building’s cash flow sources of finance for retrofit but welcomed a
over several years while a tax credit doesn’t tax benefit.
Ch. 4—Will Building Owners Invest in the Energy Efficiency of City Buildings? . 139

Table 45.— Building Owner Preferences for ●I ndividual and partnership owners of office
Tax Credits or Financing Subsidies buildings in markets that have become sen-
Case study city Financing Tax credit Total sitive to energy costs.
Buffalo . . . . . . . . . . . . . 18 5 23 Programs to reduce risks and/or lower financ-
Des Moines . . . . . . . . . 13 3 16 ing costs can take a wide variety of forms, in-
Tampa . . . . . . . . . . . . . 7 4 11
San Antonio. . . . . . . . . 10 3 13 cluding:
Total . . . . . . . . . . . . . 48 (76.20/,) 15 (23.80/o) 63 ● Private market investment and assumption
SOURCE Off Ice of Technology Assessment of risk through leasing or guaranteed sav-
Summary: Likely Impact of Risk Reduction
● Private- or public-sponsored programs to
and Financing on the Pace of Retrofit in City test retrofits for specific kinds of buildings,
Buildings. How willing owners are to retrofit e.g., several current restaurant and hotel
their buildings depends on several conditions programs.
apart from the ease of retrofitting their
● Financing by private utilities, insurance
buildings: companies, or any level of government de-
signed to increase loan terms and lower in-
IS energy retrofit important to the owners’ terest rates.
goals for the building and consistent with ● Tax credits, although these are relatively
them? less helpful to most building owners than
IS the risk of retrofit and the cost of financ- the same amount of government money in
ing it tolerable to the owner? the form of a financing subsidy.
Owners can crudely be divided into four cate- For building owners who are able to retrofit
gories on the basis of the product of these four but not highly motivated to retrofit because it is
conditions. not consistent with their goals for the building,
Importance of reducing energy
the long-term operation of the market may
eventually have an impact. Such owners in-
and absorb risk Willing and able Able but unwilling ● Well-financed owners (such as national
owner can’t tolerate risk
and/or lacks financing........ Willing but Unwllllng and syndicates and development companies) of
not able unable tenant-metered multifamily buildings.
SOURCE: Office of Technology Assessment. Ž WelI-financed owners of office buildings i n
tight markets that are insensitive to energy
Public and private programs designed to re- costs.
duce risk or lower the cost of financing retrofit ● Well-financed owners of shopping centers

(a variety of such programs are described in ch. in retail markets that are insensitive to
11) are likely to have the greatest impact on the energy costs.
group of owners who are willing and even anx-
In some governmental jurisdictions there may
ious to retrofit but who lack the financial flex-
be political support for requiring energy retrofit
ibility to finance retrofits at reasonable cost and
for certain categories of these buildings, espe-
to absorb the costs of a mistake. Such owners
cially tenant-metered multifamily buildings.
Such requirements might be imposed at the
● Owner-Occupants of small multifamily time a master-metered building were converted
buildings. to a tenant metered one, or at the time of sale.
● Small business owner-occupants of their In response to such a requirement, well-
buildings. financed building owners will be able to make
● Individual and small (local) partnership the retrofit. Whether they can recoup the in-
owners of master metered multifamily vestment over time will depend on the nature of
buildings. the rent structures in the building’s market area.
140 Ž Energy Efficiency of Buildings in Cities

By contrast, building owners who are both least possible that local private utilities and leas-
unwilling to retrofit and unable to finance or ing and energy savings guarantee companies
tolerate the risk of a retrofit, are not likely to be would be active enough in a particular city that
able to respond to a requirement to retrofit un- no public program would be needed,
less some financing and risk reduction assist-
Owners of buildings in marginal areas are a
ance is provided. Such owners include:
special case. For these, retrofit makes sense only
● Small individual or partnership investor in the context of the potential resale value of
owners of tenant metered multifamily buildings in the entire neighborhood or district.
buildings. For such buildings, programs to speed up ener-
● Small individual or partnership investor gy retrofit only make sense in the context of
owners of retail or office space with net or overall rehabilitation programs designed to en-
passthrough leases. courage general owner investment in their
● Owners of buildings in marginal areas. buildings (in structure, facade, wiring, plumb-
ing, and energy efficiency) and to increase con-
Any political jurisdiction wishing to speed up
fidence in the area by potential building pur-
the pace of retrofit by regulation of such build-
chasers and the financing community.
ings would have to see to it that financing and
risk-reduction assistance were available. It is at
Chapter 5
Retrofit for the Housing Stock
of the Urban Poor

Page Table No. Page

Impact of Residential Energy Costs on 49. Total Residential Energy Consumption
Low-Income Households. . ..........144 for All Fuels–April 1978 Through
March 1979. . . . . . . . . . . . . . . . . . . . . . 1 4 6
Energy Efficiency of Low-lncome Housing. .147
50. Energy Efficiency Characteristics of
Prospects for Energy Retrofit of Low- Single-Family Houses Occupied by
Income Housing–Private Efforts. .. ...150 Low-Income People Compared to All
Single-Family Houses. . . . . . . . . . ... , . 1 4 8
Prospects for Retrofit: Public Housing. .. ..154
51. Structural Adequacy of Occupied
Federal Programs That Address the Energy Single-Family Houses by Presence of
Needs of Low-Income Households. .. .156 Energy-Saving Features, 1976 . . . . . . . . .148
Direct C a s h Assistance. . .............156 52. Comparison of Increases in Abandoned
Weatherization . . . . . . . . . . . . . . . . . . . . .158 Buildings With Increases in Energy
Costs in Rochester, N. Y.. . . . . . . . . . . . . 152
Some Successful Approaches to Retrofit
53. Energy Conservation Potential of
for the Urban Poor. . . . . . . . . ........159
Public Housing. . . . . . . . . . . . . . . . . .. .153
Fitchburg, Mass,: Low Cost/No Cost. .. ..159
54. summary of Low-Income Energy
Philadelphia Burner Retrofit. . .........161
Assistance Programs, Fiscal Years
1977-81 . . . . . . . . . . . . . . ...,........157
Table No. Page
46. Who Are the Poor: Number of Poor
Households According to Two
Different Federal Standards. . ........143
47 Estimated Annual Household
Expenditures on Home Energy by Page
Income Class, 1981 . . . . . . . . . . . . . . . . 145 G. Heat: No Cash, No Fuel. . . . . . . . . . 146
48 Estimated Average Household Home H. Bad Debts. , ., .........,...,......147
Energy Expenditures, by Type of Fuel I. Metering policy: Public Housing. .. ...154 .
Used for Heating and Region, J. Energy Consciousness in Public
Fiscal Year 1981 . . . . . . . . . . . . . . . . .. .145 Housing: Case Study Cities. . . . . . . . .. .155
Chapter 5
Retrofit for the Housing Stock of the Urban Poor

Like other buildings, those buildings housing income households. Much of the focus of Fed-
the poor can be retrofit to use far less energy eral energy policy, as well as part of the focus of
than they now use, at low or moderate capital State and local energy policy has been on assist-
cost compared to the energy that is saved. The ance to low-income people i n coping with esca-
prospect that such retrofit will actually occur, Iating energy costs.
however, depends on an interaction between
private means and public purpose that is quite It should be remembered that low-income
different from the real-estate decisionmaking households range from elderly widows to
described in chapter 4. The likelihood of retrofit households with children headed by a single
is affected, on the one hand, by the poorer non- working parent. Large proportions of the poor
dition of housing and higher proportion of are not on welfare, do not receive food stamps,
renters among the housing of the poor and, on are not over 65, and live in the South or West
the other hand, by the strong public tradition of rather than the Northeast or North Central.
providing cash and in-kind assistance to low- Table 46 is a useful reminder of Who Are the

Table 46.—Who Are the Poor: Number of Poor Households According to

Two Different Federal Standards (in millions)

