Building A Greener Economy
In the midst of a deep recession, sustainable development, green building, smart growth and alternative energy move to the top of the priorities list.
The PNC Firstside Center was going up. Ground was broken, the steel ordered and the project team moving at full force on the financial service company’s new office building in downtown Pittsburgh.
Nonetheless, Gary Jay Saulson, PNC’s corporate real estate director, agreed to meet with a green building advocate who called asking for an hour of his time to try and talk him into changing the design to meet green building standards, which in 1998 neither Saulson nor any of his engineers or architects knew anything about. “At that point, my vision of a green building was dirt floors and straw walls and people walking around wearing Birkenstocks,” he says.
Saulson committed to changing the entire building design to an environmentally friendly one, though his entire project team told him he was crazy. The idea made sense somehow. “And it seemed like something that was achievable. It seemed like something that was going to be cutting-edge—it seemed like the right thing to do from a corporate standpoint, an employee standpoint, a shareholder standpoint and a community standpoint,” he says.
Not knowing a single project consultant with green building experience, Saulson contacted the U.S. Green Building Council, which he was told was the organization that would certify the project as meeting LEED (Leadership in Energy and Environmental Design) standards. The USGBC put him in touch with a project consultant who had helped devise its rating system for buildings, and together this expanded team saw the project to completion—$4 million under budget and five weeks early. The 650,000-square-foot building, with its water-efficient fixtures, unique air-distribution system and light-colored pavement outside, was LEED certified in September 2000. Not only did the Firstside Center become the world’s largest certified green building at that time, it started the company on a path to becoming the nation’s leader in green buildings a decade later. PNC has since built 53 LEED-certified bank branches and another large office building, and has another dozen buildings in the works registered for certification.
The banking company is among the pioneers in the green building movement, which has continued to pick up steam even amid the economic crisis and credit crunch. According to the USGBC, some 2,257 commercial buildings in the U.S. are LEED certified, and another 16,816 projects are registered to achieve the status, as of mid-March.
A private, nonprofit organization founded in 1993, the USGBC has seen LEED become the national benchmark for recognizing sustainable buildings and practices. Buildings are rated based on a lengthy list of criteria such as access to public transportation, water use reduction, energy efficiency, construction waste management, indoor air quality and innovation in design.
The worsening economy has not slowed the momentum of green building, at least from the USGBC’s perspective. The number of LEED projects doubled between late 2007 and early 2009, a fact that seems to demonstrate what leaders of the movement have spent years trying to prove: that building green can be done on the same budget as conventional design and construction, and can save money over the life of the building. While some research has shown that green buildings cost an average of 2 percent more, consultant firm Davis Langdon concluded in its two “Costing Green” studies over the past five years that there was no significant difference in average costs for environmentally friendly buildings. One reason project teams are able to build green on budgets well within the cost range of non-green buildings is that in many areas of the country contractors have embraced sustainable design, and no longer see LEED requirements as additional burdens to be priced in their bids.
“We always say that a green building should not cost you any more upfront, but it’s sort of like any construction project in it really depends on what amenities and features you want in your building,” says Aurora Sharrard, research manager for the Green Building Alliance, an advocacy pioneer founded 16 years ago in Pennsylvania. “If you want that green roof, obviously it is going to cost you a little more than an asphalt roof, but you have all these quantitative and qualitative benefits that come from those choices associated with that upfront cost. I think in general some green buildings can cost more to build, but you could also say that about any type of building.”
PNC Bank found savings in both cost and environmental impact, for example, by switching from 60- to 80-gallon water heaters to those with just five gallons at its bank branches, meeting the limited demand for hot water. Its trademark Green Branch is consistently built on a reasonable budget, reportedly averaging $2.6 million, though Saulson says the numbers vary based on the site and what is factored into the cost.
“What we do know,” Saulson says, “is that we took the same size branch we were building, and we benchmarked it against one of our competitors that was building the same size branch—not green—and ours was $100,000 less. We used the same general contractor for a couple of those, in the same labor market.”
