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Sustainability Desk

By Chuck Tawney
CEO, Integrated Energy Efficiency
Strategies (IEES)

When it comes to “greening” an existing building, most owners are at a loss for what needs to be done and how to finance it. Yet now is probably the best time to take action. Energy prices are bound to increase substantially over the next few years, meaning the return on investment is likely to be better than expected.

Why concern yourself with greening a building?

The simple answer is economics: it directly impacts the bottom line. Approximately 75 percent of the lifetime costs of a structure can be attributed to energy consumption and operations. Energy use alone accounts for 30 percent of operating costs on average, making it the largest controllable operational cost.

The question remains: How can you best realize these savings, and how does one afford the necessary actions to realize them? The answer, while not so simple, can be easy.

First, there is the “how.” In discussing the right approach to greening homes, Steve Thomas of Renovation Nation offers the analogy of the “Green Pyramid.”

At its base is conservation, minimizing or eliminating the need for energy. This is often confused with efficiency, and vice versa. A good example of conservation is “daylighting” — the practice of providing as much natural light as possible within a building to eliminate or minimize the need for artificial lighting. The same principle can be applied to other resource users including heating and cooling. If you invest in eliminating or minimizing the need, the infrastructure investment is often reduced, and/or it means significantly lower operating costs.

The second tier of the pyramid is efficiency. Examples include a new furnace or boiler with a higher efficiency rating, LED lighting, etc. Although more efficiently heating a leaky structure may save some cash, conservation significantly reduces operating costs and often HVAC (heating, ventilation, air conditioning) system costs as well, especially when combined with efficiency.

At the top of the pyramid is renewables. Unfortunately, when considering going green, most owners think of this first and efficiency second, with conservation a distant third. A better approach is a mix of these factors that determines the best results for your particular building. How to determine that mix? Standards exist to help answer that question. In the case of existing U.S. buildings, there’s LEED for Existing Buildings: Operations & Maintenance (LEED EB: O&M).

How to finance the necessary changes?

Typically, building improvements have been financed through borrowed money and/or cash reserves. You install the better equipment and reap your savings. However, a third option conserves what financial resources you may have, funding the project through what is referred to as a “paid from savings” approach.

Known as “performance contracting,” paid from savings consists of contracting with an energy services company (ESCO) which defines the project, handles the technical and implementation details, and sometimes even provides or arranges the financing. The ESCO projects and guarantees the savings from the proposed changes, taking on the risk if the changes fail to deliver over a specific time — paying the difference between their fee and the savings to the building owner. Sounds good, doesn’t it?

But, according to Paul von Paumgartten of the Alliance for Sustainable Built Environments, “Traditional performance contracting only addresses two-thirds of the potential savings.” It too narrowly defines the parameters of the green pyramid — doing things right, not necessarily doing the right things.

Conversely, Green Performance Contracting (GPC) builds on what traditional performance contracting promises. GPC tackles the other tiers of the pyramid and includes operating and maintenance expenses — broadening the resource expense stream, increasing the potential for savings, both in dollars and in resources. The LEED EB: O&M standard is most often used in the U.S. as the basis for a GPC.

The green pyramid shows where the dollars can be found and impacts reduced. As suggested above, the most acknowledged approach to defining it for your building is LEED EB: O&M. Conserving more of the expense stream provides a viable means to making yourself green, and putting you in the green.

The U.S. Green Building Council is a coalition of leaders from across the building industry working to promote environmentally responsible, profitable and healthy places to live and work. The West Michigan Chapter provides and develops leadership through affiliations and education at all levels. Please send comments and column proposals to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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