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May 7, 2011

Winning with Green Buildings


I’ve heard the design approach for the National Renewable Energy Laboratory Research Support Facility (RSF) described as “first eating your vegetables then having dessert.” The design for this large-office super-performer is based on first maximizing energy efficiency, then considering renewables, which are generally more expensive.

Completed in 2010, the RSF is a net-zero energy building. Its construction costs are in line with other recently built large office buildings in Colorado. A rooftop and parking-garage solar photovoltaic system, sized to meet the building’s slender annual energy use, was paid for through a power purchase agreement at no extra cost to NREL.

The success of the RSF and other net-zero-energy building projects provide contrast to recent newsworthy concerns regarding the implementation of EISA 2007, Section 433—an ambitious Department of Energy mandate. The draft rule requires significant reductions in fossil-fuel-generated energy use in new federal buildings or renovations totaling $2.5 million or more. The issue brief presented by two concerned groups—the American Gas Association and the Federal Performance Contracting Coalition—requests that Congress block the provision.

An existing companion rule requires that all existing federal buildings must progressively reduce their annual energy use relative to 2003 baseline use. For example, by 2015 the required reduction is 30 percent of the 2003 amount. In comparison, the draft rule sets more aggressive one-time reductions relative to the 2003 baseline that can be met with efficiency and/or renewables. For example, the savings reduction for projects under way in 2015 is 65 percent. For projects commencing in 2030, the target is 100 percent. The groups’ concern is that layering on the additional requirement will dissuade investments in deep retrofits of existing buildings for fear of crossing the proposed cost threshold. They also state that a 100 percent reduction (net-zero energy building) is “a target viewed as generally unattainable.”

Boon or Boondoggle?

A recent research study by the Rockefeller Foundation and DB Climate Change Advisors examines the potential size and investment opportunity of energy-efficient retrofits in U.S. real estate, and finds that:

“In the United States alone, more than $279 billion could be invested across the residential, commercial, and institutional market segments. This investment could yield more than $1 trillion of energy savings over 10 years, equivalent to savings of approximately 30 percent of the annual electricity spent in the United States. If all of these retrofits were undertaken, more than 3.3 million cumulative job years of employment could be created.”

Additionally, the report says, if all of these retrofits were undertaken, U.S. emissions would decline by nearly 10 percent.

To meet the draft rule or tap into the efficiency market will require making greater up-front investments. In our work at Rocky Mountain Institute, we’ve learned that the most cost-effective way to incorporate efficiency into a retrofit is to piggyback them on top of capital improvement projects. This “right-timing” approach causes synergistic efficiency benefits to be associated with marginal incremental costs.

We’ve also learned that aggressive energy performance targets like the 2015 goal are not easy to accomplish or cost-effective for all existing buildings—especially large buildings in urban settings. Efficiency efforts can be constrained by the building’s orientation, geometry, and existing system configurations. However our and others’ success with projects like the Empire State Building demonstrate that deep retrofits can often be the best investment based on a life-cycle cost analysis. In addition, capturing deep savings as part of large capital improvement projects is generally more cost-effective than making ongoing investments in efficiency on its own.

Aggressive Energy Reductions Will Be The Norm

The New Buildings Institute recently published a report on the status of net-zero energy office buildings in the U.S. NBI found defensible data for 60 projects that were net-zero or net-zero capable. The data showed that zero-energy buildings (ZEB) are feasible and achievable with current technologies for some building types. All ZEB projects aggressively reduced energy use before sizing and adding renewable systems. The energy-efficient design of the ZEB and ZEB-capable buildings resulted in a typical energy use of about 20-30 kBtu/ft2 year (before renewables), achieved with incremental additional construction costs ranging from 3 percent to 18 percent. Their performance is lower than the draft-rule 2015 target for office buildings, which is about 35 kBtu/ft2 year (based on typical U.S. climate depicted by Washington, D.C.).

Thinking about aggressive reductions through energy efficiency appears to be the trend outside of federal circles. The American Society of Heating Refrigeration and Air Conditioning Engineers (ASHRAE) develops building performance standards that are referenced by state and local building codes. The controversial draft rule performance targets align with ASHRAE’s future projections for performance standards for commercial building new construction and major renovation projects. In addition, forward thinking (and cost-constrained) entities such as the State of California have issued legislation requiring 50 percent of new and renovated state buildings to be net-zero energy by 2020 and 100 percent by 2025.

A Winning Strategy

The NBI data indicate that for many buildings the draft-rule short-term performance requirement is equivalent to “first eating your vegetables.” It aligns with the right-timing concept, which provides the best return on investment. It encourages deep retrofits to create ZEB-capable buildings.

Through a high-performance design or deep retrofit investments, the federal agency gets infrastructure improvements, improved reliability, diversity, security and energy cost savings. The energy service company sells more products. The Treasury achieves deeper savings and controls energy costs. The environment benefits from reduced carbon emissions. Americans are put to work.

These wins come with challenges. New financing arrangements are needed to address higher up-front costs. Achieving deep savings will be difficult for some existing buildings due to construction constraints. A building’s location may not afford the space or renewable resources needed to fill the gap between ZEB-capable and ZEB.

But should the difficulty of a few hinder the government’s market nudge and leadership? It seems with all the potential benefits, blocking the draft rule would make us all losers. Creative thinking is needed here.

For example, clarifications are needed to account for on-site cogeneration and offsetting fossil-fuel use with on-site renewable systems. Slightly less aggressive performance targets can be set for existing buildings to acknowledge their design constraints. Alternatively, the implementation could be fee-based. Projects challenged by the requirements could pay a penalty capped at average incremental construction costs for deep retrofits. The fees could be used to offset costs for other projects with greater opportunities.

Efficient buildings run on green power represent a revolutionary change. Investing more up front in buildings has the potential to profoundly improve environmental and economic conditions over the long term. If the intent of Section 433 is maintained, it may inspire new business models attracting entrepreneurs to shape a new economy—spawning a graceful transition into a new green building age.

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