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Five tips to finance green building

More efficient architectural, mechanical and electrical systems generally have a premium construction cost, but they are proven to have a short-term payback—when studied and designed holistically.

Page
02/27/2017

More efficient architectural, mechanical and electrical systems generally have a premium construction cost, but they are proven to have a short-term payback—when studied and designed holistically. Courtesy: PageAlthough many project teams aim to incorporate sustainable strategies into project designs, the construction cost of some of the most effective energy-conservation measures is often not included in the development of project budgets, which are frequently based on conventional design strategies. Managing construction-cost expectations requires close collaboration with cost estimators and contractors throughout the design process. Even with an integrated design team, many project teams must conduct a value-engineering (VE) process to align design goals with estimated construction costs. The disadvantage of any VE exercise is the potential loss of project quality or scope, which is acutely felt by high-performance building projects relying on design synergies to achieve performance targets. The careful calibration of systems in high-performance buildings is lost if components are removed or changed during the VE process.

The sustainable-design consultant’s role is to identify and endorse elements that add long-term value through high-performance design. Communicating the business case for sustainable design initiatives is critical. It is imperative in the early design stages to uncover the owner’s long-range energy-conservation goals.

More efficient architectural, mechanical and electrical (MEP) systems generally have a premium construction cost, but they are proven to have a short-term payback—when studied and designed holistically.

Communication is critical
This holistic approach requires coordination between the sustainable-design consultant, owner, facility management, contractor and mechanical and electrical engineer, among many others. In some cases, it may be imperative to consult a cost estimator and possibly a tax attorney. With the direction of the sustainable-design consultant, the project team can investigate strategies to effectively design systems and identify the residual impacts of decisions made as they navigate the design process. Detailed descriptions of multiple options can be provided to the contractor or cost estimator as the team coordinates with the owner to establish a realistic payback period for systems—and investigates tax and rebate incentives available. This investigation involves coordination with local utility companies to identify rebate opportunities, both performance-based and prescriptive.

High-performance building design actively seeks to synergize architectural and mechanical strategies. For example, when optimizing access to natural daylight, the sustainable-design consultant may recommend LED lights (with integral daylight sensors) that are located and circuited to enable appropriate dimming. (The initial cost of LED fixtures has fallen significantly in the past few years and are comparable to dimmable compact fluorescents.) Once mechanical systems are right-sized to account for the impact of natural daylight and a daylight-harvesting system, the financial impact from tax incentives and rebates is further optimized.

Online resources

Funded by the U.S. Department of Energy, the Database of State Incentives for Renewables & Efficiency provides a database of federal and local tax incentives, rebates and financing opportunities and includes information regarding qualification thresholds, dollar amount available and expiration dates.

Types of financing

The most common types of financing and incentive options available include the following:

PACE loans can be issued by municipal or county financing districts or financial institutions. The repayment process through property taxes is instrumental in this structure, because the loan is now associated with a property, not the owner, and is transferable upon sale of a building. This incentivizes capital improvements—without fear of capital loss—to a property that may have payback periods longer than an owner intends to own the building. 

This article originally appeared on Page’s blog, Page is a CFE Media content partner.

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