In 1979, the Department of Energy (DOE) estimated that there were 3.8 million commercial buildings in the United States; twenty-five years later there were nearly five million commercial buildings larger than 1,000 square feet in size and more than seventy-one billion square feet of commercial floor space in the U.S., or about 2,600 square miles of commercial floor space. If you laid out all that commercial floor space, it would cover about 1 percent of the state of Texas, which happens to be larger than any nation in Europe except Russia.
Most of those buildings are used for education, retailing, offices, and storage. Altogether, those activities use about 60 percent of the total commercial floor space and 51 percent of buildings in the U.S. The construction business that builds these buildings itself generates more than $531 billion in annual revenues and employs more than 1.7 million workers (2002), with an annual payroll of nearly $62 billion. More than 1.8 million residential houses and buildings (2003) and approximately 170,000 commercial buildings are built and about 44,000 commercial buildings are demolished annually. Almost seventy-three million Americans, including 68.5 million children, spend their days in approximately 117,000 public and private primary and secondary schools (2000). While our kids are in school, the rest of us are in some other structure—house, office, store, or hospital, as on average, according to an EPA study on indoor air quality, Americans spend 90 percent or more of their time indoors. Buildings and homes account for 40 percent of total U.S. energy consumption and 70 percent of total U.S. electricity consumption. Consumption is pretty evenly split between homes and commercial buildings. All that energy consumption means that buildings in the United States contribute 38 percent of the nation’s total carbon dioxide emissions.
Worldwide, 30 to 40 percent of all primary energy is used in buildings that in turn produce approximately 30 percent of the greenhouse gas emissions. That won’t change much over the next twenty years without extensive retrofitting of existing building stock, because, due to their long life cycle, buildings that will be operating in the decade of 2030 have in the majority already been built. Energy use in buildings is strongly related to the building’s construction, its purpose, and the climate where it is located. There are five phases of energy use in a building’s life cycle: (1) the manufacturing of the products and components that make up the building; (2) the transportation of these products and components to the construction site; (3) the construction itself; (4) the ongoing operation of the building after it is built; and (5) the final demolition and recycling of the building.
The operating phase is the most energy intensive, with the use of heating, cooling, and lighting. But the other phases aren’t insignificant. For example, buildings are large users of materials that have a high content of embodied energy. Embodied energy is the energy that is consumed when building materials and components are produced. This includes the mining and manufacturing of materials and equipment, especially materials with high embodied energy content such as aluminum, cement and steel, the production of which usually depends on the use of fossil fuels, resulting in CO2 emissions. Cement plants alone account for 5 percent of global emissions of carbon dioxide. Each year, three billion tons, more or less, of raw materials—40 to 50 percent of the total flow in the global economy—are used in the manufacturing of building products and components worldwide.
Housing accounts for the major part of energy consumed in buildings; in developing countries the share can be over 90 percent. In the low-income rural areas of Africa, India, and China the main energy source for more than 70 percent of the population is wood, animal dung, and crop waste; and kerosene and paraffin are still widely used for lighting. Surprisingly, even today, around 2.4 billion people depend on wood, agricultural residues, and dung for cooking and heating; that number is expected to increase to 2.6 billion by 2030. According to a forecast presented by the IEA (2002), in 2030 biomass use will still represent over half of residential energy consumption in developing countries. The use of biomass does not necessarily contribute to climate change as biofuels are renewable unless harvested in an unsustainable way, but it often causes serious indoor pollution.
It is believed that building construction costs typically increase by 3 to 5 percent due to the introduction of energy efficient solutions. The reduction of energy use in one system can affect the energy use in another system. For instance, lighting savings can lead to significant reductions in the energy used for cooling and ventilation systems even in countries like Sweden, where typical modern buildings require cooling even at an outdoor temperature of -10°C. Commercial buildings enjoy a net Heating Ventilation and Air Conditioning (HVAC) benefit from lighting savings because of the considerable internal heat generated by the lighting. A rule of thumb is that about one watt of air cooling energy savings result from every three watts of lighting energy savings.
In the U.S., the perceived increase in the cost of energy efficiency discourages investment in it and building codes often do not require it. Building codes are intended to protect public health, safety, and general welfare as they relate to the construction and occupancy of buildings and structures; but we don’t have a standard national building code or national energy code. Building codes vary by state and municipality, but because the codes are expensive to structure they are frequently set on a model code put out by various industry associations and government funded entities. In the case of energy use in buildings, the Department of Energy has a Building Energy Codes Program that works with federal agencies, national code organizations, the building industry, and state and local officials to promote more stringent building energy codes.
