Wednesday, January 29, 2014

Rocky Mountain Institute Releases Guide for Accurately Valuing Deep Energy Retrofits
Report details how to determine the full value of investments in building efficiency
On January 22, 2014 the Rocky Mountain Institute released a report, “How to Calculate and Present Deep Retrofit Value: A Guide for Owner-Occupants,” that defines the non-energy costs and benefits, risk reductions and overall value of deep energy retrofits.

Deep energy retrofits provide substantially greater energy savings—often reducing a building’s energy consumption by up to 50 percent—than traditional retrofits and other building efficiency upgrades. While deep energy retrofits in the United States and around the world are attractive investments, they still receive far less attention and capital than they deserve. This is partly due to a narrow definition of their value, typically focused on energy cost savings alone, as well as the confusion and uncertainty around how to calculate, present and justify such additional value streams as part of a retrofit capital request.
This report provides a structured and evidence-based methodology for determining the costs and savings of many other value streams, from additional operating cost savings categories to revenue drivers like employee comfort, health and productivity, and even market and reputation risk mitigation.

Graphic of Empire State Building silouette with statistics: 5 partner companies, 60+ energy-efficient ideas vetted, 8 final projects recommended, 8 months iterative design process; $4.4 million annual energy savings, 38% energy reduction
When planned and executed properly, a deep retrofit can decrease company and property operating costs, help manage enterprise risk, and enable bigger and more sustainable company revenues, all of which lead to higher property and company value. The guide reviews a set of value elements to illustrate how the economics of investing in building energy efficiency can dramatically improve when all value that is created is recognized. Nearly all retrofit stakeholders can tap into these value streams, including corporate real estate managers, building owners, occupants, lenders, developers, corporate sustainability offices, energy managers, government entities, and the full range of sustainability and real estate service providers.

“By systematically assessing the additional value streams in the deep energy retrofit process, building or facility managers can make a strong case for deep energy retrofits in a way that unlocks value for the entire building or portfolio of buildings, instead of just doing tiny, short term projects capturing ‘low-hanging’ energy savings with very short payback periods but not improving the employee environment or reducing risks,” said Scott Muldavin, an RMI senior advisor.

The report is the latest installment of resources RMI has provided for driving the greater adoption of deep retrofits, and accelerating overall retrofit activity. RMI is seeking partners who will use this report to refine their retrofit decision making, test enhanced retrofit strategies, and drive energy efficiency even deeper on new projects. In addition, RMI is currently working with CoreNet Global—the world’s leading association for corporate real estate professionals, service providers, and economic developers—to identify more examples and best practices for getting to deeper levels of energy savings.
Retrofit development costs are complicated to calculate and present accurately, and are often misunderstood and misrepresented due to the general difficulties of cost forecasting, made more difficult when new products, systems, and contracts are used. Further complicating the analysis is that it is often difficult to properly allocate the energy/sustainability retrofit costs, as they are generally an incremental portion of the total retrofit development budget....

Many of the most prominent studies looking at green premium costs are based on new construction, and do not well represent existing buildings. Evidence from new building developments, and the experience and claims of major contractors, suggest retrofit cost premiums for high levels of sustainability may be 10 percent
or more (compared with the cost of a major renovation) with greater cost volatility.

But ... many retrofit projects have little cost premium if timed correctly with other capital improvement projects and if the project follows best practices....

The total retrofit development cost budget for all of the planned upgrades is called the gross retrofit cost. The gross cost of deep retrofits will vary greatly based on a wide range of factors, including building type, project team experience, project location, site conditions, the varying ways energy use reductions are achieved, and the significant underlying variances in building age, construction type, and other variables. An article in the Journal of Sustainable Real Estate stated that the gross cost of a retrofit of all major energy-using systems in a typical 500,000-square-foot office building is $10–$20 per square foot.  Case studies of recent deep retrofits of office buildings revealed an energy-efficiency cost premium of $3–$31 per square foot.
Subsidies and Incentives for offsetting deep retrofit costs included the following

