Current status and trends of sustainable construction in the U.S. The difficulty lies not in new ideas, but escaping from the old ones. John Maynard Keynes Business Consulting & Training, Inc. www.bctbiz.com 1
Sustainability definedSustainable development is development that meets the needs ofthe present without compromising the ability of future generations tomeet their own needs. United Nations, March 20, 1987 Sustainability requires the reconciliation of environmental, social and economic demands - the "three pillars" of sustainability. 2005 World Summit 2
CO2Driving force of sustainable construction.Current level: ~ 380 ppmCatastrophic level: 450 - 460 ppm coined SCENARIO 450 2° C rise in temperaturePrevention: reduction of CO2 emission by 60%-90% from 2006 level 3
International CooperationLatest: The Copenhagen Accord at the 15th session of the Conference ofParties to the UN Framework Convention on Climate Change on 18 December2009.The Accord itself is not legally binding. Countries pledged to reduce CO2by 2020 (caveat – different baseline):United States: 17% reduction, 2005Japan: 25%, 1990China: 40% - 45%, per unit of GDP!, 2005Russian Federation: 15% - 25%, 1990EU: 25%; 30% conditional on others, 1990Brazil: 36.1% - 38.9%, over projected trend!Regardless, the trend is downward for CO2 and global. 4
Why sustainability in buildings?U.S. Inventories ~ 115 million of housing units ~ 70 billion m2 of commercial floor space CO2 Emissions from Fossil Fuel Combustion, Tg CO2 1990 2006 2008 TOTAL US 4,735.70 5,652.80 5,572.80 Residential 932.2 1,152.90 1,184.50 Combustion 339.1 322.1 342.7 Electricity 593 830.8 841.8 Commercial 754.6 1,005.00 1,044.90 Combustion 216.7 206 219.5 Electricity 538 799 825.4 TOTAL BLDGS 1686.8 2157.9 2229.4 % TOTAL 35.6% 38.2% 40.0% Source: U.S. EPA, author 5
Execution of Sustainability: Codes Sustainable construction is achieved by:• Mandatory statues: Codes Federal, State, and City legistlations Municipal codes based on Model Codes: ASHRAE Standard 90.1 for commercial design community International Code Council for commercial & residential International Green Construction Code – commercial (Rhode Island is the first state to adopt the Code in 2012) Federal: American Clean Energy and Security Act of 2009 The Act (has to be approved by Senate) calls for: National building code energy reduction targets of: • 30% below the baseline energy code (2006) in 2010, • 50% below the baseline energy code in 2014-2015, and • 5% additional reduction every three years to 2029-2030. Codes and mandates work best; incentives help. 6
American Clean Energy and Security Act of 2009 (H.R. 2454)The Act (has to be approved by Senate) calls for:National building code energy reduction targets of:• 30% below the baseline energy code (2006) in 2010,• 50% below the baseline energy code in 2014-2015, and• 5% additional reduction every three years to 2029-2030.It does not matter that this example is for the U.S. Trend is similar in alldeveloped economies.Two themes to investors: trend that will continue for decades (early entrance) state policies (incentives, direction, relative certainty)Business opportunity: more appealing homes new construction technologies and materials knowledge-based services 7
Execution of Sustainability: Voluntary Certifications Leadership in Energy and Environmental Design (LEED) – C&R Energy Star – C&R National Green Building Standard – Residential Passive Homes – C&R (mostly Residential)It does not matter that those examples are for the U.S. Trend and approaches are similar in all developed economies. 8
Think globally, act locally.U.S. Conference of Mayors Climate Protection Agreement1044 cities signed the Agreement - as of 9/27/2010 (52 from Illinois)Under the Agreement, participating cities commit to:Strive to meet or beat the Kyoto protocol targets in their owncommunities, through actions ranging from anti-sprawl land-usepolicies to urban forest restoration projects to public informationcampaign.Each city has its plan – many different approaches and initiatives Key: cities include in codes LEED, or equivalent, standards!Boston, MA: over 50,000 sf must be LEED certifiableBabylon, NY: over 4,000 sf for commercial & multifamily 9