The Green Winners
In recent months, studies have shown green buildings and operating practices as a bright spot in today’s economy. With the national push for green jobs and infrastructure, consumers’ desire for energy efficient homes and buildings, and businesses’ need to reduce operating costs, there is an “imperfect storm” that is resulting in environmentally friendly companies being rewarded in the financial markets, according to global management consulting firm A.T. Kearney.
In February, the firm released a study, “Green Winners: The Performance of Sustainability-Focused Companies in the Financial Crisis,” in which 99 green-minded companies from the Goldman Sachs Sustain Focus List were compared to their industry peers. In 16 of the 18 industries studied, companies committed to sustainable practices outperformed industry averages by 15% from May through November 2008 in stock indices. This amounted to $650 million in protected-market capitalization per company.
“It may well be that these 99 companies are outperforming their peers simply because they’re well run and happen to embrace sustainability—cause and effect are difficult to prove,” says Dr. Daniel Mahler, author of the A.T. Kearney study. “But digging deep into the data, one gets the strong sense that something more is going on.”
For years, he says, the focus has been on making “the quick buck,” often by borrowing, an attitude that ties into both the economy and the environment. The consumption of natural resources was built around an assumption that they are of endless supply, much like the mortgage crisis was caused by the notion that housing prices would rise endlessly.
“Investors seem to be discovering that such a short-term attitude is not sustainable,” Mahler says. “The major U.S. stock indices are down roughly 50% from their October 2007 peaks, and it isn’t clear that they have reached a bottom yet. Investors are looking for safe places to take their money.”
According to Mahler, a focus on long-term health over short-term gains was one of four common characteristics among companies that performed well, the other three being strong corporate governance, sound risk management practices and a history of green innovations. Much of the environmentally friendly technology, such as new energy-efficient machines or packaging made from recycled materials, came with significant upfront costs, but down the road the companies that pursued those initiatives realized savings from more efficient processes, he says.
Roger Limoges, state and local advocacy manager for the USGBC, says it is no surprise to find environmentally minded firms getting ahead in the financial markets, something he believes is a sign of the new green economy.
“Folks that have already invested are certainly benefiting from it, but I think the important thing is that there are still a lot of entry points here and still a lot of opportunities for people who haven’t previously put a whole lot of thought into it,” Limoges says. “There’s plenty of room for everyone in the movement and [for all to] benefit from it.”
The Stimulus Impact
The economic recovery plan signed by President Barack Obama in February will only quicken and expand the integration of green practices across the nation. The stimulus package includes billions of dollars for green building, retrofitting, energy efficiency and renewable energy projects. These funds are largely aimed at federal, state and local facilities, schools and housing, and it remains to be seen how the commercial building industry will be affected. As the money slowly made its way from Washington D.C. over the past two months, states scrambled to determine how best to use their share. Limoges believes the month ahead will be telling in terms of the funds’ eventual uses on green projects. However, he stresses that the mere existence of the recovery act speaks to clout held by those advocating for energy efficiency and sustainable practices. The package presents seemingly endless opportunities for homeowners, companies and politicians to make strides to benefit the environment and the economy, and for everyone to save money.
“It really does touch on all, and it really presents an unprecedented opportunity to transform our built environment into one that is sustainable and economically responsible, while stimulating the economy with jobs,” Limoges says, noting as an example the $9 billion to modernize schools and other buildings consistent with green standards, and the $5 billion allocated for weatherizing low-income homes. “They say that for every $1 million spent on weatherization, you’re going to either save or create 52 jobs, and this program is talking about $5 billion, so it’s absolutely substantial.” Officials in some states are starting to realize it will be difficult to spend all the stimulus money on public facilities, and they could channel some funding to the private sector, according to R. Neal Elliott, associate director for research at the American Council for an Energy-Efficient Economy (ACEEE). Commercial projects that have been stalled due to a lack of financing, he believes, could be in a good position to take advantage of this funding.
“Some of the state and municipal programs already are doing a good job. They’ve looked at their database of projects and figured out that they’re going to need to go outside their own public sphere to effectively spend the money,” Elliott says. “So, some of them are looking to partner with utilities, some are going directly to commercial entities in their jurisdiction and asking them to step up.” Unfortunately, he adds, those states and companies that have not fully embraced sustainability will be at a disadvantage and may not be able to take full advantage of the funding. “The money is probably going to ultimately go to the people who are already doing a good job, and not to the people who are the ones who’ve done nothing,” Elliott says.
