Recently in LEED by USGBC Category

Green building has been ramped up mostly as a voluntary choice -- market and politically motivated.

But the USGBC LEED program hasn't achieved significant energy efficiency impacts, and as climate change dangers continue to mount, more impactful change is likely in the near future.

More assertive public policies regarding energy efficient buildings will warrant careful consideration.

Commercial Building Energy Use Reporting

The mildest of such energy use policies, which will be implemented in the coming years in California and Washington, D.C., requires energy use reporting for commercial buildings.

Energy Star has laid the groundwork for such a requirement, by rating the energy performance of about 16% of all commercial building floor space and 43% of office space in the U.S. to date on a voluntary basis.

Mandatory energy use reporting would make the value contrast between "green" and "non-green" buildings sharper to all real estate buyers and lessees.

If a cap and trade program to address climate change is enacted in the U.S., monitoring and disclosure of building energy performance may well be mandated in order for utilities and other participants to manage their carbon emissions under the program.

Building codes that incorporate LEED certification (or the equivalent) represent a much bigger step for states and localities than energy use reporting requirements. Already in place in a few locations, such mandates ask building inspectors to evaluate energy simulations that they may be poorly prepared to understand.

By making LEED the baseline for buildings, rather than speaking to "green" aspirations, LEED mandates seem likely to amplify the pressure on USGBC for "dumbing down" of the system.

ASHRAE standard 189.1P

ASHRAE standard 189.1P for "green buildings," in which USGBC is a partner, may help deflect this pressure.

This proposed standard, currently under development, will cover the same broad categories as LEED (materials, site, energy and atmosphere, etc.). Rather than relying primarily on simulation to assess energy performance, it will be written in the "prescriptive" language with which building inspectors are used to working, so that it can be adopted with relative ease by interested jurisdictions.

The ASHRAE standard 189.1P energy efficiency targets are 25-30% more stringent than ASHRAE 90.1-2007 (and would earn roughly 8-10 points out of LEED 2009's 110 point maximum).

Green building advocates expect ASHRAE 189.1P as a whole to be more stringent than LEED Silver when completed. 

This strategy would make ASHRAE, rather than USGBC, into the legislative authority for jurisdictions that would seek to "out-green" the rest of the country.

ASHRAE already serves in this capacity as the Congressionally-authorized developer of commercial building energy codes for states.

ASHRAE 189.1P would provide a testbed for more stringent versions of ASHRAE 90.1 and should make it more easy to implement new versions of the latter.

ASHRAE 189.1P broadens the scope of ASHRAE's activity beyond energy efficiency and indoor air quality to the other LEED categories, which has created "pushback" from some affected parties. In October 2008, the 189.1P project committee was temporarily disbanded, due to conflicts over its composition and, reportedly, opposition from "building owners, the gas and electric industries, the steel construction industry, and wood interests."

USGBC, ASHRAE, and Energy Star

Although more states and localities may choose to use the institutional infrastructure being created and continually ratcheted up by USGBC, ASHRAE, and Energy Star, many will not. Only the federal government has the authority to change this hard fact.

DOE could begin focusing authority by more assertively implementing the provisions of the 1992 Energy Policy Act under which the Department certifies each new version of ASHRAE 90.1 and requires states to adopt it.

The research paper cited in this article (Don't Worry About the Government? The LEED-NC "Green Building" Rating System and Energy Efficiency in U.S. Commercial Buildings, by David M. Hart ) describes the history, development, and current operation of USGBC and LEED, particularly with regard to energy efficiency in commercial buildings, the subsector in which LEED has had its greatest impact.

"Despite its high visibility and sometimes grandiose claims, LEED's impact on building energy efficiency has been modest to date. If LEED is to fulfill its potential to steadily push the leading edge of "green building" practice, public policymakers will need not only to continue to support that effort, but to act assertively to pull along the trailing edge of "brown building" practice as well. The voluntary model that LEED represents is inevitably bumping up against its limits,"

says David M. Hart in an MIT-IPC Energy Innovation Working Paper in March, 2009.

Too big to fail?

Since its inception in 1998, the Leadership in Energy and Environmental Design (LEED) family of rating systems for buildings and its parent organization, the United States Green Building Council (USGBC), have grown at an extraordinary rate.

