Engaging as Partners in Energy Efficiency

The multifamily building sector presents a unique set of challenges and opportunities for utilities seeking to implement effective energy efficiency programs. To deliver successful programs, utilities must understand what motivates building owners to take part in these programs, as well as barriers that may prevent participation.

There are 16 million renter-occupied apartments and condominiums in US buildings with five units or more. Collectively, these building owners and tenants spent nearly $22 billion on energy in 2009, an average of $1,141 per household. If the best current multifamily energy efficiency programs were expanded nationwide, they would save nearly $3.4 billion per year.

In addition to its large potential for savings, the multifamily rental housing sector offers relative ease of recruitment to energy efficiency programs relative to the single family and small commercial sectors. Multifamily building owners have formed tight networks in cities nationwide, and many own multiple buildings. Consequently, utilities can enlist building owners in efficiency programs relatively easily through existing networks, and sign up multiple buildings through one decision-maker.

But, the multifamily market presents unique challenges that must be addressed in order to deliver effective programs. One key challenge, for example, is the split incentive that exists when building owners are responsible for investing in energy efficiency improvements, while tenants reap the benefits via lower energy bills. Savings attribution can also be complicated in buildings with multiple fuel sources. In some cases, utilities have difficulty matching multifamily buildings to the appropriate program because their accounts may be categorized as commercial, residential, or some combination of the two.

This paper outlines the opportunities to meet energy efficiency goals with multifamily programs. It then describes the benefits that multifamily building owners gain from these programs, and the barriers they face to participation. The paper focuses on rental housing, because these buildings are owned by a single entity and form the largest sector of the multifamily housing market. The paper provides a framework to help utilities develop successful programs that maximize energy savings and create benefits for building owners, tenants, and communities. And lastly, the paper recommends nine program design considerations that can help attract multifamily building owners to utility energy efficiency programs.

Multifamily housing presents significant opportunities for utilities to create cost-effective energy efficiency programs. As utilities seek to expand their energy efficiency program offerings to meet increasingly stringent efficiency goals, multifamily buildings can provide deep savings, comparable to those achieved in commercial buildings. While multifamily building owners in many areas historically have not made energy efficiency investments a high priority, utilities can and have designed effective programs to deliver on the opportunity presented by the multifamily sector.