Households with
Households with incomes below lower
incomes below living standard b
125 percent of or 125 percent of
poverty guidelines’ poverty guidelines
— .
A l l h o u s e h o l d s
12.3 16.2
Public assistance recipiency
aid to families with dependent
children (AFDC) or supplemental
security Income (SSI) 3.5 4.1
F o o d s t a m p s o n l y 1.5 1.8
Not receiving AFDC, SSI, or
f o o d s t a m p s . . . . 7.3 10.3
Family type:d
Married couple with children 2.0 3.8
Single-parent female with
children 2.6 3.3
S i n g l e - p a r e n t m a l e w i t h
c h i l d r e n 0.1 0.2
Single persons and couples
w i t h o u t c h i l d r e n 7.6 8.9
Age of householder:e
6 5 o r o l d e r 4.6 5.5
L e s s t h a n 6 5 7.7 10,7
Race of householder:
W h i t e 9.1 12,3
B l a c k . 2.9 3.6
Other . . . . . 0.2 0.3
Census region:
Northeast. . . . . . 2,5 3.5
North Central. . . . . . . 2.9 3.8
South . . 4,8 6.0
West . . — . . . . . 2.1 2.9
As established by the Of ffce of Management and Budget
bAs e~~abl(~hed bv the Bureau Of Labor Statlstlcs
Based on a total ‘of 794 mllllon households In Ihe United States
dAFDC and SSI rec[plency and family type are based on the primary famllY onlY
‘The rrouseholder IS defined as the person In whose name the housing unit IS owned or rented or I( there IS no such person.
any adult member exclud!ng roomers boarders or pad employees I f the house IS owned or rented Jointly by a married
couple the householder may be e[fher the husband or wife
f Morlhea~l Mal ”e Ve r m o n t N e w H a m p s h i r e M a s s a c h u s e t t s . C o n n e c t i c u t R h o d e Island NeW York pennsY[vanla “W
J e r s e y Norfh Ceflfra/ Ohio. Michigan. Ind[ana, Illtnols Wmconsln Minnesota Iowa Mlssour! Kansas. Nebraska Soufh
Dakota North Dakota SouffI Maryland Delaware D(str{ct of Columbja Vtrg)n!a West Vlrglnla, North Carol[na, S o u t h
Carolina Georgia, Flor!da Kentucky Tennessee Alabama M ISSISSIPPI Lou[slana, Arkansas Oklahoma Texas West M o n
tana Wyom!ng Colorado New Mex[co Arizona, Utah, Idaho Washington Oregon Nevada Call forn!a Alaska Hawal[

SOURCES: Census Bureau’s March 1980 Current Population Survey and the Congressional Budget Off Ice

144 . Energy Efficiency of Buildings in Cities

Poor whose numbers range from about 12 mil- way with energy conservation for low-income
lion to about 16 million households depending people.
on which definition of poverty is being used. ’
From the Federal perspective the most impor-
Because of limitations of data this chapter pre- tant consideration in energy policy for the poor
sents primarily information on energy retrofit of is how to design sensible low-income assistance
low-income housing in the country as a whole programs. In addition, however, buildings oc-
and very little information on low-income hous- cupied by the poor do consume a significant
ing in central cities per se. This does not in any amount of energy, an estimated 2.2 Quads or
way imply that energy efficiency in low-income about 8 percent of total building energy use.
housing is not an important concern in cities.
This chapter first describes what is known
All of the case study cities visited by OTA (see
about the impact of rising energy prices on the
ch. 9) had developed policies to deal in some
poor and what is known about the condition of
I For a complete treatment of the impact of energy costs on the their housing. It then discusses the private pros-
poor and government options for dealing with this problem see pects for retrofit and finally the many public
Hans H. Lansberg and Joseph M, Dukert, High Energ} Costs: Urr-
e\w~, Un(a/r, Una\’o/~ab/e/ Johns Hopkins University Press for Re-
programs for retrofit and energy assistance, in-
sources tor the Future, Inc., 1981. cluding those that deal with public housing.


On average, low-income families spend a on oil as its heating source. 3 More than half of
greater proportion of their income on residen- the households in Hartford are on fixed in-
tial energy expenses than do households in comes averaging $3,700 per year. Year round, a
higher income brackets. The latest data, as- household with an average fixed monthly in-
sembled by the Congressional Budget Office come of about $312 ($3,700 per year) would
(CBO) and updated to 1981 from the Depart- pay an average of $96 a month for energy–fuel
ment of Energy (DOE) 1978-79 National Interim oil for heat, gas for cooking, and electricity—for
Energy Consumption Survey (NIECS), show that a four- to five-room apartment typical of the
households earning less than $7,400 spend 15.2 two- and three-family houses in the Hartford
percent of their income on residential energy. area. During the 5-month winter season the
This percentage is almost twice that of the next average utility cost of utilities and heat would in-
income group2 (see table 47). However, there is crease to about $145 per month. Combined
a sharp variation in what households pay for with the average rent of $150 for such an apart-
energy, depending on where they live and the ment the total cost of shelter is calculated to use
type of fuel they use (see table 48). In 1981, up virtually all ($295) of the monthly income of
average home energy expenses (for all income a household living on a fixed income. Accord-
classes) varied from $680 for those heating with ing to the study, the situation would be only a
natural gas in the West to $1,690 for those little easier for fixed income households living
heating with fuel oil or kerosene in the North- in apartments of one to three rooms. Exacerbat-
east or North Central. ing the strain on low-income households from
high energy costs in Hartford are the cash de-
A study prepared for the city manager’s office
mands from oil heat dealers who are themselves
in Hartford, Corm., gives some sense of the im-
caught in a cash squeeze (see box G).
pact of energy prices in a community that relies
jchristopher Merrow, “The Impact of Rising Energy Costs on the
2Congressional Budget Office, Low-/ncorne Energy Awstance: City of Hartford,” August 1979 (unpublished report prepared for
I$sues and OpfIon.s, June 1981, p. 6. Much of the information in greater Hartford Process, Inc., and the Hartford City Manager’s
this chapter is drawn from this study. Office).
Ch. 5—Retrofit for the Housing Stock of the Urban Poor Ž 145

Table 47.—Estimated Annual Household Expenditures on Home Energy

by Income Class, 1981

Estimated average
expenditures on
home energy Percent
(in dollars)a of incomeb
Estimated household income:
Less than $7,400 . . . . . . . . . . . . . . . . . . . $ 740 15.20/o
$7,400 to $14,799. ... . . . . . ... . . . . . . . . . 880 7.9
$14,800 to $22,099 . . . . . . . . . . . . . . . . . . 910 4.9
$22,100 to $36,899 . . . . . . . . . . . . . . . . . . 1,090 3.8
$36,900 or more. . . . . . . . . . . . . . . . . . . . 1,290 2.5
Average, all households’ (not just poor) . $1,000 4.20/o
aH~~~ ~n~rgY ~~~~”dlt”res include fuel 011, kerosene, electnclty, natural gas, and Ilquld petroleum 9as expenditures These
expenditures are adjusted from the survey year to 1981 on the basis of estimated energy price changes The quantltY of
energy purchased IS assumed to decrease by 0.15 percent for each 1 percent Increase In the price of energy
b lncome5 are adjuSted t. 1981 on the basis of CBO economic assumptions Households with negative total lnCOmeS because
of self. employment losses are excluded when calculating average Incomes.
cThe NIECS only collected data on a household’s Income class, such as less than $3,001), or between $3,000 and $5,000 In
order to determine a household’s poverty status, each household was assumed to have Income equal to the mldpolnt of Its
Income class For example, a household report Ing Income between $3,000 and $5,000 would be assumed to have Income of
$4,000 In order to calculate the ratio of household Income to the poverty guldellne
dsee footnote (f) t. table 46 for a Ilst of the States In each region Table excludes residents of Alaska and Hawaii

SOURCES Congressional Budget Off Ice estimates, based on the Department of Energy’s National Interim Energy Consump.
tlon Survey (N IECS) which covers the 12.morrth period from Apr!l 1978 to March 1979 Income data derived from
the Census Bureau’s March 1978 Current Population Survey, updated using Congressional Budget Off Ice
economic assumptions

Table 48.—Estimated Average Household Home Energy Expenditures, by Type of

Fuel Used for Heating and Region, Fiscal Year 1981 (in dollars)

All North
regions a Northeast Central South West
Estimated average home energy
expenditure for households
heating with:b
Natural gas . . . . . . . . . . . . . . . . . . . . $ 890 $1,080 $ 970 $ 840 $ 680
Fuel oil or kerosene . . . . . . . . . . . . . 1,560 1,690 1,690 1,240 1,160
Electricity. . . . . . . . . . . . . . . . . . . . . . 830 770 1,130 860 660
Liquid petroleum gas (LPG) . . . . . . . 1,030 1,250 1,360 890 1,080
Other . . . . . . . . . . . . . . . . . . . . . . . . . 570 560 710 580 440
Percent of households heating
principally with:c
Natural gas . . . . . . . . . . . . . . . . . . . . 55 41 77 38 68
Fuel oil or kerosene . . . . . . . . . . . . . 19 43 13 15 5
Electricity. . . . . . . . . . . . . . . . . . . . . . 17 10 4 30 18
Liquid petroleum gas (LPG) . . . . . . . 5 9 3
Other . . . . . . . . . . . . . . . . . . . . . . . . . $ 5 $ 5 $ 5 $ 7 $ 5
aTable excludes resld.entsOf Alaska and Hawaii, See footnote (f) to table 46 for a list Of StateS In each re910n.
bThese expenditures are adjusted from the survey year to 1981 on the basis of estimated energy PriCe chan9es The quantltY
of energy purchased IS assumed to decrease by 0.15 percent for each 1 percent Increase in the price of energy.
cAs of November 1979.
NOTE. Details may not sum to totals because of rounding
SOURCE. Congressional Budget Off Ice estimates, based on the Department of Energy’s National Inter!m Energy Consump.
tlon Survey, and DOE’s 1979 Household Screener Survey.
146 . Energy Efficiency of Buildings in Cities

