INVESTING IN THE FUTUREINVESTING IN THE FUTUREGREEN BUILDING POLICY AND FUNDING PROGRAMS

Spring into Wellness ConferenceMarch 19, 2009      

Maureen Guttman, AIA

Governor’s Green Government Council

Residential Electricity Bill Increases After Rate Caps

Met ED

PECO

PENELEC

PPL

West Penn

0%

10%

20%

30%

40%

50%

60%

70%

Perc

ent Inc

reas

e in

Tot

al B

ill

Projected Electricity Sources for Pennsylvania

-

20

40

60

80

100

120

140

160

180

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Mill

ions

of M

WH

Alternative EnergyAll Other Electricity

INDUSTRY25%

TRANSPORTATION27%

BUILDINGS48%

Source: Energy Information Administration Statistics and Pew Climate Report

Declining sources of fossil fuel

High cost to build new power plants

Price caps ending

NEW FUNDING FOR ALTERNATIVE ENERGY AND CONSERVATION

The Perfect Storm

$ American Recovery and Reinvestment Act

$ PA Alternative Energy Investment Act

$  

PA Demand Side Management – Act 129

$ PA Climate Change Advisory Council

•

Weatherization ‐

$5 Billion•

Energy Efficiency Block Grant $2.8 Billion–

Large cities and counties; $1.96 Billion (approx. $50 MM to $65 

MM to PA)

–

Local gov's

‐

small counties and municipalities; $448 Million 

(approx. $11 MM to $14.7 MM to PA)

–

State Energy Programs; $336 Million ( approx. $8.7 MM to $11 

MM to PA)

–

A competitive program $400 Million. •

State Energy Program:  $3.1 B –

($99.6 MM to PA)–

cost share waiver for SEP (20%) is included in the package as is

the waiver of the 50% capital cost limitation

AMERICAN RECOVERY AND REINVESTMENT ACT    ‐‐

2.12.09

AMERICAN RECOVERY AND REINVESTMENT ACT    ‐‐

2.12.09

•

$11 billion for variety of electricity related issues, including

R&D, 

pilot projects and matching funds for smart grid technology, in part 

intended to fund new power lines and expand existing lines related 

to renewable energy;

•

$8 billion for loan guarantees for renewable generation and 

transmission projects beyond the $11 billion;

•

$6 billion for federal energy efficiency projects at federal buildings;

•

$2.5 billion for

a new competitive program at HUD for low income 

energy efficiency projects;

AMERICAN RECOVERY AND REINVESTMENT ACT    ‐‐

2.12.09

•

$2.4 bill for

carbon capture and sequestration demonstration 

projects;

•

$2 billion for R&D for energy efficiency intended to be awarded 

competitively between labs, companies and universities;

•

$2 billion for advanced batteries loans and grants to support U.S. 

manufacturers;

•

$600 million for additional alternative‐fueled cars in the Federal 

fleet;

•

$500 million for energy efficiency manufacturing and 

demonstration projects;

AMERICAN RECOVERY AND REINVESTMENT ACT    ‐‐

2.12.09

•

$400 million to state and local governments to purchase alternative 

fueled vehicles and reduce carbon emissions;

•

$350 million to DOD for research into using renewables to power 

weapons systems and bases;

•

$300 million in grants and loans to state and local governments for 

projects that reduce diesel emissions, including technologies to

retrofit school bus emission exhaust systems, the replacement of

engines and vehicles and the establishment of anti‐idling programs; 

and

•

$200 million in grants to encourage electric vehicle technologies.

PENNSYLVANIA ALTERNATIVE ENERGY INVESTMENT ACT ‐‐

2008

$650 Million in Funding ProgramsAdministered Through:

