Business Case for Energy Efficient Building Retrofit and Renovation Table of Contents 4 Foreword: Making the Business Case
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SmartMarket Report Business C a s e f o r EnergyEnergy EfficientEfficient Building Retrofit and Renovation Produced with support from Funding provided by U.S. Department of Energy through the Pacific Northwest National Laboratory ■ Design and Construction Intelligence SmartMarket Report McGraw-Hill Construction Business Case for Energy Effi cient Building President Retrofi t and Renovation Keith Fox SmartMarket Report Vice President, Product Development Executive Editor Kathryn E. Cassino Harvey M. Bernstein, F.ASCE, LEED AP About McGraw-Hill Construction Editorial Director McGraw-Hill Construction McGraw-Hill Construction (MHC), Research & Analytics/Alliances Michele A. Russo, LEED AP part of The McGraw-Hill Compa- Vice President, Industry Editors nies, connects people, projects and Enver Fitch, LEED Green Associate Insights & Alliances products across the design and con- Harvey M. Bernstein, F. ASCE, LEED AP Donna Laquidara-Carr, LEED AP struction industry, serving owners, Senior Director, Research & Analytics Senior Group Art Director architects, engineers, general con- Burleigh Morton Francesca Messina tractors, subcontractors, building Director, Partnerships & Alliances Contributing Art Director product manufacturers, suppliers, John Gudgel Donald Partyka dealers, distributors, and adjacent Director, Green Content & Production Manager markets. Research Communications Alison Lorenz A reliable and trusted source Michele A. Russo, LEED AP for more than a century, MHC has Contributing Editor David Sokol remained North America’s leading provider of construction project and Research Project Manager product information, plans and spec- Dana Gilmore, MRA, PRC ifi cations, industry news, market research, and industry trends and For further information on this SmartMarket Report or for any forecasts. In recent years, MHC has in the series, please contact emerged as an industry leader in the critical areas of sustainability and McGraw-Hill Construction Research & Analytics interoperability as well. 34 Crosby Drive, Suite 201 In print, online, and through Bedford, MA 01730 events, MHC offers a variety of tools, 1-800-591-4462 applications, and resources that embed in the workfl ow of our cus- [email protected] tomers, providing them with the information and intelligence they need to be more productive, successful, and competitive. Acknowledgements: Backed by the power of Dodge, The authors wish to thank the many individuals who provided insights on Sweets, Architectural Record, their effi ciency programs and projects for the case studies. Engineering News-Record (ENR), GreenSource and SNAP, In particular, we would like to thank Roland Risser and Joseph Hagerman at McGraw-Hill Construction serves the U.S. Department of Energy’s Building Technologies Program for provid- more than one million customers ing strategic direction for this project. We also appreciate the assistance of within global construction Andrew Nicholls at Pacifi c Northwest National Laboratory for his project community. To learn more, visit oversight. us at www.construction.com. Finally, thank you to Mike Italiano, Capital Markets Partnership for sharing his invaluable assistance and expertise regarding sustainability in the world of fi nancing and to Ken Black, E Source for his assistance. SmartMarket Report Introduction he opportunity for improving insights that build on previous research by energy performance in the United McGraw-Hill Construction and others on how States has never been greater. The to create high-performing buildings. Some ation Better Buildings Initiative proposed critical results include: V Tby the Obama administration is the latest ■■The commitment of corporate America to eno national effort drawing attention to our build- R sustainability continues to grow, despite ing energy consumption and ways we can the adverse economy: 42% of the firms and help reduce it—and win at the same time. it surveyed view sustainability as a business F The economic downturn shifted the Harvey M. Bernstein opportunity or as transformational, up attention of firms and public owners with F.ASCE, LEED AP etro from 37% just a little over a year ago. large building portfolios toward their exist- Vice President Industry Insights and G R ing buildings. With government and utility ■■92% of companies report being influenced Alliances incentives, the time was ripe for focusing by operational savings in their decision McGraw-Hill Construction uildin on retrofit and renovation investments that to pursue energy efficiency projects, but B could save energy and money. market differentiation (73%) and employee However, despite the fact that retrofit satisfaction and