Introduction

U.S. energy consumption in buildings outpaces usage, both in transportation and by industry. Moreover, since much of this use is coal-derived electrical energy, buildings play a huge role in worldwide carbon dioxide emissions. Reducing energy consumption by buildings, or replacing it with non-emitting, renewably generated energy, has therefore been identified as a critical step in managing climate change. In response, industry groups have proposed several methodologies for evaluating how "green" new building designs are, but no single approach has yet emerged.

Reducing energy consumption by buildings is a critical step in managing climate change.

One goal of green building design is the ability to construct "zero net energy buildings." The approach entails pushing the tradeoffs between energy efficiency and renewable energy generation to the level of individual buildings, where it can be evaluated during design, construction, and operation. Since some energy use can not be eliminated, these designs use local generation, often by photovoltaics, to bring the net energy usage to zero.

To help build consensus on how to evaluate low- and zero-energy construction, the Academy's Green Buildings Discussion Group this year presents a four-part series on zero net energy building.

Defining the terms

The first meeting in the series, held at the Academy on October 15, 2008, addressed the critical issue of how to evaluate zero net energy.

Clark Brockman reviewed the significant contributions to greenhouse gas emissions arising from energy use in buildings-estimated by the government to be almost half of U.S. emissions. He then outlined the Architecture 2030 Challenge which challenges builders to reduce greenhouse gas emissions with steadily escalating energy codes culminating in net zero energy buildings by the year 2030.

Paul Torcellini of the U.S. Department of Energy's National Renewable Energy Laboratory in Golden, Colorado, described four different ways to define a zero-net energy building. The definitions differ on whether various external energy sources should be considered in evaluating a building's impact, and if so, how their impact is weighted. Torcellini emphasized that significant energy reductions can be attained while simultaneously reducing the building cost over traditional designs.

Paul Schwer of PAE Consulting Engineers in Portland, Oregon, gave an engineer's perspective in designing low-impact buildings. Setting aggressive goals is critical to achieving significant savings, Schwer emphasized. Designing heating and cooling systems with an eye to local climate, and reducing lighting and other electrical use are the most powerful tools for improving efficiency, he noted. On-site renewable generation to offset the remaining usage can include bio-derived fuels in addition to photovoltaics. Both Schwer and Torcellini acknowledged that for some types of construction or use, including high-rises, the zero-net-energy goal is impractical at the building level, and must instead be evaluated at a regional level.

Case studies

In the second meeting, on February 8, 2009, three speakers described case studies of commercial-scale buildings that approach zero-net-energy consumption. In addition to listing mechanical systems that helped them meet their goals, the speakers emphasized the importance of accounting for and monitoring the way that buildings are actually used to allow continuing energy savings.

Roger Frechette of Skidmore, Owings, and Merrill described two Asian projects that feature super-tall towers whose entire form helps them to harvest wind energy. The Pearl River Tower in China is under construction now, and should be occupied next year.

Luke McKneally of Solar Design Associates presented three smaller scale projects that over the year export energy even in very cold climates. In particular, the Lewis Environmental Sciences Center at Oberlin College, which achieves net-zero status by the addition of photovoltaics over its parking structure, is a flagship for low-impact design principles.

Edward Brzezowski of Noveda Technologies operates a commercial building in Branchburg, New Jersey, that has already met the governor's energy challenge for 2050. He demonstrated sophisticated monitoring tools that he regards as critical to sustaining low energy use.

WBCSD report

The third meeting, on April 22, 2009, highlighted a report on building energy use by the World Business Council on Sustainable Development, a coalition of companies that aim to move the global economy towards a greener future.

William Sisson of United Technologies summarized the report, which was publicly released the following week. The report accepts the premise that a nearly 80% reduction in carbon emission is needed by 2050, and analyzes what incentives can bring the building contribution in line with this goal. Although much of the technology is available and even economically attractive, Sisson said, the conversion won't happen fast enough even without government interventions that go beyond higher carbon prices.

Guy Battle of dcarbon8 and Battle-McCarthy gave a European perspective on sustainable buildings that showed how badly the U.S. has been lagging in this regulatory process. He also emphasized the importance of public perceptions of companies for reinforcing responsible behavior, and described some innovative building designs that take advantage of local climate conditions.

