Business Case for Energy Efficiency Retrofit Renovation Smr 2011

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  SmartMarket  Report Produced with support from   Business Case for   Energy Efficient  Building Retrofit and Renovation Funding provided by U.S. Department of Energy through the Pacific Northwest National Laboratory  McGraw-Hill Construction President Keith Fox Vice President, Product Development Kathryn E. Cassino McGraw-Hill Construction Research & Analytics/Alliances Vice President, Industry Insights & Alliances Harvey M. Bernstein, F. ASCE, LEED AP Senior Director, Research & Analytics Burleigh Morton Director, Partnerships & Alliances John Gudgel Director, Green Content & Research Communications Michele A. Russo, LEED AP   Business Case for Energy Ef󿬁cient Building Retro󿬁t and Renovation SmartMarket Report Executive Editor Harvey M. Bernstein, F.ASCE, LEED AP Editorial Director Michele A. Russo, LEED AP Editors Enver Fitch, LEED Green AssociateDonna Laquidara-Carr, LEED AP Senior Group Art Director Francesca Messina Contributing Art Director Donald Partyka Production Manager Alison Lorenz Contributing Editor David Sokol Research Project Manager Dana Gilmore, MRA, PRCFor further information on this SmartMarket Report or for any in the series, please contact McGraw-Hill Construction Research & Analytics34 Crosby Drive, Suite 201Bedford, MA 017301-800-591-4462 MHC_Analytics@mcgraw-hill.com ■   Design and Construction Intelligence SmartMarket  Report Acknowledgements: The authors wish to thank the many individuals who provided insights on their ef󿬁ciency programs and projects for the case studies. In particular, we would like to thank Roland Risser and Joseph Hagerman at the U.S. Department of Energy’s Building Technologies Program for provid-ing strategic direction for this project. We also appreciate the assistance of Andrew Nicholls at Paci󿬁c Northwest National Laboratory for his project oversight. Finally, thank you to Mike Italiano, Capital Markets Partnership for sharing his invaluable assistance and expertise regarding sustainability in the world of 󿬁nancing and to Ken Black, E Source for his assistance. About McGraw-Hill Construction McGraw-Hill Construction (MHC), part of The McGraw-Hill Compa-nies, connects people, projects and products across the design and con-struction industry, serving owners, architects, engineers, general con-tractors, subcontractors, building product manufacturers, suppliers, dealers, distributors, and adjacent markets. A reliable and trusted source for more than a century, MHC has remained North America’s leading provider of construction project and product information, plans and spec-i󿬁cations, industry news, market research, and industry trends and forecasts. In recent years, MHC has emerged as an industry leader in the critical areas of sustainability and interoperability as well.In print, online, and through events, MHC offers a variety of tools, applications, and resources that embed in the work󿬂ow of our cus-tomers, providing them with the information and intelligence they need to be more productive, successful, and competitive.Backed by the power of Dodge, Sweets, Architectural Record  , Engineering News-Record (ENR)  , GreenSource   and SNAP  , McGraw-Hill Construction serves more than one million customers within global construction community. To learn more, visit us at www.construction.com.   McGraw-Hill Construction 1   www.construction.com SmartMarket Reports T he opportunity for improving energy performance in the United States has never been greater. The Better Buildings Initiative proposed by the Obama administration is the latest national effort drawing attention to our build-ing energy consumption and ways we can help reduce it—and win at the same time. The economic downturn shifted the attention of firms and public owners with large building portfolios toward their exist-ing buildings. With government and utility incentives, the time was ripe for focusing on retrofit and renovation investments that could save energy and money. However, despite the fact that retrofit activity remained active during the down economy, only a tiny portion of the U.S. build-ing stock has been affected. The opportunity has never been greater. We merely need to help create and seize those opportunities. In order to do so, it is important to under-stand what drives American companies and building owners to adopt efficiency improve-ments and sustainability policies. Understanding those drivers is the first step. Then, it is about making the business case to those different influence agents. We were excited that the U.S. Department of Energy’s Building Technology Program and the Pacific Northwest National Labora-tory supported this effort because the results show that energy efficiency is occurring and will continue to occur. The levels of that activ-ity depend on our ability to convey the full breadth of benefits that come from sustain-able investments, of which energy efficiency is just the tip of the iceberg.The research in this report provides new Introduction Harvey M. Bernstein F.ASCE, LEED AP Vice President Industry Insights and Alliances McGraw-Hill Construction Michele A. Russo LEED AP Director, Green Content & Research Communications McGraw-Hill Construction SmartMarket  Report    B   U   S   I   N   E   S   S   C   A   S   E   F   O   R   E   N   E   R   