Woodstock, IL – Sustainability Plan Population: 25,500 82 km northwest of Chicago; area quite wild Environmental Plan for 2020 per UN definition of sustainabilityThe concept of sustainability holds the promise of long-term economicsecurity, social equity and environmental integrity. It suggests thatthrough increased self-sufficiency and responsibility, the production andconsumption of goods and services can be maintained without harmingthe natural environment.The Plan included matters that citizens of Woodstock deemed suitablefor sustainability, such as: Be a community of law abiding citizens with no tolerance for crime. Be a community of choice for residents, visitors & investors. Weave ethnic backgrounds together to celebrate diversity, promote understanding, & support ―One Woodstock.‖ 10
LEED: Leadership for Energy & Environmental DesignIn LEED 2009 there are 100 possible base points. Buildings can qualify forfour levels of certification:Certified: 40 - 49 pointsSilver: 50 - 59 pointsGold: 60 - 79 pointsPlatinum: 80 points and aboveHuge range of certifications, for: schools, hospitals, commercial, interior,new constructions, renovations, neighborhood development, andoperations & maintenance.LEED has been continually evolving and modified, though the mainconcept remains the same. 14
LEED: Points – Sustainable SitesSustainable Sites 26 Possible Points• Prerequisite 1 Construction Activity Pollution Prevention Required• Credit 1 Site Selection 1• Credit 2 Development Density and Community Connectivity 5• Credit 3 Brownfield Redevelopment 1• Credit 4.1 Alternative Transportation—Public Transportation Access 6• Credit 4.2 Alternative Transp.—Bicycle Storage and Changing Rooms 1• Credit 4.3 Alternative Transp.—Low-Emitting and Fuel-Efficient Vehicles 3• Credit 4.4 Alternative Transportation—Parking Capacity 2• Credit 5.1 Site Development—Protect or Restore Habitat 1• Credit 5.2 Site Development—Maximize Open Space 1• Credit 6.1 Stormwater Design—Quantity Control 1• Credit 6.2 Stormwater Design—Quality Control 1• Credit 7.1 Heat Effect—Nonroof 1• Credit 7.2 Heat Island Effect—Roof 1• Credit 8 Light Pollution Reduction 1 15
LEED: Points – Water & EnergyWater Efficiency 10 Possible Points• Prerequisite 1 Water Use Reduction Required• Credit 1 Water Efficient Landscaping 2-4• Credit 2 Innovative Wastewater Technologies 2• Credit 3 Water Use Reduction 2-4Energy and Atmosphere 35 Possible Points• Prerequisite 1 Fundamental Commissioning of Building Energy Systems Required• Prerequisite 2 Minimum Energy Performance Required• Prerequisite 3 Fundamental Refrigerant Management Required• Credit 1 Optimize Energy Performance 1–19• Credit 2 On-site Renewable Energy 1–7• Credit 3 Enhanced Commissioning 2• Credit 4 Enhanced Refrigerant Management 2• Credit 5 Measurement and Verification 3• Credit 6 Green Power 2 16
LEED: Points – Material & ResourcesMaterials and Resources 14 Possible Points• Prerequisite 1 Storage and Collection of Recyclables Required• Credit 1.1 Building Reuse—Maintain Existing Walls, Floors and Roof 1-3• Credit 1.2 Building Reuse—Maintain Existing Interior Nonstructural Elements 1• Credit 2 Construction Waste Management 1-2• Credit 3 Materials Reuse 1-2• Credit 4 Recycled Content 1-2• Credit 5 Regional Materials 1-2• Credit 6 Rapidly Renewable Materials 1• Credit 7 Certified Wood 1 17
LEED: Points – Indoor Environmental QualityIndoor Environmental Quality 15 Possible Points• Prerequisite 1 Minimum Indoor Air Quality Performance Required• Prerequisite 2 Environmental Tobacco Smoke (ETS) Control Required• Credit 1 Outdoor Air Delivery Monitoring 1• Credit 2 Increased Ventilation 1• Credit 3.1 Construction IAQ Management Plan—During Construction 1• Credit 3.2 Construction IAQ Management Plan—Before Occupancy 1• Credit 4.1 Low-Emitting Materials—Adhesives and Sealants 1• Credit 4.2 Low-Emitting Materials—Paints and Coatings 1• Credit 4.3 Low-Emitting Materials—Flooring Systems 1• Credit 4.4 Low-Emitting Materials—Composite Wood & Agrifiber Products 1• Credit 5 Indoor Chemical and Pollutant Source Control 1• Credit 6.1 Controllability of Systems—Lighting 1• Credit 6.2 Controllability of Systems—Thermal Comfort 1• Credit 7.1 Thermal Comfort—Design 1• Credit 7.2 Thermal Comfort—Verification 1• Credit 8.1 Daylight and Views—Daylight 1• Credit 8.2 Daylight and Views—Views 1 18