Building energy codes currently are set in a complicated process. National model codes are updated every few years, typically with incremental improvements, by two independent organizations: the International Energy Conservation Code (IECC) from the International Code Council for residential buildings, and American Society of Heating, Refrigerating and Air-Conditioning Engineers better known as ASHRAE Standard 90.1 for commercial buildings. The DOE determines whether the amended model code saves energy. States set the actual building energy codes (except a few states that leave codes to local governments) based on the national models. States are required to adopt a commercial code at least as stringent as the national model within two years of DOE’s determination. For residential codes, states are required to look at updates to the national model and either adopt them or explain why they chose not to.
According to the DOE, twelve states in the U.S. have residential energy building codes that meet or exceed the standards of the latest IECC, which was released in 2006. Some have codes based on earlier versions of the IECC and some have codes that were developed prior to 1990. Just because a state has an energy building code doesn’t mean that the code is applied to all new residences. In many states, the codes are not broadly enforced and may be restricted to state or federally owned buildings or in municipalities that have chosen to adopt the state energy building code.
According to the Alliance to Save Energy, if model building energy codes were strengthened incrementally by 30 percent in 2010 and 50 percent in 2020—and if all states implemented the codes—by 2030 cumulative savings from these code improvements would reach 56 quads of energy, $435 billion (nominal 2003 dollars), and 889 million metric tons of carbon equivalent. The greenhouse gas emissions reductions would be equivalent to taking 32 million cars off the road for twenty years. In the year 2029 alone, the savings would be 6.1 quads of energy (about 5 percent of total U.S. energy use), $47.5 billion in consumer energy bills, and ninety-seven million metric tons of carbon equivalent. This is comparable to removing seventy million cars from the road for one year.
If the benefits are so great, why do we need the regulation in the first place? Why doesn’t the market just adopt these measures? There is no simple answer, although it is true that the building construction industry suffers profoundly from a lack of leadership when it comes to energy efficiency. There are a variety of reasons for this. Buildings and homes are becoming increasingly complex, with many more choices for materials and products. Those products and materials are chosen, assembled, and constructed by many different parties that frequently don’t work together on an ongoing basis. The building team is usually led by the least experienced member of the team—the owner or developer—who often knows the least about building, let alone running loosely knit impromptu organizations that are usually at each other’s throats. That is what building team is like. It’s a group of business parties glued together by contractual relationships that are usually contentious. Litigation in the building business is very common, with lots of finger pointing. (I know because my husband is a builder.) This is hardly the climate in which to create an innovative product. Besides the inexperienced and untrained owners coordinating contentious building teams, the local utility company often pushes energy consuming solutions because they make money by promoting energy use and not efficiency. Construction and permanent lenders do not distinguish between energy efficient and non-energy efficient buildings; and builders and architects are not well trained in the issues of energy efficient construction and design. Some say that architects’ roles in the past century have, for various reasons, devolved from that of master builders to stylists.
A case in point on the state of the construction industry is the Stata Center on the campus of the Massachusetts Institute of Technology. This $300 million building is one of the most celebrated works of architecture in years. MIT paid renowned architect Frank Gehry $15 million to design the building, which was completed in 2004. Three years later, MIT sued Gehry, alleging the building design causes leaks that lead masonry to crack, mold to grow, and drainage to back up. According to Gehry, “These things are complicated and they involved a lot of people, and you never quite know where they went wrong. A building goes together with seven billion pieces of connective tissue.” If one of the leading engineering schools in the world can’t work together with one of the leading architects in the world to create a building that doesn’t leak, what does this say about the possibility for creating energy efficient buildings?
Home building isn’t much different. Much of the residential construction is now done by stock builders who repeat ten or twenty designs ad infinitum, meaning they repeat the same mistakes and same inefficiencies ad infinitum as well. The stock builders have learned that they don’t make money adding options or customizing existing plans, so energy efficient improvements in the homes they build don’t often happen. For individuals choosing to build a home on their own, hiring an architect is often an expensive proposition—usually 10 percent or more of the projected building cost. And when you use an architect you have to make lots of decisions that you don’t have to make when you buy an off-the-shelf house or even off-the-shelf house plans. For the decision and design challenged like me, the prospect is daunting at best and at worst purported to be a proven destroyer of marriages. My husband and I built a house recently and remain married; but we both have experience in the development and building industry, so we were well prepared for the task. We rejected design proposals from well respected architects due in part to the cost and in part from the knowledge that we would go crazy making all the additional decisions that go with designing something. We wound up using stock building plans we bought online for a house we saw featured in a book. Then we used the book to help us make aesthetic decisions, my experience to make decisions regarding energy efficiency and my husband’s construction experience for the rest. Even so, and despite the fact that the home builder we used was both pleasant and honest, it was apparent to me that had we left the decisions regarding energy-using equipment, insulation, windows, etc., in his hands, our home would have ended up as yet another energy hog.
