Last Friday the Ottawa Region Chapter of the Canada Green Building Council and the City of Ottawa organized a Leadership Forum on “Greening the Capital's Existing Buildings."
This was an extremely worthwhile event because it brought together representatives from some of Ottawa's major private building owners and operators and real estate companies including Bentall Kennedy, Halsall Associates, Brookfield Office Properties, BLJC, Minto, Cushman and Wakefield, Ottawa Community Housing, the local electric distribution company Ottawa Hydro, University of Ottawa and the City of Ottawa all of whom have made energy conservation a major priority.
The new Empire State Building, an icon for greening existing buildings
The model for what can be done to improve the environmental footprint for existing buildings is the newly renovated and energy-efficient Empire State Building. Speaker after speaker referred to the retrofit of the Empire State Building in New York City, where green retrofits and renovations that earned the building LEED Gold certification have saved more than $4.4 million annually in operations costs, reduced energy use by 38 percent, and cut carbon emissions by 105,000 metric tons over a 15-year period. This was achieved at an incremental cost of about $0.25 per square foot with a payback period of slightly more than three years.
Several speakers made the case that when all factors are included, the greenest building is the one that has already been built. As the Empire State Building experience shows, it is possible to significantly improve energy performance of the existing buildings.
Ottawa's building portfolio
Ottawa has 675 buildings of which 260 have not been renovated in the past 25 years. About 32% of the competiive market in Ottawa are BOMA BESt or LEED certified buildings in the Ottawa's downtown core including the first LEED EBOM (Existing Buildings: Operations & Maintenance) certified building in Ottawa, the World Exchange Plaza owned by Bentall Kennedy.
The environmental context
According to the U.S. Green Building Council in the U.S. buildings are responsible for 41% of energy consumption, 38% of all CO2 emissions and 73% of electricity consumption. Motivated by similar statistics in other parts of the globe governments around the world, especially the European Union, have targeted buildings for energy conservations measures.
Compared to the average commercial building, a comparable LEED Gold building in the U.S. General Services Administration’s portfolio consumes 25% less energy and 11% less water, has 19% lower maintenance costs; 27% higher occupant satisfaction; and 34% lower greenhouse gas emissions.
The market imperative for owners and tenants
In the US there are 32,000 registered LEED buildings of which 12,000 have been certified. As of June 2012 that comes to about 2 billion sq ft of office space. According to the US Green Building Council 193,750 sq ft of commercial floor space is being LEED certified every day.
In Ottawa the number of LEED certified buildings has increased by 375% in the past two years. According to James Neil of Cushman and Wakefield LEED or BOMA BESt certification is now mandatory for major new buildings in the downtown core. This is driven by the Federal Government which requires all new Federally owned buildings to be at least LEED Gold certified. And this policy has now been made mandatory for Federally leased buildings as well.
In addition Canadian and international companies like the Royal Bank of Canada, Microsoft or Autodesk who have made sustainability a priority in the market place will only lease in LEED or BOMA BESt certified buildings, because these companies have made sustainability part of their public presence and need to be seen as walking the talk. James Neil foresees that the number of certified buildings will increase significantly in the next 12-16 months as the result of a “flight to quality”. Class A building owners will do it because certification protects their investment. Tenants will demand it because it is becoming increasingly important for businesses to be seen to environmentally aware.
One of the sessions focused on how tenant demands and owner leadership are driving investment in energy efficiency. Bentall Kennedy conducts a biennial survey of the tenants in its buildings. In the most recent survey 80% of respondents cited one or more sustainability factors as important reasons for leasing from Bentall-Kennedy. The factors they cited most frequently were indoor air quality, waste recycling and energy efficiency.
Probably the most interesting results from the last two Bentall Kennedy tenant surveys in 2007/2008 and 2010 are a significant increase in the proportion of tenants who have implemented sustainability practices or who have a corporate sustainability policy.
Tenants whose companies have a corporate sustainability policy
- 2007/8 29%
- 2010 48%
Tenants who companies that implemented sustainability practices in the workplace
- 2007/8 41%
- 2010 63%
The Bentall Kennedy survey also asked tenants whether sustainability was important enough that they would pay a premium. About 14 % responded that they would expect to pay a premium for sustainability options when deciding where to locate. According to Bentall Kennedy their biennial surveys show that the proportion of tenants who expect to pay a premium for sustainability is increasing.
Benefits of energy efficiency
Many of the speakers talked about various measures they have done to improve the energy performance of their building including florescent and LED lighting, boiler replacement, water conservation, variable frequency drives (VFD) on chillers, and managing outside air brought into the building. Benefits were usually expressed as the investment required to achieve a certain level of energy savings and the payback period required to recoup the investment. For example, an owner of a major downtown building invested $670,000 in energy conservation improvements that resulted in 18% energy savings annually with a payback of 3.9 years.
In the past the reason that energy efficiency was not every tenant's or building owner's top priority was explained by Shawn Carr of Halsall Associates. Typical tenant expenditures on human resources, facilities, and energy are in the ratio 300, 30 and 3. In other words tenants typically spend 100 times as much on staff as on energy, and 20 times as much on facilities as on energy. But environmental awareness is driving growing interest in energy because firms are finding that typically 40-60% of their carbon footprint is attributable to energy consumption. The other major motivator for energy efficiency are the increasingly hard numbers about the softer benefits of going green. Increasingly owners are looking for other benefits in addition to the hard numbers of energy savings. From an owner's perspective, changes that improve tenant satisfaction result in higher occupancy rates and other financial benefits.
