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September 1, 2009 @ 10:56 am
Good News and Bad News on Green Building Results

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Not surprisingly, there is some inconsistency in the outcomes derived from LEED and other green certified buildings. It is not necessarily anyone’s fault, but models don’t always match reality and some certification bodies are better than others when it comes to monitoring the ongoing energy efficiencies and other features of green buildings. My friend and reader, Billy, referred me to a NY Times article over the weekend that downplayed the successes of all green buildings by featuring one bad apple – a Youngstown, Ohio government building. This building has some bad statistics in terms of energy savings, but it was only originally certified at the lowest LEED level and the author finally admits at the end of the article that LEED requirements have evolved to the point where it wouldn’t qualify if constructed today. For its part, the U.S. Green Building Council has plans to incorporate more stringent recertification processes in the future.

The Times article also uses some crafty rhetoric to make a negative inference by noting half of LEED buildings didn’t meet EPA Energy Star label requirements. These are two different systems and the overwhelming majority (about 68%) had Energy Star ratings above the national median and over 30% of LEED buildings were in the top two deciles. To read more details and draw your own conclusions, the study is here. For more good news, one can look at cost savings/net present value of green buildings vs. conventional buildings.

The additional upfront costs of LEED certified buildings have been analyzed by a number of parties who found the premium to range from 2-5% according to Reed Construction Data. They note that much of the cost is architectural and engineering design time and commissioning (tested system conformance with design). Looking at the tangible cost savings from energy and resource efficiency, increased earnings from tenant retention/premium rent and the intangible productivity and health benefits, one can calculate the net present value (NPV) obtained by constructing and owning a green building. Greg Kats of Capital E analyzed 20 year NPVs in this 2003 study to come up with more than $50/ft2 of net benefits (lower numbers in range are for Certified/Silver-rated buildings, higher numbers are for Gold/Platinum-rated buildings):

Type of Benefit 20-year Net Present Value / sq. feet
Energy Savings $5.80
Emissions Savings $1.20
Water Savings $0.50
Operations and Maintenance Savings $8.50
Productivity and Health Benefits $36.90 – $55.30
Subtotal $52.90 – $71.30
Initial Investment in Green Building Practices $3.00 – $5.00
Total 20-year Net Benefit $50 – $65

In a rigorous study of a Rutgers building expected to be LEED Silver-rated, the green features were calculated to have a positive net present value in a conservative base case scenario. Since the building is institutional, there is no premium rent component to the analysis (i.e. the results would be better given a for-profit building that charge premium rent for green features).

The corresponding bad news is that green construction costs are overestimated by 300% and greenhouse gas emissions (GHGs) from buildings are underestimated by 50% according to a 2007 survey. 1,400 respondents guessed that green buildings are 17% more expensive instead of the true 5% premium. Those surveyed also thought buildings produced only 19% of GHGs rather than the actual 40%. With more knowledgeable market participants and improved certification oversight, the good news has every opportunity to outweigh the bad news.

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One Response to “Good News and Bad News on Green Building Results”

  1. GreenBldgBlog - Home Says:

    […] improve LEED certification. I addressed this issue in last week’s “Good News, Bad News” post. In that post I mentioned the efforts and need to recertify buildings over time as well as the […]


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