Subsidies and Incentives
Tax Credits & Incentives
■ Federal IRC 48 provides a 30-percent tax credit for qualifying renewable energy projects.
■ Georgia provides an income tax credit for lighting retrofits and other energy-efficiency projects.
■ Oregon offers business energy tax credits for investments in sustainable buildings or renewable energy.
Grants, Rebates, and Other Financial Subsidies
■ A Pennsylvania program offers up to $2 million grants for high-performance building programs.
■ Numerous California utilities offer incentives up to $500,000 when building efficiency exceeds a threshold, with an additional $50,000 for enhanced commissioning, certification, and monitoring.
Entitlement-Related Benefits
■ Anchorage refunds permitting fees for LEED projects.
■ Seattle, Chicago, San Diego, San Antonio, and Santa Barbara County offer expedited permitting or permit assistance.
Subsidized Lending
■ An April 2012 study by Resources for the Future identified 226 government and utilities-related energy efficiency financing programs on the books in 2011, over 150 of which covered commercial properties.
■ Approximately 30 states have passed legislation authorizing PACE loans and many localities—including San Francisco, Washington, D.C., Los Angeles, Cleveland, Miami, New Orleans, and Madison—have programs underway.
Reduced Maintenance Costs
Based on ... experience and studies on the correlation between green buildings and maintenance costs, green buildings generally cost less to maintain than the average building (in the range of 5–10 percent).
■ A 2008 Leonardo Academy study found that properties certified with LEED for Existing Buildings (LEED-EB) had a median maintenance and repair (not including janitorial) cost of $1.17 per square foot compared to the regional average of $1.52 per square foot. After accounting for slightly higher janitorial costs ($1.24 vs. $1.14 per square foot), the overall cost of maintenance was $0.25 per square foot cheaper, or a 9 percent annual maintenance cost savings.
■ According to a 2010 Aberdeen Group study, adopting a data and performance management strategy can cut 14 percent or more of maintenance costs, allowing for visibility and routine tracking of key performance metrics such as operating costs, budget, and energy consumption; and increased collaboration between departmental stakeholders.

■ A study conducted for the U.S General Services Administration (GSA) found that 12 green GSA buildings had maintenance costs on average 13 percent less than the baseline....

The impact of environmental regulation on productivity: the case of electricity generation under the Clean Air Act Ammendment (CAAA)-1990

This paper measures the impact of the 1990 Clean Air Act Amendment on the productivity and output of US coal- red power generating units. The Act led to power units adopting a number of direct pollution abating behaviors, one of which was an input change to lower SO2 emitting coal. A key feature of coal generating units is each one is designed to burn a particular variety of coal, with significant deviations from the targeted coal characteristics resulting in productivity loss. The main innovation of my paper is to quantify the effect that switching to cleaner coal had on productivity, output, generation costs, and ultimately, the corresponding cost pass-through on prices. With data spanning over twenty one years, I first compute the ideal coal type of each unit in my sample and document ensuing deviations caused by switching to cleaner coal, finding deviations reaching magnitudes of over 30%. I then incorporate the effect of this deviation directly into a production function to explicitly quantify the resulting productivity loss. Estimated output losses range from 1% to 4%, varying across regions, over time, and mainly depending on the proximity of generating units to low-sulfur coalmines. Additional costs caused by the regulation were significant in magnitude, representing up to 11% of electricity price in one of the regions considered. Finally, certain evidence of cost pass-through to prices was observed in some regions.
John E. Amos coal-fired power plant in West Virginia, owned and operated by Appa
The John E. Amos coal-fired power plant in West Virginia, owned and operated by Appalachian Power, a subsidiary of American Electric Power (AEP)/
Credit: fotopedia via
by Pedro Hancevic; Department of Economics, University of Wisconsin-Madison
November 21, 2013 (Preliminary Draft); William H. Sewell Social Sciences Building, 1180; Observatory Drive Madison, WI 53706-1393. E-mail: Phone: +1(608)520-3765.
Keywords: productivity, production function, environmental regulation, sulfur, electricity, coal.

Saturday, January 25, 2014

Further Limiting Bisphenol A In Food Uses Could Provide Health And Economic Benefits

There is mounting evidence that bisphenol A (BPA), a chemical used in the production of polycarbonate plastics and the linings of aluminum cans, may have adverse health consequences. The Food and Drug Administration has banned BPA from baby bottles and sippy cups but has deferred further action on other food uses—that is, uses in metal-based food and beverage containers. This article quantifies the potential social costs of childhood obesity and adult coronary heart disease attributable to BPA exposure in the United States in 2008 and models the potential health and economic benefits associated with replacing BPA in all food uses. BPA exposure was estimated to be associated with 12,404 cases of childhood obesity and 33,863 cases of newly incident coronary heart disease, with estimated social costs of $2.98 billion in 2008. Removing BPA from food uses might prevent 6,236 cases of childhood obesity and 22,350 cases of newly incident coronary heart disease per year, with potential annual economic benefits of $1.74 billion (sensitivity analysis: $889 million–$13.8 billion per year). Although more data are needed, these potentially large health and economic benefits could outweigh the costs of using a safer substitute for BPA....