The building industry is very fragmented and there are few barriers to prevent any Tom, Dick, or Harry from entering the business. The many small firms mean that no one company dominates the market, competition between builders is ferocious, and profits are slim. Licensing exists, but it is not a significant barrier. Education, particularly in home building and design, seems to more by experience than through formal training, with the result that innovation and progress in energy efficient design and construction is close to nonexistent. Meanwhile, with building growth rampant, there are an overwhelming number of new products being introduced into the marketplace, but builders are not trained or motivated to sort them out to decide what’s best. Builders are a cautious lot and not known for being innovative. Because there is little corporate size or presence in the industry, corporate research dollars are scant. Builders rely mainly on owners and architects to tell them what to do. Commendably, some builders are cleaning up their own acts from a waste and efficiency standpoint. They have a lot to clean up. Industry studies show that up to 46 percent of time spent on job sites is wasted.
The process of building home or commercial buildings is pretty much the same. The owner or developer sets the program. They decide how many bedrooms or conference rooms are needed, where the building will be located, and what the budget will be. Frequently this owner will not be the entity or person who ultimately uses the building or home. The home-building industry has constructed about 13.5 million single-family homes since the mid-1990s. For the past few years, nearly 20 percent of single-family home buyers have been purchasing newly constructed houses. In recent years, the difficulty of getting things built has made business harder for small, local builders and easier for big companies, with their greater resources, to gain control of the housing market. Over one-quarter of the homes built today in the U.S. are built by home building companies such as Pulte, Centex, or Toll Brothers. They build the homes according to their interpretation of what the market wants and then sell the homes to people looking for a place to live. Frequently, commercial space is built by a developer who then either sells or leases the space to a company or individual who uses it for their enterprise needs. In both cases, the party responsible for the building has little interest in the long-term operating characteristics of the home or building they construct unless either the customer or regulation demands them to take an interest. Since that so far hasn’t been the case, the resulting structure usually isn’t energy efficient. At Toll Brother’s developments, the average customer spends $103,000 on special extras like additional bathrooms and prime locations. According to Toll, buyers choose visible flourishes over pragmatism every time. During the energy crisis of the late 1970s, for instance, one option was a higher grade of insulation but no one bought it. Instead, everyone spent their extra money on moldings.
Even in a good housing market when profits are healthy, most home builders don’t build energy efficient homes. How good are their profits? According to the New York Times, in one of Toll Brothers’ developments the actual cost of building a single 2,700 square-foot home, including infrastructure, land, labor, and materials, was around $300,000. The houses went on the market in the spring of 2003 at $424,000. Most recently the same house now costs $695,000, yielding a profit per house of $395,000.
A small group of players in the building industry, having recognized its negligence, organized a program called Leadership in Energy and Environmental Design, or LEED. LEED is a voluntary program now over a decade old. In that time period, approximately 1,025 buildings have been LEED certified. These are not the only energy efficient buildings that have been built, but of the million or so buildings built in the past ten years, less than one-tenth of 1 percent have been LEED certified. Part of the reason for this is the amount of paperwork required to certify a building for LEED. I know this because I developed software to help document the information required for certification. Another reason is the perception, true or not, that it costs more to build a LEED certified building. And for many architects, who sit in the passenger seat of the building development process next to the owner/driver, the LEED guidelines often lead to a constricted idea of what sustainability and energy efficiency means.
In Europe, where green architecture is more prevalent, architects have expanded the notion of energy efficiency and sustainable design beyond compact fluorescent lightbulbs, solar panels, and sod roofs. It is unfortunate but we Americans have become laggards in architectural design trends, unlike the days of architects like Frank Lloyd Wright. In Europe, the building industry, particularly architects, have come to see that the sustainability and energy efficiency of buildings come from integrating forward thinking design with much broader stakeholder participation that takes into account energy consumption, the organization of the home or workplace, building location, and transportation. This is unlike programs such as LEED, which present a long checklist of items that, to those of us long in the energy industry, have almost become cliché and discourage the innovation, invention, and leadership needed to mobilize the broader community of people looking to build.
