Why U.S. Buildings Are Leaking a Mixture of Money and Carbon (& What Congress Can Do About It)
By 2020, U.S. buildings will have wasted the equivalent of the entire U.S. defense budget and nearly the equivalent of the stimulus bill passed in February. Drawing from a recent study by McKinsey & Co. the estimate of this leakage will be more than $640 billion this decade -- and another $73 billion per year in the next decade.
The good news is that policy makers have recently passed legislation addressing building efficiency and our overall energy future, including the American Clean Energy and Security Act (ACES), and the 2007 Energy Independence and Security Act (EISA), which set national goals for zero-net-energy buildings for new construction after 2025, and the retrofit of pre-existing structures to zero-net-energy use by 2050.
Where legislation has fallen short is that the U.S. has typically invested only a fraction of the capital necessary to reap any benefits. Energy efficiency investments typically have returns over 20 percent with risks comparable to U.S. treasury bills. Our investments neglect the opportunities with greatest return and lowest risk.
Improving energy efficiency in buildings generally runs into three barriers:
- Difficulties in measuring and verifying the financial and carbon benefits of avoided energy use
- The split incentives for efficiency investments between builders, owners, and tenants
- Significant upfront cost to receive longer term payback
To overcome these persistent barriers public policy should address the three R's. Not Reduce, Reuse, Recycle, but instead Reveal, Realign and Reward.
Reveal
Measuring and verifying the financial and carbon benefits of avoided energy use in buildings is tricky and time-consuming, but is also a critical step to creating the transparency needed by developers, architects, owners, and prospective tenants to invest in energy efficiency.
Both ACES and the American Clean Energy Leadership Act of 2009 reported by the Senate Energy and Natural Resources Committee grasp the importance of this by providing for building energy performance labeling programs. In setting federal standards, these bills refer to existing building labeling programs such as LEED, HERS, and ENERGY STAR, which have seen mostly voluntary adoption in the new and existing building market. Recent ACES language passed by the House limits the prototype building labeling program to new construction only, but the Senate should stand firm to establish a comprehensive, consistent, and required building labeling program, including existing commercial and residential markets.
There also has been a recent push to install sub-meters and smart meters in numerous homes and commercial buildings. This is a relatively expensive way to go about understanding your building, is only relevant after a building is constructed (i.e. when improvements are harder to make), requires expertise to interpret and diagnosis issues, and may not reap the intended rewards for the building owner until the systems are smarter. The U.S. needs to consider faster, cheaper options, like rapid building energy analysis through Building Information Modeling, which can be completed in a few hours and undertaken at all points throughout the life cycle of a building.
Realign
Split incentives (or "principal-agent problems") among builders, owners and tenants are some of the most powerful obstacles to building efficiency investments. The International Energy Agency estimates this issue alone can account for 30 percent of wasted energy in the built environment. Coupled with the access to transparent information described above, the most powerful policy mechanisms for realigning incentives among builders, owners and tenants are building standards and new contractual arrangements that ensure that the costs of energy - and the benefits of its avoided use -- are spread across all parties.
In regards to building standards, the American Recovery and Reinvestment Act of 2009 made good headway by amending the Energy Policy & Conservation Act to promote lighting and appliance efficiency standards. However, this neglects the biggest opportunity for financial and energy savings: the building structure itself.
As for new contractual arrangements, more support is needed for those experimenting with the concept of 'green leases', whereby tenants revise contract terms with their building owner to ensure that both invest in, and both benefit from, efficiency upgrades.
Reward
While energy efficiency investments tend to have attractive returns, the upfront capital costs have proven to be one of the main reasons why such returns are so frequently passed up. The $3.2 billion and $5 billion allocated by the ARRA to DOE to disburse efficiency grants to states and fund weatherization programs, respectively, are two steps towards rewarding building owners for smart investments. The General Services Administration's $4.5 billion to transform public buildings into high-performance green buildings is an opportunity to develop models of the next generation of buildings from which we all can learn.
Far more is possible and state experiments can point the way. FERC and state legislators must revise utility regulations to reward efficiency over volume of energy delivered. On-bill financing programs by utilities have proven that when tenants know they are able to pay for efficiency investments in small increments added to their utility bill, they are far more likely to make such investments in the first place. Pay-As-You-Save programs take this one step further by ensuring that the entire loan is repaid using money from rebates and saved from reduced utility bills, often times with a zero sum cash flow over the life of the loan, then positive cash savings through the remainder of the measures' life.
Additionally, more programs are needed that tie tax credits to green building standards or publicly financed low-cost loans should be offered for efficiency improvements. Legislators and agencies such as Housing & Urban Development should be careful to ensure that such financial rewards give preference to applicants proposing holistic retrofits. These are more cost-effective and avoid the possibility of decreasing overall building performance through knock-on effects.