What is known is that a large chunk of the stimulus money, $30 billion, is targeted for renewable energy, including $6 billion in loans for alternative energy power generation and transmission projects, and $2.5 billion for energy efficiency and renewable energy research, development and deployment activities to foster energy independence and reduce carbon emissions.
A City Seeking Sustainability
San Antonio is among the major U.S. cities focusing on energy efficiency and green building. The city has an extensive recycled water system that allows for the conservation of hundreds of millions of gallons of potable water each year, and recently approved an ordinance calling for greater energy efficiency in building design, with the goal of city buildings becoming 15% more energy efficient in 2010, 30% by 2012 and carbon-free by 2030.
San Antonio also has made gains in sustainability through CPS Energy, the largest municipally owned combined gas and electric company in the nation. CPS, which generates energy through nuclear, coal, natural gas and renewable sources, has a growing wind-energy program that enables businesses and residents to purchase power created at wind farms in West Texas.
Mario Hernandez, president of the San Antonio Economic Development Foundation, says many local companies have taken advantage of the program and become 100 percent wind-energy customers. CPS also is studying the benefits of solar power and has partnered with development company Silver Ventures to create the largest solar installation in Texas. The $1.35-million solar energy joint project includes the installation of a 200-kilowatt photovoltaic array of solar panels atop a 67,000-square-foot former warehouse facility being adapted for office, retail and residential use. The company is set to meet 15% of its electrical peak demand with renewable energy by 2020. Attention to natural resources has translated into profitable business practices for many in local industries such as IT, healthcare, manufacturing and logistics, according to Hernandez.
“San Antonio leaders recognized early on that practices already in place to conserve water, save energy and educate the general population translate into good business, and that diversification of resources creates access to more natural resources at a lower cost,” Hernandez says.
Tom Long, senior manager of customer relationships and economic development for CPS Energy, says its efficiency and conservation programs aim to save 771 megawatts (MW), or the equivalent of a large electrical generating unit, by 2020.
“To achieve this ambitious goal, CPS Energy is committing millions of dollars to customer incentives and rebates for the installation of high-energy-efficiency appliances, lighting, insulation, etc.,” Long says. “In fact, Microsoft Corp. availed itself of the CPS Energy rebate program for its new data center in San Antonio. Likewise, Lackland Air Force Base recently received the largest lighting rebate delivered so far for lighting retrofits throughout the base, resulting in more than two megawatts of savings, the equivalent of more than 500 homes.”
Making renewable energy a priority, according to Elliott at ACEEE, accomplishes a number of things for a city and for a business, but notably, it decouples building operations from the volatility of the traditional energy markets. He notes that wholesale natural gas prices went from $14 last June to now less than $4 per million BTUs.
“Will it stay at $4? Unlikely. How high will that go? If I knew that I’d be a rich man,” Elliott says. “But I can guarantee you the price will go up, and after it goes up the price will likely come down. How far, who knows? But unpredictability is one of the biggest threats to the economic viability for individual companies and building owners. And energy efficiency reduces your exposure to this market, so it’s smart business.” Sharrard, at the Green Building Alliance, says that in a down economy the building projects that she sees moving forward in western Pennsylvania tend to be the green ones. If companies are going to invest in something, she says, they want it be worth supporting, and green building seems to be it.
Similarly, business executives may want to take heed of the research showing environmentally minded companies getting ahead during the struggling economy. Mahler, at A.T. Kearney, says that with the near future continuing to look bleak, investors are favoring those businesses that focus on long-term health, whose bold leadership views sustainability initiatives as fundamental business strategies.
“It is not too late for companies to start investing in the future, developing true value that can last in the long term,” Mahler says. “If companies can keep an eye on their future health while weathering the current storms, they can put themselves in position for long-term success—and maybe even be rewarded.”
NYSERDA Makes New York a Leader in the Clean-energy Economy
As a national leader in the development and promotion of energy efficiency and clean-energy technologies, the New York State Energy Research and Development Authority (NYSERDA) is investing millions of dollars—and is committed to investing millions more—in the businesses, resources, and technologies that will create jobs, sustain economic growth, and protect the environment.
