Economics + Initial First Cost

I. Integrated Design Process

Implementing an integrated design process can be extremely effective in accomplishing higher performing and more sustainable buildings (Brunsgaard 2009, Lechner 2014). The integrated design process is a collaborative effort between stakeholders throughout all stages of design and construction aimed to reduce inefficiencies and enhance the value to produce the highest quality project (Koch 2013, Hanna 2016). The strategies used in an integrated approach work to create synchrony in the systems so they work in concert rather than piece mealing on top of one another. The systems are intertwined and support each other, preventing them from being removed from projects without significantly effecting energy results (Integrated Design Lab 2012). Through this approach, systems are considered from the very beginning of the design process. Decisions made early in the process on high performance building play a significant impact to the success of the building as a whole. For example, if a building is designed with the wrong orientation from the beginning, design decisions about daylighting, thermal gain, and shading become much more complicated and less effective (Lechner 2014). In an integrated design, energy, construction, economics, site, and other aspects of a project become the primary design parameters and are integrated with the architectural concept rather than being an add on (Koch 2013). By utilizing a collaborative process from the beginning, early decisions can be made utilizing the expertise of an integrated team working together to accomplish ambitious project goals (AIA 2007, Cheng 2016).

Economic Implications

In the United States, of the $650 billion annual expenditure on construction, an estimated $200 billion has been attributed to mistakes, inefficiencies, and delays (Hanna 2016). Projects that utilize the integrated design process have been found to result in less inefficiencies and produce “better, faster, less costly and less adversarial construction projects” (AIA 2007). By establishing energy efficiency or sustainable goals from the start, an integrated team not only has the ability to deliver greener buildings but can do so at a lower cost. Since construction costs and strategies are considered from the beginning, projects have fewer requests for information (RFIs) and change orders (CEC 2015). In a study by Awad S. Hanna and the American Society of Civil Engineers, the processing time for change orders on an integrated design project was averaged at 1.9 weeks where a typical project processing time averaged at 4.8 weeks. The same study found that the average RFIs per million was 3.9 on an integrated design project compared to an average of 8 on a non-integrated project (Hanna 2016). A case study on a renovation in Portland, Oregon found that as a result of using integrated teams, the project had only 855 RFIs in comparison to a typical similar project which can have up to 6,000 RFIs (CEC 2015). Reducing the amount of RFIs and change orders can decrease overall project time and save money by minimizing modifications.

There have been many instances in which the collaboration of on integrated team resulted in substantial cost savings. A case study of a utility plant in Orlando reported a 10% cost savings below the six million GMP as a result of an integrated design process (Hanna 2016). Another case study of a residence hall at Brown University found that through the collaboration and efficiency of an integrated team, there was a “deeper application of green retrofits.” Of the $12 million budgeted for the project, there was savings of $1.2 million that was then used to further develop more efficient water and energy systems within the building (CEC 2015). A case study from the Mexico City World trade Center highlighted that some of the green features implemented in the building would likely have been cut to reduce costs if it were not for the efficiency attained through implementing an integrated design team (CEC 2015). In the Mosaic Centre for Conscious Community and Commerce building project, they were able to complete the project under budget and five months ahead of schedule while staying on track to exceed its ambitious energy goals (Cheng 2016). Projects that have implemented the integrated design process have continually outperformed traditional projects and have exceeded owners’ expectations in terms of performance, budget, schedule, sustainability, and overall building quality (Collins 2014, Hanna 2016).

II. Tradeoffs between Efficiency & Cost

It is becoming widely recognized that high performance design features are not always a cost add, and that expensive high performance elements can be offset by lowering the cost of other elements (Dean 2016). The following section outlines several cost tradeoffs between various building elements. The strategies outlined here are not exhaustive, but are meant to illustrate various pathways to reduce initial first cost.

Reduced HVAC size with Load Reduction

As buildings become more energy efficient by incorporating passive and climate responsive design strategies, they demand less energy for heating, cooling, and ventilation (Hyde 2010). As a result, HVAC systems can be smaller. For example, designing to Passive House standards with a high-efficiency thermal envelope (high insulation and low air leakage) and a heat recovery ventilator can reduce the heating demand by so much that a 1000-watt hair dryer could provide enough heat for a typical home (HKP Architects 2020).

A renovation project of an existing, tilt-up concrete building into a 31,800 sf Net-Zero energy office building in Sunnyvale, California demonstrates the reduction in HVAC equipment and costs associated with improved energy performance. The passive design strategy for the office building included adding additional 6” of insulation to the outside of the concrete walls (Dean 2016). The project was also designed to prevent heat gains to the windows using electrochromic glass. Skylights were added to the building for daylighting, but also to facilitate passive cooling through stack ventilation and night flushing of the concrete (Dean 2016). Through all of these interventions, the project only needed two, 11 ton air-source heat pump units to supplement the passive heating and cooling systems (Dean 2016). Based on national averages, a standard office building would need a HVAC capacity of 280 sf/ton (ASHRAE 2012), which would represent a required capacity of 114 tons for a similarly sized building.

