Rosetta Stone

October 13, 2020

Economics + Initial First Cost

Talking Points • Research Brief • Collection Database

Summary

A major concern of building owners in implementing sustainable building practices is the perception that the initial first cost is too high and will not outweigh other cost benefits (Ahn 2013, Dodge 2018). The following sections outline efficiencies and opportunities of high performance buildings that reduce initial first cost.

Keywords

Economics, Initial First Cost, High Performance Building, Integrated Design Process, Tradeoffs between Efficiency & Cost, Grants & Incentives

Integrated Design Process

  • 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).
Economic Implications:
  • 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).
  • Construction costs and strategies are considered from the beginning resulting in fewer requests for information (RFIs) and change orders. Reducing the amount of RFIs and change orders can decrease overall project time and save money by minimizing modifications (CEC 2015).

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).
Reduced HVAC size w/ 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. As a result, HVAC systems can be smaller (Hydes 2010)
Space Savings with Efficient Mechanical Systems
  • Decoupling heating and cooling from ventilation can reduce duct size and reduce initial first costs (http://doas-radiant.psu.edu/).
    • A cost analysis of a hypothetical 6 story, 31,000 sf office building in Philadelphia concluded that reductions in initial cost due to duct size, chiller size, air handling unit size, plenum depth, integrated thermal and fire suppression piping 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).
Grants & Incentives
  • Major top-down drivers of implementing sustainable building practices are laws and regulations by federal, state, and local governments (Dean 2016). Sustainability incentives have also been found effective in promoting the development of green buildings (Berawi 2020).
Types of Green Building Incentives
  • Financial incentives involve grants, rebates, tax incentives, utility incentives, and discounted development application fees. There are also non-financial incentives which include but are not limited to Floor Area Ratio (FAR) bonuses, technical assistance, and expedited permitting (Olubunmi 2014).
  • As another form of incentive, green building programs and certifications have also found success in promoting sustainable practices. These types of incentives do not receive anything from external sources but are significant enticements to building green (Olubunmi 2014).
    • For example, 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).

Key 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.