The professional certification system and building, community and retrofit certification system is not merely preeminent among environmentally-inclined property developers and owners, having "no major competitor" in this niche; its advocates claim that it has become a "de facto standard" for new class A office space in the U.S.

"The business case [for LEED] is so strong," according to the president of the National Association of Industrial and Office Properties (NAIOP), that "you would be foolish to ignore it."

LEED certification is taken by many casual observers to be synonymous with energy efficiency.

After all, the first "E" in the LEED acronym stands for "energy."

A recent study, however,  by the New Buildings Institute found that comparable buildings that had received the same LEED rating used vastly different amounts of energy. Some LEED-certified buildings used more energy than permitted by code, which is supposed to define "the worst possible building you're allowed to build."

LEED's flexibility permits builders to define and fulfill their responsibilities in many ways, reflecting the diversity of environmental demands put upon them across the country and the specific opportunities available in any given project.

The advantages of flexibility have to be balanced with the limitations.

LEED is a much bigger program than it would have been if it had used a rigid checklist instead of a menu of alternatives.

Awareness of "green building" is much broader, too, penetrating the mainstream of the industry and even public consciousness to an unprecedented degree.

But these achievements, impressive as they are, hardly mean that the U.S. building industry is destined for a high-efficiency future, as is required to stave off climate change.

LEED's success depended on collaborators and allies, and its future impact on energy efficiency will also depend on what other actors do. Chief among these other actors are governments at all three levels - federal, state, and local.

LEED is widely perceived to be (as Thomas Friedman puts it) a "perfect example of an energy/environment standard that did not come from government down, but from society up."

Yet government agencies, in their roles as buyers and owners of buildings, as land use and taxing authorities, and as regulators of construction, undoubtedly helped to catalyze LEED's explosive growth in the past decade.

While USGBC may well have been "the right idea at the right time,"  its leaders skillfully seized both political and business opportunities. The paper returns in the later sections to the role of LEED in future efforts to improve building energy efficiency, which may be perceived with greater clarity once its past and present are better understood.

The research paper cited in this article (Don't Worry About the Government? The LEED-NC "Green Building" Rating System and Energy Efficiency in U.S. Commercial Buildings, by David M. Hart ) describes the history, development, and current operation of USGBC and LEED, particularly with regard to energy efficiency in commercial buildings, the subsector in which LEED has had its greatest impact.

The narrative situates "green building" in a political as well as a business context.

LEED's Market Perspective

From the market perspective, USGBC seems to have set the balance effectively.

• As of December 2008, approximately 17,500 commercial projects had registered with LEED (all programs) and over 2100 had been certified.
• The growth rate is accelerating, to the point that (according to a November 2007 report by Deutsche Bank's real estate investment arm) "green building is fundamentally altering real estate market dynamics."
• Ernst and Young's Real Estate Market Outlook 2007 similarly opines that "green is no longer a luxury."
• The Costar Group recent year-end round-up put it this way: "2008 was the year when green building became inevitable."

These analyses equate "green" with LEED.

Large Private Institutions' Roles in LEED-Dominance

Large private institutions made up a second group of early adopters.

The non-profit sector, composed mainly of private universities and schools, made up an additional 21% of LEED-NC registrations through the end of 2005.

LEED-NC quickly gained traction as well among firms and other organizations that wanted to project an image of environmental responsibility, especially when constructing a new headquarters or other high-profile building.

These early adopters were typically owner-operators, who stood to reap any long-term cost savings or price appreciation (as well as goodwill) that LEED certification might bring.

Speculative builders, who account for a large portion of commercial construction in the U.S., take a shorter-term view than owner-occupants. They typically seek to minimize construction costs in order to keep prices competitive and profits up. Their interest in LEED took off about three or four years ago, as a result of several convergent factors.

• USGBC developed new programs, LEED for Core and Shell (LEED-CS) and LEED for Commercial Interiors (LEEDCI), that targeted speculative builders.
  