The truth is that people like good design and would respond to sustainable energy-efficient design that pleases the eye. That design does not have to be out of the reach of the pocketbooks of all but the very rich. If Martha Stewart is available to the K-Mart shopper and Isaac Mizrahi and Michael Graves to the Target shopper, then good architecture that is energy efficient and sustainable should be available to the home and commercial building customer.
An alternative to LEED is the Energy Star program, a jointly managed program developed by the U.S. EPA and DOE. Unlike LEED, Energy Star programs focus solely on saving money and energy through energy efficient products and practices, with a direct reduction in greenhouse gases. In fact, Energy Star certification is one of the requirements of achieving LEED certification. However, Energy Star is a more robust program with higher brand awareness, much wider acceptance and adoption, and far more bang for the buck. Energy Star certification can be achieved for new construction and existing buildings, factories, and homes. Energy Star also certifies products based on their energy use so you know that when you are buying a new refrigerator, computer, washing machine, etc., you are buying the most energy efficient model available. The Energy Star label simplifies the buying decision for many of us looking to be more energy efficient. Its advantage at this point is its high brand awareness among average consumers. For buildings and homes, Energy Star recognizes the best performing ones in the country based on an energy management program developed by the EPA. Energy Star has partnered with over 12,000 organizations representing almost 15 percent of the commercial building market to improve their energy performance. Similarly, they have signed up over 3,500 home builders who have built over 725,000 Energy Star qualified homes since the program’s inception.
If we continue to build homes and buildings for the next 140 million Americans the way we have for the last twenty or thirty million, we will waste an enormous amount of energy. We can’t afford to do that. But the bad news about how buildings are built is good news for the retrofit business. Unlike cars, buildings are pretty easy to retrofit for meaningful energy savings. The truth is that, while we can make sure new construction is built to high standards of energy efficiency, retrofitting existing building stock is equally, if not more, important. Every year the commercial building stock grows by about 3.5 percent. Unless it is retrofitted with energy efficiency improvements, that means that over 90 percent of the building stock remains energy inefficient.
According to a study by the American Council for an Energy Efficient Environment (ACEEE), the average energy savings to be had in the U.S. by retrofitting existing homes and businesses with energy savings improvements is 33 percent. If we just made what would be considered cost effective improvements, we would save about 21.5 percent of our current energy use. Of course that cost effectiveness analysis presents a whole different kettle of fish. Consider the investment analysis to install energy efficient lightbulbs. When making a cost effectiveness calculation, you could count in not only the reduced energy bills but also saved operating and maintenance costs—high efficiency light bulbs have a longer life, so they don’t need to be changed nearly as frequently as regular light bulbs, which saves the cost of labor, planning, and shipping, and the saved costs of environmental cleanup because fewer light bulbs need to be made, less emissions are generated from the energy used, and fewer light bulbs will need to be disposed of. But those latter costs are often considered to be “societal,” not on the individual making the decision, and thus are usually not considered in the investment decision. If and when a carbon emissions market is put in place in the U.S., these costs may be factored into the investment decision, because theoretically the owner could sell the carbon credits that are created to someone who needs those credits. Or the maker and retailer of the high efficiency light bulb could embed the value of the carbon credit into the light bulb, thus lowering the cost of the bulb to the owner.
Energy retrofitting requires the knowledge, analysis, and experience to know what can be retrofitted and how to do it, and investment to implement it. One vehicle for accomplishing these retrofits is via a method called performance contracting. Under the performance contracting model, money now being paid to the utility for energy that is wasted by running inefficient equipment can be redirected through a special financing vehicle known as a performance contract to fund new equipment that uses less energy and costs less to operate and maintain. The performance contracting business model has been around for the past twenty or more years but has seen limited adoption for a variety of reasons, not the least of which is the lack of interest and understanding on the part of potential users, the poor marketing skills of companies offering the contracts, and poor performance by some contractors. Today most energy retrofits occur via utility demand side management (DSM) programs or when energy services companies, which are privately owned companies organized to offer energy savings contracts, enter a market.
The organization Rebuild America estimates that between the years 2000 and 2030, growth-related and replacement development in America will increase by more than two-thirds the buildings and homes existing in the U.S. in 2000. All told, perhaps $25 trillion in construction will occur, maybe more. A significant portion of that construction will be to replace existing structures, although the majority will be for new ones. This window of time offers an opportunity for us to shape imminent construction into something more energy efficient than would otherwise occur, thus improving the nation’s quality of life.
