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5 Findings and Recommended Approaches for DOD’s Consideration The Committee on Energy-Efficiency and Sustainability Standards Used by the Department of Defense for Military Construction and Repair was tasked to conduct a literature review (Appendix D) and evaluate a Department of Defense (DOD) consultant’s report (Slaughter, 2012; reprinted in Appendix C) to help determine the long-term economic benefits of the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) Standards 90.1-2010 and 189.1-2011, the U.S. Green Building Council’s (USGBC’s) Leadership in Energy and Environmental Design (LEED), and the Green Globes green building certification systems. Based on its findings, the committee was also tasked to recommend approaches for DOD’s consideration as part of DOD’s comprehensive strategy for improving the sustainability of its portfolio of facilities. The first green building certification system implemented in the United States, the USGBC’s LEED system was introduced in 1998. DOD and other federal agencies were early adopters of LEED and other green building certification systems as a tool to help design buildings to limit their environmental impact. Legal requirements for the use of green building certification systems, to meet goals for multiple objectives related to high-performance buildings and for the training of federal building managers, were subsequently enacted through the Energy Policy Act of 2005, the Energy Independence and Security Act of 2007, and the Federal Buildings Personnel Training Act of 2010. As of fiscal year (FY) 2012, the federal government as a whole had 550 buildings certified under LEED, Green Globes, or other green building certification systems in a total portfolio of 429,000 buildings. The first empirical studies to evaluate the performance of buildings designed to be highly energy efficient or buildings certified under a green building certification system in the United States were published in 2006 (Torcellini et al; Diamond et al., Turner). The first study evaluating a sample size of more than 100 green buildings was published in 2008 (Turner and Frankel). The largest study to date that focused on factors relevant to the DOD operating environment included 170 buildings (Kats, 2010). In conducting its literature review, the committee identified 25 studies that met its criteria for timeframe, robustness, and relevancy to the DOD operating environment. Most included a wide range of building types within the samples of green or high-performance buildings and focused on the reduction of energy and water use or improvements in indoor environmental quality. The baselines for comparison of high-performance or green buildings to conventional buildings varied, as did the factors evaluated, the methodologies used, and the locations of buildings. None of the studies focused on the long-term cost- effectiveness attributable to the use of building standards or green building certification systems. Because there is not yet a significant body of objective, research-based evidence available on the topic of the performance of high-performance or green buildings, the committee’s evaluation of the literature review was not straightforward. The green building movement is a relatively recent phenomenon, and so the lack of a standard research protocol, variations in definitions and baselines, limited sample sizes, and the inclusion of many building types were not unexpected. Development of a body of empirical research for any building-related topic takes many years: it typically takes at least 5 years to program, design, and construct a building, which will then be operated for 30 years or longer. Over decades of use, a building’s performance will change as building systems age, through wear and tear, and through changes in occupancy and equipment. How much performance changes depends on the quality of the design and construction, operation and maintenance practices, climate zones, and other factors. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 5-1
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For these reasons and others, as outlined in Chapters 1 through 4, the committee relied on the “preponderance” of evidence from the literature review, its evaluation of the DOD consultant’s report, and its members’ own experience and expertise in developing its findings and recommended approaches, which are presented below. FINDINGS Finding 1. The committee did not identify any research studies that conducted a traditional benefit –cost analysis to determine the long-term net present value savings, return on investment, or long-term payback related to the use of ASHRAE Standard 90.1-2010, ASHRAE Standard 189.1-2011, and the LEED or Green Globes green building certification systems. Of the 25 studies that met the committee’s criteria for timeframe, robustness, and relevancy to the DOD operating environment, only two (Turner, 2006; Kats, 2010) provided some analyses of net present value (NPV) benefits, return on investment, or payback associated with high-performance and green buildings. Those studies, however, did not evaluate the cost-effectiveness of the specific building standards or green building certification systems. Instead, they looked at the cost-effectiveness of green buildings compared to conventional buildings. The DOD consultant’s report did conduct a traditional benefit-cost analysis for the specified building standards and green building certification systems. However, the committee had significant concerns about the data used for the analyses and the application of those data, such that it could not support the absolute NPV benefits calculated by the DOD consultant for the ASHRAE standards, LEED, or Green Globes. Finding 2. There is some limited evidence to indicate that provisions within ASHRAE Standard 189.1-2011 may need to be selectively adopted if use of this standard is to be cost effective in the DOD operating environment. ASHRAE Standard 189.1-2011 contains mandatory requirements that limit the ability of DOD to adapt the standard to its operating environment. The foreword to ASHRAE 189.1-2011 states that “new provisions within the standard were not uniformly subjected to economic assessment” (p. 1) and that cost- benefit assessment was not a necessary criterion for acceptance of any given proposed change to the standard from the 2009 version. The Logistics Management Institute study Incremental Costs of Meeting