LEED, Efficiency Standards, and Risk Fa 08

Overview

What are green buildings?

Green building focuses on improving the efficiency with which buildings use resources such as energy, water, and virgin materials than those built to conventional code. This building practice also reduces impacts on human health and the environment during the building's life cycle. The buildings are designed to reduce waste as well as pollution and environmental degradation. Ideally the buildings protect the occupant's health, improve occupant's productivity, and efficiently use resources. It achieves these goals through better siting, design, construction, operation, maintenance, and removal.

According to a report prepared in partnership with the US Green Building Council (USBC), buildings consume 70% of the nation’s electricity and a large part of the materials, water and waste used and generated in our economy. Because of the static nature of buildings, they comprise a relatively constant resource and technology consumption in our economy. Presently, there has been a widespread perception that green buildings are substantially more costly than conventional design and may not be justified from a cost benefits perspective. Despite their ascetically pleasing construction and design, this perception creates an obstacle to the more widespread adoption of green design.

Leadership in Energy and Environmental Design Standard

LEED, or Leadership in Energy and Environmental Design, is one of the primary certification and ratings systems for sustainable buildings. It was developed by the United States Green Building Council (USGBC) to provide guidelines and ratings system for evaluating "Green" buildings.

The standards are defined such that a building may LEED Certified if the building scores at least 26 points from the following categories:

Categories Points Available

• 1. Sustainable Sites ..........................14
• 2. Water Efficiency ...........................5
• 3. Energy and Atmosphere.......................17
• 4. Materials and Resources.....................13
• 5. Indoor Environmental Quality................15
• 6. LEED Innovation Credits.....................5
• Total Points Available.......................69

A Building may be classified as falling under one of four certification categories:

• LEED Certified 26 - 32 points
• LEED Silver 33 - 38 points
• LEED Gold 39 - 51 points
• LEED Platinum 52+ points

Source

Background Information

Green Buildings Benefits

It is generally recognized that buildings consume a large portion of water, wood, energy, and other resources used in the economy. Therefore, if building green is cost effective, a change to green construction offers a savings in reduction of energy, water, and waste; as well as lower operations and maintenance costs; and enhanced occupant productivity and health. This section will analyze the reduction of resources used in green buildings and the benefits of green building.

Energy Use Reduction

Energy usage is the largest source of reduction a building can undertake because of the availability of energy efficient technologies. The savings primarily come from reduced electricity purchases and a reduction in peak energy demanded. This reduction can be seen in the lower costs of energy bills. The average cost of energy in buildings is $1.47/ft a year. Green buildings are seen to use 30% less energy than conventional buildings. Therefore if this reduction is spanned across a 100,000 ft2 state office building it would be worth $44,000 per year, with the 20-year present value of expected energy savings worth over half a million dollars. LEED rated buildings compared to conventional buildings are on average 25-30% more energy efficient, seen to have lower electricity peak consumption, likely to generate renewable energy on-site, and likely to purchase grid power generated from renewable energy sources. The financial benefits of 30% reduced consumption at an electricity price of $0.11/kWh (which was estimated to be the average cost of electricity in 2003) are about $0.44/ft/yr, with a 20-year present value of $5.48/ft2. The additional value of peak demand reduction from green buildings is estimated at $0.025/ft2/yr, with 20-year present value of $0.31/ft2. Combining the 20-year present value of peak demand reduction with the present value of reduced energy consumption, the financial energy benefits from a typical green building is $5.79/ft2. Thus, green buildings appears to be cost-effective. [1]

Emissions Reductions

Most are aware of the effects fossil fuel emissions cause on the environment. That being said a study done in California recognized that over 95% of electricity consumption comes from state government buildings. A simple reduction in emissions focusing on state government buildings will garnish unprecedented benefits. As stated previously, green buildings use on average 30% less energy than conventional buildings and reduce emissions by the same percentage. California particularly recorded 36% reduction in emissions compared to conventional buildings.

By reducing energy consumption a building is reducing the amount of fossil fuels burned and thus reducing emissions. Air pollutants that result from the burning of fossil fuels include:

• Oxides of Nitrogen (NOx) – a principal cause of smog.
• Particulates (including PM10) – a principal cause of respiratory illness (with associated health costs) and an important contributor to smog.
• Sulfur Dioxide (SO2 or SOx) – a principal cause of acid rain. (SOx and SO2 are functionally the same for the purposes of this report.)
• Carbon Dioxide (CO2) – the principal greenhouse gas and the principal product of combustion.[1]

Once analyzing how much of a reduction in the pollutant, the building can be weighed regarding its direct costs of pollution effects on property, health and environment as well as deciding the cost of avoiding or reducing these pollutants and using that value as a way to determine market value of pollutants.