•

Commonwealth Financing Authority•

Department of Environmental Protection

•

Ben Franklin Partners •

Pennsylvania Housing Finance Agency

•

Department of Public Welfare•

Department of Revenue

PENNSYLVANIA ALTERNATIVE ENERGY INVESTMENT ACT ‐‐

2008

Programs for Consumers and Small Businesses•

$100 Million for Solar Energy ‐

DEP

–

Rebates funded through bonds–

Up to 35% of project costs

•

$92.5 Million for Consumer Energy  Conservation Projects ‐

DEP

–

A mix of loans, grants and rebates–

Up to 25% of project costs

•

$25 Million for High Performance Bldgs

‐

CFA–

Standards by DGS in consultation with DEP

CFA ‐

$165 MILLION FOR THE FOLLOWING:Loans Grants

Businesses •Clean energy projects•Alternative energy 

production projects•Site preparation

•Alternative energy 

production projects•Site preparation

Non‐profit 

economic 

development 

organizations

•Clean energy projects•Alternative energy 

production projects•Site preparation

•Alternative energy 

production projects•Site preparation

Political 

subdivisions•Clean energy projects•Site preparation

•Clean energy projects•Site preparation

PENNSYLVANIA ALTERNATIVE ENERGY INVESTMENT ACT ‐‐

2008

Commonwealth Finance Authority

•

$80 Million for Solar Energy Projects–

May be loans or grants

–

Can include incentives for manufacturers–

No restriction on who can apply

•

$25 Million for Geothermal and Wind–

May be loans or grants

–

No restriction on who can apply–

For wind, may include manufacturing

PENNSYLVANIA ALTERNATIVE ENERGY INVESTMENT ACT ‐‐

2008

Other Programs

• $40 Million to the Ben Franklin Partners to Support Early‐Stage Activities

• $10 Million Annually over 4 Years to DPW to Supplement LIHEAP

• $5 Million to PHFA

for Home Efficiency  Loan Fund for Income‐Eligible Households

PENNSYLVANIA ALTERNATIVE ENERGY INVESTMENT ACT ‐‐

2008

Other Programs

• $25 Million for Pollution Control  Equipment

–

For coal‐fired power plants with less than 500  MW capacity

• $2.5 Million for Data Center Virtualization  Projects for Individuals and Small 

Businesses

PENNSYLVANIA ALTERNATIVE ENERGY INVESTMENT ACT ‐‐

2008

Alternative Energy Production Tax Credits•

Up to 15% of Total Costs of Development, Equipment and 

Construction, up to $1 Million/Year/Taxpayer

•

Taxpayer Includes a Person or Entity Subject to:–

Personal income tax–

Corporate net income tax–

Capital stock and franchise tax•

Total Credits Limited to:–

$5 million for each of first 4 years–

$8 million in 5th year–

$10 million in 6th and 7th years–

$2 million the 8th year

PENNSYLVANIA ALTERNATIVE ENERGY INVESTMENT ACT ‐‐

2008

“Clean Energy” Projects

•

Replaces/supplements existing energy system  w/ alternative energy system.

•

Installation of alternative energy systems in  existing or new buildings

•

“Facilitates” construction of high performance  buildings or site preparation for the same

•

Equipment improving energy efficiency:  heating, cooling, solar thermal.

•

ESCO projects.

PENNSYLVANIA ALTERNATIVE ENERGY INVESTMENT ACT ‐‐

2008

“Alternative Energy Production” Projects

•

Energy production or distribution from  alternative energy sources and clean coal

•

Manufacturing facilities producing equipment  and components for alternative energy 

production projects, alternative fuels, and  conservation.

•

R&D facilities for alternative energy or fuels•

Rail transport for alternative fuels

PENNSYLVANIA ACT 129 ‐‐

2008

Energy Efficiency and Conservation Program•

EDCs

must develop and receive approval from PUC for 

cost‐effective efficiency & conservation programs•

By May 31, 2011 consumption must be reduced by 1% 

below 2009 levels•

By May 31, 2013 consumption must be reduced by 3% 

(additional 2%) below 2009 levels•

By November 30, 2013 and every 5 years afterwards, 

PUC must analyze costs/benefits of continuing an EE/EC  program

PENNSYLVANIA ACT 129 ‐‐

2008

Energy Efficiency and Conservation Program

The EE/EC plans approved by PUC must also reduce  electric demand:

–

By May 31, 2013 reduction in the 100 peak hours of demand by 

4.5% from peak demand in 6/1/07 through 5/31/08–

By November 30, 2013 PUC must analyze costs/benefits and 

determine if continued reductions are warranted

KEY DRIVERS FOR EFFICIENCY

•High and volatile energy prices• Evolving national energy auditing 

standards• Access to training and education• Systems that channel the value of EE to 

those that create it – net metering, smart  grid, smart appliances

CHANGES TO LOOK FOR

• JOB CREATION–

Solar, wind, geothermal industries•

Manufacturing, Installation, Maintenance

–

Energy auditing–

Building operating engineers

–

High performance design/construction–

Code enforcement 

• INCREASING EE STANDARDS–

Incentives for high performance

–

“Green” Building Code provisions

MAUREEN GUTTMAN, AIAMAUREEN GUTTMAN, AIA

Governor’s Green Government

Council

www.gggc.state.pa.us

Productivity Benefits ofGreen Building

A Presentation for the Spring Into Wellness conference

March 19, 2009

David Sheridan, P.E., LEED-AP

Why build green?

The answer:

COST!

Which costs? Costs of building operation?

p The cost of energyp The cost of materialsp The cost of wastep Energy is the common denominator

Buildings use (and waste) a lot of energy and resources

p About 1/3 of the energy used in the U.S.p About 70% of the electric power used in

the U.S.p $150 billion of the energy used in U.S.

buildings each year is wasted.

We’ve all heard that electric power rate caps are expiring

Source: PA PUC

Building green will save moneyp Energy savings of

30% compared to a code-built building are fairly routine

p A green building can be built for the same cost as a code-built building

Sustainable practices are no longer optional – for most of us, anyway

p Right-sizing and debt reduction will dominate our thinking

p Conditions will encourage us to reduce, reuse, recycle

p Federal and state governments will encourage – strongly – conservation and improved efficiency

Added value of green buildings

p Royal Institution of Chartered Surveyors (property appraisers) 2005 study of buildings in UK, Canada, and USn “A link is beginning to emerge between the

market value of a building and its green features and related performance.”

