Advances in Green Building

By Rona Fried, Ph.D.

Over the past few months, as the commercial construction sector shows signs of rebounding, there have been some major advances in green building policy and measurement. Luckily, they didn’t require Congress to pass legislation, or they never would have passed.

Energy Conservation Codes Upgraded

The International Energy Conservation Code was upgraded for 2012 – it now requires homes and buildings to achieve energy savings 30% higher than the 2006 code. Since homes and buildings produce fully half of US greenhouse gases and use over 75% of the electricity generated from power plants, the new code is a very significant energy policy decision. In fact, the changes represent the largest single-step efficiency increase in the history of the national energy code.

About 500 state, county and city building and fire code officials from around the US voted to upgrade the code. The changes – which affect new construction and retrofits for homes, businesses, schools, churches and commercial buildings – were sought by the U.S. Department of Energy, the U.S. Conference of Mayors, the National Association of State Energy Officials, various governors, American Institute of Architects and the broad-based Energy Efficient Codes Coalition (EECC).

Local building codes across the country are based on these national model standards. The new codes address all aspects of residential and commercial building construction, laying a strong foundation for efficiency gains.

In the residential sector, improvements will:

  • Better seal new homes to reduce heating and cooling loss
  • Improve the efficiency of windows and skylights
  • Increase insulation in ceilings, walls, and foundations
  • Reduce wasted energy from leaky heating and cooling ducts
  • Improve hot-water distribution systems to reduce wasted energy and water in piping
  • Boost lighting efficiency

In addition to those features, commercial building codes include continuous air barriers, daylighting controls, use of economizers in additional climates, and a choice of three paths for designers and developers to increase efficiency: renewable energy systems, more efficient HVAC equipment, or improved lighting systems. It also requires commissioning of new buildings to ensure that actual building energy performance meets the design intent.

"It’s notable that the votes that will have the most profound impact on national energy and environmental policy this year weren’t held in Washington or a state capital, but by governmental officials assembled by the International Code Council in Charlotte, North Carolina," said EECC Executive Director William Fay.

The people who voted rejected proposals that would have weakened the codes, such as tradeoffs, where a builder could install less efficient insulation and windows in exchange for more efficient HVAC equipment that would have been installed anyway. "Efficiency shouldn’t be an either/or proposition," Fay said. "We need to both improve building envelopes and install high-efficiency HVAC systems."

Standard to Measure Building Energy Performance

As more buildings undergo energy efficiency retrofits, buyers, sellers and lenders of these properties need a way to consistently measure energy performance data among them.

A growing number of states (California, Washington) and local governments (D.C., Austin, Seattle, New York City) have passed mandatory green building/energy efficiency requirements that require commercial properties to disclose their energy performance. Other states are considering such rules, including Illinois, Massachusetts, Maryland, Minnesota, Minnesota, Ohio, and Oregon.

Until now, if there’s any data at all, it’s often unreliable. Results are skewed by factors such as building occupancy levels, weather conditions, operating hours etc.

In early February, ASTM International, which develops standards internationally, formally published its Building Energy Performance Assessment (BEPA) Standard. Its objective is to standardize the collection and reporting of energy consumption information for a building involved in a real estate transaction. That will make it easier for buyers, sellers and lenders to understand and predict energy costs.

It will:

  • Collect building characteristic data, including gross floor area, monthly occupancy, and occupancy hours;
  • Collect data on a building’s energy use over the previous three years, including weather data representative of the area where the building is located;
  • Analyze variables to determine what constitutes the average, upper limit, and lower limit of a building’s energy use and cost conditions;
  • Determine pro forma building energy use and cost;
  • Communicate a building’s energy use and cost information in a report.

The report will describe a commercial building’s historical energy use and cost; how these factors can be affected by weather, occupancy, and other conditions; the building’s carbon footprint and an energy consumption disclosure statement with supporting documentation. The standard may eventually be used as a complement to other benchmark and rating programs, such as EPA’s Energy Star and US Green Building Council’s LEED.

The standard is also important from a legal liability perspective. It should help reduce (or prevent) lawsuits where plaintiffs allege that green/energy-efficient buildings do not deliver projected cost savings or anticipated energy performance.

Energy Retrofits Rebounding

Each year, Johnson Controls’ (NYSE: JCI), the world’s largest energy efficiency service provider, conducts an Energy Efficiency Indicator survey of decision makers responsible for energy use in commercial buildings. In fiscal 2010 (ends in September), JCI’s building efficiency division generated $13 billion in revenue, representing 38% of its total sales.

The survey shows that corporate efficiency spending is rebounding. What’s driving efficiency investments? Respondents say, rising energy costs (95%), public image (65%), government/ utility incentives (60%) and climate leadership goals (63%). Despite the lack of climate legislation, more corporations are setting voluntary carbon reduction targets – building efficiency is a top carbon strategy.

30% say they undergoing or have retrofit plans, up from 22% in 2009, and 22% are undertaking new energy efficient construction projects, up fro 16% last year. The most popular upgrades are lighting, followed by education of facilities operations staff and building occupants, HVAC adjustments and installation of occupancy or daylight sensors. 31% are considering adding solar, but that’s down from 46% in 2009.

Which Companies Benefit?

Green Building stocks that should benefit from these trends include LSB Industries (LXU) in geothermal heat pumps, NCI Building Systems (NCS), a leading supplier of cool metal roofs and insulated metal panels, efficiency services providers Ameresco (AMRC) and Johnson Controls (JCI), and architectural glass manufacturer Apogee Enterprises (APOG). To learn about these stocks and when to invest, subscribe to our green stocks newsletter, Progressive Investor.


Rona Fried, Ph.D. is CEO of

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