The general feeling about the future of green investments at this forum mirrored a recent McGraw-Hill Construction report basd on a qualitative survey of education, healthcare, retail, manufacturing and federal government sectors about decision making for green building investments. The report makes the case that for energy efficiency in building to grow at a rate comparable to the past decade, more far-reaching benefits often referred to as the "triple bottom line" need to be examined and supported with hard statistics. The triple bottom line includes not just financial benefits such as savings in energy, water, waste and lowered operating costs, which has been the primary motivation to date, but also environmental and social benefits. Most respondents reported that there is a need for more data about the non-financial benefits of green to encourage to encourage greater investment in green building. Respondents also indicated a need for standardized measures that can capture the impact of green building across the triple bottom line.
According to McGraw-Hill Construction financial benefits represent "only a fraction of the advantages offered by green buildings—missing is a quantification of the full triple bottom line benefits from these investments, especially around the social benefits to human performance and well-being." To achieve this the McGraw-Hill study recommends evaluating social, environmental and financial goals together when making decisions on green building investments; creating green building benchmarks through standardization and disclosure of operational building costs; compiling data and case studies that establish the value of nonfinancial benefits of green building; better tools using a more thorough, industry-consensus definition of lifecycle costing based on impacts across the triple bottom line; and assembling a public database of green project measures across the triple bottom line.
Several speakers at the conference in Otttawa made the case for the importance of an integrated design approach that encouraged collaboration between different teams of specialists with the objective of whole building ecology.
A number of cities are going beyond improving the perfromance of single buildings and are looking at optimizing sustainability golas for a larger urban area referred to as an EcoDistrict. It seeks a broad commitment to accelerate neighborhood-scale sustainability. Portland, Oregon is a leader in this initiative. An EcoDistrict initiative has also been proposed for Ottawa's downtown core with the objective of leveraging existing assets to achieve more ambitious sustainability performance goals; attract investment and community action; and track results.
One representative of an owner that owns one of the highest profile office buildings in downtown Ottawa also mentioned the importance of water and water conservation. In their case 25% of their water consumption is used by their cooling towers which they submeter so they can monitor water consumption on a daily basis. A number of speakers mentioned the simple problem of leaking toilets each of which can add hundreds of dollars to the monthly water bill.
I was a little surprised that only one speaker, Robin Hutcheson of Arborus Consulting, mentioned the importance of having reliable as-builts as being essential to building owners. Though once Robin brought the topic up other speakers agreed that they were of critical importance. More than one speaker also identified as-builts as a problem because of their uncertain reliability. Two problems were mentioned as contributing to the problem. Uncertainty about what was delivered in the first place, an "as-constructed" or an "as-designed". Another problem is that drawings are often not updated when renovations or other changes were made. One building owner said he had to manage 5,000 CAD drawings that comprised his building's as-builts and keeping them up-to-date with renovations was a challenge.
Electricity conservation as a major motivator for greening existing building
One of the important initiatives that contributes to the greening of existing buildings in Ottawa are several Ontario Power Authority (OPA) programs that Ottawa Hydro has been particularly active in promoting. The OPA is responsoble for the very successful High Performnace New Construction program that will pay for energy modeling and analysis for new buildings and will pay $400-$800 for every kW saved over code.
Ottawa Hydro also offers OPA programs focused on existing buildings. These include subsidies for energy audits, retrofit programs, chilled water system assessment and retrofit, energy management and monitoring systems, demand response and small business lighting. These programs have been so successful that, for example, low efficiency chillers are no longer stocked in the Ottawa region by major suppliers.
New technologies can dramatically change energy usage in buildigs. Several owners mentioned the benefits of building automation systems that not only allow continuous real-time monitoring of building performance, but also to automatically change building parameters. For example, it is now possible to automatically monitor CO2 based on ASHRAE 62 guidelines and control how much and when outside air is brought into the building. In one example, managing outside air reduced natural gas consumption by 40% and electric power usage by 12-15%.
A number of speakers and members of the audience brought up the challenge of “split incentives”. A recent survey published by the Institute for Building Efficiency found that one of major inhibitors to reducing energy demand in buildings is the institutional conflict between landlords and tenants resulting from “split incentives”.
Commercial leases usually make the building owner responsible for covering the cost for all capital upgrades while energy costs and day-to-day operating expenses are paid by the tenants. The problem that arises is that the owner is responsible for spending the money to improve the energy efficiency of the building while the the tenant is the sole beneficiary of reduced operating expenses. (An argument that is sometimes made is that there is an indirect benefit to the owner in the increased market competitiveness of the owner's office space.)
The problem of providing a direct incentive to both the owner and the tenant is solvable though. The Empire State Building is often cited as an example of a leased building that succeeded with its energy retrofit because of tenant participation. In this case the energy efficiency retrofits were successfully implemented because the building owner, manager, and tenants worked together as partners in the project with a shared sustainability goal for the building”. So-called “green leases” can also be part of the solution. Green leases share the costs of energy efficiency projects between the owner and the tenant.
An interesting financial vehicle used often by government to transfer the risk of green projects to the private sector is the energy performance contract. This type of contract specifies that the private contractor is allocated a certain percentage of the energy savings realized by a project.