ASHRAE Standard 189.1 at Air Force Facilities (LMI, 2011) and this committee’s review of ASHRAE 189.1-2011 identified some mandatory requirements that may not be cost-effective or feasible in the DOD operating environment. Among those are requirements related to renewable energy, remote metering systems, peak load shedding, and maximum waste generation. Provisions for heat island reduction, minimum side lighting, indoor environmental quality management before occupancy, and the consistent implementation of operations plans could also prove problematic for design choices and in building operations. Finding 3. Research studies indicate that the incremental costs to design and construct high- performance or green buildings typically range from 0 to 8 percent higher than the costs to design and construct conventional buildings, depending on the methodology used in the study and the type of building analyzed. The additional incremental costs to design and construct high-performance or green buildings are relatively small when compared to total life-cycle costs. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 5-2
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Several studies focused on the incremental costs to design and construct high-performance or green buildings when compared to conventional buildings. Those studies used different methodologies to calculate the additional costs of design and construction and applied them to different types of buildings. The studies indicated that the additional first costs for high-performance or green buildings would typically range from 0 to 8 percent higher than the costs to design and construct conventional buildings, although the costs ranged up to 18 percent higher in a few instances. The study with the largest sample size indicated that, on average, the incremental first costs of green buildings are within 2 percent of the costs of conventional buildings. During the life cycle of a building, design and construction costs typically range from 5 to 10 percent of total costs, while operations and maintenance costs account for 60 to 80 percent of total costs. Thus the additional incremental costs to design and construct high-performance or green buildings are relatively small when considered as part of total life-cycle costs. If the additional up-front investment in a building results in long-term savings in energy, water, and other resources, as indicated by an NPV greater than 1, then the investment would be cost effective. Finding 4. The analytical approach proposed by the DOD consultant has merit as a decision support tool in the DOD operating environment if appropriate and verifiable data are available for conducting benefit-cost and sensitivity analyses. The DOD consultant conducted a traditional benefit-cost analysis to calculate NPV benefits and adjusted rate of return on investment to determine the cost-effectiveness of the two ASHRAE standards and the two green building certification systems. The consultant also conducted a payback analysis as required by the National Defense Authorization Act of 2012. The consultant’s proposed analytical approach expanded on the traditional benefit-cost analysis (BCA) to incorporate factors related to geographic location, climate conditions, and local factors for utility costs. Sensitivity analyses were also incorporated to test a range of scenarios that represented uncertain future conditions related to discount rates, water prices, and energy prices. To the committee’s knowledge, those factors are not required by DOD or by other federal regulations. The committee believes that the consultant’s analytical approach has merit as one of an array of decision support tools to be used by DOD for evaluating investments in new construction or major renovations. However, the committee has significant concerns about the sources of data available and the application of those data in the consultant’s NPV calculations, including estimates of the incremental costs to design and construct high-performance or green buildings. Actual incremental construction cost data for both LEED-certified and Green Globes-certified buildings were not available. To generate the incremental construction cost data, which are essential to calculations of NPV benefits, the consultant used two methods. The total cost of a building that is not LEED-certified or Green Globes-certified (a baseline building) was calculated using square foot data gathered from R.S. Means. For the LEED- certified and Green Globes-certified buildings, the consultant used the actual costs of construction for entire buildings, which were then adjusted based on an assumption that 35 percent of the project costs were attributable to architect and engineering fees and other costs. The committee notes that for the purpose of calculating the cost of energy, water, and green systems, the R.S. Means square foot data cannot be directly compared to the cost of actual buildings, because the R.S. Means data make assumptions about building configurations, while actual buildings have specifics. There can be many differences between an actual building and a prototypical building used by R.S. Means in the square foot tabulations that are not attributable to water, energy, or green systems. If the specifics of the actual building are unknown, the comparison can be significantly skewed. Second, to conduct the analyses of cost effectiveness for ASHRAE standards 189.1-2011 and 90.1-2010, the data provided by ASHRAE were the same data used in the models run for the development of those standards. The source of the data, therefore, did not allow for an independent verification of the cost-effectiveness of those standards. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 5-3
