Rising From The Rubble: What Opportunities Does The Loss Of Energy Star Present For Software Vendors?

Rising From The Rubble: What Opportunities Does The Loss Of Energy Star Present For Software Vendors?

The US Environmental Protection Agency (EPA) has plans to cut its Energy Star energy efficiency accreditation programme as part of an organizational restructure following the Trump administration’s funding cuts to climate- and environment-related departments. While this move is not final, the real estate community has been vocal in its opposition, leaping to Energy Star’s defence. Petitions are gathering signatures as industry bodies such as the Urban Land Institute and U.S. Green Building Council rally behind the programme.

Energy Star has garnered bipartisan support across the real estate industry, highlighting its transformational impact. Adoption – particularly of the software platform, Portfolio Manager – is widespread: utility consumption for more than 25% of US commercial buildings is reported into the platform. Meanwhile, the Energy Star certification and energy efficiency guidance is estimated to have saved over $14 billion in energy costs. Despite its name, Energy Star allows building owners to track not only energy, but also water and waste through Portfolio Manager — all at no direct cost to the user, thanks to taxpayer funding.

The prospect of the loss of Energy Star has, at minimum, fuelled uncertainty and anxiety over data security, and at most threatens to destroy the foundational infrastructure upon which the path to sustainable real estate has been built. The vulnerability of the Energy Star system has created many questions about what the future holds – but the data chasm created by the loss of the largest database of commercial building utility performance may create new opportunities for the software market.

The simplest of these opportunities relates to data resiliency and continuity. Closure of Portfolio Manager could mean the loss of historical consumption data for the more than 465,000 commercial buildings currently tracked in the platform. If Portfolio Manager were no longer available, building owners would need to rethink their data management approach and identify new solutions for tracking and analysing consumption. Fortunately, there are a plethora of specialized software solutions available for real estate utility data management. Software vendors across the sector – including Arcadia and EnergyCAP – have released statements touting their ability to provide secure access to data previously held in Portfolio Manager. Data uncertainty is likely to drive an uptick in investment in this software. Yet, the true value that Energy Star Portfolio Manager has carved out since its launch 12 years ago stretches far beyond that of a data aggregation tool.

The data collected through Energy Star enables measurement and benchmarking of a building’s energy performance relative to industry standards. Building owners use this data to prioritize capital spend, inform investment and disposal strategies, and gain competitive differentiation. Insights garnered from Energy Star are increasingly essential given the mounting focus on ROI for sustainability and decarbonization initiatives. REIT giants BXP and AvalonBay Communities, for example, have both spoken publicly about the importance of Energy Star for their asset management and investment strategies. Energy Star’s centralized information is an anchor around which industry gathers, acting as an alignment mechanism for lenders, insurers, regulators and tenants who rely on its credibility to guide their decisions. There are currently no suitable replacements. Publicly available, free-to-access data are scarce, and its loss could put the sector in a spin; it is here that software vendors appear to be presented with the greatest opportunity.

On the surface, as mass aggregators and proponents of big data, software tools could create a similar benchmarking tool around which the industry could regather, should Portfolio Manager be lost. While peer-to-peer benchmarking tools offered by software vendors will likely become more valuable to building owners, the real opportunity appears in becoming the sector’s new go-to platform for aggregating and benchmarking utility performance across the industry — a move that could unlock unprecedented revenue potential. Building decarbonization software provider Cambio was quick off the blocks, and has already launched a software platform positioned as a Portfolio Manager alternative, but not all see this as the same opportunity. Interestingly, Measurabl — which already has a sizable internal data set and a benchmarking module that could, at first glance, fill the gap — responded to the Energy Star announcement by launching a stripped-back free version of its software. But it stopped short of a full repositioning as a Portfolio Manager alternative, and with good reason.

The opportunity may be somewhat of a mirage. The challenge for vendors to create an alternative to Portfolio Manager goes far beyond that of technical development. Technical questions are still significant: to capitalize on the opportunity created by the loss of Portfolio Manager, each vendor would have to make its solution free to use, as Cambio has done, and be willing to invest significant capital and development time. But what will likely be the more important hurdle is that these tools will be faced with the potentially unassailable task of garnering the same consensus and support fostered by Energy Star. This must extend beyond building owners to the whole industry, drawing in lenders, insurers and tenants to accept and utilize a new data infrastructure and benchmarking taxonomy. Industry-wide consensus will be harder to achieve through privately backed software vendors, as they lack the trust and neutrality of a federally managed programme.

Though many vendors across the sector have been vocally supportive of Energy Star, Verdantix expects a few vendors to follow in the footsteps of Cambio, enticed by the prospect of this new role at the heart of the sector – and even more will follow should Energy Star die at the hand of proposed budget cuts. Paradoxically, as software vendors race to fill the gap left by Energy Star with their own benchmarking tools, they risk fragmenting the market — undermining the very consensus and shared framework they'll need to succeed in this new role.