We need to apply good systems engineering principles to policy creation to address the benefits gaps that confront multifamily stakeholders today.
The Smart Grid And Multifamily Dwelling Challenges
Christine Hertzog | SGL Partners
There are many disconnects and dysfunctions in the multifamily real estate market that are beyond the ability of renters or property owners alone to resolve. There are multiple challenges in a market segment that includes stakeholders with sometimes vastly different financial perspectives. That is why we need a systems engineering approach to policy to address the unique challenges of this underserved segment. There’s tremendous potential in overall electricity savings in programs that deliver benefits to owners and occupants in multifamily dwellings. Multifamily buildings typically experience higher energy use per square foot of living space due to more people using electricity when compared to single family homes.
That systems engineering approach has to start with policy, not technology, because the Smart Grid technologies exist. Policies just haven’t caught up to where owners and renters want to go. One reason policies haven’t caught up yet is that policy-makers need information about what their constituents want and need in terms of energy programs.
There’s good news on that front. Back in March, a new collaborative initiative called WikiEnergy was announced. This project, which is supported by Pecan Street Inc., Carnegie-Mellon University and others will create the largest research database about anonymized consumer energy and water use. This database will be free to academic and non-governmental organizations (NGOs) focused on scientific and public policy research. Admittedly, there’s more data today about single family dwellings, but there is a concerted effort underway to obtain more data about multifamily electricity consumption behaviors. It will be interesting to track the progress of this initiative and learn about the research results derived from their data.
For instance, there’s conventional wisdom about multifamily behaviors and perceptions, but how much of it really makes any distinctions between income levels and ownership? After all, townhomes, condominiums, and apartments, like single family homes can be upscale or downscale and inhabited by owners or renters. Of all the income levels within the under-researched multifamily housing marketing, the least is known about low-income consumers. But there’s good news here too. The Smart Grid Consumer Collaborative just released the second of a two part study on the needs of low-income consumers. Their first report identified a knowledge gap in which low-income consumers had less awareness of Smart Grid benefits than their more affluent counterparts. The second half of the Spotlight on Low Income Consumers identified a significant gap between renters and homeowners around the ability to initiate energy efficiency improvements in their respective homes. Fifty-seven percent of survey respondents who were renters could not make changes to their home or appliances to increase overall energy efficiency.
This is just one illustration of a serious “benefits gap” in our approaches to consumption and policies around multifamily dwellings. Gathering and researching data about consumer behaviors and perceptions is extremely important. But policy-makers don’t always need information about what consumers want in order to design legislation or regulations that encourage smart consumption. The benefits gap cited above exists because we lack sensible policies that could help bridge the financial disconnects that confront multifamily dwelling stakeholders like renters and property owners. For instance, many multifamily dwellings have just one master meter. In these situations, all units may pay equal shares of an electricity bill for an entire building. Even the most motivated renter who is willing to pay extra for LED lightbulbs will not enjoy the full cost benefits of the resulting savings, and may opt to not make the investment.
The negative implications of this situation extend to utilities as well. Utilities cannot enroll individual units in demand response programs because the prosumer benefits are diluted across all units. What would help? Policies that encourage landlords to install submeters that deliver granular, unit-by-unit consumption data and bills that accurately reflect individual unit consumption are one possibility. That would be a win for consumers and utilities too, since it would create a greater pool of participants in utility programs that reduce electricity loads and electricity bills. An enlightened federal tax policy could offer tax credits for energy efficiency projects that include submetering retrofits. Otherwise, landlords have to be willing to incur expenses for projects that reduce their tenants’ utility bills, but accrue no financial benefits for themselves. Specially designed tariffs could be enacted that make the same win/win/win connections for landlords, consumers, and utilities.
Of course, there are many other challenges for policy-makers when it comes to multifamily dwellings. But multifamily housing is on a higher growth trajectory than single family housing. We need to apply good systems engineering principles to policy creation to address the benefits gaps that confront multifamily stakeholders today.
About Christine Hertzog
Christine Hertzog is managing director of the Smart Grid Library and author of the Smart Grid Dictionary and The Smart Grid Consumer Focus Strategy. She consults for smart grid startups and established vendors, investor groups and utilities.
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