Financial Incentives and Valuation

The fourth meeting, on June 4, 2009, addressed the critical issue of how to financially evaluate sustainable buildings.

Scott Muldavin of the Green Building Finance Consortium discussed the issue from the perspective of real estate investors. Although sustainability decisions are frequently made solely on the basis of cost, a proper analysis must include all contributions to the value of a property, including the attraction of sustainable properties for tenants, and thus for investors, said Muldavin. These expected revenue increases can make otherwise marginal investments in sustainability much more attractive. Muldavin noted that traditional valuation frameworks include these features, but for green investments they need to do better at including risks.

Ron Dembo of Zerofootprint, Inc. said that government can play a key role in encouraging sustainable building investments, but that it will have more leverage as an insurer of cash flows—guaranteeing that other investors benefit from future savings—than as a direct investor. He also suggested that although large corporations may respond directly to carbon pricing, individuals and small business will respond better to credits, which could be financed by taxing the big users. Dembo emphasized the importance of reducing energy usage of existing buildings by giving them an attractive, efficient envelope. To jumpstart this retrofitting on the vast scale needed to meaningfully reduce greenhouse gases, Zerofootprint is sponsoring a $1 million "re-skinning" competition.

Summary

Significant reductions of global emissions of greenhouse gases will demand major reductions in the carbon dioxide emissions from constructing and operating buildings. It is clear that both new and existing buildings can do much better, and that many emission-reducing investments will pay for themselves within a few years through energy-cost savings. Since the payoff often goes to someone else, however, builders and operators need incentives before they will make the investments. In addition, the five-fold reductions that appear necessary to meaningfully affect global warming will require further government incentives beyond carbon-pricing mechanisms.

In spite of the huge scale of the challenges, the speakers and audiences for the Academy's Zero Net Energy Buildings series seem energized to meet them. As new methods of conservation and local generation are developed, as systems to monitor and optimize them become widespread, and as sustainable buildings become a personal and reputational priorities, the goal of major reduction in building impact seems poised to slowly become a reality.

Case Studies

Speakers:
Roger E. Frechette, III, Skidmore, Owings & Merrill
Luke McKneally, Solar Design Associates
Edward H. Brzezowski, Noveda Technologies

Highlights

• Zero net energy buildings have been a reality at the residential scale for decades.
• Recent projects have demonstrated zero or near-zero energy in medium- and large-scale institutional buildings.
• Sustainable super-tall towers capture the human imagination, and are also well suited for harvesting wind energy.
• Successful projects combine a variety of techniques for conserving and generating renewable energy, rather than depending on a single solution.
• Continual monitoring of building performance in actual use is critical to maintaining low or zero net energy.

Introduction

Designers of complex institutional buildings must make myriad decisions and tradeoffs, often guided as much by experience as by technical analysis. If low or zero net energy structures are to become widespread, forward-thinking designers need to become familiar with new ways of doing things, as they already have for smaller buildings. "We've had net zero residences since the 1970s," noted moderator Chris Garvin of the architectural firm Cook & Fox. Only recently, however, have larger buildings begun to approach a similar degree of efficiency.

A review of several case studies of institutional buildings highlights the fact that no single technology will achieve net zero energy. Instead, each of the successful projects combines a variety of approaches for reducing and re-using energy, in addition to renewably generating it on site.

In addition, it is important to understand how a building is actually used, monitoring energy consumption so that the building systems can be adapted to that use and so that problems with the systems can be quickly corrected. This is especially important to ensure that "zero and near-zero" buildings operate as designed. There are many roadblocks and detours along the path from design to the post-occupancy periods that can prevent success. Experience has shown that though a building is designed green, it may not operate that way in the real world.

Reaching for the sky

Skidmore, Owings, and Merrill has a long record of innovation in office towers, including the Academy's home at 7 World Trade Center, which achieved LEED gold status. Roger Frechette and his multi-disciplinary Performative Design Group strive for new approaches to sustainable design. "Form for the sake of form is not good enough; we need to think about buildings [whose] very form contributes to the overall performance," he said. "We think that tall buildings are important if for no other reason that they are iconic—they inspire us. If we can make these super-tall buildings green, make them zero energy, it should provide inspiration to other projects."