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The committee was particularly concerned about the estimated NPV benefits attributable to water savings associated with ASHRAE 189.1-2011, which the committee believes would be very difficult to achieve absent extraordinary measures that may not be cost effective for DOD. Third, the consultant used estimated data assembled by ASHRAE staff for the ASHRAE standards analysis. The consultant used a combination of data from actual buildings and estimated data (R.S. Means square foot data) for the analysis of the green building certification systems. The use of data from such different sources makes it difficult to compare the cost-effectiveness of the ASHRAE standards to the cost-effectiveness of the LEED and Green Globes green building certification systems. The lack of actual incremental cost data calls into question the consultant’s calculations for incremental costs and, therefore, it calls into question the consultant’s findings related to NPV benefits. As noted in Finding 3, the studies analyzed in the committee’s review of the literature indicate that the incremental construction costs for LEED-certified buildings are significantly lower than the incremental construction costs estimated by the DOD consultant. The NPV benefits calculated by the DOD consultant would likely have been higher if the consultant had used the average incremental construction costs from those studies. As a consequence, the committee cannot support the consultant’s findings related to the absolute NPV benefits calculated for the ASHRAE standards, LEED, or Green Globes. Finding 5. The evidence from the literature search indicates that high-performance or green buildings can result in significant reductions in energy use and water use. The cost savings associated with the reductions in energy and water use will vary by geographic region, by climate zone, and by building type. Thirteen of the 25 studies evaluated focused on measured actual energy use in buildings based on utility bills. Despite a wide variation in baselines, sample sizes, types of buildings, methodologies, and geographic distributions, all thirteen studies found that high-performance or green buildings, on average (i.e., over a group of buildings), used 5 to 30 percent less site energy than similar conventional buildings. The six studies that provided some evaluation of water use found that high-performance or green buildings on average used 8 to 11 percent less water than conventional buildings. Seven studies provided some analysis of the performance of buildings certified at different levels of LEED. They indicated that the majority of LEED-Silver, Gold, or Platinum buildings studied used significantly less energy and less water than conventional buildings. The long-term cost savings that can be achieved through reductions in energy and water use over the life cycle of buildings will depend, in part, on local utility prices and on heating and cooling loads related to climate zones. Five studies focused on buildings in specific regions or states (Pacific Northwest , Massachusetts, Illinois, and Arizona). In these studies, energy use reductions attributed to green buildings when compared to conventional buildings ranged from 5 to 40 percent. During the 30 or more years a DOD building is in use, those differences could be significant. Across a portfolio of facilities, local price factors may be an important consideration for DOD in determining which investments in military construction or major renovations will be the most cost effective over the long term. Finding 6. Not every individual high-performance or green building achieved energy or water savings when compared to similar conventional buildings. Although high-performance or green buildings saved energy and water, on average, across a sample of green buildings, some individual buildings had significantly greater reductions than the average, and some did not perform as well as conventional buildings. Similarly, there were LEED-Silver and LEED-Gold buildings that used more energy and more water than conventional buildings. The research studies speculated about reasons why this was so but did not provide sufficient evidence to draw generalizations regarding why some high-performance or green buildings significantly outperformed PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 5-4
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conventional buildings and why others did not, although building type was clearly a factor. Another factor was the type of technologies employed to reduce energy or water use. Finding 7. In general, the quantities of energy and water used by a building once it is in operation are greater than the quantities of energy and water predicted by building design models, if these models are specifically created for compliance with LEED, Green Globes, or ASHRAE standards. All building standards and green building certification systems require that a building design meet or surpass an energy efficiency standard. In the case of LEED, Green Globes, and ASHRAE 189.1, this standard is ASHRAE/IESNA 90.1. An energy model created to be compared with the ASHRAE/IESNA 90.1 standard necessarily underestimates the energy use and the energy cost of the building once it is constructed and in operation. This is because (1) such models assume perfection in manufacturing, installation, and operation of buildings and their systems; and (2) such models do not include certain heat losses, because they are too difficult to calculate. Energy and water use should be predicted with an “actual use” model that takes into account factors not considered by the LEED, Green Building Initiative (GBI), or ASHRAE design models. An “actual use” model starts with the model created for compliance with LEED, Green Globes, or with ASHRAE 189.1, and then incorporates real-life assumptions of manufacturing, installation, and operation. It also incorporates the three-dimensional heat losses. An “actual use” model created during design can be significantly improved in its predictive value if it is updated with as-built/as-operated conditions. Imperfections during construction can be observed and incorporated in the model, change orders can be modeled as well, and variations in occupancy captured (e.g., different plug loads). An “actual use/as-built model” is best suited for use as a benchmark to assess whether the building performs as it should and to correct deficiencies in operation. The difference between modeled energy or water use and actual energy or water use is important for facilities managers and other decision makers when communicating with other stakeholders. Using data from LEED, GBI, or ASHRAE design models in decision making or in communications can set unrealistically high expectations that cannot be met. Using data from an as-built model will provide more realistic performance data. However, conveying information based on measured energy or water use will provide the most realistic data for decision-making and will improve the credibility of facilities managers and decision makers with other stakeholders. Finding 8. DOD has the opportunity to continue to take a leadership role in improving the