Most of those buildings are used for education, retailing, offices, and storage. Altogether, those activities use about 60 percent of the total commercial floor space and 51 percent of buildings in the U.S. The construction business that builds these buildings itself generates more than $531 billion in annual revenues and employs more than 1.7 million workers (2002), with an annual payroll of nearly $62 billion. More than 1.8 million residential houses and buildings (2003) and approximately 170,000 commercial buildings are built and about 44,000 commercial buildings are demolished annually. Almost seventy-three million Americans, including 68.5 million children, spend their days in approximately 117,000 public and private primary and secondary schools (2000). While our kids are in school, the rest of us are in some other structure—house, office, store, or hospital, as on average, according to an EPA study on indoor air quality, Americans spend 90 percent or more of their time indoors. Buildings and homes account for 40 percent of total U.S. energy consumption and 70 percent of total U.S. electricity consumption. Consumption is pretty evenly split between homes and commercial buildings. All that energy consumption means that buildings in the United States contribute 38 percent of the nation’s total carbon dioxide emissions.
Worldwide, 30 to 40 percent of all primary energy is used in buildings that in turn produce approximately 30 percent of the greenhouse gas emissions. That won’t change much over the next twenty years without extensive retrofitting of existing building stock, because, due to their long life cycle, buildings that will be operating in the decade of 2030 have in the majority already been built. Energy use in buildings is strongly related to the building’s construction, its purpose, and the climate where it is located. There are five phases of energy use in a building’s life cycle: (1) the manufacturing of the products and components that make up the building; (2) the transportation of these products and components to the construction site; (3) the construction itself; (4) the ongoing operation of the building after it is built; and (5) the final demolition and recycling of the building.
The operating phase is the most energy intensive, with the use of heating, cooling, and lighting. But the other phases aren’t insignificant. For example, buildings are large users of materials that have a high content of embodied energy. Embodied energy is the energy that is consumed when building materials and components are produced. This includes the mining and manufacturing of materials and equipment, especially materials with high embodied energy content such as aluminum, cement and steel, the production of which usually depends on the use of fossil fuels, resulting in CO2 emissions. Cement plants alone account for 5 percent of global emissions of carbon dioxide. Each year, three billion tons, more or less, of raw materials—40 to 50 percent of the total flow in the global economy—are used in the manufacturing of building products and components worldwide.
Housing accounts for the major part of energy consumed in buildings; in developing countries the share can be over 90 percent. In the low-income rural areas of Africa, India, and China the main energy source for more than 70 percent of the population is wood, animal dung, and crop waste; and kerosene and paraffin are still widely used for lighting. Surprisingly, even today, around 2.4 billion people depend on wood, agricultural residues, and dung for cooking and heating; that number is expected to increase to 2.6 billion by 2030. According to a forecast presented by the IEA (2002), in 2030 biomass use will still represent over half of residential energy consumption in developing countries. The use of biomass does not necessarily contribute to climate change as biofuels are renewable unless harvested in an unsustainable way, but it often causes serious indoor pollution.
It is believed that building construction costs typically increase by 3 to 5 percent due to the introduction of energy efficient solutions. The reduction of energy use in one system can affect the energy use in another system. For instance, lighting savings can lead to significant reductions in the energy used for cooling and ventilation systems even in countries like Sweden, where typical modern buildings require cooling even at an outdoor temperature of -10°C. Commercial buildings enjoy a net Heating Ventilation and Air Conditioning (HVAC) benefit from lighting savings because of the considerable internal heat generated by the lighting. A rule of thumb is that about one watt of air cooling energy savings result from every three watts of lighting energy savings.
In the U.S., the perceived increase in the cost of energy efficiency discourages investment in it and building codes often do not require it. Building codes are intended to protect public health, safety, and general welfare as they relate to the construction and occupancy of buildings and structures; but we don’t have a standard national building code or national energy code. Building codes vary by state and municipality, but because the codes are expensive to structure they are frequently set on a model code put out by various industry associations and government funded entities. In the case of energy use in buildings, the Department of Energy has a Building Energy Codes Program that works with federal agencies, national code organizations, the building industry, and state and local officials to promote more stringent building energy codes.
Building energy codes currently are set in a complicated process. National model codes are updated every few years, typically with incremental improvements, by two independent organizations: the International Energy Conservation Code (IECC) from the International Code Council for residential buildings, and American Society of Heating, Refrigerating and Air-Conditioning Engineers better known as ASHRAE Standard 90.1 for commercial buildings. The DOE determines whether the amended model code saves energy. States set the actual building energy codes (except a few states that leave codes to local governments) based on the national models. States are required to adopt a commercial code at least as stringent as the national model within two years of DOE’s determination. For residential codes, states are required to look at updates to the national model and either adopt them or explain why they chose not to.