Frechette emphasized four steps to high-performance design: First, reduction of the energy the building consumes, for example through efficient lighting, fans, and so forth. Second, reclamation. "Once you put energy into this box, you don't want to let it out. You want to capture it and use it again," he said. Third, absorption of energy from the environment, such as wind and solar radiation. "These are streams of energy that can be put to work within the building," Frechette noted. Fourth, to achieve a net zero energy at the building level, on-site energy generation to offset the remaining consumption. "We have the ability to generate power in buildings much more efficiently that we can within our cities' electrical grids," Frechette asserted.

Frechette used two major projects to illustrate these principles. The first, the DMC tower in Seoul, South Korea, features a hollow interior reminiscent of the core of a sea sponge. "We take the forces of nature and combine them to create one large force," he observed. The combination of wind suction over the top of the building, convection driven by solar heating, and the stack effect that usually plagues designers will create a massive updraft, he said. "We can generate wind speeds of 30 miles an hour within this core." Using dozens of vertical-access wind turbines, "we can generate at least two thirds of the electricity required for this project."

The Pearl River Tower is designed to funnel wind through channels in the building. Modeling of solar radiation on the skin of the building allows them to place photovoltaics in the right place.

The second tower that Frechette described is the 71-story Pearl River Tower under construction in Guangzhou, China. The entire tower is designed to funnel wind through channels in the building. According to simulations and wind-tunnel tests, he noted, "just by the shape of the building, we can increase the wind speed two- to threefold." Since the power increases as the cube of the wind speed, this translates into an enormous potential for electrical generation. In addition, some 30,000 square feet of photovoltaics will be strategically placed on the skin of the building.

But Frechette stressed that "there is no one mechanical system that's going to get you to zero energy. It's going to take a large number of strategies working together." The Pearl River Tower, for example, also includes water cooling through the ceilings, and uses the skin of the building as an air return so that occupants near the windows stay comfortable. However, regulations against net metering for commercial buildings prevented the cost-effective use of microturbines that would have provided additional, efficient generation. "Once they were removed from the design, the building was no longer a net zero energy building," Frechette noted, although it will still be a very efficient one.

Down to earth

In three examples of institutional architecture of a more modest scale, Luke McKneally of Solar Design Associates showed designs that approach zero net energy even in very cold climates. "These northern-climate projects," he said, prove that "net export of energy is possible despite a difficult and not very solar-friendly climate." These buildings generate electricity using photovoltaics, rather than the wind power that Frechette illustrated for towers.

One challenging project was the Tin Mountain Conservation Center in northern New Hampshire, which experiences some 8700 degree days a year in heating demand. By employing two-solar electric arrays and a solar-thermal array, this building produced an excess of almost 500 kW-hours per year, consuming four cords of locally-harvested wood for supplemental heating. "This is a fairly net zero electric building and in fact a net positive electric building," McKneally said. To achieve this, the design team carefully estimated future energy loads and calculated the ideal solar contribution given the available building scale and overall orientation.

At the Tin Mountain Conservation Center, a combination of photovoltaics, solar thermal, and a wood boiler creates a zero net electric building.

McKneally also described the cadet housing building at the Massachusetts Maritime Academy. The generation capability includes both a solar array and a neighboring wind turbine. "This makes a good point that renewable energy systems work well together," McKneally noted. "As a whole, this building is considered a zero net energy building." He cautioned however, that including the very large wind turbine in the calculation for this building is not entirely accurate, since its energy is shared throughout the campus.

The Lewis Environmental Center at Oberlin College, built in 2001, has been a flagship of low-impact design. "This is the first net zero energy institutional building," McKneally said. In addition to zero fossil fuel consumption, the center emphasizes other aspects of sustainability as well. However, due to the larger than estimated energy demands, and smaller than optimal solar area, the original rooftop photovoltaic system was inadequate to meet the electricity demand, so an additional solar electric system was added over the local parking lot. McKneally stressed that the success of this zero net energy building lies in the combination of efficiency and renewable energy. Even without the photovoltaic systems, the building uses less than half of the electricity of comparable buildings.

To achieve this performance, the Oberlin occupants "carefully monitor their building," McKneally said. "[More than half of] the key to zero net energy comes from the [efficient] use of the building," including myriad individual decisions. "Having a performance monitoring system that is telling us the effect of our actions is very helpful."

