Towards a green economy

Box 1: Life cycle cost for a commercial office in a tropical climate12 In the example, a 100,000 m2

commercial building

is being designed for the tropics. Based on the building programme typically employed by the owner, there are several green technologies that can be added to the baseline cost to improve overall building performance. The new technology either costs more than the baseline technology it replaces, or it adds a new technology and additional cost. The technology investment is being considered because it produces higher performance and yields savings over the baseline technology. By expressing the savings as positive cash flow, and showing the total accumulated savings (net present value, NPV) over the life of the technology, it can be shown that the overall investment (added cost plus accumulated savings) pays off over time.

In this example, the building is a centre of commerce and the occupants will be wearing Western business attire, so air conditioning was considered necessary. Given this high cooling load,

technologies that

could mitigate solar gain and meet the load more efficiently were considered. These include window film, exterior shading, a wider comfort band on the thermostats, demand control for ventilation and wall insulation. Three envelope packages are compared to a building built to the local standard practice construction methods. The costs of the features were estimated using standard construction pricing techniques. Energy savings were estimated using energy simulation software. The blue line shows the Minimal Impact package (window film and optimised wall insulation), which is the cheapest technology to implement. The dark window film in this package, however, offsets potential daylight savings and does not provide much benefit over its useful life (as shown by the flat slope of the blue line). The Medium and High Performance scenarios have higher first costs, which are offset by higher

2009) in order to reduce emissions in the building sector by 8.2 Gt per year by 2050 (see Table 3).11

Retrofits in developed countries will account for a meaningful share of this additional investment, particularly in the early years of greening the buildings.

11. The analysis by Houser (2009) uses a different approach to estimating the costs of achieving the emissions reduction of 8.2 Gt/year, which corresponds to the earlier estimated necessary reduction from IEA (2008) – see footnote 8 above. Houser’s estimates use data and an investment cost model developed by WBCSD (2009) and notes various explanations for the higher cost estimates, including the assumptions on the cost of solar photovoltaic technology, as well as future projections of energy prices.

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energy savings over the life of the building. The steep purple slope of the High Performance package (including exterior window shading and demand control ventilation) means that the owner will see a large reduction in the total cost of ownership over the life of the building – almost US$ 800k for the period of the analysis shown.

Similar studies analysing the trade-offs between building components have shown that there can even be a net initial cost saving for green measures. An assessment of the TCO for a Passive House concluded that the integrated design could immediately provide net initial cost savings because the incorporation of higher insulation levels eliminates the need for a traditional heating system (Laustsen 2008).

But the bulk of the incremental investment will occur through greening new buildings, an opportunity firms and households are already starting to take advantage of.

For the USA, a recent study predicts that the green retrofits of non-residential buildings will grow to a US$ 6.6 billion market by 2013, targeting the third of the US commercial building stock that could benefit from such a retrofit – a US$ 400 billion market (Pike Research 2009). For new commercial construction and new residential

12. Simulations and text contributed to this chapter by Tom Paladino. 1,000,000 800,000 600,000 400,000 200,000 - 1 (200,000) (400,000) (600,000) 6 11 16 21 Time (years)

Minimal impact Medium performance High performance

NPV (US$)