Congress is on the right track in setting higher standards for building performance. As it completes energy legislation this fall, it should keep its focus on policy mechanisms that help reveal the financial and carbon benefits of efficiency upgrades, realign the incentives of different parties throughout the life cycle of buildings, and reward those parties who chose to invest in efficiency by assisting them over the upfront cost hurdle, Americans will find ourselves with a lot fewer leaks in our buildings and a lot more money in our pockets.
Future historians will inevitably judge all 21st-century presidents on just two issues: global warming and the clean energy transition. In that sense, Obama's first year has been a promising success.
Steven Chu: Weatherization: Saving Money by Saving Energy
Long before I learned about the risks of climate change, I was fanatical about energy efficiency because I'm cheap. We want to help millions of families seize the same opportunity to cut their utility bills.
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I have had the privilege to be part of Ever blue energy, which provides training for LEED exams. I believe that this issue will change and we will have more LEED certified buildings.
Ms. LEED Trainer
everblueenergy.com
Retrofitting appropriate governmnet building with efficiency and rooftop solar is the low hanging fruit.
The federal governmnet can directly order from the private sector, and immediately stimulate the economy, particular construction jobs.
Instead we were extorted by the Bankster for 24T$, and they now have the power to decide where that money goes.
Bankster would rather gamble in high leverage der3ivaitves insurance with CDS backed by TARP taxpayers funds, How wouldn't?
3 cent rooftop solar on the thousands of acres of governmnet rooftop, would pump up the solar industry, and save the USA money of the long term..
taking our organic waste and converting all of it to BioFuels can supply all the additional fuels and energy the worlds needs, cheaper safe, and carbon negative.
See my profile for proof and links.
I think the focus should be more on how to produce more energy at cheaper prices. Further, we should reduce regulation so that energy companies can operate their business with lower overhead and more speed. We will all be wealthier then.
I've worked as an energy modeler and produced documents for incentive programs including LEED.
This kind of simulation analysis is excellent for informing the design process, for example quantifying the energy impact of a selection of different windows. But it's not especially accurate at comparing substantially different designs. The baseline definition isn't always clear or appropriate. And absolute energy consumption predictions are little better than wild guesses.
The tools for performing this analysis are based on old FORTRAN code developed in the 80s. But now there are snazzy point-and-click frontends that allow people who don't have the slightest idea what they're doing to produce professional-looking stacks of "garbage in garbage out".
The auditing of these reports is contracted to the lowest-bidding bunch of glorified data-entry workers who only catch minor procedural violations and aren't insightful enough to catch the really huge errors. Firms with better talent have better things to do.
LEED is just a plaque on the wall and maybe a press release. Property owners would be advised to choose their energy consultancy wisely. I would prepare three sets of results for each project: one for the building code regulators, one for LEED certification, and one for the client.
The client always got the best possible prediction. The rest were all compromised by the unintended consequences of rules and regulations designed in a futile attempt to create fair comparisons but really only add distortion to a field already too full of fictions and myths.
Green washing and Energy Efficiency Washing:
What the US Green Building Council does on a daily basis.
See: http://www.buildinggreen.com/live/index.cfm/2008/9/2/Lies-Damn-Lies-and-Are-LEED-Buildings-iLessi-Efficient-Than-Regular-Buildings
Rather than waste our time trying to, once again, bribe the foxes to guard the henhouse (i.e., running loan and efficiency programs through utilities, which are ABSOLUTELY OPPOSED to any kind of demand-side reduction, even with the lame "decoupling" we have here in CA), we need to insist that they pay fair ROI to every property which feeds more power into the grid than it uses.
Utilities get guaranteed return on investment of 10-15% for infrastructure, whether or not it is needed, so WE should get the same rate for installing solar panels and efficiency upgrades in our homes and businesses - via the Feed In Tariff mechanism working in every developed nation in the world except the Big Energy Republic of the US. We don't need their permission, because they are REGULATED and have to do what we say. Why is this so impossible for our legislators and policy wonks to grasp?
Big Energy, whether it's Big Solar, Big Wind or Big Coal, should not be the future of our nation - efficiency, conservation, clean point of use generation and storage, coupled with local grid balancing is what is needed, but since that would be democratic, clean, and affordable we can't have it. There always has to be some corrupt special interest getting huge welfare (public lands, eminent domain, water rights, huge rate hikes, etc.) and simultaneously destroying our environment (SF6, concrete, steel, water waste, destruction of CO2 sequestering ecosystems, massive wilderness slaughter, etc.).
Remember "Earth Hour"?
Folks in cities across the globe...
TURNED OFF LIGHTING INSIDE BUILDINGS...
LIGHTING THAT WAS NOT NEEDED...
EVER LOOK AT CITIES AT NIGHT??
WAY PAST CLOSING TIME, THESE BUSINESSES CONTINUE TO BURN
ELECTRICITY UP BY KEEPING THE LIGHT ON...
DIDN'T YOUR PARENTS TELL YOU TO "TURN THE LIGHTS OFF"?
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