In 2021 the Colorado Legislature passed, and Governor Polis signed into law, House Bill 21-1286 which mandates data reporting requirements, energy efficiency standards, and GHG reductions for large buildings throughout the State. The law directed the Air Quality Control Commission (“AQCC”) to conduct rulemaking by June 1, 2023, that will specifically set building benchmarking and performance standards.
Thus far, the AQCC’s proposed rule, Regulation 28, applies to buildings with a gross floor area of 50,000 square feet or more, but excludes buildings that are storage facilities, stand-alone parking garages, hangers that lack heating and cooling systems, single-family, duplex, or triplex homes, and buildings where more than half of the gross floor area is used for manufacturing, industrial, or agricultural purposes. Each of the last three exceptions are defined broadly, with an important caveat that regulated marijuana growing facilities are not excluded as agricultural buildings and will need to abide by this new rule.
Buildings subject to this rule will be required to submit annual benchmark energy usage data and GHG emission data, obtained from local utility providers, by June 1 of each year. This benchmarking data is crucial considering the statute requires covered buildings to reduce GHG emissions by 7% by 2026, and 20% by 2030 compared to 2021 levels.
This leads to the important discussion of how buildings will show compliance with this new regulation. Currently, the AQCC is proposing three compliance pathways: 1) energy efficiency measures that will decrease energy usage intensity (“EUI”), 2) electrification of space and water heating equipment, and 3) a combination of energy efficiency and electrification measures to meet the required reductions.
1) EUI is a measure of a building’s energy use expressed as total site energy use, per square foot, per year. It is calculated by dividing the total energy consumed by the building in one year (measured in kBtu) by the total gross floor area of the building. Buildings will be assigned a target EUI to achieve based on what the building is being used for. For example, building EUI’s range in value from 33.2 to 228 and for uses from Aquariums and Casinos to Energy Stations, Museums, and Refrigerated warehouses.
2) Specific electrification standard percentages were not proposed in the most recent iteration of the AQCC’s rules. However, given recent Public Utility Commission proceedings that discussed beneficial electrification and strategic issues for Black Hills Colorado Electric, we know from industry experts such as the Energy Efficiency Business Coalition and Southwest Energy Efficiency Project that currently available electrified heat pumps and water heaters are not capable of completely replacing similar gas powered devices for large scale commercial buildings. If the AQCC considers those market perspectives, it’s reasonable to believe that electrification standards would not exceed 50% before 2030.
3) Similar to compliance pathway #2, the combination pathway does not yet have specific GHG reduction standards. It does, however, contemplate the potential that building owners will be allowed to use distributed renewable energy generation (rooftop solar, offsite RECs, etc.).
Lastly, standard adjustments and penalties. Building owners will be able to request compliance pathway adjustments and adjusted energy use intensity targets based on their specific business type. Each adjustment request will be considered on a case-by-case basis by AQCC staff. Further, penalties – which do not apply to publicly owned buildings – include: $500 - $2,000 for no submitting annual benchmarking data, and $2,000 to $5,000 for buildings that do not meet performance standards.
The AQCC will host hearings on this proposed Regulation 28 from May 16-19, 2023, which will guide the next steps in this process.