NYSERDA is New York’s premiere resource for information, services, and financial support to help the state’s businesses and industries use energy more efficiently. It offers a host of funding opportunities to help clean-energy businesses undertake new ventures and expand into new markets, while also offering incentives for new construction, green buildings, existing facilities, and the establishment of renewable energy manufacturing facilities.
NYSERDA’s New Construction/Green Buildings program is a progressive effort to transform the way buildings are designed and constructed to improve energy efficiency, performance, and to reduce greenhouse gas emissions.
The program, which offers incentives to reflect both NYSERDA’s and the customer’s commitment to energy efficiency and sustainable building practices, is supporting sustainable building and energy-efficient upgrades on approximately 35% of all new construction in the state. New York is home to more than 64 LEED-rated buildings and, as of late 2008, more than 650 new construction projects were registered with the U.S. Green Building Council to receive LEED certification. NYSERDA is ready to assist companies interested in constructing the next green building in the state of New York. For more information, visit www.nyserda.org/programs/New_Construction. New York’s inventory of existing commercial and industrial facilities offers companies significant opportunities to relocate operations while lowering operating costs.
NYSERDA’s Existing Facilities program is a one-stop shop for customers to make informed energy and conservation decisions that reduce overhead and improve business’ bottom line. Pre-qualified and performance-based incentive categories offer flexibility in designing, and investing in, the right energy efficiency strategy that best meets the energy needs of the business.
NYSERDA’s incentive programs are financing viable clean-energy projects and providing funding for R&D, business growth, business expansion, and manufacturing. NYSERDA’s Manufacturing Incentive program assists companies in establishing clean or renewable power-generation projects. For more details about these incentives, visit www.nyserda.or/businessdevelopment.
By establishing new public-private partnerships and diversifying industrial and manufacturing resources within the business and clean-energy sectors, New York maintains its position as a leader in the innovation economy.
Fulfilling a Vision of an “Eco-sustainable” Destiny in Florida
Within the next two years, an idealistic vision shared by a local land developer and the co-founder of a national fast-food chain will begin to take shape in central Florida—America’s first “eco-sustainable city,” to be known as Destiny.
Destiny was the dream of Florida land developer Anthony V. Pugliese III and Fred DeLuca, co-founder of Subway Restaurants. In 2005, they teamed up to purchase 41,300 acres in Osceola County and began to put together what they say will be the largest planned environmental development in the United States.
Destiny is designed to attract leading clean technology manufacturing, eco-friendly companies and environmental research groups and universities, which will provide higher-paying “green-collar” jobs for its residents. The new city will boast a next-generation airport and hundreds of miles of walking and riding trails.
According to the developers, Destiny’s sustainable initiatives will preserve more land than it uses, leaving hundreds of thousands of acres undisturbed. Business and industrial complexes will share renewable energy—much of it produced from home-grown biofuels—along with residential communities. The city will be connected by a multi-modal transportation system designed to reduce Florida’s heavy carbon footprint. Most residents of Destiny will live within walking distance of their employers.
On October 27, 2008, Osceola County commissioners unanimously approved a plan to allow development of the city. Although building is yet to begin (ground will be broken in 2011), Randy Johnson, chief operating officer for the Destiny project, says “the rush to be a part of America’s first eco-sustainable city is already underway.”
Destiny has garnered the interest from several green-oriented companies. Mid State Energy, Inc. will build Florida’s first LEED green-energy refueling station at Destiny. The 6,000-square-foot “E-station” will contain traditional and renewable fuels, electric car charging stations and a solar- and geothermal-powered green-mart convenience store. Additionally, Destiny has joined forces with the University of Florida, Green Technologies and Global Renewable Energy to create a Sustainable Energy Farm, where biofuel-yielding crops like sweet sorghum, algae and jatropha will be grown.
Destiny also is aiming to attract eco-friendly biotechnology and construction businesses. “The response from businesses has been impressive and really reflective of the vision of this project,” says Johnson.
To learn more about this totally green city of the future, visit www.destinyflorida.com.
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