G   Y   E   F   F   I   C   I   E   N   T   B   U   I   L   D   I   N   G    R   E   T   R   O   F   I   T   A   N   D    R   E   N   O   V   A   T   I   O   N Harvey M. Bernstein, F.ASCE, LEED AP has been a leader in  the engineering and construc- tion industry for over 30 years. Currently, he has lead respon-sibilities for MHC’s market research group, including MHC’s  thought leadership initiatives in areas such as green building, BIM, interoperability, innova- tion and global construction markets. Bernstein was one of  the team members involved in launching MHC’s GreenSource  magazine. Previously, Bernstein served as President and CEO of  the Civil Engineering Research Foundation. He has written numerous papers covering inno-vation and sustainability and currently serves as a member of  the Princeton University Civil and Environmental Engineering Advisory Council. He is a visit-ing professor with the University of Reading’s School of Construc- tion Management and Engi-neering in England, where he also serves on their Innovative Construction Research Centre Advisory Board. Bernstein has an M.B.A. from Loyola College, an M.S. in engineering from Princeton University and a B.S. in civil engineering from  the New Jersey Institute of Technology. Michele A. Russo, LEED AP, has been working in environ-mental policy and communica- tions for 15 years. She currently is responsible for helping direct the green content across MHC’s portfolio of products and services, including the manage-ment of MHC’s  SmartMarket  Report  series. Russo is also a contributor to The McGraw-Hill Companies’ corporate initiatives around sustainability. Previ-ously, she served as Executive Director of the Clean Beaches Council and Deputy Direc- tor of the National Pollution Prevention Roundtable. She has authored several articles on pollution prevention and is a frequent speaker on green building trends. Russo has a B.S. in chemical engineering from Cornell University and a Masters of public policy from Harvard’s Kennedy School of Government. insights that build on previous research by McGraw-Hill Construction and others on how to create high-performing buildings. Some critical results include: The commitment of corporate America to ■ sustainability continues to grow, despite the adverse economy: 42% of the firms surveyed view sustainability as a business opportunity or as transformational, up from 37% just a little over a year ago. 92% of companies report being influenced ■ by operational savings in their decision to pursue energy efficiency projects, but market differentiation (73%) and employee satisfaction and productivity (71%) are also important. Renewable energy is seen as a potential ■ business opportunity for some firms. It is obvious that the business case matters to firms, and energy efficiency and utility savings are the foundation of that case, but firms today expect more. Tenants are using their influence in a high-vacancy commer-cial office building market to demand green features (see page 65), and firms want market differentiation and competitive advantage. Whether you are a manufacturer trying to get your energy-efficient products installed, a builder or engineer experienced in adding value to projects through better building practices, or policy makers wanting to lower the environmental impacts of our buildings, understanding how to make the right busi-ness case to the right person is critical. We hope the data and market insights in this report help you make that case and seize those opportunities.  TABLE OF CONTENTS SmartMarket Reports McGraw-Hill Construction 2   www.construction.com   SmartMarket  Report  4 Foreword: Making the Business Case  5 Executive Summary  7 Recommendations 10 Data: Retrofit and Renovation: Market Activity and Sizing   10  Construction Activity at Large: Renovations versus New Construction  11  Private versus Public Renovation Projects  12  Green Building and Green Retrofit and Renovation Market Opportunity 13  Retrofit and Renovation: Project Size and Sector Activity  14 Retrofit and Renovation Regional Activity: Non-Green versus Green 16 Data: Business Case for Green and Energy Efficiency Upgrades   16  Current and Future Levels of Energy Efficiency Activities  18 Energy Efficiency Activities Undertaken in the Last Two Years 20  Current and Future Influence Factors on the Business Case for Energy Efficiency Upgrades  23  Financing Energy Efficiency Activities  27  Business Benefits from Sustainable Activities  29  Drivers and Obstacles to Corporate Sustainability  34  Corporate Involvement in Sustainability  36  Sustainability Metrics  37  Looking Forward: Renewables and Net-Zero Energy 46  Data: Financing Energy Efficiency: Perspectives from Banks and Real Estate Investment Firms   58 Sidebar Data: Business Benefits of Green and Energy-Efficient Retrofit and Renovation Activities  58 Comparative Market Value of LEED Certified and Energy Star Labeled Office Buildings  59  Financial Benefits Expected from Green Upgrades  60  Owner Perspectives  62  Building Manager Perspectives  64  Tenant Perspectives  66 Occupant Perspectives TABLE OF CONTENTS BUSINESS CASE FOR ENERGY   EFFICIENT BUILDING RETROFIT AND RENOVATION    P   h  o   t  o  g  r  a  p   h  c  a  r  e  o   f   G  e   t   t  y   I  m  a  g  e  s   (   F  r  o  n   t   C  o  v  e  r   )
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