productivity (71%) are icient activity remained active during the down also important. economy, only a tiny portion of the U.S. build- ■■Renewable energy is seen as a potential GY EFF ing stock has been affected. The opportunity business opportunity for some firms. has never been greater. We merely need to ner E help create and seize those opportunities. It is obvious that the business case matters or In order to do so, it is important to under- F to firms, and energy efficiency and utility stand what drives American companies and Michele A. Russo ase savings are the foundation of that case, but building owners to adopt efficiency improve- C firms today expect more. Tenants are using LEED AP ments and sustainability policies. Director, Green Content & their influence in a high-vacancy commer- Understanding those drivers is the first Research Communications cial office building market to demand green McGraw-Hill Construction step. Then, it is about making the business usiness B features (see page 65), and firms want market case to those different influence agents. differentiation and competitive advantage. We were excited that the U.S. Department Whether you are a manufacturer trying to of Energy’s Building Technology Program get your energy-efficient products installed, and the Pacific Northwest National Labora- a builder or engineer experienced in adding tory supported this effort because the results value to projects through better building show that energy efficiency is occurring and practices, or policy makers wanting to lower will continue to occur. The levels of that activ- the environmental impacts of our buildings, ity depend on our ability to convey the full understanding how to make the right busi- breadth of benefits that come from sustain- ness case to the right person is critical. able investments, of which energy efficiency We hope the data and market insights in is just the tip of the iceberg. this report help you make that case and seize The research in this report provides new those opportunities. Harvey M. Bernstein, F.ASCE, the Civil Engineering Research an M.S. in engineering from contributor to The McGraw-Hill LEED AP has been a leader in Foundation. He has written Princeton University and a Companies’ corporate initiatives the engineering and construc- numerous papers covering inno- B.S. in civil engineering from around sustainability. Previ- tion industry for over 30 years. vation and sustainability and the New Jersey Institute of ously, she served as Executive Currently, he has lead respon- currently serves as a member of Technology. Director of the Clean Beaches sibilities for MHC’s market the Princeton University Civil Council and Deputy Direc- research group, including MHC’s and Environmental Engineering Michele A. Russo, LEED AP, tor of the National Pollution thought leadership initiatives Advisory Council. He is a visit- has been working in environ- Prevention Roundtable. She in areas such as green building, ing professor with the University mental policy and communica- has authored several articles BIM, interoperability, innova- of Reading’s School of Construc- tions for 15 years. She currently on pollution prevention and is tion and global construction tion Management and Engi- is responsible for helping a frequent speaker on green markets. Bernstein was one of neering in England, where he direct the green content across building trends. Russo has a B.S. the team members involved in also serves on their Innovative MHC’s portfolio of products and in chemical engineering from launching MHC’s GreenSource Construction Research Centre services, including the manage- Cornell University and a Masters magazine. Previously, Bernstein Advisory Board. Bernstein has ment of MHC’s SmartMarket of public policy from Harvard’s served as President and CEO of an M.B.A. from Loyola College, Report series. Russo is also a Kennedy School of Government. McGraw-Hill Construction 1 www.construction.com SmartMarket Reports SmartMarket Report BUSINEss CASE FOR ENERGY EFFICIENT BUILDING RETROFIT AND RENOVATION TABLE OF CONTENTS 4 Foreword: Making the Business Case 5 Executive Summary 7 Recommendations 10 Data: Retrofit and Renovation: Market Activity and Sizing 10 Construction Activity at Large: Renovations versus New Construction 11 Private versus Public Renovation Projects 12 Green Building and Green Retrofit and Renovation Market Opportunity 13 Retrofit and Renovation: Project Size and Sector Activity 14 Retrofit and Renovation Regional Activity: Non-Green versus Green 16 Data: Business Case for Green and Energy Efficiency Upgrades 16 Current and Future Levels of Energy Efficiency Activities 18 Energy Efficiency Activities Undertaken in the Last Two Years 20 Current and Future Influence Factors on the Business Case for Energy Efficiency Upgrades 23 Financing Energy Efficiency Activities 27