Table 49.—Total Residential Energy Consumption

for All Fuels–April 1978 Through March 1979
Average amount consumed per
Income household (millions of Btu)
Less than $5,000 . . . . . . 108
$5,000 -$9,999 . . . . . . . 124
$10,000-$14,999 . . . . . 122
$15,000 -$19,999 . . . . . 141
$20,000 -$24,999 . . . . . 153
$25,000 or more. . . . . . . 176
Total poor . . . . . . . . . 119
SOURCE: Residential Energy Consumption Survey: Consumption and Expendi-
tures April 1978 through March 1979. Department of Energy, July

tionwide, the poor closed off rooms (26 per-

cent) a little less frequently than did other

households (31 percent) in the winter of
1978 -79.4 In St. Paul, in the winter of 1979-80,
poor households closed off rooms slightly more
(63 percent) than average households (58 per-
cent), but they turned down the thermostat
slightly less (85 percent of poor households
compared to 87 percent of all households.) In a
1975 survey of five communities in the South-
west, poor families were substantially more like-
ly than high-income families to take steps to
conserve energy—such as using less hot water,
hanging clothes out to dry, or turning off the
thermostat when away from home—that re-
quired greater effort or inconveniences
Anecdotal evidence from various studies of
energy and the poor, and conversations with
housing officials in the case study cities of Buf-
falo and Jersey City indicate that high heating
costs have brought about a “heat or eat” choice
for poor families in cold climates, but OTA
could find no survey data on changing house-
holds’ budgets in response to higher energy
Thus far, communities such as Hartford that prices. 6 Another response of poor households
are dependent on oil heat have borne a heavy
share of the burden of rising energy costs. The 4
Energy Information Admi nitration, Resident/a/ Energy Con-
variations between regions may be evening out, sumption Survey: Conservation, February 1980, p. 35.
‘These two surveys are described in Bernard j. Frieden, ‘‘House-
however. Controls on most natural gas prices hold Energy Consumption: The Record and The Prospect,” MIT
are scheduled to be lifted by January 1, 1985, Program on Neighborhood and Regional Change, Cambridge,
Mass., 1981. One survey is from Cunningham and Lopreato, En-
and households relying on natural gas may ex-
ergy Use and Conservation /ncentives; the other survey is from the
perience sharp price increases similar to those St. Paul Energy Office, Energy Mobilization Survey, February
of households relying on oil heat. 1980.
bAdaptations by low-income households to rising energy costs
Poor households already use less energy on are summarized in, among other sources: Consumer Federation of
average than higher income households, as is America, “Low Income Consumer Energy Problems and the Fed-
shown in table 49, so it is theoretically difficult eral Government’s Response: A Discussion Paper, ” in Residential
Energy Conservation (vol. 11), OTA, Washington, D. C., 1979;
for them to cut back further as energy costs in- Eunice S. Grier, and George Grier, Too Cold,.. Too Dark (Washing-
crease. Evidence from survey data is mixed. Na- ton, D. C.: U.S. Community Services Administration, 1979).
Ch. 5—Retrofit for the Housing Stock of the Urban Poor Ž 147

(as well as all households) to higher energy bills erable evidence of increasing bad debts re-
from utilities is to not pay them. There is consid- ported by utility companies (see box H).

Box H.-Bad Debts Ironically, shutoffs for these utilities did not
show a dramatic rise. This is because most utili-
At least one response by consumers-and ties are limited in their shutoff actions so as not
not just low-income customers-to rising ener- to impose undue hardship on their low-income
gy costs is to let their accounts go into arrears. customers. Some utility officials feel that re-
Data from utilities in three of the case studies strictions on shutoffs have contributed to the
shows that arrearages have increased substan- increase in bad debts. An Iowa Power & Light
tially since 1978: executive notes:
● National Fuel Gas Distribution Corp., In 1978 the Iowa State Commerce Commission
which serves the Buffalo area, reports that instituted new rules forbidding shutoffs on any day
residential accounts in arrears for the New in which the temperature for that day or the day
York and Pennsylvania markets jumped following was forecast to be below 20° F. How-
from 65,737 in 1978 to 91,294 in 1981. ever, with the passage of the new rules and attend-
● City Public Service of San Antonio shows
ant publicity, more and more people let bills lapse
and bad debt writeoffs were accelerated. Knowing
$26.7 million worth of accounts receiv- that disconnects were forbidden convinced larger
able for 1979. For the year ending 1981, numbers of customers to withhold payment dur-
this had grown to $32.3 million. ing the colder months and then to simply termi-
● The most dramatic rise was shown by nate service and change addresses.
Iowa power & tight, which serves Des
Moines, Here bad debt writeoffs grew
Note.-The material in this box is drawn from unpub-
from $582,000 in 1978 to $1.2 million in Iished data supplied by low Power& Light (Des Moines,
1980. This was 0.3 percent of revenues in Iowa), City Public Service Board (San Antonio, Tex.) and
1978 and 0.4 percent of revenues in 1980. National Fuel Gas Distribution Corp. (Buffalo, N.Y.)


The housing stock occupied by lower income shows how the characteristics of single-family
households is not universally less energy effi- houses occuped by low-income people (de-
cient than the housing stock occupied by fined as those with less than $8,000 annual in-
households with moderate or upper incomes. come) compare to the general characteristics of
Rather, the energy efficiency of the housing of single-family houses. More than 4 million of
low-income households differs from the hous- these low-income households own houses that
ing of other income groups in a few important have all three energy-saving features present.
respects that are significant for the formation of Another 4 million own houses that have only
public policy. one or two energy features missing. For these
two categories the housing stock of the poor is
The best data are available on the energy effi-
not dramatically less energy efficient than the
ciency of single-family houses. Using data from
housing occupied by other income groups.
the 1977 annual housing survey, the Urban in-
stitute classified the single-family housing stock In two other respects, however, the housing
into those with three specific energy-saving fea- stock of the poor is less energy efficient than the
tures present—attic insulation, storm windows, housing stock in general. Poor households oc-
and storm doors—and those with one or more cupy about half of the more than 3 million own-
of these energy saving features absent. 7 Table 50 er-occupied houses with all three energy-saving
features absent. Poor households who rent their
7Mlchael Andreassi, Lorene Yap, and (Ilson Lee, The Impa[-t ()/
ReJIdentIa/ Energy, (-{)n~umptif)n on }Iouseh[)lds houses occupy about two-thirds of all rental
DC.: The Urban Institute, June 1980), HUD contract No. H-2882. houses with all three energy-saving features
148 . Energy Efficiency of Buildings in Cities

Table 50.—Energy Efficiency Characteristics of Single-Family Houses Occupied by

Low-Income People Compared to All Single. Family Houses

Households households
with less than as a percent
All $8,000 annual of all
households income in 1977 households
(millions) (millions) (percent)
single. family houses
All three energy saving
features present . . . . . . . . . . . 23.0 4.3 19%
One or two features missing . . . 16.0 4.2 28
All three features missing . . . . . 3.2 1.6 49
single-family houses
All three energy saving
features present . . . . . . . . . . . 1.9 .6 33
One or two features missing . . . 4.7 2.4 51
All three features missing . . . . . 1.8 1.2 64
Total households. . . . . . . . . 50.6 14.3
SOURCE: 1976 Anrrua/ Hou.smg Survey, as analyzed by the Urban Institute in Andreassl, Yap, and Lee, op. cit.; and the Office
of Technology Assessment.

missing and about halfhouses with

of all rental Table 51 .—Structural Adequacya of Occupied Single-
one or two features missing. The large fraction Family Houses by Presence of Energy *Saving
Features, 1976 (percentage distribution)
of renters among low-income occupants of
energy-inefficient single-family houses creates Units lacking one or
special problems for public policy, which will more features
be discussed below. containing Lacking
all three all three
In all, about 2.8 million of the 5 million single- features Total features
family houses lacking all three energy-savng fea- Structurally
tures, are occupied by poor households. These adequate . . . . . . 96.9% 79.8% 47.770
5 million houses pose a special challenge to inadequate . . . . 3.1 20.2 52.6
prospects for retrofit because almost half of Total. . . . . . . . 100.0 100.0 b
100.0 b
them (45 percent) were built before 1940 and aA unit is defined as inadequate if it has one or more o? the following defects:
more than half of them (53 percent) are structur- untt lacks or shares complete plumbing facilities; lacks or shares a complete
kitchen; lacks a septic tank, cesspool, or hookup to a public sewer system;
ally inadequate, s as well as energy inefficient. does not have any means of heating or heating is from unvented room heaters
burning gas, oil, kerosene, or from fireplaces, stoves, or portable room
That means that they have one or more of the heaters; suffers from any Iwo maintenance problems consisting of a leaking
roof, open cracks or plaster or peeling paint on Interior walls or ceiling; or has
defects, listed in table 51, such as no kitchen or exposed wiring and lacks a working wall outlet in one or more rooms. This
a shared kitchen, or at least two maintenance definition is a modification of the definition used In the HUD series, “HOW
Well Are We Housed?”
problems such as a leaking roof, open cracks or hhe distribution in this column IS significantly different (at the 5-per~ent level
or better) from the distribution in the first column.
holes in interior walls or ceiling, or exposed wir-
SOURCE: 1976 Arrrrua/ Housing Survey, data analyzed in Andreassl, et al. (see
ing. Some of these defects, especially leaking footnote ?).