Primarily, the large energy use of buildings (more than one third of energy used in the economy) has led ways in which to cut CO2 emissions. Legislation passed in 1997 in Oregon mandates that new power plants in the state offset a significant portion (roughly 17%) of their CO2 emissions either by avoiding, sequestering or displacing emissions or by funding projects that do the same. Many states are following this lead. [1]

==Overall Economic Costs and Financial Benefits of Building Green== adrian DO THIS- 5 SECTIONS!

Cost Analysis of LEED Projects

Insurance Benefits of Green Building

Why Should the Risk Industry Care?

As standards and science progress and change over time, so does the impact of companies upon society. Consider asbestos, once thought to be safe during the early 1900s given the available knowledge, now recognized as a serious health and environmental risk. While the evidence of its risks mounted, it was more than 50 years before companies were held accountable for harms caused by their negligence. Many of the firms that did not anticipate the consequences of these liabilities in the context of the growing research that demonstrated asbestos’ risks were bankrupted when results came crashing down. The Harvard Business Review states: “No longer can companies be content to monitor only the obvious social impacts of today. Without a careful process for identifying evolving social effects of tomorrow, firms may risk their very survival.” That being said, LEED offers in of itself a unique opportunity for the Risk industry; a venerable crossroads of interests, one that combines the economic/financial interests of the company with the environmental interests of the global community.

Insurance and Risk Mitigation of LEED Certified Buildings

Many insurance companies have entered the market with sustainable building insurance products. For example, XL Capital has entered the field with a new Sustainable Property Endorsement: “XLI’s Sustainable Property Endorsement is designed to be attached to US property insurance policies and is also adaptable to other tailored or manuscript forms under certain conditions. The Endorsement is based on the Leadership in Energy and Environmental Design (LEED®) Green Building Rating System™ developed by the U.S. Green Building Council. It allows XLI’s customers to collect an amount greater than the value of the damaged property provided the damaged property is replaced with an environmentally acceptable substitute and, therefore, encouraging customers to upgrade their property at the time of loss.

Economics of Risk Mitigation of LEED Certified Buildings

The economics of this are clear when examined side by side with the risk mitigation that LEED offers. According to Evan Mills, who has written extensively on the impact of “green products” on the insurance industry, LEED in fact reduces risk to the insurer due to the efficiency of the technology utilized. In almost every case, the more environmentally and/or economically efficient technology also proved to be safer. This is because of more stringent standards and design specifications as well as the subsequent reduction of related risks (lower interior temperatures improves roof lifetime, reduction of heat-related mortalities due to cooler temperatures as a result of increased vegetation around the building, etc).

Dickinson College

Dickinson's College Center for Sustainable Living, know as the 'treehouse' received a Gold rating from the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) program. With this certification, Dickinson became the first College in Pennsylvania to receive a Gold rating for a student residence.

The success of the treehouse arises from a combination of technological and architectural features, as well as from the commitment to sustainability of its inhabitants.

Among the most remarkable technological features, we can find:

• A high-performance building shell coupled with highly efficient heating and cooling systems, yielding energy saving of more than 17% over traditional buildings.
• Water savings from a dual flushing system, low-flow fixtures, and the capture of gray water for sewage conveyance, resulting in a 54% reduction of potable water use.
• Low usage of virgin raw materials for the construction of the building, by the usage of recycled materials.
• Usage of only energy star appliances which use less energy than conventional appliances.
• An energy monitoring office, where residents can monitor energy consumption in real time.

Besides these features, students are commited to:

• Taking 3-minute showers.
• Never using a clothes dryer.
• Using fans during summertime instead of air conditioners.
• Keeping heated spaces during winter at 62 degrees F.
• Reduction of waste production.

Each resident of the treehouse has carbon-dioxide footprints that are half the size of the average Dickinson student, and they use an average of 8000 fewer gallons of water per academic year.

References

1. Kats, Greg. (2003, October). The Costs and Financial Benefits of Green Building. A Report to California’s Sustainable Building Task Force. pp 1-134.

2. Kats, Greg. (2003) Green Building Costs and Financial Benefits. A Report to Massachusetts Technology Collaborative. pp. 1-10.

3. 2008 U.S. Green Building Council: LEED rating systems. Retrieved November 21, 2008 from, http://www.usgbc.org/.

Links of Interest

• XL Capital's Sustainable Property Endorsement
• Fireman's Fund Green Building Solutions