According to the DOE, twelve states in the U.S. have residential energy building codes that meet or exceed the standards of the latest IECC, which was released in 2006. Some have codes based on earlier versions of the IECC and some have codes that were developed prior to 1990. Just because a state has an energy building code doesn’t mean that the code is applied to all new residences. In many states, the codes are not broadly enforced and may be restricted to state or federally owned buildings or in municipalities that have chosen to adopt the state energy building code.
According to the Alliance to Save Energy, if model building energy codes were strengthened incrementally by 30 percent in 2010 and 50 percent in 2020—and if all states implemented the codes—by 2030 cumulative savings from these code improvements would reach 56 quads of energy, $435 billion (nominal 2003 dollars), and 889 million metric tons of carbon equivalent. The greenhouse gas emissions reductions would be equivalent to taking 32 million cars off the road for twenty years. In the year 2029 alone, the savings would be 6.1 quads of energy (about 5 percent of total U.S. energy use), $47.5 billion in consumer energy bills, and ninety-seven million metric tons of carbon equivalent. This is comparable to removing seventy million cars from the road for one year.
If the benefits are so great, why do we need the regulation in the first place? Why doesn’t the market just adopt these measures? There is no simple answer, although it is true that the building construction industry suffers profoundly from a lack of leadership when it comes to energy efficiency. There are a variety of reasons for this. Buildings and homes are becoming increasingly complex, with many more choices for materials and products. Those products and materials are chosen, assembled, and constructed by many different parties that frequently don’t work together on an ongoing basis. The building team is usually led by the least experienced member of the team—the owner or developer—who often knows the least about building, let alone running loosely knit impromptu organizations that are usually at each other’s throats. That is what building team is like. It’s a group of business parties glued together by contractual relationships that are usually contentious. Litigation in the building business is very common, with lots of finger pointing. (I know because my husband is a builder.) This is hardly the climate in which to create an innovative product. Besides the inexperienced and untrained owners coordinating contentious building teams, the local utility company often pushes energy consuming solutions because they make money by promoting energy use and not efficiency. Construction and permanent lenders do not distinguish between energy efficient and non-energy efficient buildings; and builders and architects are not well trained in the issues of energy efficient construction and design. Some say that architects’ roles in the past century have, for various reasons, devolved from that of master builders to stylists.
A case in point on the state of the construction industry is the Stata Center on the campus of the Massachusetts Institute of Technology. This $300 million building is one of the most celebrated works of architecture in years. MIT paid renowned architect Frank Gehry $15 million to design the building, which was completed in 2004. Three years later, MIT sued Gehry, alleging the building design causes leaks that lead masonry to crack, mold to grow, and drainage to back up. According to Gehry, “These things are complicated and they involved a lot of people, and you never quite know where they went wrong. A building goes together with seven billion pieces of connective tissue.” If one of the leading engineering schools in the world can’t work together with one of the leading architects in the world to create a building that doesn’t leak, what does this say about the possibility for creating energy efficient buildings?
Home building isn’t much different. Much of the residential construction is now done by stock builders who repeat ten or twenty designs ad infinitum, meaning they repeat the same mistakes and same inefficiencies ad infinitum as well. The stock builders have learned that they don’t make money adding options or customizing existing plans, so energy efficient improvements in the homes they build don’t often happen. For individuals choosing to build a home on their own, hiring an architect is often an expensive proposition—usually 10 percent or more of the projected building cost. And when you use an architect you have to make lots of decisions that you don’t have to make when you buy an off-the-shelf house or even off-the-shelf house plans. For the decision and design challenged like me, the prospect is daunting at best and at worst purported to be a proven destroyer of marriages. My husband and I built a house recently and remain married; but we both have experience in the development and building industry, so we were well prepared for the task. We rejected design proposals from well respected architects due in part to the cost and in part from the knowledge that we would go crazy making all the additional decisions that go with designing something. We wound up using stock building plans we bought online for a house we saw featured in a book. Then we used the book to help us make aesthetic decisions, my experience to make decisions regarding energy efficiency and my husband’s construction experience for the rest. Even so, and despite the fact that the home builder we used was both pleasant and honest, it was apparent to me that had we left the decisions regarding energy-using equipment, insulation, windows, etc., in his hands, our home would have ended up as yet another energy hog.
