For nearly two decades, various solar incentives — including tax credits, renewable energy credits (RECs), grants, rebates, and state and local programs — have driven the adoption of solar energy in the U.S. The Energy Policy Act of 2005, which established the 30% federal Investment Tax Credit (ITC), stands out as a significant milestone. These incentives have served as “carrots,” encouraging the shift toward renewable energy. More recently, however, the emergence of stricter local environmental regulations and building performance standards (BPS), which impose fines and penalties for not adopting sustainable energy practices and reducing greenhouse gas emissions (GHGs), have introduced the “sticks” approach, further accelerating the transition to solar.
Awareness of hyper-local regulations is crucial for commercial real estate companies to avoid mistakes that could lead to millions in fines. As policies evolve, it’s common for smaller municipalities to adopt regulations from nearby cities. For instance, Boston’s Building Emissions Reduction and Disclosure Ordinance (BERDO), which mandates all buildings to achieve net-zero emissions by 2050, extends beyond Boston itself. Surrounding areas such as Cambridge, Somerville, and Arlington have implemented similar regulations, effectively making it a metro-wide initiative.
Solar solutions are often the most advantageous method to meet these new energy policy requirements, and recently SolarKal got firsthand experience helping clients navigate this process in Denver, New York City, San Francisco, and Washington, D.C.
Denver has an initiative called Energize Denver that seeks to improve energy performance in existing commercial and multifamily buildings, mandating energy reductions for certain buildings over 25,000 square feet (starting next year and continuing through 2030). Additionally, the city passed a Green Building Ordinance (GBO), with certain energy benchmarks and roof requirements that apply to new buildings, roof permits, and building additions that are 25,000 square feet or larger.
The penalties for non-compliance with the Energize Denver initiative can quickly add up. One of our clients, for instance, could face fines exceeding $3 million between 2025 and 2030. And that’s just for one building! If their entire Denver portfolio failed to meet the city’s requirements, the total penalties could be more than $18 million.
Installing solar photovoltaic (PV) systems is an effective strategy to significantly reduce a building’s energy consumption from the utility grid and achieve compliance with energy regulations. By generating clean, renewable energy on-site, solar PV can decrease both operational costs and carbon emissions. This not only helps meet regulatory requirements, but it also serves as a proactive measure to avoid hefty fines associated with non-compliance. Additionally, the long-term savings on energy bills, combined with available incentives and tax credits, make solar PV a financially sound investment for building owners looking to enhance sustainability and reduce exposure to future regulatory risks.
Local Law 97 (LL97), introduced in November 2019, aims to significantly reduce greenhouse gas emissions by targeting buildings over 25,000 square feet. These buildings are responsible for nearly two-thirds of the city’s emissions. The law sets ambitious goals, mandating a 40% reduction in emissions by 2030 and striving for net-zero emissions by 2050.
Starting next year, building owners who fail to comply with LL97 will face significant penalties. If a building exceeds its annual emissions limit, the owner will be liable for a civil penalty calculated based on the difference between the building’s emissions limit and its actual emissions for that year. The New York City government anticipates that 20% – 25% of covered buildings will exceed their emissions limits in 2024 if no improvements are made. By 2030, without proactive measures, this non-compliance rate could rise to 75% – 80%. Moreover, failure to submit required reports will result in fines of $0.50 per square foot per month, while false reporting could incur a steep $500,000 penalty, quickly eroding a property’s value.
LL97 considers solar PV a clean distributed energy source to offset building emissions, so integrating solar power is one significant strategy that property owners can use to not exceed their emissions limit.
San Francisco Environmental Code 30 (Ordinance 220-19) mandates that large commercial buildings source 100% of their electricity from renewable energy. The ordinance aims to eliminate on-site fossil fuel emissions from these buildings by 2035. Compliance can be achieved by generating renewable energy on-site. Non-compliance results in fines, and if a building’s Annual Energy Benchmark Summary (AEBS) report is not filed within 30 days of the deadline, the building’s compliance status will be publicly posted.
In 2021 the California Energy Commission (CEC) approved a new Energy Code, for new construction projects permitted after Jan. 1, 2023. The entire state of California is subject to the construction mandate, requiring solar PV and energy storage on most new residential and commercial construction. Learn more in our blog post, Powering Tomorrow: Understanding Solar Mandates in New Construction.
The Building Energy Performance Standards (BEPS), established by the Clean Energy DC Omnibus Amendment Act of 2018, aim to make the district more sustainable and equitable. This plan details actions needed from both private industry and the district government to meet ambitious greenhouse gas reduction targets by 2032. The District of Columbia Energy Conservation Code mandates that new buildings, additions, and major renovations over 10,000 square feet comply with renewable energy standards. A solar system can help property owners meet BEPS by providing on-site energy production, which is considered more efficient than grid electricity. A recently passed proposal set non-compliance fines at $10 per square foot with a $7.5 million cap.
New construction in certain areas of Washington, D.C., is subject to the Green Area Ratio (GAR). GAR is an environmental sustainability zoning regulation that sets standards for landscape and site design to help reduce stormwater runoff, improve air quality, and keep the city cooler.
SolarKal is currently advising a Fortune 500 real estate developer on how to integrate solar PV, noted as renewable energy in the GAR guidebook, in order to boost their GAR score and comply with local zoning regulations. Solar will also save them thousands of dollars in energy expenses annually through a third-party, non-CapEx deal.
SolarKal has been assisting our commercial real estate clients in deploying solar PV to proactively comply with these local environmental regulations. As these regulations become more stringent, forward-thinking property owners are increasingly adopting on-site solar generation to meet or exceed compliance targets. In many cases, rooftop solar PV can significantly lower a building's energy use intensity (EUI), enabling compliance and helping owners avoid costly fines.