roofs or holes in walls or floor, would have to be

fixed before the house could be made energy the calculations of the owner, tenant, or public
efficient. (Some defects such as no heating sys- agency about the value of making any invest-
tem, on the other hand, mean that the house ment in the house, even an investment to save
doesn’t waste heating energy because it doesn’t energy expenses.
use any.) Other defects, such as the absense of
Given an older building and one with other
plumbing, are not directly Iinked to the pros-
deficiencies, it is also likely that there are other
pects of retrofitting a house but they enter into
energy wasteful features of such buildings such
6Andreassi, et al., op. cit. as lack of wall insulation or very inefficient heat-
Ch. 5—Retrofit for the Housing Stock of the Urban Poor ● 149

ing systems. For such buildings it should be

technically possible to reduce energy use by a
large fraction (at least 50 percent) through retro-
fits of low and moderate capital cost (as de-
scribed in ch. 3).
There is some evidence that energy-inefficient
single-family houses are somewhat more con-
centrated in central cities than in suburbs. Ac-
cording to a 1976 Housing and Urban Develop-
ment (HUD) study, single-family houses in the
central city are more likely to lack storm win-
dows and doors (about two-thirds) than are sin-
gle-family houses in the suburbs (about half),
and are more likely to lack insulation (20 per-
cent) than houses in the suburbs (12 percent).9 ,

Unfortunately very little data is available on Photo credit: Office of Technology Assessment
the energy efficiency and condition of multifam-
Housing that is both energy inefficient and
ily buiIdings occupied by low-income house- structurally inadequate is a big problem in San Antonio
holds. overall, multifamily buildings with two and other U.S. cities
to four units are less likely to lack one or more
energy saving features (32 percent) than are sin- zation program. A Texas weatherization official
gle-family houses (51 percent). There is no data notes that in his State there is a $100 limitation
at all on energy saving features in multifamily on repairs, beyond basic weatherization ac-
buildings of five or more units. 10 tivities. “For $100 you can patch but not re-
place a roof and that could be a problem in a
The poor structural condition of the low-
place like San Antonio. "11
income housing stock has important ramifica-
tions for the prospects of retrofit. Most low- OTA has found no documentation of the ex-
income units will require basic structural repairs tent of repairs required beyond weatherization
before conservation measures can be effective. in most urban units. Hlowever, interviews with
Many city rehabilitation programs do address housing and weatherization officials in the case
energy conservation indirectly. If a roof must be study cities, as well as with those involved in
replaced, for example, insulation is usually these programs nationally, indicates that exten-
added. But public rehabilitation programs, by sive structural repairs in low-income housing is
far the largest resource for dealing with sub- an important factor in the rate of retrofit of such
standard units in cities place correction of code units. In San Antonio, for example, the city esti-
violations above energy conservation. In some mates that 27 percent of its housing is substand-
cities, energy conservation is well down a list of ard (the largest fraction in any case study city).
priorities, below both code correction and exte- Of the total of about 69,000 substandard units,
rior improvements. Local weatherization offi- more than 17,000 (or 39 percent) are not suit-
cials are conscious that their work treats only able for rehabilitation. A local human services
part of the overall structural condition of the official observes: “In San Antonio, the only
unit, but they are constrained by limitations on homes that could really be weatherized under
—. — can— be spent per unit under the weatheri- the program are middle-class homes. ”13
‘DJ\rId R, Karol risky, “Shelter and Neighborhoods: Indicators of
Physical Deterloratlon In Cities, ” pp. 136-138, In (A ( awcma/ I 1 s~p San Antonio caw \tUd Y.
Pap(’r~ In / l~NJ\Ing and (c)n?rnunlt} ,A1’1~/r~, \ 01. 4 , D e p a r t m e n t of 1 ~~lty of San Antonio, Commun Ity D e v e l o p m e n t Bloc k G r.] nt,
Hous[ng and Urban Development, July 1979, Three Year Plan, as amended, February 1980.
lf)Andrec]$~l, et al., Op. cit., flfl. 1 ~-1 7. 1 ]See S(l n Anton I o c dse ~tU~\f.
150 ● Energy Efficiency of Buildings in Cities


The prospects for the retrofit of low-income higher income families would consider invest-
housing are limited but they are much better for ments that paid for themselves in 3 or 4 years. 17
owner-occupied housing than for renter-occu-
According to a national survey of energy con-
pied housing. The discussion of energy invest-
servation (NIECS), households with incomes
ment in rental housing in this section is a brief
less than $5,000 per year were almost as likely
summary of a much longer section in chapter 4
as higher income households to purchase inex-
(Will Building Owners Retrofit Their Buildings?).
pensive insulation (17 percent of the lower in-
Owner-Occupied Low-Income Housing. Be- come households in contrast to 25 percent or
fore discussing the prospects for the retrofit of more of the higher income households) but
owner-occupied low-income housing it is useful were much less likely to buy expensive insula-
to remember that almost one half (45 percent) tion or any form of equipment to improve effi-
of low-income homeowners are elderly.14 Not ciency. Less than 1 percent of households with
surprisingly, people over 65 also own a large less than $5,000 annual income made the latter
fraction (37 percent) of the owner-occupied sin- kinds of energy conservation investments com-
gle-family houses with three or more energy- pared to 6 to 8 percent or more of higher in-
saving features missing. ’ 5 It is also useful to re- come households.lB
member that about 2 million small multifamily
buildings of less than five apartments (or du- Low-income households appear to respond to
plexes) are owner occupied, 16 These buildings the availability of free utility audits in much
are treated like owner-occupied single-family lower numbers than do higher income house-
buildings in such public programs as weatheri- holds. The Tennessee Valley Authority (TVA)
zation and many housing rehabilitation pro- visited 270,000 homes, in probably the largest
grams funded with community development single audit program in the country. In the TVA
block grants (CDBG). The prospects for retrofit service area, more than 20 percent of the fami-
of these buildings are similar to those of the lies have incomes below $5,000 and 15 percent
single family owner occupied. There is no data of all the homes in the service area lack insula-
on how many of these are occupied by low- tion. Yet in a recent survey made by TVA to
income people. evaluate the audit program, the analysts found
Survey data on the willingness of low-income that only 5.2 percent of homeowners below
households to invest in energy retrofit show that $5,000 had been audited and only 2.6 percent
such households are as willing or almost as will- of renters. This was in comparison to 18.7 per-
ing as higher income households to invest in cent of families earning above $25,000 who
less expensive retrofits such as inexpensive insu- took advantage of the audit.19
lation, calking, or weatherstripping but are Few low-income families (quite predictably
much less willing to invest in more expensive in- since they have low tax liability in the first
sulation. Data from the 1975 survey of commu- place), take advantage of the residential energy
nities in the Southwest showed that low-income tax credit (described in ch. 9). Of the 40 million
families required that investments in insulation households with taxable incomes of less than
pay for themselves in less than 2 years while $10,000 per year, only 1.2 percent took the resi-
I dschool of Engineering and Applied Sciences, George washing-
ton University, Energy Impltcat;ons o/ an Ag/ng Popu/af/on, pre- I TFrieden, Op. cit., p. 27, referring to the Lopreato and Cunnl ng-
pared for USDOE, contract No. ACOI-79ER1OO4I, August 1980, ham survey cited above.
pp. 36-49. IBFrieden, op. cit., p. 25.
15Andrea5si, et al., op. cit., P. 26. lgRobert F. Hemphill, and Ronald L. Owens, “Burden Alloca-
16u .s .Census, General Housing Character/sties, United StateS tion and Electric Utility Rate Structures: Issues and Options in the
and Regions 1977 and 1978. TVA Region,” Tennessee Valley Authority, Oct. 9, 1980.
Ch. 5—Retrofit for the Housing Stock of the Urban Poor ● 151

