Busting the Myth that Green Costs More

James D. Qualk (pictured), LEED AP, is vice president of the Sustainable Solutions Group (SSG) at SSRCx LLC, a subsidiary of Smith Seckman Reid Inc., an engineering design and facility consulting firm based in Nashville, Tenn. Of the firm’s approximately 520 employees, 64 are LEED (Leadership in Energy and Environmental Design) Accredited Professionals, and Qualk’s team of 13 is either certified or is in the process of becoming certified. Qualk is responsible for the operations management and direction of marketing and sales of sustainable consulting services, including LEED facilitation, LEED feasibility analysis and energy modeling. Qualk has presented at a number of industry events, including the 2008 Global Construction Summit in Beijing in April (“Greening the Desert—The Green Building Movement in the Middle East”) and Multi-Housing World 2008 (“Transit-Oriented Development Tour”). Most recently, in October, Qualk presented his paper, “Busting the Myth that Green Costs More Green,” coauthored by Paul McCown, senior project manager of the SSG at SSRCx, at the World Energy and Engineering Congress in Washington, D.C. Qualk talks to MHN Associate Editor Erika Schnitzer about the difference in first cost and cost of ownership, the misconception that green costs more, the benefits of building for LEED certification and what is going on in green building throughout the world.MHN: Explain the difference in first cost and cost of ownership as it relates to green building.Qualk: The difference between first cost and cost of ownership needs to be kept in mind throughout the design process. The primary reason for that is every decision you make is going to affect the cost of operating and maintaining the building throughout its life. You might use a less expensive and less efficient HVAC system, for example, but you may end up spending more over the life of the building as a result of using equipment that is less efficient. We have to keep in mind that every decision we make is going to affect those owning and operating the building. When we talk about long-term owners, it’s important because they may own the building for 50 years or more. According to the USGBC, green building does not have to cost more. And a lot of that relates back to the process of design and construction. The old paradigm was the architect and owner doing programming in a vacuum without consulting specialty consultants and forcing decisions on them, saying, “you need to make it work as a design.” LEED and sustainability are not additional features to be considered in the design. It’s a programming feature to be decided upfront. You need to have all stakeholders in the room at the first meeting to collaborate. When you do that, you can avoid the potential for additional costs that impact new construction budgets, because design is integrated. One thing to keep in mind is how decisions affect others, and stakeholders can synergize and make suggestions that may not have been possible in the old way of doing things.MHN: What is the payback period of green building? Where will you see results first? Where will you see the greatest results?Qualk: The answer may be frustrating, but it depends. First, every type of owner—whether it’s a long-term institutional or speculative developer, a school board or government—has different goals and metrics for success and different benefits. If there is a premium, it seems to be that it’s pretty minimal. In general, case studies tell us that what we see is that if green building does cost more, it’s maybe a 1 to 3 percent premium versus typical design and construction. Other studies show a 2 to 3 percent difference.Depending on what type of building, we see a lot of benefits coming from harder-to-define areas, such as improved occupant comfort and health. In office spaces, for example, the number one expense of a building owner is not utilities—it’s the cost of its people. So, if you can dramatically affect productivity and reduce absenteeism, the bottom line is affected to a high degree and the payback can be in one to two yearsResidential is more difficult to quantify. If I were in the market for a condo or home, I’d prefer to purchase one that is green or LEED-certified because I know I would be a healthier person because I live there. In the changing economy, people may be willing to pay a little more for a green space, but almost certainly green spaces carry a higher occupancy rate than what we are seeing. LEED and sustainability are about a holistic approach, about looking at all parts of the building that contribute to energy consumption and human health and comfort—site selection, materials, indoor air quality, water efficiency, and so on.MHN: When building green, which costs do developers most fear? What features are they least likely to implement due to cost, and how can these features affect the cost of ownership?Qualk: I think everyone reads about solar panels or roof gardens—things that are tangible. We are always promoting those strategies in meeting with our clients, but they are not always cost-effective, depending on their financial situation. But green building is not just about these features; it’s about an integrated design approach where everyone is communicating at a higher level and synergizing between disciplines. The fact that all team members are working more closely always results in better design and reduces consumption.You don’t necessarily need to spend money on these high-dollar items that are better known in order to have a green building. If you are thinking about this from the very