knowledge base about high-performance buildings, improving decision-support tools, and improving building models by collecting data on measured energy, water, and other resource use for its portfolio of buildings and by collaborating with others. The data currently available to support decision-making about investments in military construction and major renovation projects is inadequate. Under the Energy Performance Act of 2005, all federal buildings are required to be metered by FY2012. Metered data for energy and water use can be used to improve decision support tools and processes, establish baselines for conventional buildings, and measure the performance of high-performance or green buildings against those baselines. DOD could work with the Department of Energy (DOE) and others to improve the available knowledge and databases related to high-performance buildings to the benefit of the federal government and society. Finding 9. Effective operation of high-performance buildings requires well-trained facilities managers. High-performance or green buildings incorporate new building design processes, new technologies, and new materials. Effective operation of high-performance buildings requires well-trained PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 5-5
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facilities managers who understand the interrelationships among building technologies, occupant behavior, and overall building performance, as recognized through the enactment of the Federal Buildings Personnel Training Act of 2010. The actual performance of green buildings also depends on the actions of building occupants, who can easily undermine effective building operations by bringing in additional appliances and equipment, by leaving computers and lights on, and similar practices. Facilities managers need to understand the human aspect of building performance as well as the engineering aspects. RECOMMENDED APPROACHES FOR DOD’S CONSIDERATION Decisions about investments related to new construction and major renovations of buildings at DOD installations are not reducible to a single decision rule (such as benefit-cost maximization), nor are facilities managers responsible to a single stakeholder. In fact, facilities managers must assess the relative merits of facilities improvement projects against performance with respect to multiple decision criteria and justify recommendations to stakeholder groups and governing bodies that hold different, and sometimes conflicting, priorities. Trade-offs are required for most building projects: design and construction costs (i.e., first costs) versus operating and maintenance and deconstruction costs, resilience and flexibility factors versus worker productivity, and so forth. Based on its findings and on its own expertise and experience with building standards and green building certification systems, the committee recommends that DOD consider the following approaches as it develops a comprehensive strategy for its entire portfolio of facilities to include standards for energy efficiency and sustainable design. Recommended Approach 1. Continue to require that new buildings or major renovations be designed to achieve a LEED-Silver or equivalent rating in order to meet the multiple objectives embedded in laws and mandates related to high-performance buildings. The preponderance of available evidence indicates that green building certification systems and their referenced building standards offer frameworks for reducing energy and water use in buildings, compared to design approaches and practices used for conventional buildings. They may also result in improved indoor environmental quality, improved worker productivity, and lower operations and maintenance costs, although the evidence related to those factors has only begun to emerge. Green building certification systems can also help to establish explicit and traceable objectives for future building performance and a feedback loop to determine if the objectives were met. The incremental costs to design and construct high-performance or green-certified buildings compared to conventional buildings is minimal compared to the total costs of a building over its life cycle. Over the 30 years or more that high-performance or green buildings are in use, the cost savings attributable to reduced energy use and reduced water use may be significantly greater than the incremental first costs of design and construction. If the calculated NPV benefits are greater than 1 when incremental costs, energy costs, and water costs are included, then the use of building standards and green building rating systems will be cost effective. The limited evidence available indicates that the majority of LEED-Silver-certified buildings studied used less energy and water than conventional buildings, although some LEED-Silver-certified buildings did not outperform conventional buildings. Based on the preponderance of available evidence and committee members’ own experience with green building certification systems, the committee believes the most prudent course for DOD is to continue its current policy requiring new buildings and major renovations to meet a LEED-Silver or equivalent rating. At the same time, DOD should have standards and practices in place to evaluate the performance of its high-performance or green buildings across all of its components. Standard evaluation practices can help to ensure that building-related performance objectives are being met, to continuously improve performance, and to ensure that the PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 5-6