• The cost differential between construction of LEEDcertified and construction of non-LEED-certified buildings declined, too, as "green building" practices and materials were routinized in LEED's early years.
• Some perceived a broader change in public priorities and the preferences of buyers and lessees, associated to some degree with the movie "An Inconvenient Truth."
• Energy prices soared, helping to extend LEED's appeal well beyond the "true believers."
  

Politicians have been trying to "out-green" each another.

One of the first adopters of LEED-NC was the U.S. General Services Administration (GSA), which manages much of the federal government's real estate portfolio.

The federal government is the nation's largest real estate owner and lessee.

Attracted by the system's flexibility and required by executive order to "green" government buildings, GSA adopted a policy of LEED certification for new construction and leasing in January 2000. Several Federal agencies outside of GSA's purview, notably the U.S. Navy, which was the first federal agency to win a LEED certification, enacted similar policies. State and local governments were also in the vanguard of LEED-NC adoption. Seattle, for instance, was the first city to enact a LEED mandate for municipal buildings, requiring Silver certification in 2001.

41% of all LEED-NC registrations through the end of 2005
were government buildings.

But the business case for LEED has not yet been made.

The challenge is similar to that for building energy performance; the database remains too small to draw definitive conclusions, rhetoric notwithstanding.

A March 2008 study by the CoStar Group touting the enhanced financial value of LEED buildings, which was promoted by USGBC and reported widely in the trade press, for instance, faced a withering critique from the executive director of the Green Building Finance Consortium, because it used small samples and inappropriate reference groups.

An April 2008 study released by the Program on Housing and Urban Policy at University of California, Berkeley, by contrast, found that LEED buildings did not command higher rents.

The Berkeley study did find that Energy Star-labeled buildings, which have an energy performance in the 75th percentile or better of comparable buildings, earned higher rents.

This finding suggests that, if the ratcheting up of LEED-NC's energy efficiency elements leads to more consistent energy performance improvements, LEED buildings might also earn higher rents.

Energy Efficiency Business Case

An effective link between LEED-NC and LEED-EB (which incorporates Energy Star by reference), similarly, could enhance the business case by improving transparency for prospective buyers about energy performance and thus anticipated operating costs.

On the other hand, if energy prices continue to slide, the savings associated with energy efficiency may affect real estate values less in the future than they have in the recent past.

The first hotel in San Francisco to be LEED-EB certified was the Orchard Hotel. Stefan Mühle, the general manager explained how the efficiency process developed, initially through a need to cut operating costs after the 9/11 attacks and the subsequent recession that dramatically reduced business and personal travel.

"After 9/11, we really looked into opportunities to reduce expenses."  Department managers got creative with solutions to save money.   The housekeeping department, for example, discovered cleaning products that are natural, less abrasive to the guest rooms, better for the environment and not any more expensive. In fact, if applied properly they would be less expensive. In maintenance, we found a rebate program with  the utility company (PG&E) that offered free light bulbs, if you discarded your old incandescent lamps and replaced them with compact fluorescents. Every department participated in this and slowly but surely, we started to go green."

"For five or six years we were just trying to save money."

For the hotel industry, cost cutting can lead naturally to green solutions. Since it's hard to raise rates, the best way to increase profit is to cut costs, but it must be done without harming the guest experience. Working with partners such as electric and water utilities was very important for the hotel.

The direct impetus for the LEED-EB certification was a new hotel, the Orchard Garden Hotel, built nearby in 2006 for the same owner. This hotel achieved LEED for New Construction basic certification, the first for a hotel in California. Then, according to Mühle, the owner said, "Now it really does make sense to get both hotels on the same pedestal and make sure that they all have the same types of certifications." In looking around for opportunities, the company came across LEED-EB as a way to certify the existing property.

While greening an existing hotel obviously requires an effort by a lot of people, including vendors, employees, management, and ownership, each successful project does require one person to say, "let's do it." In this case, it was the personal interest of the owner in creating a healthier property for guests and workers.

It's becoming more and more feasible to make positive ROI cases for green building and green operation strategies.  It saves money in the long term.  And incentives and rebates can make it cost effective upfront, as well.  Add to that the ability to leverage these operational cost savings with a marketing advantage to discriminating customers -- and every property that is added to a "green portfolio" makes the company stronger and more competitive.