Keeping tabs

As both a designer and operator of the 31 Tannery Project, Edward Brzezowski keeps a keen eye on energy usage and generation in that building. This 42,000-square-foot mixed office building, occupied since 2006, is a showcase for the sustainable designs of Fereira Construction and for the monitoring technologies of its Noveda Technologies spinoff.

Brzezowski describes his design strategy with an equation: energy efficiency + renewable energy + monitoring and visualization = high performance and sustainable buildings. "Any one of those things by itself won't enable you to get where you need," he notes. Monitoring must be on ongoing process, because "the building's alive," he stressed. "Net electric or net utility metering doesn't show building energy consumption, solar energy production, the impact of energy conservation and efficiency, or if the solar array is performing as per the design goal. For net zero, you've got to watch this all 8760 hours of the year."

The 31 Tannery building is a learning tool and living lab that provides a vivid illustration of these monitoring systems, including real-time status reports on the energy generation and the heating, ventilation, and air-conditioning systems. In addition to providing rapid feedback on real-world use, the system lets the operators quickly identify and fix systems that are not working properly. As one example, Brzezowski noted that excessive voltage excursions on the utility grid can shut down the devices that convert dc power from the solar photovoltaics into ac line power. "It might be a bright sunny day, and all of a sudden you're not running your building on solar and you're not putting your surplus on the grid, instead you are drawing power from the utility company" he noted. "You want to fix that real quick." Brzezowski showed examples of the dashboard-style user interfaces of the monitoring tools, which combine a simple overview of system performance with the ability to drill down into critical details.

A large number of systems must be monitored to ensure that the building is working as designed.

The 31 Tannery building combines condensing boiler plant and radiant heating with solar photovoltaic and solar thermal hot water. The project has won numerous awards, including EPA Energy Star 100 rating for two years and counting. "We're the first commercial net zero electric building that I've been able to track down in the country," Brzezowski observes. Even in 2007, the building's 85% reduction in carbon footprint exceeded the 80% goal set by New Jersey Governor Jon Corzine for the year 2050. "We are actively looking for partners and funding to finish the 31 Tannery Project using solar thermal or direct use, deep bore, geothermal system to eliminate the remaining carbon footprint of the building," said Brzezowski.

A comparable commercial building, Brzezowski said, would typically have energy costs of about $2.30 per square foot. In comparison, the electric and natural gas usage at 31 Tannery was just over $0.50 per square foot. Factoring in state-sponsored Solar Renewable Energy Credits, the building actually covered all of these utility costs and then made $1.64 per square foot per year on energy in 2008, and recent numbers are even higher as the credits increase, he noted. "SRECs are a phenomenal way to help justify systems."

In an added benefit, the building generates more electric energy than it uses on an annual basis, and has about a one month surplus. Brzezowski and his team are now using this surplus, integrated with additional ongoing energy efficiency efforts, to operate plug-in hybrid vehicles. They have a modified Toyota Prius that they are now operating at $0.03/mile and have reduced its carbon footprint an additional 27%.

Financial Incentives and Valuation of Sustainable Buildings

Speakers:
Scott Muldavin, Green Building Finance Consortium
Ron Dembo, Zerofootprint

Highlights

• The strategic decision to invest in sustainable buildings has already been made, but real estate professionals need tools to make tactical and facility-specific decisions.
• Rather than focusing exclusively on costs, real estate decisions should be based on value, which reflects increased rents and sale prices due to the greater desirability and lower risks of sustainable properties.
• For many decisions, a simple cost-based payback time is a good guide.
• Governments can most effectively encourage sustainable investment as an insurer, guaranteeing investors that they will benefit from long-term cost savings.
• Carbon pricing is effective for large players, but small players respond better to tax credits for verified energy reduction.
• The Building Re-Skinning Competition aims to drive state-of-the-art retrofits of building envelopes that will make buildings smarter, more efficient, and more attractive.

