Buildings Box 3: Retrofitting existing office buildings in the USA17 US commercial buildings

Existing commercial building area (EIA 2003) Existing office-building area (EIA 2003) Number of office buildings (EIA 2003) Office energy use/sq.ft. (EIA 1998) Assumed office-space retrofit per year Assumed energy savings (%)

Assumed energy savings (converted to kWhr) Total value of energy savings (at US$ 0.105/kWhr) Assumed cost of retrofit (Pike Research 2009) Total cost of retrofit

Assumed productivity increase 1% Total value of productivity Assumed discount rate

Assumed life of retrofit measures Net present value (direct energy benefits) Net present value (direct energy + indirect productivity benefits)

The market size of existing office retrofit building stock in the USA is about 12.2 billion square feet (EIA 2003) while the median age of US office buildings in 1995 was 23.5 years. Office buildings consume the most energy of all building types, with an energy- use intensity of 97,200 Btu per square foot (EIA 1998). Over the next four years alone, the US retrofit market for non-residential buildings is projected to grow from US$ 2.1-3.7 billion in 2010 to US$ 10.1-15.1 billion by 2014 (McGraw Hill 2009). Energy savings of 10 per cent can be achieved with an investment of less than US$ 1 per square foot. To achieve a more aggressive target of 40 per cent, an investment of US$ 10- 30 per square foot is required (Pike Research 2009).

10% energy savings 72 billion sq.ft. 12.2 billion sq.ft. 824,000

97.2 kBtu/sq.ft./yr 100 million 10%

2.85 kWhr/sq.ft./yr US$ 29,925,000 US$ 1/sq.ft.

US$ 100 million US$ 2.5/sqft/yr US$ 250 million 5%

15 years

US$ 210 million US$ 2.81 billion

40% energy savings 72 billion sq.ft. 12.2 billion sq.ft. 824,000

97.2 kBtu/sq.ft./yr 100 million 40%

11.4 kWhr/sq.ft./yr US$ 119,700,000 US$ 25/sq.ft. US$ 2.5 billion US$ 2.5/sqft/yr US$ 250 million 5%

15 years

US$ 1.26 billion US$ 1.34 billion

The table shows it is easy to justify the investment because the 10 per cent energy savings alone show a positive NPV of US$ 210 million after a 15-year life of the retrofit measures. This increases to US$ 2.81 billion savings if a 1 per cent productivity increase is assumed. However, for the more aggressive scenario of 40 per cent energy savings, the NPV is negative after 15 years unless productivity increases are taken into account. While this case study confirms the benefits of investing in green building retrofits, it also sets out the complexities associated with significant capital outlays, which cannot be easily translated into short-term gains. Source: WBCSD (2009)

5-10 year (WBCSD 2009). The average payback time from energy savings for the green buildings analysed by Kats was six years, while over 20 years financial gains from reduced energy costs exceed the green premium by a factor of four to six – US$ 43.1 to US$ 172.2 per square metre (Kats 2010).16

But the opportunity for energy saving in buildings is not equally distributed at the global level. A recent UNFCCC study, illustrated in Figure 4, shows that in developing Asia (including India and China) there is a significant

16. Original text indicates green premium of US$ 4 to US$ 16 per square foot.

difference between current emissions and projected mitigated

emissions, reflecting the

accelerated

economic growth of these nations and their subsequent need for energy. In contrast, the study shows that OECD countries can mitigate emissions by 2030 to levels as low as those seen in 2000, confirming that advanced economies have the potential to make major strides in reducing energy demand in critical sectors such as the building industry.

17. This example from the USA is referring to square foot. In the table the existing commercial building area corresponds to an area of 6.7 billion sq.m, with an office energy use of 1.1 million Btu/sq.m./yr, assumed energy savings of 30.7 kWhr/sq.m./yr (10%) and 122.7 kWhr/sq.m./yr (40%), assumed cost of retrofit of US$ 10.8/sq.m. (10%) and US$ 269.1/sq.m (40%), and assumed gains from a productivity increase of 1 per cent of US$ 26.9/sq.m/yr.

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