Analysis of the financial impacts of building performance standard penalties on commercial buildings in Aurora, Colorado

Buildings are responsible for 30% of total energy consumption worldwide. To address building energy, jurisdictions in the USA have enacted Building Performance Standards (BPS) legislation. The objective of BPS is to reduce energy consumption in buildings, thereby reducing the energy burden on utility infrastructure and other externalities. This is accomplished by setting mandatory energy use limits coupled with penalties for exceeding those limits. One of the key questions in BPS policymaking is how these penalties might impact the finances of building owners and tenants. This paper presents an analysis of BPS penalties in Aurora, Colorado, specifically targeting buildings impacted by the adopted statewide BPS legislation. Several BPS penalty structures were applied to the affected building stock in Aurora, and the potential impacts on building owner returns and tenant rents were estimated. The results show that for some combinations of building types and penalty structures, potential rent increases due to penalties could match or exceed typical yearly rent increases. The results also show that in most cases, for Aurora, there was no statistically significant difference in impact between buildings located in under-resourced and well-resourced areas.