LEED: Additional 10 PointsInnovation in Design 6 Possible Points• Credit 1 Innovation in Design 1-5• Credit 2 LEED Accredited Professional 1Regional Priority 4 Possible Points• Credit 1 Regional Priority 1-4LEED certification covers almost all types of commercial & industrial development:• New Construction & Major Renovation• Existing Buildings: Operation & Maintenance• Commercial Interiors• Core and Shell Development• Schools New Construction and Major Renovation• Neighborhood Development 19
LEED: Pros & ConsPros: LEED is a growing knowledge-based business: - Sustainability Consultant Requirements create opportunity in supplies: - cleaning products Mostly applicable to occupancy-based buildings: offices, schools Owners can differentiate properties It’s healthier and more pleasant to stay in LEED bldg.Cons: Certification cost You are married for life to it >> maintenance & operation Cumbersome for residential homesBottom line: LEED will grow in the U.S. because of federal and state mandates, and acceptance in commercial real estate. 20
Passive HouseCertified if: Airtight building shell ≤ 0.6 ACH @ 50 Pa pressure Annual heat requirement ≤ 15 kWh/m2/year (4.75 kBtu/sf/yr) Primary Energy ≤ 120 kWh/m2/year (38.1 kBtu/sf/yr)In addition, the following are recommendations, varying with climate: Window U-value ≤ 0.8 W/m2/K Ventilation system with heat recovery with ≥ 75% efficiency with low electric consumption @ 0.45 Wh/m3 Thermal Bridge Free Construction ≤ 0.01 W/mKKey principle: super-insulation and air-tightness 21
Passive House There are over 20,000 passive homes (max 25,000) worldwide About 20,000 are in Germany, Austria, Scandinavia About 50 in U.S. Passive House favors cold climates – but applicable to all climates Success in Germany is attributed to incentives and policy 22
Energy Star Originated in early 1990 by the US Environmental Protection Agency Designed primarily to promote energy efficiency. Appliances are assigned Energy Star labels.Example. Low-slope (2:12) roof materials: Initial Solar Reflectance > 0.65 Reflectance after 3 years > 0.50Overall a useful standard and certification. But….2008 audits of the Inspector General found: Claims regarding GHG reduction were inaccurate and based on faulty data Energy savings were unreliable or unverifiable 23
What Big Guys are doing? Leading Builders of America – coalition of 16 largest homebuilders Sold 99,000 homes in 2009, or 27% of total for U.S. 24
What Big Guys are doing? 2009 2008 2007Beazer Homes USA 4,330 6,697 10,160 eSmartD.R. Horton 17,034 21,251 33,687Hovnanian Enterprises 5,659 11,281 14,928KB Home 8,488 12,438 23,743 Energy StarLennar Corporation 11,478 15,735 33,283M.D.C. Holdings 570 409 1,350Meritage Homes 4,039 5,627 7,687 Energy Star + super effNVR, Inc. 9,042 10,741 13,513Pulte Group 15,013 21,022 27,540 Energy Star & LEEDRyland Group 5,129 7,352 10,319 HouseWorksStandard Pacific 3,581 5,025 8,051Toll Brothers 2,965 4,743 6,687M/I Homes 2,409 2,025 3,173 TOTAL 89,737 124,346 194,121Source: 10K reports, author 25
What Big Guys are doing? LBA estimates that additional costs for ―typical‖ new home are:• $5,000 for 30% energy reduction• $15,000 for 50% energy reduction LBA worries that increased up front costs will eliminate many potential buyers. Proposes to include Energy in mortgage (PITI + E). 26
Benefits of certification All certifications for a private sector are voluntary - be it LEED, BREEAM, or passive homes. Residential: Energy & water savings: payback in minimum circa 10 years Greater likelihood of selling a house Usually incentives provided by government Commercial: Positive differentiation against competitors Assured better indoor air quality and healthy environment Increased productivity Energy & water savings Lower vacancies Greater rents Incentives from government Why certify? To prove the claim. 27
Why certify?Certification makes sense when there is a transactional benefit between SELLER BUYER or OWNER TENANTWhen you plan to build a property for you own benefit and do not plan to sell it or rent to others, certification brings limited benefits. but….IT DOES NOT IMPLY THAT THE STRUCTURE SHOULD NOT ADHERE TO SUSTAINABILITY STANDARDS!!! IT IS JUST NOT CERTIFIED BY THIRD PARTY.