The building industry is very fragmented and there are few barriers to prevent any Tom, Dick, or Harry from entering the business. The many small firms mean that no one company dominates the market, competition between builders is ferocious, and profits are slim. Licensing exists, but it is not a significant barrier. Education, particularly in home building and design, seems to more by experience than through formal training, with the result that innovation and progress in energy efficient design and construction is close to nonexistent. Meanwhile, with building growth rampant, there are an overwhelming number of new products being introduced into the marketplace, but builders are not trained or motivated to sort them out to decide what’s best. Builders are a cautious lot and not known for being innovative. Because there is little corporate size or presence in the industry, corporate research dollars are scant. Builders rely mainly on owners and architects to tell them what to do. Commendably, some builders are cleaning up their own acts from a waste and efficiency standpoint. They have a lot to clean up. Industry studies show that up to 46 percent of time spent on job sites is wasted.
The process of building home or commercial buildings is pretty much the same. The owner or developer sets the program. They decide how many bedrooms or conference rooms are needed, where the building will be located, and what the budget will be. Frequently this owner will not be the entity or person who ultimately uses the building or home. The home-building industry has constructed about 13.5 million single-family homes since the mid-1990s. For the past few years, nearly 20 percent of single-family home buyers have been purchasing newly constructed houses. In recent years, the difficulty of getting things built has made business harder for small, local builders and easier for big companies, with their greater resources, to gain control of the housing market. Over one-quarter of the homes built today in the U.S. are built by home building companies such as Pulte, Centex, or Toll Brothers. They build the homes according to their interpretation of what the market wants and then sell the homes to people looking for a place to live. Frequently, commercial space is built by a developer who then either sells or leases the space to a company or individual who uses it for their enterprise needs. In both cases, the party responsible for the building has little interest in the long-term operating characteristics of the home or building they construct unless either the customer or regulation demands them to take an interest. Since that so far hasn’t been the case, the resulting structure usually isn’t energy efficient. At Toll Brother’s developments, the average customer spends $103,000 on special extras like additional bathrooms and prime locations. According to Toll, buyers choose visible flourishes over pragmatism every time. During the energy crisis of the late 1970s, for instance, one option was a higher grade of insulation but no one bought it. Instead, everyone spent their extra money on moldings.
Even in a good housing market when profits are healthy, most home builders don’t build energy efficient homes. How good are their profits? According to the New York Times, in one of Toll Brothers’ developments the actual cost of building a single 2,700 square-foot home, including infrastructure, land, labor, and materials, was around $300,000. The houses went on the market in the spring of 2003 at $424,000. Most recently the same house now costs $695,000, yielding a profit per house of $395,000.
A small group of players in the building industry, having recognized its negligence, organized a program called Leadership in Energy and Environmental Design, or LEED. LEED is a voluntary program now over a decade old. In that time period, approximately 1,025 buildings have been LEED certified. These are not the only energy efficient buildings that have been built, but of the million or so buildings built in the past ten years, less than one-tenth of 1 percent have been LEED certified. Part of the reason for this is the amount of paperwork required to certify a building for LEED. I know this because I developed software to help document the information required for certification. Another reason is the perception, true or not, that it costs more to build a LEED certified building. And for many architects, who sit in the passenger seat of the building development process next to the owner/driver, the LEED guidelines often lead to a constricted idea of what sustainability and energy efficiency means.
In Europe, where green architecture is more prevalent, architects have expanded the notion of energy efficiency and sustainable design beyond compact fluorescent lightbulbs, solar panels, and sod roofs. It is unfortunate but we Americans have become laggards in architectural design trends, unlike the days of architects like Frank Lloyd Wright. In Europe, the building industry, particularly architects, have come to see that the sustainability and energy efficiency of buildings come from integrating forward thinking design with much broader stakeholder participation that takes into account energy consumption, the organization of the home or workplace, building location, and transportation. This is unlike programs such as LEED, which present a long checklist of items that, to those of us long in the energy industry, have almost become cliché and discourage the innovation, invention, and leadership needed to mobilize the broader community of people looking to build.
The truth is that people like good design and would respond to sustainable energy-efficient design that pleases the eye. That design does not have to be out of the reach of the pocketbooks of all but the very rich. If Martha Stewart is available to the K-Mart shopper and Isaac Mizrahi and Michael Graves to the Target shopper, then good architecture that is energy efficient and sustainable should be available to the home and commercial building customer.
