Can Green Buildings Pass Payback Tests?
By SAQIB RAHIM, ClimateWire
Published: February 27, 2009
It's been sold as the ultimate no-brainer climate investment: Make a building that's more energy efficient, and you'll pocket the savings while avoiding harmful emissions.
With buildings accounting for 40 percent of the country's greenhouse gas emissions, the "green" building has also gotten a look from Obama administration policymakers hoping to shrink the nation's carbon footprint.
Now a group of builders has issued a report arguing that the green-building vision may be more of a myth. You can make a building more energy efficient, the group says, but it won't come cheap, and it could take decades to pay off.
The report, released this week by the Commercial Real Estate Development Association, found that a 50 percent energy improvement beyond federal standards is technically impossible. A 30 percent target is achievable, but only by adding a million-dollar solar system that could take up to 100 years to pay for itself.
Experts say it is one of the first efforts they have seen to question whether the green building's economic foundation is as solid as advocates claim.
The association, which represents developers of office buildings and other commercial properties, goes by its former acronym, NAIOP. John Bryant, a lobbyist for the group, said he wants the report to wake up policymakers who are considering a big hike for building energy codes.
"Some of the language that's been used in mandate proposals might not be as achievable as people have said," he said. "We don't want to stop the debate -- we want it to move forward; we just want to add some economic data to it."
Prompt paybacks in Chicago, but not in Baltimore
The report used a Department of Energy computer model to simulate how an imaginary, four-story commercial building would fare in three different U.S. climates: Chicago, Baltimore, and Newport Beach, Calif. In each case, the building was given features like insulation, low-leak windows and high-end heating and cooling equipment.
The goal was to make each building 30 to 50 percent more efficient than the current federal standard covering most buildings, ASHRAE 90.1-2004. NAIOP said this is a target commonly backed by efficiency advocates. ASHRAE, an association of building engineers, has sought a 30 percent improvement for commercial buildings by 2010.
Then the efficiency fixes were added up for cost, and that was compared against electricity prices to figure out how long it would take to pay off the "green" features of the building.
The study's finding: too long.
The best-performing building flourished in wind-frozen Chicago, where energy use was shaved 23 percent, for a payback time of nine years. The other two buildings, however, couldn't save more than 22 percent of their energy, and payback took more than 11 years -- too long to interest developers, NAIOP said.
The numbers can be even more skewed than that, said Ken Sagan, a building codes analyst for the National Association of Home Builders. Sagan, who used to own a heating and air-conditioning company, said that when he considered adding a wind turbine to his zero-energy home, he realized that its cost -- $175,000 -- would take 25 years to pay off in utility savings.
Similarly, he said, many technologies that make greener homes can take multiple decades to break even. "Is it practical? Common sense tells you no," he said.
Sagan applauded the NAIOP report, calling its payback estimates "realistic" and labeling it "probably the best report I've seen that is factual and truthful."
The study's results make a marked contrast with the claims of efficiency enthusiasts, some of whom have claimed that new buildings can halve their energy use by next year -- and use zero net energy within a few decades.
Assumptions comparable to those of 'climate deniers'?
Jeffrey Harris, a vice president at the pro-efficiency group Alliance to Save Energy, said these claims have a sturdy foundation in the laboratorys and in the real world. He pointed to the Energy Department's data on high-performance buildings, as well as other databases containing information on existing buildings. Engineers and green-building leaders, he said, "are not breaking a huge amount of sweat in getting beyond 30 percent in code."
He also had major question marks about the NAIOP study. He called the 10-year payback target "an undershot," since the savings of a green building continue as long as it's still standing. He also questioned the report's assumptions about electricity prices and the cost of certain "green" features.
"There's a lot of evidence on the other side," he said. "At the end of the day, you have a single study that has, like any, some shortcomings, and a large body on the other side. ... I kind of compare it to the climate deniers."
Bryant, the NAIOP lobbyist, disagreed. He said commercial building developers routinely make decisions based on a five-to-10-year payback period, and if green buildings broke even that quickly, builders would have erected more.
"We're looking at it from a developer point of view, when maybe some of the other groups aren't," he said.
Congress, meanwhile, has set out in search of the zero-energy commercial building through its 2007 energy bill. The goal is to develop a building by 2030 that uses 80 percent less energy than today's buildings -- and to get the remaining 20 percent of power from renewables like wind or solar.
But builders say these changes are drastic and too rapid, and that code changes need to be more gradual.
The real problem, NAHB says, is the hundred-million-strong body of existing buildings that are as leaky and drafty as ever. Many were built to old codes. Sagan said that is why NAHB was supportive of the White House's recent efforts to weatherize and retrofit homes through the stimulus package.