dential energy tax credit in 1978, compared to value of these properties, even if they were
16.5 percent of the 22 million households with, more energy efficient, is limited. Only if build-
taxable incomes of more than $20,000 per year. ings are located in potentially revitalizing areas
Low-income households often don’t have suffi- are the owners likely to even consider investing
cient tax liability to use the tax credit in a single in retrofit. At this point owners must reckon
year; a quarter of those taking the credit carried with the lack of access to financing for building
the amount foward into subsequent tax years.20 improvements especially for low-rent buildings
in locations that banks regard as uncertain.
In summary, there is some evidence that low-
Without access to relatively long-term financing
income homeowners will partially retrofit their
at less than exorbitant interest rates, it is im-
houses in response to rising energy costs but
possible to pay for a retrofit out of the buildings’
there is further evidence that they are unlikely
cash flow (by offsetting financing costs by reduc-
to do any extensive retrofit without outside as-
tions in energy costs).
OTA’s analysis in chapter 4 of a hypothetical
Renter-Occupied Low-Income Housing. Al-
low-rent building drawn from St. Louis data il-
though tenants may occasionally perform low-
lustrates the dilemma for a building owner very
cost retrofits such as calking and weatherstrip-
clearly. With longer term (1 O year) financing
ping, the prospects for any extensive retrofit of
and moderate (1 3 percent per year) interest
low-income rental housing depend on deci-
rates the building owner would be able to sub-
sions of landlords to retrofit their buildings. The
stantially improve the building’s cash flow with
influences on building owners’ decisions to ret-
a retrofit. With a loan of shorter term (5 years)
rofit are described at length in ch. 4, “Will
and high interest rate (1 6 percent per year) there
Building Owners Invest in City Buildings?” This
is a sharp reduction in the building’s cash flow
section summarizes the prospects for retrofit by
for at least 5 years. Since loan terms and interest
owners of low-income buildings, and some of
rates available to owners of low-income build-
the impacts on low-income tenants.
ings tend to be respectively much shorter and
Low-income rental buildings vary, from the higher than those analyzed for this hypothetical
small building with two or three apartments building it is clear that building owners can only
owned by a low-income retired couple to the retrofit if they are willing to accept a sharp
high-rise with 40 to 50 apartments owned by a reduction in cash flow.
real estate partnership. For all this variation, the
Rather than invest in retrofit, owners of mas-
most important influence on the prospects for
ter-metered buildings are likely to cut back on
retrofit of such buildings is whether the tenants
services or maintenance or go into arrears on
or the owner pay for fuel and electricity.
their fuel bills. In jersey City, for example, heat-
Master-Metered Buildings: Where the Own- ing complaints rose from 2,400 in 1980 to al-
er Pays for Utilities. There is no doubt that ris- most 3,400 for 1981, an increase that is almost
ing energy costs are a burden to owners of mas- entirely attributable, according to the city’s
ter-metered buildings. While financing and tax chief building inspector, to a cutback in heating
costs on these buildings are low, the rents are service by multifamily building owners. Typical-
relatively lower and there is little margin to raise Iy, he says, “landlords turn the heat off from 1 to
rents to accommodate increases in operating 4 in the afternoon when they think no one is
costs due to higher fuel and electricity bills. On home, as a way to conserve.”21’ In New York
the other hand, there are few incentives for the City, with its enormous housing stock, heating
owner of a master-metered building occupied complaints increased from 225,000 in 1978-79
primarily by low-income families to engage in to 320,000 in 1980-81.22
retrofit. Many of these buildings are located in — —
z 1 I nterl,lew \Vi th Ctl I ef hU i Id I ng inspector, Jersey City, N. j. See
marginal neighborhoods and the future resale jersey City case study.
22TelephOne I ntervlew with Joseph M. Wh Ite, Director of C@ra-
Prell ml nary Report Stat15tlcs of in-
~01 nt~rnal Reverl ue service tions, Di\ Ision of Code Enforcement, New York City Department
come— 1979 Indlvldual Tax Returns, Washington, D. C., 1980. of Preservation and Dmfelopment.
152 ● Energy Efficiency of Buildings in Cities

Officials in several cities attribute the rise in

abandonment i n part to the multifamily owner’s
inability to cope with rising energy costs. A
Jersey City housing official notes: “Taxes and
energy are the keys to abandonment in this city.
What happens is that increased taxes and rising
energy costs come at the same time that these
older buildings are due for major repairs. But
landlords cannot jack the rents up because peo-
ple are too poor. The smaller landlords are usu-
ally well in over their heads already and they do
not know how to cope. They sell to the large ab-
sentee owners who cut services and the good
tenants move out.”
There is, in fact, no consensus among observ-
ers of real estate on the linkage between energy
and abandonment. The best guess is that rapidly
rising energy costs are the “last straw” for
buildings unable to continue covering their ex-
penses with adequate rents. Two analyses of
abandonment in Rochester, N. Y., serve to illus-
trate the controversy. one analysis, by the
former director of Rochester’s neighborhood re-
habilitation program relates a striking increase
in abandoned buildings from 1970 to 1978 to
the rapid increases in the costs of oil, gas and
electricity over the same period. 23 (See table
52). A somewhat earlier analysis of Rochester’s
abandonment problem by a real estate analysis
Photo credit: Office of Technology Assessment

Housing oversupply is often the general cause

Eugene Kramer and Linda Berger, ‘‘The High Cost Of Heat: A
and rapidly increasing energy prices the immediate cause
New Threat to City Neighborhoods, ” papers for the Energy in the
of housing abandonment in cities like Buffalo
Cities symposium, American Planning Association Report No.
firm had, however, uncovered a much deeper
reason for significant abandonment of older
Table 52.—Comparison of Increases in Abandoned housing stock in the Rochester area—Rochester
Buildings With Increases in Energy Costs in
Rochester, N.Y.
suffered from an excess supply of new housing
in the early 1970’s. Although there was an in-
Average annual home crease in population of only about 8,300 per-
heating costs sons between 1970 and 1975 in the Rochester
(in dollars)
Vacant metropolitan area, a total of almost 40,000 new
Y e a r buildings Oil Gas Electric
units of housing were built, enough to accom-
1970 . . . . . . . . 300-400 $199 $184 $310
224 415
modate (after allowing for replacement of lost
1974 . . . . . . . . 370 321
1975 . . . . . . . . 821 332 229 404 housing inventory) a population increase of
1976 ..., . . . . 1,125 406 290 533 88,500 or about 10 times what actually oc-
1977 . . . . . . . . 1,500 416 308 511
$503 $369 $646
curred. This new housing encouraged a series
1978 ..., . . . . 1,900
of “trading up” moves into better housing and
SOURCE: E, Kramer and L. Berger, “The High Cost of Heat: A New Threat to resulted in an excess supply of the oldest hous-
City Neighborhoods,” papers for the Energy m the C/f)es, Sym-
posium, American Planning Association, report No. 349. ing stock in the central city, which in turn
Ch. 5—Retrofit for the Housing Stock of the Urban Poor Ž 153

became candidates for abandonment.24 Rapid master-metered (and submetered) building is

increases in energy costs are likely to have generally served under a commercial rate struc-
made it difficult for owners of this excess hous- ture, which results in a lower per unit cost than
ing to hang on to their buildings until the era of a residential rate. Individually metered apart-
housing oversupply came to an end. In this ments, however, are subject to the higher in-
sense, energy costs can be accused of being the dividual rate schedules. Commercial users often
trigger for the actual abandonment. can elect interruptible service and time-of-day
rate schedules, which further reduce rates. And
Tenant-Metered Buildings: Where Tenants
the majority of States still maintain declining
Pay for Utilities. Once a building is tenant
block or promotional rate structures, which
metered, there are no further incentives for an
make energy less expensive per unit consumed
owner to invest i n energy retrofit. Under current
the larger the quantity consumed through a
market conditions there is no evidence that
single meter per billing period. While this may
owners charge higher rents for an energy effi-
provide a disincentive to conserve, it does pro-
cient building, all other things being equal. (Ch.
vide a significant cost advantage for master-
4 has an extensive discussion of tenant meter-
metered over tenant-metered units .27
ing.) There is evidence that conversion from
master to tenant metering does lead to behav- There is only anecdotal evidence on the ex-
ioral efforts by tenants to conserve energy. tent of higher cost for tenant-metered utilities.
These are much more pronounced for electrici- Calculations on multifamily meter conversions
ty than for fuel .25 for Detroit, Atlantic City, and St. Paul for exam-
There is no data on the extent of conversions ple, show that the same amount of power will
from master to tenant metering in low-income cost 33 percent more in individually metered
buildings. For multifamily buildings in general, apartments than in a master-metered building.
conversion to tenant metering is believed to be The manager of a Philadelphia apartment house
common although there is also no data. that may convert to tenant metering found that
the total price of gas for apartments would dou-
For all the potential benefits of inducing ble for the same quantity after the conversion .28
energy conserving behavior, however, conver-
There are other costs as well. Tenants that are
sion to tenant metering will, under the most
common utility pricing practices, cause finan- converted to individual meters are normally re-
cial hardship for low-income tenants. 26 A quired to post a security deposit with utility sup-
——- — ——- — .— pliers. This can be $75 to $100 or the equivalent
M. Leanne Lachman and Maxine V. Mitchell, ‘‘New Construc- of 2 months usage, and can pose a substantial fi-
tion and Abandonment: Musical Chairs in the Housing Stock, ” nancial obligation, particularly for low-income
Nation's Cities, September 1977, tenants without a prior credit history. individ-
Lou McLelland, op. cit., in footnote 4 to ch. 4.
There are three basic metering types for multifamily rental ually metered tenants are more likely to pay
houslng: penalties for late payments.29
● a master meter, which serves the entire building or a series

of units I n the building. The owner is the customer of the

utility and rental payments Include utilities. There IS no rec-
ordation of Individual unit or common area usage. This may
be combined with allocations of energy costs. Bills are
based on commercial rate structure.
● a submeter system, which combines a master utility meter

with a separate set of privately owned and installed meters

for each apartment. The buildings owner IS still the customer
of the utility, at commercial rates, but can bill tenants sep- ——.——
arately for individual consumption. 27steken Ferrev & Associates, “Fosterln~ Equity In Urban Con-
● individual meters, which use a separate utility meter for s e r v a t i o n : Utillt} Metering ~nd Utlllty Flnanclng, ” see working
each unit. The tenant is the direct consumer of the utility, papers, pp. 24-25,
and is billed at individual rates. Rent only includes utility 2 8 Ferre)l, Op. ~ It., p. 2S
services for common areas of the building. Zqlbid., p. 26.