An alternative to LEED is the Energy Star program, a jointly managed program developed by the U.S. EPA and DOE. Unlike LEED, Energy Star programs focus solely on saving money and energy through energy efficient products and practices, with a direct reduction in greenhouse gases. In fact, Energy Star certification is one of the requirements of achieving LEED certification. However, Energy Star is a more robust program with higher brand awareness, much wider acceptance and adoption, and far more bang for the buck. Energy Star certification can be achieved for new construction and existing buildings, factories, and homes. Energy Star also certifies products based on their energy use so you know that when you are buying a new refrigerator, computer, washing machine, etc., you are buying the most energy efficient model available. The Energy Star label simplifies the buying decision for many of us looking to be more energy efficient. Its advantage at this point is its high brand awareness among average consumers. For buildings and homes, Energy Star recognizes the best performing ones in the country based on an energy management program developed by the EPA. Energy Star has partnered with over 12,000 organizations representing almost 15 percent of the commercial building market to improve their energy performance. Similarly, they have signed up over 3,500 home builders who have built over 725,000 Energy Star qualified homes since the program’s inception.
If we continue to build homes and buildings for the next 140 million Americans the way we have for the last twenty or thirty million, we will waste an enormous amount of energy. We can’t afford to do that. But the bad news about how buildings are built is good news for the retrofit business. Unlike cars, buildings are pretty easy to retrofit for meaningful energy savings. The truth is that, while we can make sure new construction is built to high standards of energy efficiency, retrofitting existing building stock is equally, if not more, important. Every year the commercial building stock grows by about 3.5 percent. Unless it is retrofitted with energy efficiency improvements, that means that over 90 percent of the building stock remains energy inefficient.
According to a study by the American Council for an Energy Efficient Environment (ACEEE), the average energy savings to be had in the U.S. by retrofitting existing homes and businesses with energy savings improvements is 33 percent. If we just made what would be considered cost effective improvements, we would save about 21.5 percent of our current energy use. Of course that cost effectiveness analysis presents a whole different kettle of fish. Consider the investment analysis to install energy efficient lightbulbs. When making a cost effectiveness calculation, you could count in not only the reduced energy bills but also saved operating and maintenance costs—high efficiency light bulbs have a longer life, so they don’t need to be changed nearly as frequently as regular light bulbs, which saves the cost of labor, planning, and shipping, and the saved costs of environmental cleanup because fewer light bulbs need to be made, less emissions are generated from the energy used, and fewer light bulbs will need to be disposed of. But those latter costs are often considered to be “societal,” not on the individual making the decision, and thus are usually not considered in the investment decision. If and when a carbon emissions market is put in place in the U.S., these costs may be factored into the investment decision, because theoretically the owner could sell the carbon credits that are created to someone who needs those credits. Or the maker and retailer of the high efficiency light bulb could embed the value of the carbon credit into the light bulb, thus lowering the cost of the bulb to the owner.
Energy retrofitting requires the knowledge, analysis, and experience to know what can be retrofitted and how to do it, and investment to implement it. One vehicle for accomplishing these retrofits is via a method called performance contracting. Under the performance contracting model, money now being paid to the utility for energy that is wasted by running inefficient equipment can be redirected through a special financing vehicle known as a performance contract to fund new equipment that uses less energy and costs less to operate and maintain. The performance contracting business model has been around for the past twenty or more years but has seen limited adoption for a variety of reasons, not the least of which is the lack of interest and understanding on the part of potential users, the poor marketing skills of companies offering the contracts, and poor performance by some contractors. Today most energy retrofits occur via utility demand side management (DSM) programs or when energy services companies, which are privately owned companies organized to offer energy savings contracts, enter a market.
The organization Rebuild America estimates that between the years 2000 and 2030, growth-related and replacement development in America will increase by more than two-thirds the buildings and homes existing in the U.S. in 2000. All told, perhaps $25 trillion in construction will occur, maybe more. A significant portion of that construction will be to replace existing structures, although the majority will be for new ones. This window of time offers an opportunity for us to shape imminent construction into something more energy efficient than would otherwise occur, thus improving the nation’s quality of life.
References:
2002 Economic Census. Census
Annual Housing Starts (1978-2003). Census
http://www.census.gov/const/www/newresconstindex.html. C-Series Reports. Manufacturing and Construction Division, Census
The Total Exposure Assessment Methodology (
“Emissions of Greenhouse Gases in the
http://www.energycodes.gov/implement/state_codes/state_status_full.php (accessed
Proceedings of the 2004 ACEEE Summer Study on Energy Efficiency in Buildings, the Technical, Economic and Achievable Potential for Energy-Efficiency in the U.S.—A Meta-Analysis of Recent Studies, Steven Nadel, Anna Shipley, and R. Neal Elliott, American Council for an Energy-Efficient Economy.
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