Financing green building and retrofits

A public policy silver bullet that's available to fight global warming today

Posted by David Roberts at 2:47 PM on 17 Dec 2007

Read more about: energy | placemaking | green building

Steve Heckeroth's piece "Solar is the solution" has been recommended all over the green blogosphere, first by Robert Rapier, I think. It's great reading, but I wanted to hone in on one thing he mentions -- a piece of public policy that has been woefully under-hyped.

To wit: with today's technology, we know how to make new buildings net energy generators, and we know how to retrofit existing buildings to reduce their energy consumption by well over 50%, in some cases 90-95%. We just need someone to pay for it.

That, however, turns out to be the rub. An investment in green construction or retrofit has these basic features:

It's capital intensive up front. CHP units, glazed glass, thicker than standard walls, solar panels, specialized architects and builders who have familiarity with green techniques -- all these cost more at the outset than building with cheaper, more familiar materials and methods. And retrofitting buildings is labor intensive, labor being a cost that most money types these days reflexively seek to reduce.
It pays off slowly and modestly. It takes time for the extra money invested in green building to pay off; same with retrofits. The return on investment is modest even for a while after that. Only in the long term do these investments offer a handsome dividend.
It is a sure thing. No investment is risk free, but money spent reducing the energy consumption costs of a building will almost certainly pay itself back, given proper maintenance and a sufficiently long time horizon. This is particularly true with energy costs, particularly natural gas for heat, slated to rise.

Hyper-capitalism being what it is, and people being how they are, investors are heavily predisposed against investments with features 1 and 2. It's all about quarterly numbers these days.

For this reason, it seems like an obvious place for government and civil society to step in. Figuring out financing mechanisms for such investments is a public policy with guaranteed payback, considerable social benefit, and built-in political support -- a gimme.

Why doesn't every city do what Berkeley, Calif. is doing? The city loans money to homeowners to add solar panels; the homeowner pays the city back over 20 years via a small addition to their property tax. The city makes a modestly profitable loan, the homeowner pays nothing, and all owners of the home from the 20-year mark on get a permanent reduction in energy costs. Oh, and let's not forget you get a reduction in greenhouse gases and a homeowner who can strut around his neighborhood bragging about his solar home.

The Clinton Global Initiative is doing something similar around NYC public housing, working with banks to finance upfront green retrofit costs that will be paid back over time via energy savings.

My point is, how is this not a silver bullet? Why isn't every city in every country in the world doing this? It's win-win-win.

Like I said, I'm so sick of hearing how we can't do anything without future technology. Here's a cherry solution, staring us in the face, perfectly available now. Let's just get on it.

For story: Financing green building and retrofits
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What we already have

You can already get tax credits for historic preservation, which is an inherently green practice. Preservation projects (including adaptive reuse like turning abandoned schools and factory buildings to apartments or retail space) must comply with standards that mean they have to reuse as much of the existing material as possible, so preservation projects always have higher labor costs and lower material costs than new construction (creating jobs and reducing waste).

Preservation projects are usually required to keep the old windows, which is a big sticking point for a lot of environmentalists, but that's mostly an education problem; a properly restored wood window, with an appropriate storm window, will perform thermally as well, or better, than a new window, and will last about 5 times as long as a vinyl window before needing to be restored again, so there's another big embodied energy savings.

There is definitely a need for tax credits for green buildings also, so I'm not saying the preservation credits are all we need, but they do help. Also, a program to support green building techniques could be modelled after the preservation tax credit program.

Tax credits can be an easier sell politically than grants or other financial support because they don't require taking any money out of government budgets, so they are "invisible". The only problem with them is they work best on projects with total budgets over a million dollars, because they best way to use them is to sell them to raise cash for equity, and the buyers are all big corporations that don't buy anything less than that.

by willa at 4:00 PM on 17 Dec 2007

Are you experienced?

We live in a green building. The energy efficiency is an attractive feature, but was not the primary reason. It was comfort, unbelievable comfort, a new experience.

Decades ago I spent a night at Amory and Hunter's house. It was the middle of the Winter, above Aspen, in the Rockies. I had one thin blanket on a bench next to a single pane French glass door with snow swirling outside. I thought I would freeze but was totally comfortable.

The damper on a wood stove squeaked all night from the howling winds, and when I told Amory about it the next morning he said that they put in the wood stove during home construction years earlier, but never used it.

You have to feel it to believe it. I just had to have a house like that and finally built one ten years ago. Our home never changes temperature. It doesn't matter whether the weather is below zero or 100 outside. It is just amazing. As more people experience the comfort of efficient thermal mass buildings, with passive solar, the demand will grow, organically, by experience.

Cassandra adds that people with Seasonal Affective Disorder (SAD) will go into remission with the steady warmth of this type of building.

by sunflower at 5:14 PM on 17 Dec 2007

That's Your Happiness, and It's My Hap...

Why argue about money and energy, if we're miserable?

World Bank to globally replicate Bhutan's happiness model
http://www.earthtimes.org/articles/show/139614.html

The Land of the Thunder Dragon, Bhutan, is ranked near the bottom of the world's development scale. The nation, hence, came up with a unique way to measure the country's wealth in terms of the happiness of its citizens.
Instead of attaining a higher gross domestic product (GDP), the official goal here is GNH - a policy decreed by former King Jigme Singye Wangchuck to try and reflect the true quality of life in a more holistic manner.
The official said among the countries the World Bank partnered with, the Himalayan kingdom tops the list in terms of government performance in areas like preservation of cultural values, good governance, and conservation of the environment.

Texeme.Construct(function(x)=Participation(x))

by jabailo at 7:42 PM on 17 Dec 2007

it doesn't cost more!

You wrote..."It takes time for the extra money invested in green building to pay off; same with retrofits."

That's not true...anymore. Solar panels are not a proxy for green / non-green! They can constitute one component, but unfortunately as they're one of the most costly options, there appears to exist a perception that green building must cost more. Many builders have proven otherwise. It's just time for the rest of the educational curve to catch up.

Same with defining "green". "Green" and "Sustainability" don't mean much anymore, if anything. Especially given the inherent tendency of the Bush administration (and others through history) to take words and redefine them (water boarding is what?!), it is essential that the "green" community define itself and its message. How? Science based standards. Same goes in construction...ecology and biology provide indisputable standards on which to measure "greeness". Think Biomimicry. Think conservation biology.

But building "green" does not cost a cent more than traditional construction, as a first cost. Over a lifecycle, homeowners continue saving more and more...probably akin to compounding interest! And with more and more externalities measured, I would bet (these bets seem to be going around), that dollars and cents proof will bear out that green building never cost more than traditional construction. Maybe solar panels do, but that's not the same thing.

Beyond that, to a more theoretical level, I'd argue that this statement was NEVER true...when you factor in all externalities caused by "non-green" construction, it has been cheaper to build green, from the start of time.

by JoshS at 5:38 AM on 18 Dec 2007

The time is right

With new home construction on a downturn, there are a lot of residential contractors who'll be desperate for work in the coming year; if we can get them on these greening projects it'll be win-win-win for homeowners, contractors, and our global warming/oil dependency fight. A timely federal program or large state-level projects could make a huge difference.

by apsmith at 12:25 PM on 18 Dec 2007

Is that right?

Decades ago I spent a night at Amory and Hunter's house. It was the middle of the Winter, above Aspen, in the Rockies. I had one thin blanket on a bench next to a single pane French glass door with snow swirling outside. I thought I would freeze but was totally comfortable.
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by chargerplates at 1:01 AM on 04 Mar 2008

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