Energy-efficiency-based renovations are surging ahead of new construction lately as legislation and the sheer cost of energy encourage building owners to find ways to slash power consumption. Owners are discovering that such projects reduce a building’s operational costs, help them meet standards, and attract tenants, thereby gaining a competitive edge.
A series of studies illustrates the transition. For example, according to the U.S. Green Building Council (USGBC), projects for existing buildings surpassed new construction projects in 2009 (one year after the start of the recession), and the growth has continued exponentially.
A Pike Research report predicts that the overall green renovation market will grow from $80.3 billion in 2011 to $151.8 billion by 2020. A McGraw-Hill Construction report found that the market for green retrofits in nonresidential buildings—which includes the installation of energy-efficient electrical systems—is expected to reach between $10.1 billion and $15 billion in 2014.
About two-thirds of building owners who take on such renovations expect a return on investment in 10 years or less. A related study found an even lower number. The most recent annual Energy Efficiency Indicator survey conducted in March 2013 by Johnson Controls found that 50 percent of commercial building owners require projects to have a simple payback period of three years or less, translating to an internal rate of return greater than 30 percent.
What else motivates building owners to go green? In a July 2012 study, Navigant Research reported that building owners are reducing greenhouse emissions not only because of a sense of responsibility, but also in an attempt to retain tenants and gain a market edge in a competitive building market. The most important driver of all is the desire to reduce operations costs by cutting the amount of energy being consumed.
“We have seen a market shift to optimization of existing buildings,” from what was initially new construction, said Brendan Owens, vice president of LEED technical development at the USGBC. “As new construction hit a wall and has not recovered yet, the market has been shifting.”
Initially, this growth in green building renovation took the industry by surprise when the recession hit. Since then, building owners have been collaborating with general and electrical contractors (ECs) to find new ways to achieve greater efficiency on the cheap. It is possible, but, for one thing, there is a wide variety of rebuilding and in types of renovation, posing the question of how to achieve the greatest return on efficiency. In some cases, buildings are being taken down to the core with new integrated systems, along with better materials and insulation, installed. Other retrofits are as simple as changing lighting or reducing space.
Owens pointed out that the opportunity for ECs in extensive retrofits is in understanding the options to provide a greener, more energy-efficient electrical system that integrates with the building’s other controls. For such projects, opportunities lie in the ability to collaborate. In a recent renovation of the USGBC’s own building, the lighting designer, architect and furnishings provider collaborated with contractors to ensure the systems worked appropriately together.
“The bottom line is that project teams that are most successful are the ones that talk about a whole system [rather than their own singular installation],” Owens said, adding that his assessment includes ECs. “You have to be engaged in the process of design.”
Not every project encourages that collaboration, Owens said, adding that contractors should be actively searching for opportunities in which they can provide early project schematics.
And when these opportunities do come up, contractors can create a competitive advantage by being able to integrate with the other services being built into the structure.
“It’s a differentiator. It can break the tie between two qualified teams,” he said.
At the same time, the USGBC is seeing a growing number of projects aiming for a net-zero effect in major renovations.
“The effectiveness in energy efficiency and circuitry are playing a critical role,” Owens said.
Because alternative energy has its limitations, contractors sometimes find themselves as problem-solvers for customers or utility companies. One problem, Owens said, is that the sun doesn’t always shine; the wind doesn’t always blow.
“So they’re looking for generators to level set the load,” he said.
That can require a tremendous amount of coordination to ensure the load is even. In California, for example, Lawrence Berkeley National Laboratory is working with Southern California Edison (SCE) utility company on the demand response project. Participants receive a device that is installed near a meter or pumping equipment to control the total load served. When the grid reaches critical demand, SCE transmits a signal to automatically turn off electricity until critical demand ends. Those willing and able to have SCE temporarily suspend electric services are rewarded by credits to their bills.