The nuts and bolts of real estate

Seriously reducing the huge contribution of buildings to greenhouse-gas emissions will require widespread adoption of more sustainable practices. The relevant decisions must be made by an army of real estate specialists, who need to deliver compelling financial arguments, not idealized visions. When Scott Muldavin, who now heads the Green Building Finance Corporation, began to explore the financial analysis of sustainable properties three years ago, the few tools available all came from "green" organizations, and the corporations were still wondering whether to commit to sustainability, he said.

"Today, that question has been asked and answered," he said, and sustainability is now integral to corporate strategy and reputation. The challenge now is to translate that strategic decision into tactical decisions about how to manage the transition in an organization's portfolio of properties, and how to assess the value of individual properties with a particular combination of sustainable attributes.

"To get where we need to go, we need to factor in value, not just cost."

"A big issue today is that most people make the decisions based on a simple cost analysis" that compares possible expenditures with later energy-cost savings, and the resulting payback time, Muldavin observed. "If we're going to get where we need to go in society, we really need to factor in value." He and his organization provide tools that help real-estate managers translate visionary, strategic goals into practical, property-specific actions.

Of the many different types of value discussed in real estate, Muldavin focused on market value, which he described as "the most probable price for which the property should sell in a competitive marketplace." Sustainability investments also create public value and enterprise value, he noted, but these are "only relevant to the market value if an investor can figure out how to monetize them, through higher rents, regulatory benefits, and so forth."

Among methods for estimating value, "the income approach is the most important," Muldavin said. The approach computes the total net present value of a net operating income over a chosen holding period, factoring in risk and the price at which the property is then sold.

In addition to directly saving energy costs, sustainability can make a property more attractive, and thus increase operating income. "Everybody wants to know how sustainability will affect rents," Muldavin noted. "But in reality, what you really need to understand is how [it's] going to affect space-user demand"—the desirability of the space to occupants. That in turn "will affect a variety of things in the financial model: rents, occupancy, absorption, tenant retention," he said. "Rents are often the last thing to really be affected."

Nonetheless, these premium rents can still easily be of greater magnitude than the direct energy savings. The increased desirability of the property also affects how much investors are likely to pay at the end of the holding period for a given net operating income. The ratio of income to price is defined as the capitalization rate, or cap rate, which is taken as a parameter in the valuation model. The computed value is sensitive to even modest changes in the cap rate, which might reflect the greater desirability and reduced risks of sustainable properties.

"You have to understand how regulators and investors and space users for your specific building respond to the performance."

"To get to the pot of gold," Muldavin said, "you have to understand how regulators, investors, and space users for your specific building respond to the performance" created by sustainability investments. Doing this properly requires evaluation of how noncost "green issues," including enhanced reputation, improved productivity, and health benefits, affect occupant demand, he said. "If space users demand the properties more, then investors will demand it more."

Increasingly, sustainability has become a strategic goal for corporations, Muldavin emphasized, meaning that they do not eliminate such activities when times get tough, but are "trying to do the lowest-cost sustainability activities within budget constraints." These actions influence recruiting as well, because most new graduates want to work for a responsible company. Potential tenants, including the government as well as many major corporations, have made sustainability a high priority, so demand for green properties is an important factor in real-estate valuation. "How many tenants," Muldavin asked, "have to think sustainability is important before it becomes important to you as an investor?"

Proper assessment of sustainable real estate should include methodical analysis of many factors that contribute to its value.

Many specific decisions, such as whether to improve the heating control systems, are justified because the reduced costs rapidly compensate the investment, Muldavin noted. "Simple payback actually works for lots of decisions." But when the payback time is longer, "you're going to have to go to the next level." Although some 40% of carbon emissions can be eliminated with a payback period under five years, as discussed by Bill Sisson, further reductions to reach an 80% target require more patience at the cost level, Muldavin said. "We're never going to get there unless we think about value."

In his presentation, Muldavin could only give an overview of the methodical process he advises for evaluating property decisions. This process needs to be property specific, he stressed, and to include sensitivity analysis, consideration of multiple scenarios, and risk-mitigation analysis. To consider risk comprehensively and to articulate it clearly and consistently, Muldavin advocates a procedure he calls RAP, for Risk Analysis and Presentation. "The real estate industry fundamentally does a bad job about incorporating and thinking about risk in their decisions. We've got to get better about that, because sustainable property values are driven by risk."