beginning, there is a cost-benefit to every decision you make.Sometimes, the payback will be longer than CFOs are looking to take on. If a payback is between two and five years, then it’s a thumbs-up. Solar panels have a longer payback period than that, so depending on the commitment of the owner, it might stay. Different projects have different priorities and goals. If we can get something under five years, it’s generally a go.MHN: What are the benefits of designing for LEED, as opposed to just building green? Qualk: The case studies that we see are categorized as LEED-certified and Energy Star buildings. I’d be wary of anyone claiming a building is green without third-party certification. For a building to be green without third-party certification, it’s hard to know what was done and if they actually followed through on their promise and intent. Despite best intentions, without someone looking over your shoulder, it’s hard to know whether you did what you intended to do. LEED certification is a giant leap forward. This is better—a more integrated design approach—and places the priority on all aspects of design and operations. MHN: How might achieving LEED certification affect a developer’s bottom-line?Qualk: It really goes back to being able to verify documentation and repeat what is it that you’ve done. More than likely, you won’t do what you think you have done. With third-party verification, you know your predicted energy consumption will do this, paints and carpets are low-VOC and the building is compliant with a certain plan because it was documented. Without that—construction sites are complex. If you aren’t documenting and having audits done, it’s probably not getting done the way it should be.The benefit of reducing energy consumption and water usage as well as improving occupant comfort with day-lighting strategies and reducing chemicals—those benefits can happen in a building that is not LEED certified, but you can’t guarantee you’ll achieve those benefits unless they were verified by a third party.MHN: How can having LEED certification impact potential renters/purchasers’ decisions?Qualk: At this point, how savvy is the marketplace? What understanding do they command for what relates to them? I think if you have rainwater collection or solar panels but don’t certify your building, it’s still admirable and you should promote it to attract residents. As people become savvier and understand the crisis we
are facing globally and economically, I think they will seek out a certain quality. The market definitely is one that is LEED-qualified and people will eventually prefer that over anything else.However, it’s really early with homes and condos. The LEED rating has only been out of the pilot program for a year. In the end, maybe a green building will be the standard deliverable property and consumers won’t pay a premium. Now some are, because it’s a better home and better performing. And if those benefits are properly communicated to buyers, they might be willing to let go of a little more cash to buy a place.If I were choosing between a home that was LEED certified or in another residential program versus one that was not, if it was the same price or even 5 percent higher, I would buy the green home because I know I’ll get it back in utility savings and be a happier, healthier individual. If I had the opportunity to rent a green apartment, I could see paying more because I know, if I pay utilities, I will get that money back over time.MHN: You recently spoke at a construction summit in Beijing. Describe what the green building movement is like in the Middle East.Qualk: It’s a little different, of course. In general, many more countries are trying to do it because they see an end to the money train relating to oil revenues. They know it won’t last forever and their economy is based on selling oil, so they are trying to create service economies for their people so they can have a viable economy when oil slows and runs out. So, there is an enormous construction boom in the GCC Region—Saudi Arabia, Dubai, etc. Those economies are fairly stable, but they are trying to diversify themselves by creating something for the future. An enormous amount of construction is going on and they have realized that, in the rest of the world, it is the way to do things moving forward. They know it will have a significant impact on the bottom line and the improved productivity and health of citizens. They see that the business case has been made. Some countries are mandating that they pursue green principles. Some, such as the Emirates Green Building Council, are creating their own rating systems based on LEED.MHN: What country is leading the way in green building?Qualk: The leaders outside the U.S. would include Australia and England. There are no less than 30 countries that have adopted some sort of green building principle, either by code or executive mandate. MHN: Where will green building go from here?Qualk: LEED is a continually improving standard. We are undergoing a big improvement with LEED 2009 and it is going to continue to raise the bar. There’s a lot of talk of net-zero building. Right now, buildings and construction projects are in a deficit to the national economy. In the future, we want to equalize them so that they don’t take away from the natural environment. They could potentially create enough energy for themselves without pulling anything off the grid.We want to build buildings that are green. LEED certification all the way up to platinum is a good first step in the marketplace, but we have a long way to go and we can still improve quite a way beyond that.