Why certify: developers & investorsIf you are a developer or an investor, a transaction always takes place –be it an office building, residential home, or industrial property. tenants & rentersA transaction always takes place in the form of a lease. homeowners(a) NO TRANSACTION - If you do not plan to sell a home for, say, minimum 15 years and do not plan to rent it.(b) TRANSACTION – otherwise industrial companyIt depends on a type of a property. But if you want to be perceived as agood citizen, pursue certification.
Why certify: public propertyCertification of public properties such as schools, universities, city halls,and hospitals gives warranty per expected performance, providesleadership in sustainable development , and creates healthierenvironment. In summary - real estate is mostly transactional. After all, that’s why we have a thriving business of real estate agents.
Certification: StatisticsIn God we trust, all others bring data. Dr. W.E. Deming Number of certified properties/units in U.S. Energy Star (1999) LEED (2000) Passive House (2000) ~12,720Commercial 11,787 (Worldwide)Residential 1,111,856 7,882 ~50For LEED residential: 594 has Certified designation 3,628 Silver 2,056 Gold 1,604 Platinum 31
How to market ecological homes?Passive House – Kansas City, KS, May 2010 1,700 square foot $190,000 (worth at least double) Still waiting for a buyer! 32
How to market ecological homes? Passive House – Urbana, IL, 2007 1,450 square foot$120,000 sold ($25k City + donations) 33
How to market ecological homes? 1. Be a resident of Champaign County, and 2. Be at 80% or below the median family income (see the chart)Energy efficiency alone is not enough to differentiateyourself in the marketplace!!!
EUEurope leading the world - an Action Plan for EnergyEfficiency: Realising the Potential. European Parliament resolution of 2008 January 31st…calls on the Commission to propose a bindingrequirement that all new buildings needing to beheated and/or cooled be constructed to passive houseor equivalent non-residential standards from 2011onwards, and a requirement to use passive heatingand cooling solutions from 2008.
Life-Cycle Cost Analysis BUDMA 2011: Sustainable Construction - Investment in the FutureLCCA is most comprehensive. Includes all costs over life time. LCC = I + Repl — Res + E + W + OM&R + OLCC = Total LCC in present-value (PV) dollars of a given alternativeI = PV investment costsRepl = PV capital replacement costsRes = PV residual value (resale value, salvage value) less disposal costsE = PV of energy costsW = PV of water costsOM&R = PV of non-fuel operating, maintenance and repair costsO = PV of other costs (e.g., contract costs)Problems: It’s expensive and time consuming. Assumptions about future (e.g., prices) are subject to huge variance.
Life-Cycle Cost Analysis The most misquoted example of LCCA! Personnel Salaries refers to salaries of persons working in the occupied space. Excellent book, and in 1994. Lean & clean management, Joseph RammExample is given to emphasize that a lot of savings could come fromimproved productivity of employees.Indeed, studies show that designing of buildings per LEED certificationincreases productivity.
Zero energy building (ZEB)In U.S., zero energy building refers usually to net zero site energy use: theamount of energy provided by on-site renewable energy sources is equalto the amount of energy used by the building. Passive House + Clean Energy = Killer Application 40
Clean energy: geothermal, solar, wind. Renewable Portfolio Standards. Selected States. State Amount YearPolicy and incentives are primarydrivers for clean energy. Arizona 15% 2025 California 33% 2020But incentives are often in under- Colorado 30% 2020developed localities. Connecticut 27% 2020 Delaware 20% 2019Technology choice comesafterwards. Hawaii 40% 2030 Illinois 25% 2025Utilities will opt for large projects(e.g., wind farms) to satisfy reqt’s. Oregon 25% 2025 Pennsylvania 18% 2020Utilities are to make profits for Rhode Island 15% 2020shareholders. Utah 20% 2025Costs will be passed to Virginia 12% 2022customers. Washington 15% 2020 West Virginia 25% 2025 41
Geothermal (Ground Source) Heat Pumps Proven technology, stable, can work 24/7, and be installed ~ anywhere Over 600,000 units installed in the U.S. But EU grows faster.Per research from Oak Ridge National Laboratory (ORNL/TM-2008/232), key barriers to growth of GHP are (in order of importance):1. High first cost of GHP systems to consumers2. Lack of consumer knowledge and/or trust or confidence in GHP system benefits3. Lack of policymaker and regulator knowledge of and/or trust or confidence in GHP system benefits4. Limitations of GHP design and business planning infrastructure5. Limitations of GHP installation infrastructure6. Lack of new technologies and techniques to improve GHP system cost and performance. 42