For many investors, these risks can provide a powerful drive toward greener buildings, Muldavin noted. "They don't want to buy a property for which the costs to cure a potential obsolescence due to energy efficiency or sustainability would be too high."

Financing the retrofit

To seriously reduce greenhouse-gas emissions, many observers, such as Bill Sisson, see a need for governments to actively intervene to stimulate actions that may not pay off for a decade or more. "But governments have it wrong," said Ron Dembo of Zerofootprint, especially when it comes to the critical challenge of updating existing buildings. "When you green a building, you need a lot of capital now, and then you get green benefits later," he noted. "The problem is that those cash flows don't have good credit."

"Government should be an insurer rather than a funder of green investments."

Instead of investing directly, Dembo said, governments could get more leverage by insuring those future cash flows. "That's where we should be spending money." With such guarantees, financial firms such as "energy service companies will then step in" and create financial products that raise much more capital than direct investment would. "It's very simple," Dembo said. "Instead of becoming a funder, become an insurer."

Dembo acknowledged that achieving a 70%–80% greenhouse-gas reduction will also require government incentives and subsidies. Nonetheless, he stressed that retrofitting existing buildings will yield other benefits, such as reduced health costs of some $10 billion by 2030 in Toronto, for example. "I wish we knew how to monetize this," he said. "You could fund the retrofitting of New York City in savings in health costs alone."

Another way that government incentives miss the mark, Dembo asserted, is that they "treat the world of carbon as if it was homogeneous." Instead, he distinguished two classes of energy users. Major corporations "really understand cap and trade, and just want certainty so they can run their business." In contrast, individuals and small businesses don't understand or respond to carbon pricing incentives.

Rather than being applied across the board, a carbon tax could be levied on large users who respond to it and used to fund credits for small users who respond better to them.

"What if we had an alternative, where we partitioned the world into these two?" Dembo asked. He proposed a tiered system in which carbon taxes levied on the large corporations subsidize carbon credits for small users, analogous to frequent-flyer miles. "You now have a single currency for green," Dembo said. Moreover, "verifying is easy," he claimed, because "80% of your footprint, I can guarantee, sits in databases" like those of utilities.

These funding innovations could help in reducing the huge greenhouse gas emissions from existing buildings. "The big problem," Dembo said, "is there's no thermal isolation" in many older structures. "Those buildings simply leak heat or cool out into the atmosphere. There's a limit to how much you can do with changing light bulbs and energy systems in buildings like that."

Dembo advocates "re-skinning" of buildings to provide them with an updated envelope. This makeover offers a relatively cheap route to running new pipes, ducts, and so forth into existing structures, "sort of a cheap retrofit," he observed, to take a holistic view of a building's energy footprint. At the same time, "we can take those ugly buildings," he said, and "make them more efficient and more beautiful."

The re-skinning of a single building can save tens of thousands of tons of greenhouse-gas emission every year. Across a city, the impact is even greater, and will also reduce pollution and provide jobs. "If we re-skinned America, we would take out more greenhouse gas than all of transportation combined,” Dembo said. He cautioned, however, that traditional methods require people to temporarily evacuate a building under retrofit. "That wouldn't possibly work for an entire city," he noted. "You're going to have to do it while people are living there."

To encourage new ideas in the re-skinning field that will create jobs and leverage expertise in design and construction, Zerofootprint recently established a competition called the Z-prize. This $1 million prize would be the "world's largest prize in architecture, by far," Dembo said, and the goal is "to improve the state of the art and jumpstart a new, green economy around this [retrofitting process]."

Submissions for the re-skinning prize are already coming in. Five finalists selected in the fall of 2009 will go on a traveling exhibition in 2010. "The key is that they are funded," Dembo noted. They must be completed by March 2011, after which a two-year performance-monitoring period will determine the winner. A parallel "virtual re-skinning" prize encourages participation by university groups.

The criteria for the prize include cost-effectiveness and reproducibility to ensure that the techniques can be used elsewhere. Aesthetic and social benefits are considered as well as energy consumption. In addition, the re-skinning projects will be judged on their "smarts." As noted by other speakers in this series, most buildings today provide less feedback on their energy performance than a typical automobile. "Why don't we make our buildings as smart as our cars?" Dembo asked. "That would be a revolution." He and his colleagues are hoping to help make it a reality.