Space savings with Efficient Mechanical Systems

Using efficient HVAC systems that de-couple ventilation air from heating and cooling can offer both energy efficiency and cost savings. For example, dedicated outdoor air systems (DOAS) coupled with radiant heating/cooling can offer significant space savings compared with variable air volume systems due to reduced duct and equipment sizes. The reduction in ventilation rates, which are 15 to 20% lower in DOAS systems (http://doas-radiant.psu.edu/) allow for a down-sizing of air distribution systems when compared with similar forced air heating and cooling systems. Because of a reduced need for outdoor air, chiller and pump size is reduced for DOAS (http://doas-radiant.psu.edu/). Ductwork size can also be reduced due to lower flow rates, resulting in plenum and mechanical shaft reductions. Reducing the plenum depth has major implications on total building cost due to reductions in floor-to-floor heights and required amounts of exterior façade cladding. Furthermore, reducing mechanical shaft size frees up floor area for programmatic uses and provides more planning flexibility.

A cost analysis of a 6 story, 31,000 sf office building in Philadelphia assessed the economics of a DOAS that used a chilled beam system for cooling compared with a traditional VAV system. The chilled beam system, which chills air with cold water, has a shallow depth of less than 12 in and is more space effective than cooling with forced air (Alexander 2008). The initial cost reduction of the DOAS and chilled beam system reduce duct size, chiller size, air handling unit size, plenum depth, integrated thermal and fire suppression piping and leads to a cost savings of $2/sf (http://doas-radiant.psu.edu/).

Daylighting Tradeoffs

An effective daylighting design strategy can reduce reliance on electric lighting, provide views to the outdoors, reduce glare, reduce heat gains in the hot season, and accept thermal energy in the cold season (Lechner 2014). Dean et al demonstrates the multi-faceted benefit of efficient daylighting through a case study of an office building in San Francisco (Dean 2016). The office building, completed in 2014, is a 12,000 SF renovated net-zero energy office space. Because of zero-lot line neighboring buildings, the main opportunity for access to natural daylight was an existing single-pane skylight. Because of concern for glare and thermal heat gain issues, the design team decided to use electrochromic glass. While the glass was expensive, it provided a benefit of access to natural light and views to the sky. The large electrochromic skylight and additional smaller skylights provide glare-free 80 foot-candles of daylight in summer and 20 foot-candles in the winter, with task level lighting provided for the latter. The reduction of heat gains from skylights using electrochromic glass in conjunction with large, slow moving ceiling fans resulted in downsizing of mechanical equipment (Dean 2016).

III. Grants & Incentives

High performance buildings are likely to become the norm in the near future. Major top-down drivers of implementing sustainable building practices are laws and regulations by federal, state, and local governments. In March 2015, President Obama issued Executive Order 13693, which calls for new federal building construction above 5,000 sf to be net zero energy by 2030 (Dean 2016). Many municipalities are requiring new buildings to meet LEED or LEED-equivalent such as San Francisco who beginning in November 2008 began requiring new buildings to meet local green building standards and all municipal projects – both new construction and large renovations— to achieve LEED silver certification (Choi 2010). There have also been policies that have penalties or negative consequences for not meeting green standards (Olubunmi 2014). In addition to green building policies, sustainability incentives have been found effective in promoting the development of green buildings (Berawi 2020).

There are several types of green building incentives. Financial incentives involve grants, rebates, tax incentives and discounted development application fees. Tax incentives are commonly provided by the government as either deduction or exemption from tax payment. They could also be used inversely as a tax penalty for unsustainable practices (Olubunmi 2014). There are also non-financial incentives which include but are not limited to Floor Area Ratio (FAR) bonuses, technical assistance, and expedited permitting. A study by Olubunmi found that non-financial incentives are more effective in influencing a developer’s decision to invest in green buildings than financial incentives (Olubunmi 2014). Non-financial incentives are often financially rewarding. A project in Singapore utilized an incentive that granted a FAR bonus of up to 2 percent of the total floor area for achieving “Green Mark Platinum” certification. Due to the FAR bonus, the development was able to increase rentable/saleable space and recoup some or all of their initial costs as a result (Olubunmi 2014).

