Source: Sacramento Business Journal
By: Michael Shaw
Originally Published: 8/29/2008

Gov. Arnold Schwarzenegger’s 2004 mandate for green state buildings will cost taxpayers millions of dollars initially, but the total expenditure — and the amount of energy and water savings from this mandate — could be incalculable.

Studies show that constructing energy-efficient structures and retrofitting old ones is thought to be a much more expensive process than it actually is. But advocates still disagree about the true costs. Some studies suggest green building is a negligible expense when features are included during initial design, while others say it adds 10 percent or more to a project’s overall budget. That might be because features that can win a building the “green” label vary wildly in cost and can hinge on seemingly arbitrary circumstances, such as the distance from the building to a light-rail station.

The state studied the cost of green buildings before the governor issued the executive order and concluded that the benefits of the mandate would outweigh costs by a significant margin.

“A minimal upfront investment of about two percent of construction costs typically yields life cycle savings of over ten times the initial investment,” said a report issued to the state’s Sustainable Building Task Force in 2003.

But just getting a building certified as green is often a lengthy process.

Since the mandate was issued, 13 of the state’s buildings have been certified as green. Eleven of them are in Sacramento, including the California Environmental Protection Agency and the California Public Employees’ Retirement System.

But California has 213 new buildings in the pipeline at various stages of development, ranging from conceptual plans approved and budgeted by the Legislature to those that are nearing completion now, said Ken Hunt, a spokesman for the California Department of General Services, which owns most of the state’s buildings. Under the mandate, all those new buildings are required to be green.

Many of the state’s existing buildings also must be upgraded. A total of 105 buildings larger than 50,000 square feet are undergoing evaluation for green standards.

The measure of a building’s “greenness” comes from a rating by the U.S. Green Building Council, a nonprofit coalition that certifies the level of energy savings, water conservation and other sustainability features. There are other organizations vying for the privilege to make these evaluations, but so far, the council has a virtual monopoly on doling out the green label. The certification process takes place under the council’s Leadership in Energy and Environmental Design program, and the LEED levels of Platinum, Gold, Silver and Certified are becoming household terms.

The governor’s mandate says all new state buildings must achieve LEED certification at the Silver level. But there are many ways to reach that level, some expensive, such as the use of solar photovoltaic panels. Others are much cheaper, such as putting in bike racks to encourage cycling to work.

“What people perceive as a green building has evolved,” Hunt said. “Not every building has to have a windmill, solar panels and a cow out front that’s turning manure into energy.”

He said the energy-efficient buildings also save water and improve indoor air quality through materials low in volatile organic compounds.

The cost for these features can vary widely, said Matthew Hargrove, president of the Building Owners and Managers Association of California. The organization has been lobbying against a trend to mandate LEED standards for private buildings after more than a dozen cities in California adopted such mandates.

“Don’t get me wrong, we love LEED,” Hargrove said. “We encourage our members to do it when it works for them.” But Hargrove said the costs are too variable and too unknown for mandates to be fair.

The organization says California buildings are already much more efficient than the national average.

“It’s a fallacy to say if you’re not LEED certified, then you’re not green,” he said.

There are several prominent studies that look at the cost of green building.

Hunt cited a 2006 survey by Davis Langdon, a consulting firm that determines construction costs for its clients.

The study said there is no significant difference in average costs for green buildings as compared to non-green buildings. That might be because the building owners surveyed, many of them public entities, tended to go for the cheapest options that would get the green label.

“The more advanced or more expensive strategies are often avoided,” the study said.

The Leonardo Academy, a nonprofit with a mission of developing practical solutions to environmental problems, in April issued the results of a survey that said obtaining LEED Platinum, the highest level of certification, increased building costs by an average of $2.71 per square foot.

Compare that with a study from Northbridge Environmental Management Consultants, a Massachusetts-based company hired by the American Chemistry Council that examined LEED certification in 2003. It estimated the additional cost for the nation’s public buildings that were seeking certification ranged from 4.5 percent to 11 percent, totaling $900 million to $2.2 billion that year.

Despite these discrepancies, the construction industry itself tends to overestimate the costs.

The 1,400 respondents to a survey released by the World Business Council on Sustainable Development last year estimated the additional cost at 17 percent. That’s well over what the council, and the two companies that prepared the study, believe the true costs are — about five percent.

Most experts expect the cost of LEED certification to decline as architects, contractors and consultants become more familiar with the process.

The state’s costs to upgrade existing buildings might be easier to determine.

California is only at the outset of upgrading its existing buildings to be more energy efficient. The simplest measures have been implemented in six state buildings, including the California Highway Patrol Academy in West Sacramento and the Department of Technology Services Gold Campus Data Center in Rancho Cordova, at a total cost of $656,000. Those improvements are expected to save 10.3 percent in electricity at those sites, meaning the state could recoup its expenses in a mere 1.6 years.

The state is scheduled to spend an additional $4.7 million to upgrade 19 more buildings, Hunt said.

This “retro-commissioning” process only looks at the cheapest fixes to save energy. Some buildings could get more expensive “retrofitting” of energy saving features, such as new air conditioning systems, but that process is also just at the outset.

The California Department of Corrections and Rehabilitation is among the first agencies to start retrofitting its buildings. The 16 facility upgrade will cost $13.1 million, said Paul Verke, department spokesperson. Utility companies supplemented those upgrades with $5.8 million in incentives, reducing the state’s financial burden. The upgrades will improve energy efficiency of interior lighting, heating and cooling systems and a variety of other functions. Those upgrades are expected to save millions of dollars a year, Verke said.

As more state buildings get retrofitted, the total cost will rise.

The U.S. Green Building Council also charges a fee to examine and issue certification. Of the state’s 105 buildings that need evaluation, the Department of General Services has 58 buildings seeking certifications. The cost is expected to be about $200,000.

mshaw@bizjournals.com | 916-558-7861

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