Michael Kanellos
Green Building Gets Its Boost in California July 18, 2008 at 8:43 AM
Buildings are the George Harrison of green tech. Usually, it’s the first two guys–solar and biofuels–that come to mind when the green tech gets debated. Buildings are typically in the “oh yeah, that too” category.
But entrepreneurs and VCs are gravitating toward the topic and for good reason. Buildings account for nearly half of greenhouse gas emissions in the U.S. (the emissions come from generating power to run lights and HVAC systems.). Many investors also believe that green buildings will be one of the few sectors in green tech that will not require subisidies. Why? Buildings aren’t very energy efficiency so plenty of opportunity exists to cut waste and the components for cutting power aren’t orders of magnitude more expensive than conventional parts. Some major contractors have told me constructing a new building to at least low LEED standards only adds about three percent to the overall cost.
To prod the industry further, California has just announced a plan to adopt a construction code that will aim to cut energy usage in buildings by 15 percent and water use by 20 percent. Water for landscaping will be cut by 50 percent. The exact regulations for hitting these goals will likely be issued by late 2010 or early 2011. These are subisidies–just regulations, like CAFE standards.
Some companies to watch out for? In green homes, keep an eye on for Michelle Kaufman Designs, Zeta Communities, and Living Homes. Then there is Serious Materials (green drywall and energy efficient windows), Cal-Star Cement, Hycrete, Aspen Aerogels (thin, efficient insulation) Luminus Devices and all of the other LED companies, and Ice Energy (ice-powered cooling system) among others. Some of these and more companies will be displaying their products at West Coast Green in September.
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Green building is definitely under-rated in greentech discussions. People tend to argue that renewable energy is “too expensive” but they are referring to the use of renewable energy in wasteful buildings. When the building meets you halfway, renewable energy is essentially at grid parity. Then there’s the indirect energy savings from building with locally-sourced, low embodied energy materials. These savings are somewhat harder to quantify than savings in operating costs but they are real and significant nonetheless. The biggest hurdle I see to ubiquitous best-practices green building is the lack of incentive for the builder to go through the learning curve and extra expense. In most cases these days, the builder would get no return on their additional efforts and they tend to be thwarted by their surroundings (the last thing builder’s supply companies want is for builders to start using straw bales grown 15 miles away). This, coupled with general ignorance and misunderstandings of green building, is stifling its potential.
A silver lining though: a study done by the appraisal institute found a $20 increase in value for every $1 of annual energy savings (from efficiency or on-site renewables). That’ll help, but we need much more regulatory incentives to make it really succeed.
You are right. Buildings are where it is at. It is the only market that can succeed without subsidies.