. .- . . >-. .
154 . Energy Efficiency of Buildings in Cities


Public housing provides about one-fifth of the
low-income rental housing in this country.
There are at present about 1.2 million units of
public housing in about 9,900 projects around
the country; these house more than 3.4 million
tenants, a sizable portion of whom are elderly
or handicapped. so Over 60 percent of these
units are located in large- and medium-sized
cities, Public housing represents a major capital
investment for the Nation; about $20 billion has
been spent to develop these projects since the
program began in 1937.
Energy cost has been the most rapidly escalat-
ing operating cost for public housing managers
and tenants. Like much of the private housing
stock described in this chapter, public housing
Photo credit: Office of Technology Assessment
was built when energy was cheap and energy
consciousness was low. Today, housing authori- HUD modernization funds have been used to improve the
energy efficiency of public housing projects (such as
ties and tenants are saddled with high energy this one in Tampa, Fla.) as well as to make them safer
costs—the average in 1980 dollars is $670 per and more marketable
dwelling unit. (See box I for a discussion of
energy payments by public housing tenants.)
Energy costs overall for housing authorities rose
400 percent between 1970 and 1980.31 These
cost increases have been an important factor in
the growth of the Federal operating subsidy re-
quirements to housing authorities in recent
years. Operating costs virtually tripled between
1968-78, while monthly rents have increased
less than 50 percent. 32
The poor thermal quality of public housing is
a matter of great concern to administrators of
the program. Most of the stock was built before
rigorous energy standards were instituted by
HUD. There is, however, considerable poten-
tial for energy savings in the public housing
stock (table 53). A recent HUD study estimates
that an average investment of about $1,100 per
unit (1980 dollars) will yield an average annual
JONatlOnal Association of Housing and Redevelopment Officials,
“Profile of the Public Housing Program, ” memo to Large Housing
Authority Working Group, Washington, D. C., Feb. 12, 1981.
J] Ibid.; perkins & Will, the Ehrenkrantz Group, “An Evaluation
of the Physical Condition of the Public Housing Stock” (executive
summary-draft), HUD, Office of Policy Development and Re-
search, March 1980.
JZNational Association of Housing and Redevelopment Officials,
op. cit.
Ch. 5—Retrofit for the Housing Stock of the Urban Poor Ž 155

Table 53.—Energy Conservation Potential of

1 Public Housing
data of PHA consumption. Individually
metered tenants receive a utility allowance Potential
based on the historic average consumption of Energy conservation category cost savings
similarly sized units for similar construction. Operation and maintenance . . . . . . . . . . . . . 11 ”/0
The allowance is a cash deduction from Windows and door improvements . . . . . . . . 13
monthly rent and tenants can basically do with Wall/ceiling/roof insulation. . . . . . . . . . . . . . 6
the money what they please. Mechanical equipment improvements . . . . 13
Electrical. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
This system appears to penalize the individ- Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ually metered tenant. Tenant-metered units re- National Average . . . . . . . . . . . . . . . . . . . . . 480/o
ceive an allowance for utilities that can be 35 NOTE: The above averages were based on an analysis of 58 energy conserva-
to sO percent less than that received by iden- tion Opportunltles In a randomly selected representatwe sample of
public housing projects
tically situated submetered tenants,2 even
SOURCE. Energy Conservation Handbook, VOI 3 (draft), U S Department of
though the per unit cost of energy may be Housing and Urban Development Apr 15, 1981, prepared by Perkins
higher in States with declining block or com- and WI II, The Ehrenkrantz Group

mercial multifamily rates. Furthermore, indi-

vidually metered tenants are subject to security HUD has already begun to act on a program
deposits, late payment fees, and other charges, of retrofitting public housing projects, within
similar to their counterparts in the private the agency’s constrained budget. In September
market. Perhaps most serious “the simplistic 1980, HUD awarded $23 miilion to 47 public
allowance formula makes no provision for
housing authorities for modernization of oil
units which because of their location within a
heating systems. These funds are being used to
building or because of poor thermal quality,
are inherent energy wasters beyond tenant upgrade existing oil heat systems and to convert
controL” 3 to dual-fuel systems. HUD has also awarded $5
million to 61 public housing authorities to install
l~rv, op. cit., PP. “”
and test new energy-conserving devices. OTA
Zlbid., p. 42.
Zlbid., p. 42. found that in the case study cities, HUD mod-
ernization money is being used by housing au-
thorities in part for energy conservation meas-
savings of about $300, and would reduce aver- ures, such as replacing windows, installing
age energy consumption from the current 145 storm doors, and insulation .34 (See box J.)
million Btu per unit to about 80 million Btu. 3 3
34 Depaflrnent of HOUSI ng and Urban Development, ‘‘HUD fl nds
PHA test to cut energy costs, ” HUD release of Sept. 23, 1980):
—..— HUD awards paid energy efficiency” (HUD release ot Sept. 29,
33 fJerkin5 & Wi I I, op. cit 1980); also see case studies.

Box J.-Energy Consciousness in

Public Housing: Case Study Cities

windows, install energy controls, replace has also upgraded and improved the effi-
entrance doors, and upgrade heating ciency of oil burners in its projects.
plants in three large projects. The author-
156 . Energy Efficiency of Buildings in Cities

The San Antonio Housing Authority has

received $260,000 under HUD's Solar
Demonstration Program to test various
solar applications on a 27-building com-
plex. The housing authority had already
installed a solar dotmestic hot water system
on a 65-unit project for the elderly in 1978
and retrofitted hot water heaters to solar
on several other projects.
The Tampa Housing Authority was he first
in the Nation to install solar hot water
heating–some 30 years ago. The authority


The Federal Government has tried to help tially in terms of benefits, allocations, eligibility,
low-income households cope with rising energy and other factors. 35
prices through two approaches: One provides
Until 1980, these programs served house-
direct cash assistance for payment of utility bills
holds whose income fell below 125 percent of
on an emergency or short-term basis. The other
the Office of Management and Budget (OMB)
takes a longer term approach and provides
poverty guideline—about 8.5 million house-
resources for making the structure more energy
holds. 36 In 1980, the eligibility ceiling was ex-
efficient. The first approach is exemplified by
panded to cover all those households whose in-
the Low-Income Energy Assistance program; the
come felI below the Bureau of Labor Statistics
second by the Weatherization program.
lower living standard, which added an addi-
tional 6.5 million eligible families.37 States may
Direct Cash Assistance apply more restrictive income eligibility stand-
Since 1977, the Federal Government has ards under the current programs, but they must
sponsored a series of cash assistance programs give priority to the most needy families, regard-
designed to help low-income families deal with less of their source of income. States must also
rising energy prices (see table 54). Federal fund- provide special outreach activities for the elder-
ing has grown from $200 million in 1977 to ly and disabled. Preliminary State plans ana-
lyzed by CBO indicate that about 10 million
$1.85 billion appropriated in 1981. In 1981, it is
estimated that about 10 million households will households, out of a potential 17.2 million, will
be aided by the direct cash assistance approach, be served under the 1981 program. Benefits will
the highest activity level thus far. average $160 per household, or 19 percent of
the average home energy expenditure of eligi-
The basic purpose of all of these programs has ble families.38
been to help low-income families supplement
their income so they can pay their utility bills. in —.——-
some cases, this is done on an emergency or JsCongressional Budget mice, o p . cit., p p . 45-55; contains a n

one-shot basis, in others as a supplement for a excellent summary of the program.