Solar Implementation totally driven by incentives. Germany, Italy: feed-in tariff system U.S.: market-driven rebates Poland: no incentives for PV >> no implementation PV not at parity with grid yet Market in U.S.: mostly affluent households and industrial applications 43
Wind Limited potential for small turbines in a city because of obstructions from other dwellings disturbs wind patterns Wind farms: very feasible and profitable endeavor 44
Cost of Energy Production1 QBtu (1015) of Delivered Energy 1 Btu = 1055.06 J COAL Plant: $256.0 Billion NUCLEAR Plant: $222.0 Billion BUILDING EFFICIENCY: $42.1 BillionReduction of GHG via building efficiency is much lessexpensive than building power plants. 46
Sustainability in construction Sustainability is being adopted by all forms of construction – not only in buildings. City of Chicago renovates neighborhood employing principles of sustainability in a formal way. In practice it means: preserving environment & saving energy O’Hare airport (~$20 bil project) is renovated employing sustainability Transportation: manuals are being developed for building roadsImplication: To get a contract for municipal work, one has to know sustainability or be certified as LEED (or equivalent) contractor. Proposing a development (any) that does not have sustainability features is not welcome, especially for downtowns. 47
Sustainability permeates through all fabrics of U.S. society Seattles Office of Sustainability and Environment Portland Office of Sustainability City of Cleveland: Office of Sustainability Office of Sustainability for the City of Indianapolis Maryland Office of Sustainability City of New Haven Office of Sustainability City of Palm Springs Office of Sustainability (California) Lee County’s Office of Sustainability (Southwest Florida) The Office of Sustainability, Columbia, MO The Office of Sustainability, Evanston, IL Sustainability at Texas A&M University Yale Office of Sustainability Office of Sustainability, The University of Chicago Office of Campus Sustainability Michigan State University Office of Sustainability University of Illinois at Urbana-Champaign Office of Sustainability of the University of South Florida Princeton University Office of Sustainability 51
CO2 reduction by compact developmentTransit-oriented development: key preference for municipalities, especially in affordable housing 52
Conclusions Whether you like ―green building‖ or not; or if you agree or disagree with the concept of sustainability, it does not matter much. You will be sucked into it by the global trend. The sooner you embrace it, the sooner you may rip off benefits, or at the minimum enhance your professional credentials. Sustainability is business: first entrant advantage Sustainability trend will permeate through all fabrics of construction Technology follows policy. Certification - be it LEED, Energy Star – provides a tool for systematic analysis, and implementation, of sustainable solutions. Technology follows policy. Government should play a big role: provide incentives promote best practices 53 incourage innovating and reward those who do better
Conclusions Government should play a big role: provide incentives promote best practices incourage innovating and reward those who do better actively implement sustainable solutions 54
Construction Standards INNOVATIONS PROGRESSIVE POLICY EDUCATION 1. Standards will merge. LEED 2. Why not utilize LEED now.CurrentCodes 2011 2030?
InnovationsChinese workers build 15-story hotel in just six days 56
Conclusions .Jako odpowiedzialny deweloper, rozumiemy znaczenie zrównoważonegobudownictwa. Dlatego decyzja, aby zgodnie z jego zasadami realizowaćinwestycje Skanska Property Poland, jest spełnieniem naszychzobowiązań wobec pracowników, przyszłych i obecnych najemców, atakże lokalnych społeczności. Nicklas Lindberg, dyrektor generalny Skanska Property Poland.That statement epitomizes attitudes of corporate America. 57
Impact of PITI + EP - servicing of principalI - interestT - property taxesI - insurance Affordability = f(PITI)In the current Energy Efficiency Mortgage, interest rate is the same as forregular applicable mortgage. Only greater amount can be loaned.To qualify for Energy Efficiency Mortgage, the property must have HomeEnergy Rating System (HERS) report.Pending S. 1379, the Energy Efficiency in Housing Act of 2009, wouldlikely lower interest rates on mortgage. Lenders are reluctant – more workImplications: passive houses, and net-zero energy homes could flourishVery bad for existing stock of homes if E permanently in PIPI. Buyer of ahome with low HERS will pay higher interest rates >> pressure on prices>> but increased activity in renovation to meet current standards. 59
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