One man's struggle to bridge the landlord-tenant energy divide

Ten weeks is what Aaron Landgraf had. Ten weeks to deal with some 100 landlords. A hundred busy, cagey, this-better-be-good landlords.

Fortunately for Landgraf, he had a boss. It was Booz Allen Hamilton, the enormous Virginia-based contracting firm that paid rent to these landlords. And when Booz Allen spoke, they listened.

Some of them, anyway.

Landgraf, a 27-year-old student at Johns Hopkins University's Carey Business School, recently completed a detail with this Herculean challenge: Get the landlords to tell him the power bill. Booz Allen, with about 100 buildings in the United States and a goal of measuring the company's carbon footprint, hadn't been able to get them to talk.

Enter Landgraf. Cautiously.

"One of the first things I was told was that this was going to be a challenge," he said. "What I learned was no matter how hard they would try, it simply just was not in the landlord's best interest to provide that data to Booz Allen."

As businesses and homeowners wake up to energy efficiency, they've tended to focus on new technology, financing tools, even the bizarre habits of energy users who have never had to think twice about running their lights, heaters and TVs.

Few have faced the landlord-renter relationship and the "split incentive" that keeps them from making energy-efficient changes, even when it would benefit them both.

A carbon footprint that's harder to see


Jeffrey Harris, senior vice president for programs at the Alliance to Save Energy, said it's still not a particularly well-addressed problem, even though experts have studied it for decades.

But the problem is significant in climate terms, because commercial buildings use a fifth of the country's energy, and about half of these buildings are leased, like Booz Allen's.

In these arrangements, landlords don't usually pay the utility bill -- tenants do -- so they don't save money by upgrading a building's energy efficiency. Tenants could make the upgrades themselves, but these can take many years to break even, potentially years after the tenant has moved elsewhere.

The result: In millions of office buildings, landlords stick with old, inefficient equipment that works, while tenants quietly pay their bills and move on.

Landgraf wasn't dealing with particularly creaky buildings; thanks to Booz Allen's recent greening efforts, many were already LEED-certified or Energy Star-certified; some were both. Nevertheless, as a publicly traded company, it wanted to show investors its carbon footprint, and it wanted to reach the next tier of energy savings.

Landgraf realized this had less to do with air conditioners, ductwork and insulation, and more to do with the humans occupying the buildings.

Finding energy savings the hard way

One "human" roadblock was in the power bills. Booz Allen didn't pay each of its bills separately. It paid rent by the square foot -- in one lump sum covering maintenance, insurance, utilities and more.

The power bill was somewhere in there, but landlords didn't always want to share it. As Landgraf explained, they may have been making money from that mysterious arrangement.

"Booz Allen Hamilton wasn't tracking and did not know how much of their expenditure on the building portfolio was actually coming from energy," he said.

Landgraf needed a strategy, a way to tease out this information from the landlords where possible, and to work around them where it wasn't. Since he only had 10 weeks in his fellowship, he decided to strike where he had the most leverage: the buildings where Booz Allen was the sole tenant -- and whose landlords were most likely to listen.

He spent weeks calling, trying to get power bills and estimating where the numbers weren't available. He schemed with the Booz Allen staff members who knew the landlords and the buildings best. Then he met with the landlords who were most willing, and they discussed ideas for how to save energy in each building.

They weren't all stonewallers. One manager had been reducing Booz Allen's rent in his building, thanks to a recycling program that was making him money.

When he understood that energy efficiency could work the same way, he got an idea: switching off half the lights around midday, when daylight is brightest and power costs the most. Landgraf eventually passed the idea on to Booz Allen.

As summer drew to a close, he made a few more recommendations. Some buildings needed "smart meters" to measure their power use -- that would be a huge improvement over the vague estimates they currently had. He also recommended software that can slice and dice energy data -- a considerable upgrade from the spreadsheets that Booz Allen has been using so far, Landgraf said.

A long road to 'green leases'

As Landgraf returns to business school, Booz Allen is considering his recommendations, said Elizabeth Wayt, who manages the company's sustainability program.

The company had hired him through a program run by the Environmental Defense Fund -- a "Climate Corps" that placed 96 graduate students in companies, cities and universities to tackle their energy-efficiency goals. EDF claims the students' recommendations, if implemented, would save as much carbon dioxide each year as taking 87,000 cars off the road.

Wayt said she hired Landgraf to get a fresh, independent view of Booz Allen's current plan. She said it will consider smart meters in new buildings and new leases, not necessarily the existing ones that Landgraf mentioned. Booz Allen is also looking into the possibility of turning off some lights around midday.

As for energy software, she said Booz Allen is looking seriously at the option.

Overall, Landgraf's work "pushed us pretty hard down a path we were already thinking about," she said.

When Landgraf graduates in May, he expects to keep fighting the split incentive by working on "the intersection between IT and energy." He says more and more companies are doing what he did: going through a company's buildings and digging out the energy measures that can pay themselves back in one or two years.

What has he learned this summer? One lesson is that real estate, and the relationship between landlords and tenants, really matters. He has high hopes for "green leases," a type of contract that would allow both to benefit from energy efficiency. The renter would save money on utility bills, and the landlord's building would have more value as real estate.

Nevertheless, when he thinks back on his mission, and all the phone calls and scattered data and resistance, it smarts. "We were not 100 percent successful," he said.

Like what you see?

We thought you might.

Start a free trial now.

Get access to our comprehensive, daily coverage of energy and environmental politics and policy.