JGlbid., p. 27.
defined period (usually a year). Beyond this, J’Ibid., p. 27.
however, the programs have differed substan- 38
1 bid., p. 20.
Ch. 5—Retrofit for the Housing Stock of the Urban Poor • 157

Table 54.—Summary of Low-Income Energy Assistance Programs,

Fiscal Years 1977-81

Households Average benefit

Funds appropriated served per household
Year Program (billions of dollars) (millions) (dollars)
1977 . . . . . Special Crisis Intervention $0.20 1.2 $140’
1978 . . . . . Emergency Energy 0.20 0.9 165
Assistance Program
1979 . . . . . Crisis Intervention 0.20 b b
1980 . . . . . Energy Crisis Assistance 0.40 1.6C 188d
Energy Allowance Program 0.80 4.4C 150d
SSI-Energy Allowance 0.40 4.0C 97 d
1981 ., . . . Low-Income Energy 1.76 10.0e 161f
Assistance Program
Crisis Intervention $0.09 b b
‘ceo e~tl~ate, ‘~~U~lng the ~ercent ~t funds spent on ‘drnlnl$tr’tion w’s the same as In 1978
Data not available.
CThese flgure~ ~epre~ent ~rellmlnarY e~tlmate$ Of the number Of payments made to households rather than the number of
households served. Some households received more than one benefit.
dslnCe Some houseflold$ received more than One t)enefit, the average benefit Per hoUSeholcJ Is ‘CtU’llY somewhat higher
than the average Ilsted here. Estimates are prellmtnary.
estate estimates, as of January 1981
f CBO estimate, ‘ssumlng all available funds are spent, and States spend the maximum of 7.5 perCent Of funds On
SOURCE: Congressional Budget Off Ice estimates, based on published and unpublished documents

under the 1981 program, States can provide the incentives to retrofit. Under the 1981 pro-
energy assistance either through direct cash gram, States allocate benefits according to
payments, vendor payments, or vouchers for general characteristics of a household’s energy
the household to use for energy supplies. They burden, as determined by type of fuel, income,
can also use up to 3 percent of their allocation household size, and intrastate region. The CBO
for in-kind assistance, such as warm clothing or report observes :41
minor home repairs. Until 1981, cash assistance
Since this approach ties benefits to factors that
programs were designed primarily to deal with
relate to a household’s home energy bur-
winter-related energy costs and thus were tar- den–such as intrastate region–but not to a
geted primarily to home heating. As of 1981, household’s actual home energy expenditures,
however, States can also set aside funds for it likely leads to fairly small conservation disin-
health-related cooling expenses, although only centives in the short run. In the long run, how-
12 have chosen to do so.39 ever, it might cause households to make deci-
sions concerning location and heating fuel that
About 60 percent or 9.9 million of the families are economically inefficient.
eligible for cash assistance participated i n the
program in 1980. Under the more lenient eligi- While critics acknowledge that crisis assist-
bility formula for 1981 which includes most ance may always be needed, especially in se-
renters, for example, slightly more families are vere winters when the energy needs of the poor
expected to participate. However, this will be may outstrip their ability to pay, such programs
only about 50 percent of the eligible house- could increase ad infinitum unless coupled with
holds, if the estimates in State plans hold up. 40 preventive programs that address the root
causes of the energy problems of the poor, es-
There is some uncertainty about what impact pecially the basic structural condition of their
current cash assistance approaches have on homes.
——. . —
‘glblci., p, 31,
WI bid., pp. 49 and 53. “ I bid., p. 33.
158 ● Energy Efficiency of Buildings in Cities

Weatherization Activity levels under the program have been

quite low in proportion to need, although ac-
The concept underlying weatherization pro- tivity has been greatly stepped up in recent
grams is to reduce energy consumption by low- years. Between 1975 and 1979, less than
income households by making their dwelling 250,000 homes had been weatherized and only
more energy efficient. The program was admin- 21 percent of the $480.5 million in available
istered by the Community Services Administra- funds had been used. By September, homes
tion between 1975 and 1978, with weatheriza- were being weatherized at about 30,000 a
tion assistance also offered by DOE in 1977 and month, a virtual doubling of previous activity.
1978. Since 1979, all weatherization activities By the end of 1981, DOE officials estimate that
have been administered by DOE with funding at approximately 820,000 homes will have been
an approximate level of $200 miIlion a year for weatherized. If this projection holds, about 6
1979-81.42 percent of eligible households will have been
Under the current program, DOE allocates reached by the program.46
funds to States, which in turn mete out money The impacts of weatherization on reduced
to local community action agencies. House- energy consumption vary, depending on cli-
holds with income less than 125 percent of the mate and structure, but several recent studies
OMB poverty level are eligible for the program, indicate that this is a reasonably cost-effective
as are families with at least one AFDC (Aid to program. 47 Still, weatherization is extremely
Families with Dependent Children) or SSI recip- limited as a retrofit tool for the most needy ur-
ient. This comes to about 17.6 million house- ban households. The reasons for this have been
holds. 43 touched on elsewhere in this chapter. For one
Weatherization activities typically include thing, many of the homes of the urban poor
calking, weatherstripping, installing storm win- have serious structural problems which must be
dows, insulating attics, and in some cases, walls. addressed before weatherization will really con-
The average expenditure per household in 1980 tribute to making the structure more energy effi-
was $600, but this is expected to rise to $1,000 cient. In most cases, weatherization activities
per household in 1981, the maximum allowed and rehabilitation program are not coordinated
under the program in most areas .44 at all .48 The basic repairs needed before weath-
erization can truly be effective are not eligible
The weatherization program has been fraught expenses under weatherization programs.
with administrative, financial and managerial
problems. Requirements that CETA (Concen- In addition, there are serious limitations on
trated Employment and Training Act) labor must the application of weatherization funds to rental
be used, recently waived, hampered the pro- properties in which more than half of the urban
gram in many areas. So did the lack of effective poor live.
audit procedures to determine which homes In cases where weatherization covers rental
would most benefit from the program, re- properties, landlords must sign a rental agree-
sources for training and supervising weatheriza- ment not to raise rents for a stated period of
tion crews, and monitoring completed weather- time—a restriction few landlords are willing to
ization work.45 accept. High tenant turnover in low-income
multifamily properties makes these agreements
difficult to enforce. In many cases, such proper-
42 Congre55ional f3Udg~t office, Op. Cit., p. 5.5.
ties are owned by absentee landlords who are
qJlbid., p. 28.
1 bid., p. 55. difficult to locate and who have diminished in-
45see General Accou ntl ng office, Slow PrOgress and un~erla In
Energy Savings In Programs to Weatherlze Lwv-income Hou~e- dbcongress~onal Budget Office, P P. 55-56.
Mds, Report to Congress EMD80-59, May 1980; also Christian 1 bid., pp. 40-41.
Demeter The weathwzatmn Asstsf~nc e Program. A Status Report, daRehabi Iitation programs are d Iscussed i n gredter detal I i n ch.
Urban Systems Research and Engineering, Inc., for DOE, Wash- 10, The case studies a150 provtde ample documentation of this
ington, D. C., July 1980; also case studies. point.
Chapter 8