Legislation and standards have had a big impact on renovation work, as well. In 2011, President Obama announced the Better Building Challenge to persuade commercial and industrial buildings to become 20 percent more energy efficient by 2020. As part of this effort, he challenged the federal government to complete $2 billion in federal building upgrades using long-term energy saving to pay for the initial costs, rather than taxpayer money, said Maria Vargas, director of the Department of Energy’s (DOE) Better Building Challenge.
“What we recognize is that there are a host of things standing in the way” of such energy reductions, Vargas said, adding that those hurdles include lack of senior management buy-in, missing or misinformation and concern about the financial costs.
As a result, the DOE has developed broad better building strategies that ask company CEOs, governors, mayors and building managers to commit to the 20 percent reduction and share their progress along the way, illustrating success like overcoming specific barriers. Vargas said the DOE hopes that the initiative will help others learn from projects specific to their vertical market. More than 110 organizations are participating in this initiative, she said. Some of them will provide showcase projects that others can learn from.
The group has also established the Better Building Alliance with several hundred organizations that can share some of the technical or procedural issues they face. Results of the DOE’s efforts will be released later this year based on 2012 participation, Vargas said.
“I think, when you look out across the folks doing upgrades, people have realized that technology is only half the battle,” she said.
Lights can be more efficient, for example, but if people leave the lights on all night, or have other inefficient practices, the technology won’t be much help. As a result, efficient system design also requires that the project designers consider how the building is used, how that use can be made more efficient, and how the construction should be accomplished with that in mind.
“People recognized that the answer is not always [installing] the most efficient widget but could be designing operations in such a way to drive efficiency,” Vargas said.
A second challenge for building owners is establishing a method of measurement. Having good data to benchmark against is a challenge for facilities. Today, many cities mandate disclosure of energy use, and projects need to be designed so that this benchmarking and measurement is possible. Building owners need to be able to compare their own consumption against previous consumption and against similar buildings or competitors’ facilities.
Vargas also said project managers need to be cognizant how they dive into an upgrade.
“The DOE’s view is that the right sequencing is important for renovations,” she said.
If a facility is renovated in a series of steps, the sequence of those steps can determine whether the facility’s efficiency is actually improved or that the project is affordable.
Advance planning can make it possible to do this either at once or in a series of steps over the course of years.
“Modeling so they can anticipate the results of a renovation is certainly preferable,” Vargas said, adding that completing everything at once enables bundling of purchases, thereby reducing some prices.
Successful efficiency retrofits are often completed by facility owners that look at efficiency as a profit driver that doesn’t alter the way the company delivers its services. Companies are not in business to save energy, Vargas said, adding that you have to understand the mission of that organization—whether it is a hospital providing healthcare or a corporate facility aimed at a specific service—and how to accomplish that mission efficiently.
Peter Scarpelli, vice president and global director of energy and sustainability at building services company Corporate Commercial Real Estate Services, said the company manages renovations that include everything from lighting to rebuilding of a central cogeneration plant in a facility like a hospital. The objective is to bring an existing building into LEED status. Scarpelli said that, in the three years since he’s been in the position, the demand for energy-efficient renovations has radically increased.
“When I joined three years ago, people asked about sustainability as a secondary question,” he said, adding that, since then, “it has become one of the first questions we get asked.”
Buildings must be able to transition the way they operate often and easily. Businesses and clients are more mobile than their predecessors, and frequent reconfiguration is necessary.
Scarpelli said the trend is better space use. Instead of a dedicated office, employees now have a more mobile space that could be shared and transformed. However, most office space is not configured for mobility; lighting and outlets are designed for permanent arrangement.
Larger companies, however, are opting to begin dedicating space in their buildings that can be reserved but is not necessarily assigned to a specific staff member or use.
Using space more efficiently lowers the real estate cost and increases efficiency.
“Reducing space decreases carbon output,” Scarpelli said. “One of the biggest misnomers is that, when you do a LEED project, people assume it’s achieved energy efficiency, but it’s more than a matter of material; it’s also a matter of operations.”