The Economics of Green Design, Part 1

Green Building Economics – Energy Costs

By Lynne Phipps, Contributing Editor

What are the financial implications of designing green? How does a client, architect, design team or contractor decide if building green is “worth it?”

Many variables affect the cost of sustainable design, including energy use, materials, labor and the types of building systems chosen.

Building Energy EconomicsIn this, part 1, we’ll examine energy costs. In part 2, we’ll look at the other three major variables cited above.

The purpose of green design is to create sustainable buildings that will enable organizations and individuals to save money over time. Sustainability by its very nature implies that the money spent on a project will be spent wisely in all phases of the design/build process to create a building:

  • With initial costs that are affordable for the client as
  • With operating costs that are affordable throughout its life cycle so that building operations can truly be sustainable.

The intention of green design is to be sustainable.  Sustainability means, by it’s very nature, that money is spent wisely. This means design team decisions must make initial construction costs and the costs of ongoing operation affordable for the client, if the building is going truly to be sustainable.

Generally, the design team will amortize energy costs over the course of a year to 1) determine how energy (costs) can be saved, and 2) what, if any, alternative energy systems may be appropriate for a particular building. This initial assessment is essential if long-term energy savings are to be realized. Alternative energy systems are often site and building specific, as is the application of any particular system. It is these factors which largely will determine a project’s level of sustainability over time.

There are several ways to make sure candidate energy systems are affordable and meet the criteria for sustainability for any given client. Paying close attention to the following will make or break a client’s budget:

  • What is the client spending on energy now?
  • What can be done to conserve energy already being used?
  • What would energy cost for that client using an alternative energy plan?
  • How will the alternative energy plan for the client be funded?
  • Does the alternative energy plan make sense from the stand point of sustainability?

All designers need to look at the client’s current cost of energy before they begin to design. Many LEED points are based on improvement in areas such as energy use and water use. Audits that document when, where and how much energy and water currently are being used are the best starting point. With that information in hand, the designer can examine ways, first to conserve resources, and then to produce/provide them over time.

It’s important to identify ways in which energy can be conserved first, in order to reduce the buildings’ overall resource consumption, whether it’s using traditional resources, which will be depleted and therefore negatively impact the building’s sustainability, or using alternative resources that don’t risk depletion.

It requires some specialized knowledge to determine the appropriate alternative energy application of a particular building or site. Such expertise needs to be brought into the design team, whether through a permanent member or a contracted third party. In large part, the decision will be made on data collected at the site and from the client, as discussed above. However other factors can also affect the building’s energy cost over time, and this is where specialized knowledge is helpful. These factors include a mix of granting resources, tax credits, incentives and other programs from state and other sources. Much of the funding available for alternative energy solutions comes from federal programs, but these programs are often administered by the individual states. For this reason, the designer shouldn’t be surprised to learn that wind power is cost-effective in one place, but not in another, perhaps just across a state line. And the mix of incentives, credits and other programs changes almost continuously.

With the advent of the new international building code, and code changes being made in most states to respond to energy conservation concerns, a growing portion of buildings are now required to be more energy efficient. Designers inevitably will have to pay greater attention to how their projects conserve and consume energy. The good news is that incentives often reduce the cost of greater energy efficiency. Many green professionals find that with the assistance of alternate energy funding, the cost of making most buildings significantly more sustainable is approximately 3% more than standard construction costs.

In addition to the many inherent advantages of green design, this small cost premium for sustainable building makes green design and implementation very attractive, and a sound design decision for virtually every client.

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