Prospects for District Heating

Chapter 6

Prospects for District Heating


Page Page
Introduction . . . . . . . . . . . . . . . . . . . . .. ...165 Conditions for a Successful District
Heating System. . .................191
Context for U.S. District Heating in
the 1980’s. . . . . . . . . . . . . . . . . . . . . .. .166 Options for Federal Policy Toward
District Heating. . .................193
Conditions for Viability of a District
Heating System in the United States. .. 172
Capital Costs of District Heating. . ........173 LIST OF TABLES
Variations in District Heating Systems. .. ..182 Page
Table No.
Noncapital Costs of District Heating. .. ...185 55. Cities That Already Have Steam
Systems. . . . . . . . . . . . . . . . . . . . . .. ...167
Competitive Pricing of District Heating
56. Heating Degree Days and Population
Systems and the Building Owner’s Point
Densities. . . . . . . . . . . . . . . . . . . . . . . . . 69
of View. . . . . . . . . . . . . . . . . . . . . . . . . .186
57. Summary Chart-Comparison of Steam
Contingencies in Planning a District District Heating to Hot Water
Heating System. . .................188 District Heating. . .................170
Table No. Page Figure No. Page
58. Comparison of the Estimated Capital 43. Schematic Layout of a Simplified
Cost of District Heating Systems With District Heating System. . . . . ........166
Other Major Urban Public Works 44. Development of Connected Thermal
Projects. . . . . . . . . . . . . . . . . . ........1 75 Capacity (Western Europe). . .........168
59. Annualized Capital Costs for Proposed 45. Development of Connected Thermal
District Heating Systems Under Capacity (Eastern Europe). . ..........168
Alternative Capital Recovery 46, Components of a System Cost as a
Factors . . . . . . . . . . . . . . . . . . . . . . . . . . 181 Percentage of Total Costs. . . . . . .. ....176
60. Comparison of Capital Costs for a 47. Comparison of Fuel Utilization of
Heat-Only Coal Boiler and Recovery Electric-Only and Cogeneration
of Waste Heat From Electricity Powerplants . . . . . . . . . . . . . . . . . . . . . . 177
Generation . . . . . . . . . . . . . . . . . ......182 48. Power Loss per Heat Recovery for
61. U.S. City Size, Population, and Waste District Heating From Cogeneration as
Production in 1975 .., . . . . . . . . . . . . . .183 the Supply Water Temperature
62. U.S. Standard Metropolitan Statistical Increases. . . . . . . . . . , . . . . . . ........177
Areas Size, Population, and Waste 49. Thermal Demand Zones and
Production in 1975 . . . . . . . . . . . . . . . . .183 Transmission Supply Lines for the
63. Costs of Solar Heat Compared to Heat- Study City of Detroit, Mich.. . ........178
Only Coal Boiler for District Heating. .. 184 50. Relationship of Average Heat Density
64. Subsidized Financing Would Be and Customer Size to Costs of District
Required in Some Cases for District Heat Distribution . .................179
Heating To Be Competitive With 51. Building Retrofit Costs as
Fuel Oil. . . . . . . . . . ................187 Building Size Increases. . ............181
65. Impact of Fuel Escalation Assumptions
on the Break-Even Point in a Proposed
District Heating System for Milwaukee. 187
66. How Different Contingencies Can
Affect the Total Cost of a Proposed
District Heating System for LIST OF BOXES
Washington, D.C.. . . ..............190 Page
67. Climactic Influences on Heating Loads K. A Citywide System To Be Built in
for Selected Cities. . ................191 Phases–The District Heating System of
St. Paul, Minn.. ., ... , ... , , , ... , .. ..171
L. A Small Cogeneration and District
Heating System for Downtown Trenton. .171
Figure No. Page M. Setbacks . . . The Harvard Medical
42. Three Major Components of a District Area Cogenerating and District
Heating System. . ..................165 Heating Plant. . . . . . . . . . . . . . . . . . . . . . ’189
Ch. 5—Retrofit for the Housing Stock of the Urban Poor Ž 161

Philadelphia Burner Retrofit In addition to these two prototype programs,

there have been other successful approaches to
Although a common energy problem in many promote weatherization on a wide scale. In
low-income residences is an inefficient oil Pennsylvania, the State weatherizes homes at a
burner, the weatherization program has tradi- rate of about 1,200 to 1,400 homes a month,
tionally focused on insulation and storm win- more than any other State, and each year about
dows. A pilot program sponsored by DOE in 14,000 homes are weatherized (see ch. 9). Cali-
Philadelphia was developed to test a feasible fornia expects to use Vietnam veterans in its
means of upgrading the efficiency of heating California Conservation Corps to promote
equipment on a large scale .53 Instead of recruit- weatherization in low-income neighborhoods.
ing and training unskilled and semiskilled work-
ers in carpentry and insulation skills, the pro- These programs are a worthy start, but they
gram enlisted the experience of fuel oil dealers, still beg two critical questions that must be
many of which already perform maintenance answered before the energy needs of the poor
on furnaces and boilers. are truly addressed. One is the linking of energy
retrofit to overall housing condition improve-
In the pilot effort, 30 fuel oil dealers in the ment; the other is improving the energy efficien-
Philadelphia area retrofitted 145 oil-burning fur- cy of rental units, particularly in large multifam-
naces in Philadelphia during the winter of 1980- ily buildings. On the first count, progress is be-
81. They installed flame retention burners, cor- ginning to be made. Philadelphia, Baltimore,
rected unsafe conditions in the heating system, and Pittsburgh have all geared local rehab pro-
cleaned flue passes, installed clock thermostats, grams in part to encourage energy retrofits
and conducted an instrumented furnace tune- (described in ch. 9). Energy conservation re-
up. The average cost of each job was $500 and quirements and incentives in HUD programs,
payback was expected in 2 years. On average, such as section 312, section 8, and CDBG-spon-
furnace efficiency increased by 15 percent, con- sored rehab are also helping to encourage ret-
sistent with a predicted fuel savings of 20 per- rofit.
cent. The program was designed as an alterna-
tive or supplement to using low-income energy Improving the energy efficiency of rental
assistance funds for weatherization or for direct housing, however, is much more elusive. Ex-
subsidies. cept for the Fitchburg campaign there have real-
ly been no programs that have reached rental
housing in a community in any large-scale
fashion. And until this happens, a large percent-
age of the urban poor will continue to Iive i n en-
ergy-inefficient buildings and pay more for
energy than is necessary or that they can afford.
Table No. Page Figure No. Page
58. Comparison of the Estimated Capital 43. Schematic Layout of a Simplified.
Cost of District Heating Systems With District Heating System. ... .. .. . . .166
Other Major Urban Public Works 44. Development of Connected Thermal
Projects. . . . . . . . . . . . . . . . . . . . . .. ...175 Capacity (Western Europe). . . . . . . . . . 168
59. Annualized Capital Costs for Proposed 45. Development of Connected Thermal
District Heating Systems Under Capacity (Eastern Europe). . ..........168
Alternative Capital Recovery 46. Components of a System Cost as a
Factors . . . . . . . . . . . . . . . . . . . . . . . . . .181 percentage of Total Costs. . . . . . . . . . . ,176
60. Comparison of Capital Costs for a 47. Comparison of Fuel Utilization of
Heat-Only Coal Boiler and Recovery Electric-Only and Cogeneration
of Waste Heat From Electricity Powerplants . . . . . . . . . . . . . . . . . . . . .. 177
Generation . . . . . . .................182 48. Power Loss per Heat Recovery for
61. U.S. City Size, Population, and Waste District Heating From Cogeneration as
Production in 1975 . . . . . . . . . . . . . . . . .183 the Supply Water Temperature
62. U.S. Standard Metropolitan Statistical . increases. . . . . . . . . . . . . . . . . . . . . .. ..177
Areas Size, Population, and Waste 49, Thermal Demand Zones and
Production in 1975 . . . . . . . . . . . . . . . . .183 Transmission Supply Lines for the
63. Costs of Solar Heat Compared to Heat- Study City of Detroit, Mich.. . ........178
Only Coal Boiler for District Heating. ..184 50. Relationship of Average Heat Density
64. Subsidized Financing Would Be and Customer Size to Costs of District
Required in Some Cases for District Heat Distribution. . ................179
Heating To Be Competitive With 51. Building Retrofit Costs as
Fuel Oil. . . . . . . . . . . . . . . . . . . . . .. ...187 Building Size Increases. . ............181
65. Impact of Fuel Escalation Assumptions
on the Break-Even Point in a Proposed
District Heating System for Milwaukee. 187
66. How Different Contingencies Can
Affect the Total Cost of a Proposed
District Heating System for LIST OF BOXES
Washington, D.C.. . ................190
67. Climactic Influences on Heating Loads K. A Citywide System To Be Built in
for Selected Cities. . ................191 Phases–The ‘District Heating System of
St. Paul, Minn.. . . . . . . . . . . .. . . . . . .171
L.A Small Cogeneration and District
Heating System for Downtown Trenton. .171
Figure No. Page M. Setbacks . . . The Harvard Medical
42. Three Major Components of a District Area Cogenerating and District
Heating System. . ..................165 Heating Plant. . . . . . . . . . . . . . . . . . . . . .189
Chapter 6
Prospects for District Heating

A discussion of the energy efficiency of build- opportunity for saving fuel oil or natural gas by
ings in cities is not complete without a discus- using them more efficiently, or an opportunity
sion of district heating, a system that distributes to shift to greater use of coal or renewable re-
heat in the form of steam or hot water through a sources (including municipal solid waste) for
piping network to buildings for space and water supplying heat to buildings. For district heating
heating, or industrial process heat (see figs. 42 customers it offers the prospects for slower in-
and 43). The heat may come from any of a wide creases in energy prices. For local governments,
variety of sources: waste heat from electric district heating can be a tool in the overall task
generation, centralized burning of coal or oil, of economic development since it uses local
solid waste combustion, or solar or geothermal workers for construction and operation, helps
energy. Under the right conditions, a well-man- attract new development to central city loca-
aged district heating system is an energy effi- tions and helps to stabilize energy prices for ex-
cient way of supplying heat to city buildings. As isting buildings. For a utility, a district heating
will be shown later in the chapter, the high den- system may provide a way of making money off
sity characteristic of central cities is almost waste heat from a downtown powerplant, or
always an essential requirement for an econom- adding a new product in a time of slower
ically viable district heating system although growth in electricity sales.
such high density can occasionally be found in
For all the possible advantages of district heat-
suburban office/shopping complexes, or univer-
ing, the design, construction and successful op-
sity campuses outside central cities.
eration of a district heating system is a formid-
From a national energy perspective, district able undertaking whose complexity should not
heating offers, under the right conditions, an be underestimated. This chapter discusses the

Figure 42.—Three Major Components of a District Heating System

Steam and/or
hot water
supply pipe

Boiler, Condensate and/or