Added value of green buildings

p RICS study deemed green buildings to improve asset value by:n Securing tenants more quicklyn Commanding higher rents or pricesn Enjoying less tenant turnovern Costing less to operate and maintain, in most

casesn Attracting grants, subsidies and other

inducementsn Improving business productivity for occupants

In the U.S., the Appraisal Institute

p LEED properties getting top market ratesp Accelerated lease-up for LEED propertiesp Less tenant turnoverp In residential, green moving faster than

traditional

What about personnel costs?

p Salaries and wages are the largest cost in most businesses

p Small, sustained productivity gains can translate into significant cost savings

p What do we know about the impact of green buildings on productivity?n More efficient productionn Less absenteeismn Less employee turnover

What do we know about green buildings and productivity?

p First, let’s look at some old stories:n Reno NV Post Officen PPL office buildingn Wal-Mart in Kansasn Lockheed office building

Reno NV Post Office

p 1986 renovation to improve energy efficiencyn Lower ceilings and better lightingn $300,000 capital cost

p Energy savings ~$50,000 annuallyp Productivity increased 6% (quiet, better-

lighted work environment)p Mistake rate decreased to lowest of any

PO in US

PP&L Office building

p Improved lighting in design office with task lighting

p Energy savings showed 4-year +/-payback

p Productivity increased 13%n Time for drafters to complete drawingsn Reduced payback to 2+ months

p Sick leave dropped 25%

Wal-Mart in Kansasp Daylighting with

skylights – installed in ½ of the store, due to budget constraints

p Sales higher in that area, compared to the rest of the store

p Sales higher in that area, compared to other stores

p Employees asked to be assigned to daylit area

Lockheed office building

p 60,000 square feet with 2700 occupantsp 1983 energy efficiency projectp ~4-year payback based on energy savingsp Absenteeism decreased by 15%

n Paid for improvements in <1 year

Schools

p Ventilation, acoustics, lighting, and thermal comfort

p Improved student test scoresp Improved teacher retentionp Less absenteeism – teachers,

staff, and students

Academic research into green schools

p Carnegie Mellon study: Better air quality –reduction in asthma, colds and flu

p Washington State study: Reduction in absenteeism and increase in test scores

p Capistrano School District: 20 % faster math learning and 26% faster reading learning

p North Carolina study: 20% improvement in grade level for students entering from low-performing schools in district

Health care

p Sheffield University (UK) study of Poole Hospital orthopedic unit

p Comparison of refurbished ward vsconventional wardn Patients required less pain medicinen Patients discharged in 6.4 days vs 8.1

days

Retail

p Natural light attracts shoppersp In study of 73 stores, daylighting

contributed to higher sales

Let’s not overstate green building benefits

p CoStar Study of LEED and EnergyStar buildingsn LEED buildings sold for 64% more than

conventional buildings ($171/sf premium!)n LEED buildings rented for 34% more than

conventional buildingsn EnergyStar buildings sold for 27% more

($61/sf premium)n EnergyStar buildings rented for 9% more

Problems with the CoStar study

p Very small sample, particularly the sample of LEED buildings

p Scarcity of comparables made comparisons perilous

Green Building Finance Consortium findings

p More modest $24/sf sale premium for LEED buildings – say 9%

Compare this finding to CoStar finding regardingEnergyStar buildings

New Tax Law Extends and Expands Tax Incentives

• Renewable production energy credits– Wind Placed-in service 2010– Other sources through 2011.

• Energy Credit– Extends the 30% investment tax credit for

solar and other types through 2016. Adds a 10% credit for combined heat and power system.

New Tax Law Extends and Expands Tax Incentives

• Geothermal Heat Pump Systems – 10% energy tax credit.

• Residential energy-efficient property – extends the credit for property place in service through 2016. Removes the $2,000 limitation on credit allowed for qualified solar energy property starting 1/1/09. Adds 30% geothermal heat pup credit.

New Tax Law Extends and Expands Tax Incentives

• Carbon mitigation – Some new provisions to reduce carbon emissions.

• Transportation– New tax credit for new qualified plug-in

electric drive motors of $2,500 plus $417 for each Kilowatt hour of the battery. Some limits on max. credit.

New Tax Law Extends and Expands Tax Incentives

• Bicycle commuters– There is a $20 per month fringe benefit

available for the use of a bicycle from Home to Office.

• Qualified energy conservation bonds – National Limit of $800 million and there is a tax credit based on the face.

New Tax Law Extends and Expands Tax Incentives

• Energy efficient commercial buildings – extends the deduction for another 5 years through 2013. Includes new interior or exterior lighting, heating and cooling systems and building envelope.

• Qualified Green building projects – extends the right to issue tax-exempt facility bonds for qualified green buildings design.

New Tax Law Extends and Expands Tax Incentives

Questions?