As another form of incentive, green building programs and certifications have also found success in promoting sustainable practices. In Chicago, the 150 participants in the Green Office Challenge “saved a collective amount of US $17.85 million in energy costs, reduced energy use by 124 million kilowatt hours, kept more than 85,000 metric tons of CO2 from the atmosphere, and diverted 43% of their wastes from landfills” (Aulin 2013). As part of the Green Business Network Program between the Port District and San Diego Gas & Electric, a competition was found to be successful because it helped the network learn “new ways to be more sustainable and to save energy and money and helped tenants go green with the least amount of effort possible” (Aulin 2013). Green building certification labels such as LEED or Energy Star have been found to increase the asset value of a project further incentivizing implementing these practices (Eichholtz 2010). In addition, implementing green building practices that promote well-being and performance can result in fewer tenant turnovers, lower vacancy rates, and continual returns on the investment. These type of incentives do not receive anything from external sources but are significant enticements to building green (Olubunmi 2014).

Green building incentives are primarily found through the government but some private incentives also exist. These incentives can be found through different levels, either federal, state, or local. An example of a local incentive from Seattle City Light in Washington offers financial incentives for large commercial and industrial businesses to offset cost for energy saving equipment and systems (Seattle City Light 2020). Another example in Arlington, Virginia offers a Floor Area Ratio (FAR) bonus in exchange for achieving LEED Silver Certification or above (Arlington Virginia Environment 2020). In an example at the state level, Clean Energy Rebates are offered in Maryland for implementing qualified clean energy systems (Maryland Energy Administration 2020). On the federal level, if the systems save at least 50 percent of the heating and cooling energy compared to ASHRAE standard, the owners or designers could apply to receive a tax deduction of up to $1.80 USD per square foot (Energy Star 2020). There are hundreds of incentives found at all different levels that could benefit project stakeholders and promote more green projects (Sentman 2009).

IV. References

Review Articles

• Alexander, Darren, and Mike O’Rourke. “Design considerations for active chilled beams.” ASHRAE Journal 50, no. 9 (2008): 50-58.
• Cheng, Renee. “Motivation and means: How and why IPD and lean lead to success.” (2016).
• Aulin, Radhlinah. “Incentives to Catalyse Green Building Certifications for Building Construction.” I: Trondheim (2013): 13-23.
• Brunsgaard, Camilla. “Strengths and weaknesses of different approaches of IDP.” Aalborg University, Aalborg (2009).
• Darko, Amos, and Albert PC Chan. “Review of barriers to green building adoption.” Sustainable Development 25, no. 3 (2017): 167-179.
• Hayles, C. S., and T. Kooloos. “The challenges and opportunities for sustainable building practices.” Benefits 2 (2008).
• Koch, Christian, and Buhl Henrik. “” Integrated Design Process” a concept for Green Energy Engineering.” Engineering 5, no. 3 (2013): 292-298.
• Olubunmi, Olanipekun Ayokunle, Paul Bo Xia, and Martin Skitmore. “Green building incentives: A review.” Renewable and Sustainable Energy Reviews 59 (2016): 1611-1621.
• Sentman, Shannon D. “Healthy buildings: Green building standards, benefits, and incentives.” The Journal of Biolaw and Business 12, no. 1 (2009): 4.
• Zhang, Li. “Turning green into gold: A review on the economics of green buildings.” Journal of cleaner production 172 (2018): 2234-2245.

Primary Research

• Ahn, Yong. “Drivers and barriers of sustainable design and construction: The perception of green building experience.” International Journal of Sustainable Building Technology and Urban Development 4, no. 1 (2013): 35-45.
• Berawi, Mohammed Ali,. “Role of green building developer and owner in sustainability construction: investigating the relationships between green building key success factors and incentives.” In IOP Conference Series: Earth and Environmental Science, vol. 426, no. 1, p. 012061. IOP Publishing Ltd., 2020.
• Choi, Eugene. “Green on buildings: the effects of municipal policy on green building designations in America’s central cities.” Journal of Sustainable Real Estate 2, no. 1 (2010): 1-21.
• Collins, Wesley, and Kristen Parrish. “The need for integrated project delivery in the public sector.” In Construction Research Congress 2014: Construction in a Global Network, pp. 719-728. 2014.
• Eichholtz, Piet, Nils Kok, and John M. Quigley. “Doing well by doing good? Green office buildings.” American Economic Review 100, no. 5 (2010): 2492-2509.
• Hanna, Awad S. “Benchmark performance metrics for integrated project delivery.” Journal of Construction Engineering and Management 142, no. 9 (2016)
• Hydes, Kevin R, & Creech, Laura. Reducing mechanical equipment cost: The economics of green design. Building Research and Information : The International Journal of Research, Development and Demonstration, 28(5-6), (2010): 403-407.

Print Media

• Lechner, Norbert. Heating, cooling, lighting: Sustainable design methods for architects. John wiley & sons, 2014.