John Rynne, Rynne, Murphy & Associates, Inc.

As long as I’ve been appraising, there has been energy efficiency consciousness. It began with the Middle East OPEC embargo of the United States in the early 1970s. Remember the odd-even license plate number allocation? Depending upon the last or first number of your license plate, you could only buy gas every other day. Instead of 2 x 4 wall studs; many wood frame buildings were outfitted with 2 x 6 wall studs to increase R ratings. There was a moratorium on natural gas hookups for new housing. The Rochester Institute of Technology (RIT) built a “state of the art” energy efficient prototype house shortly after. By the early 1980s the oil embargo had long ended. During that time, I was hired to appraise a house with solar panels by a developer who was from a plumbing and heating background. He had a vision for solar energy. His test house sat on the market for many months and I think the developer took a loss on this. I don’t recall whether he agreed with my appraisal. He probably failed because energy was still relatively cheap, energy tax credits were almost nonexistent, and the market resistence to having ugly (to some) solar panels on the roof. Almost 35 years later the cost efficiency of solar panels has increased. Between federal/state tax credits, New York State Energy Research & Development Authority (NYSERDA) grants, etc; as much as 60-75% of the total cost of a system is eliminated.

In the present market there is much being done with such organizations as Leadership in Energy & Environmental Design (LEED).There are four levels beginning with Certified, Silver, Gold and Platinum.

With the advent of LEED certification energy efficiency has gone to a new level. A LEED-certified building definitely carries additional value not only for direct energy efficiency but also reuse and recycling of building materials. However, with this site and building costs increase substantially. In fact, there are a small number of states which will not allow LEED construction for new public buildings. Whether it’s a LEED project or not, energy efficiency can improve the value of a property. As an example, if there is an energy savings of $100,000 due to solar, wind, geothermal, etc. design, the net operating income (NOI) may increase accordingly depending upon whether there are additional costs to monitor the system. Thus, if an overall capitalization rate is 8%, an increase in value attributed to the energy savings would be $1.25 million. However, a few years ago, I appraised a property with a geothermal heating & cooling system. The owner had substantial technical problems which commanded a significant amount of attention and translated into substantial direct and indirect expenses. Thus, the energy savings contribution to NOI was discounted. There has been much progress in more traditional HVAC systems at a much lower initial cost. Recently, I was informed of a new construction project whose intention was to become LEED-certified. Before completion, the project was abandoned because of cost overruns and was taken over by the lender. There has been limited evidence so far that “LEED-certified” or similar designations are in fact “feasible.” In other words, is there enough contribution value which warrants such a high cost especially in economically challenged areas of Upstate New York and many parts of New England which are outside of Downstate New York and Boston?

The radical “man-made” climate change advocates are gaining momentum with their accomplices in the media. Some of this momentum will hurt economic growth, Some of the man-made climate change studies were falsified with bogus data such as the University of East Anglia incident a number of years ago. Many of these studies are government funded and can be an incentive to skew the results for a political agenda. Approximately 12,000 years ago much of Upstate New York was under a 1-2 mile high glacier which melted without any contribution by man. Surface temperatures on Mars have been increasing over the past few decades without the influence of man but natural forces such as the sun. The majority of climate change on Earth is caused by the sun and other natural factors. Carbon dioxide (CO₂) is the food that green plants use to produce oxygen which sustains much of the life on our planet through a process called photosynthesis. Also, without tax credits, wind and solar energy would not be feasible. These large tax credits reduce tax revenue to government which will necessitate tax increases and/or reduction of government services. Reducing the production of inexpensive fossil fuels such as natural gas will increase energy costs to everyone and will reduce wealth. In summary, there is definitely a happy median between dogma and reality.

John Rynne, MAI, SRA is the president and owner of Rynne, Murphy & Associates, Inc., Rochester, N.Y.