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measures taken to reduce levels of energy and water use are cost effective. The lessons learned through evaluations should be shared among DOD components so that best practices can be identified and incorporated into standard designs. Because DOD has developed standard designs for the types of buildings it constructs most often, using the LEED-Volume certification program may be cost effective, although as yet there is little experience with or documented evidence about the program. DOD should consider a pilot study to determine whether volume certifications will, in fact, be cost effective. Recommended Approach 2. Retain flexibility to modify building standards and the application of green building certification systems in ways that are appropriate to the Department of Defense operating environment and mission. ASHRAE Standard 189.1-2011 contains many mandatory provisions that have not yet been evaluated for their cost-effectiveness. The committee recommends that DOD conduct pilot studies on specific provisions of the standard to determine their cost-effectiveness and their practicality in the DOD operating environment before adopting ASHRAE 189.1-2011 in its entirety. As experience with the various provisions emerges, DOD can determine which provisions of the standard are cost effective and support DOD’s mission and incorporate those provisions into DOD guidance documents or standard designs when appropriate. Recommended Approach 3. Put policies and resources in place to measure the actual performance of Department of Defense’s high-performance, green, and conventional buildings to meet multiple objectives. Not every individual high-performance or green building will have significant energy and water savings, even if it is certified at a LEED-Silver or equivalent rating. The committee recommends that for all new construction and major renovations that DOD measure actual performance for 3 years or longer after initial occupancy and use the resulting information and lessons learned to further modify its policies, if appropriate. This can be done, because DOD meters all of its buildings. Data for conventional buildings should also be gathered to establish baselines for performance measurement. It will be necessary to continue to use building models in the design stage to support decision- making among alternatives. Building models can be improved over time such that predicted results are more closely aligned with actual results. During design, the actual energy use of a building can only be predicted with an “actual use” model. This actual use model starts with the model created for compliance with LEED, Green Globes, or with ASHRAE 189.1, but it goes further, by incorporating real-life assumptions of manufacturing, installation, and operation and three-dimensional heat losses. An actual use model created during design can be significantly improved in its predictive value if it is updated with as-built/as-operated conditions. Imperfections during construction can be observed and incorporated in the model, change orders can be modeled as well, and variations in occupancy captured (e.g., different plug loads). An “actual use/as-built model” is best suited for use as a benchmark to assess whether the building performs as it should and to correct deficiencies in operation. If data on actual building performance are not available (e.g., for ASHRAE 189.1-2011) or in instances where a new design is being evaluated, the managers should require actual use energy models that are developed by modifying the standard-complying models through the introduction of the real-life factors discussed above. When DOD facilities managers and decision-makers are considering investments in high- performance buildings, the performance of those buildings will not operate under ideal conditions, but will instead depend on the as-built design and will be influenced by occupant behavior. Relying on data based on actual building performance, as opposed to predicted performance, should help to minimize gaps PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 5-7
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in expectations about how new or renovated buildings will perform and support the credibility of facilities managers and others when making the case for building investments. As DOD’s buildings are metered, DOD should gather data on the use of energy, water, and wastewater to establish baselines for conventional buildings and to determine how well green buildings are performing in comparison to baselines and in comparison to predictions associated with design models. Where building performance falls well below expectations, DOD should examine the reasons why and determine if the causes are systematic. Where appropriate, best practices should be incorporated into standard building designs, and failed practices should be avoided. DOD can continue to take a leadership role in improving the performance of all federal facilities, as well as all U.S. buildings, by collaborating with DOE, other federal agencies, nonprofit organizations, and others to improve national databases related to buildings and their performance and to improve the knowledge base related to the design, construction, and operation of high-performance facilities. Recommended Approach 4. Use investment approaches that analyze the total cost of ownership, a full range of benefits and costs, and uncertain future conditions as part of the decision-making process. The analytical approach developed by the DOD consultant could potentially be used by DOD to improve the basis for decisions about which investments will be most cost effective across its portfolio of facilities. The proposed approach accounts for life-cycle costs, variations in geographic conditions, climate, type of building, and local cost factors. It also helps define upper and lower ranges of uncertainty for specific factors. Uncertainty is inherent with decision making about buildings that will be used for 30 years or longer. To use such an approach effectively, however, DOD will need to ensure that the data available to conduct the analysis are accurate and reliable. Recommended Approach 5. Specify and fund training appropriate for facilities managers to ensure the effective operation of high-performance buildings. Effective use of new technologies and new processes associated with high-performance buildings requires a workforce that is adequately trained to make decisions and implement them to maximum benefit. Facilities managers should have the skills and training necessary to understand the interaction of complex building systems and how to operate them effectively. Implementation of the Federal Building Personnel Training Act of 2010 should help to ensure that DOD facilities managers are certified in the required competencies and skills. Facilities managers also need to understand how the behavior of occupants can affect effective facility operations and, in turn, how facility performance can affect occupants’ health and productivity. Training is needed to help facilities managers identify strategies that can be used to create a better understanding by occupants of how their behavior affects indoor environmental quality, energy use, and other factors. PREPUBLICATION COPY—SUBJECT TO FURTHER EDITORIAL CORRECTION 5-8