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NEWS UPDATE: Doubts Raised on Credibility of NAIOP Energy Efficiency Study

U.S. Green Building Council, Among Others, Voices Concerns Over the Study Released Last Week
March 4, 2009
Real estate and energy efficiency professionals have called into question the credibility of a study released last week by NAIOP, the Commercial Real Estate Development Association, which challenged the economic feasibility of developing office buildings with progressive energy efficiency goals.

Using energy models, the report found that 30 percent and 50 percent improvements in energy efficiency over code were not financially feasible for most new, Class A office construction. Developers striving for the 30 percent target would not recoup the cost of their initial energy efficiency investments within a 10-year period, while the 50 percent target was far beyond their reach, the study said.

In a statement citing the study, Thomas J. Bisacquino, president of NAIOP, called on policymakers who are considering tougher energy baselines in building codes to “realize the economic consequences that imposing mandated targets will have on the development industry.”

But energy efficiency advocates were quick to dispute the study’s findings, citing flawed assumptions and data that they said is incomplete or absent from the study altogether.

“Designing 30 percent better than code is a pretty darn easy thing to do if you know what you’re doing,” said Peter D’Antonio, president of PCD Engineering Services Inc., a Colorado-based firm that designs energy efficient buildings and conducts energy modeling and commissioning. “We know that to build more efficiently, it costs more money up front. But we’ve seen you can absolutely get that money back within 10 years.”

In a statement, the U.S. Green Building Council distanced itself from the NAIOP study, calling LEED-certified buildings “proof-positive that you can achieve 30% and greater energy efficiency using integrated design with little or no additional first costs.”

And in a biting memo posted Monday on the web site of Architecture 2030, a green building advocacy organization, the group’s founder, Edward Mazria, cast the NAIOP study as a “disinformation campaign” that was meant to “stall, confuse and distort” energy efficiency facts in advance of Senate hearings on improving building code standards.

“This type of activity by NAIOP not only hurts our country, it is also a disservice to their membership and all those in the Building Sector who work hard to deliver a high-quality, energy-efficient building product,” Mazria said.

The study examined common energy efficiency measures such as better insulation and high-performance HVAC equipment and window assemblies in a prototype Class A, low-rise office building of 95,000 square feet, which NAIOP said is representative of about 50 percent of total new Class A commercial construction. The building prototype was simulated for performance and energy cost differences in three U.S. climate zones, represented by Baltimore, Chicago and Newport Beach, CA.

The measures were modeled by ConSol, a California-based energy modeling firm, for their energy-saving potential over the ASHRAE 90.1-2004 building code standard. None of the models in the NAIOP study returned a 30 percent energy reduction within a 10-year payback period. In simulations, the Chicago model performed the best, achieving 23 percent energy savings with a payback period of about nine years. The Baltimore model achieved 21.5 percent savings with an 11-year payback period, while the Newport Beach model reached energy savings of about 16 percent with a payback period of more than 12 years.

But critics contend that glaring deficiencies in the study’s prototype building and methodology have skewed the results, with Mazria referring to the prototype used in the study as an “energy Hog.” An architect of 30 years, Mazria cited what he called flaws in the prototype's overall design, shape and orientation that, if properly addressed, could have made it more intrinsically efficient.

Buildings must be designed to be “responsive to their environments,” added PCD Engineering Services' D’Antonio, by taking into account factors such as climate and daylight that vary from region to region. “You don’t build the same building in Florida that you do in Chicago, and then plop it down all over the United States,” he said.

The study overlooked a number of highly cost-effective energy efficiency measures that are common in new buildings, such as light occupancy sensors and louvers that affect shading and heat gain, several people in the industry said, while integrated design strategies were not implemented in the models at all.

It calculated its financial payback analysis based on average commercial utility prices per state, when using actual rate schedules that apply to mid-sized office buildings would have been more accurate -- and likely decreased the length of the payback period -- several building operations experts said.

And the study failed to control for any financial incentives for energy efficiency in its economic analysis, despite the influential role of incentives from utilities and state and local governments in determining the economic viability of many efficiency projects.

Incentives knocked two years off of the projected payback period at a 70,000-square-foot educational facility in Utah where PCD Engineering is serving as a consultant. That project, which is under construction, is projected to be 35 percent above code on electric and 25 percent above code for gas, with a payback of roughly eight years.

Incentives are even more important for renewable energy, which often relies on subsidies to be financially attractive to developers.

Sustainable Energy Partners (SEP), a solar energy provider and green building consulting firm in San Francisco, has offset as much as 75 percent of the initial cost of solar projects through incentives and rebates, said Joe O’Connor, a vice president of the firm.

Payback periods for SEP’s solar projects in the solar-friendly state of California are routinely projected at less than seven years. Yet, the NAIOP study discredited solar energy as “economically impractical,” citing payback periods of 55 to 100 years.

O’Connor called the study “intentionally vague and misleading,” and said if SEP installed a solar system in Newport Beach of similar size to what was considered in the NAIOP data, the initial cost would be offset around year five with available incentives.

“Paybacks might be 55 years if you’re in Idaho and there’s no incentives, higher installation costs and your cost of energy was 5 cents per kilowatt-hour,” he said. “But that’s about the only case.”

EDITOR'S NOTE: This article has been updated since it was originally published after CoStar News learned that certain conclusions associated with this study that were included in the original announcement and reported in our original news account had been called into question. This revised version reflects our latest reporting on these issues.



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