tag:blogger.com,1999:blog-88210301059822528392024-02-07T01:05:30.532-08:00China Green BuildingsA blog about green buildings and related sustainability topics in China.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.comBlogger51125tag:blogger.com,1999:blog-8821030105982252839.post-81969909541151856352009-06-26T09:18:00.000-07:002009-06-26T09:56:54.315-07:00More on MOHURD Three Star SystemToday I'm attaching another slideshow on MOHURD's Three Star green building rating system. This PPT was presented by Song Ling, head of MOHURD's Green Building Label Management Office, at the recent Canadian Embassy green building summit.<br /><br /><div style="width: 425px; text-align: left;" id="__ss_1645172"><a style="margin: 12px 0pt 3px; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; display: block; text-decoration: underline;" href="http://www.slideshare.net/geoff848/mohurd-three-star-system-how-does-it-work?type=presentation" title="MOHURD Three Star System- How Does It Work?">MOHURD Three Star System- How Does It Work?</a><object style="margin: 0px;" height="355" width="425"><param name="movie" value="http://static.slidesharecdn.com/swf/ssplayer2.swf?doc=20090324-090626112359-phpapp02&stripped_title=mohurd-three-star-system-how-does-it-work"><param name="allowFullScreen" value="true"><param name="allowScriptAccess" value="always"><embed src="http://static.slidesharecdn.com/swf/ssplayer2.swf?doc=20090324-090626112359-phpapp02&stripped_title=mohurd-three-star-system-how-does-it-work" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" height="355" width="425"></embed></object><div style="font-size: 11px; font-family: tahoma,arial; height: 26px; padding-top: 2px;">View more <a style="text-decoration: underline;" href="http://www.slideshare.net/">presentations</a> from <a style="text-decoration: underline;" href="http://www.slideshare.net/geoff848">geoff848</a>.</div></div><br /><br />On slide 5, Ms. Song introduces the Green Building Design Label (GBDL), which serves as a form of pre-certification. Developers can submit their design plans and earn a GBDL, which confirms that the building was designed to meet the Three Star rating system. The developers can then use this pre-certification to market the sustainability of the building to potential occupants or investors. It's unclear, however, what mechanisms require the developer to actually build to the design.<br /><br />The presentation then dives much more deeply into the nuts and bolts of the system and talks specifically about who actually rates the buildings for compliance. For buildings seeking 1- or 2-star ratings, they go through a local certification process that is run by the many universities and research institutes shown on slide 8. For buildings seeking 3-star, the rating must be approved by the Beijing office of MOHURD.<br /><br />Lastly, Ms. Song presents a list of the 10 green building projects certified in 2008. The list is all in Chinese obviously, but some of the more important buildings include #1, Shanghai Research Institute of Building Sciences office; #3, the Shanghai 2010 World Expo Center; and #7, Shenzhen's Vanke City. All of these buildings achieved the highest 3-star rating. Also of note is #6, the Bank of China headquarters in Beijing, which received a 1-star rating. As more leading Chinese companies build green buildings, it will begin to drive market transformation. I wouldn't expect ICBC or China Construction Bank to be far behind.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com1tag:blogger.com,1999:blog-8821030105982252839.post-38331650025938543242009-05-08T05:47:00.000-07:002009-05-09T00:04:16.431-07:00Groundbreaking report: many barriers exist to building energy efficiency and carbon pricing alone is not enoughThe World Business Council for Sustainable Development has just released a huge report on building energy efficiency called <a href="http://www.wbcsd.org/plugins/DocSearch/details.asp?type=DocDet&ObjectId=MzQyMDY">Transforming the Market</a>. The report is the result of four years of hard work and a first of its kind computer model that attempts to incorporate how regulations, price signals and behavior change can affect global energy use in buildings. The report focused on buildings in the six largest building markets: Brazil, China, Europe, India, Japan, and the US.<br /><br />The report reconfirms that buildings represent a vast source of low-cost investment opportunities to reduce CO2 emissions. However, much to my surprise, these investments will generally cost more than previously thought. I will come back to this point at the end of my post.<br />The report drives home the message that in order to capitalize on these carbon reduction opportunities, the building industry must start transforming itself TODAY.<br /><br /><span style="font-weight: bold;">The need for transformation</span><br />As the report notes, building energy efficiency isn’t a problem of technology. It’s a problem of scale:<br /><blockquote>Some very low-energy new homes already exist in many countries, demonstrating that our energy targets are technically achievable. But these examples show little sign of being scaled up globally. Low-energy buildings must become the norm rather than the novelty project.<br /></blockquote>The report identifies several key structural barriers that are preventing broad take-up and snowballing of energy efficiency solutions<br /><ul><li> A lack of transparency about energy use and cost, resulting in a limited focus on energy costs by all those in the building value chain, with viable investment opportunities overlooked and installed technology not operating at optimal levels</li><li>Public policies that fail to encourage the most energy-efficient approaches and practices, or actively discourage them</li><li>Delays and poor enforcement of policies and building codes, which concerns all countries</li><li>Complexity and fragmentation in the building value chain, which inhibits a holistic approach to building design and use (described in their <a href="http://www.wbcsd.org/plugins/DocSearch/details.asp?type=DocDet&ObjectId=MjAzMDA">first report</a>)</li><li>A lack of adequate offers today (affordable and quality energy-efficient solutions for new constructions and retrofitted works, adapted to local contexts)</li><li>Split incentives between building owners and users, which mean that the returns on energy efficiency investments do not go to those making the investment </li><li>Insufficient awareness and understanding of energy efficiency among building professionals – identified in EEB research published in the first report – which limits their involvement in sustainable building activity and results in poor installation of energy-related equipment.<br /></li></ul>I’ve come across these same barriers time and again in my China green building research, so it’s not surprising to me that the barriers are global.<br /><br />The report also does an interesting case study of a multifamily housing unit in Northern China on Page 36. The authors model both a base case, where energy use triples between now and 2050, and a Transformation case, where an aggressive mix of policies and technology restricts the growth in energy use to 63%. Although the Transformation case still results in high growth of energy use, it results in a 50% reduction in emissions over the baseline case. But most importantly, this 50% energy use reduction over baseline pays for itself. The authors estimate this scenario will require an additional investment of $12bn per year, but will pay for itself with about $12bn of energy savings annually. So to me, the choice seems like a no-brainer: either aggressively implement policies that pay for themselves and result in 50% less CO2 emissions or do nothing and watch climate change rip the planet apart.<br /><br />But as the report notes, it’s not a simple question of economics. Achieving the aggressive energy efficiency goal won’t be easy and will require a lot of strong policies, including:<br /><br /><ol><li> Audit energy performance of apartment buildings; introduce labeling systems to provide transparency, and enforce increasingly strict building energy codes</li><li>Strengthen building codes and ensure adequate audit and enforcement capacity</li><li>Introduce heavy subsidies to achieve high performance in existing and new buildings, including significant feed-in tariffs for on-site generation</li><li>Require sub-metering, apartment level controls and charging according to use</li><li>Revise legal frameworks to overcome barriers to collective refurbishment of apartment buildings</li><li>Impose regulations to phase out low-performing buildings, including a requirement for zero net energy, new, low-rise buildings from 2020</li><li>Government authorities and other owners of social housing must act on their property portfolios</li><li>Initiate a mobilization campaign to motivate behavior change by owners, project developers, tenants and reinforce the message to fully establish a change in behavior</li><li>Educate and train developers, architects, engineers and the building trades to improve understanding of code requirements, illustrate the advantages of integrated design and alleviate concerns for higher costs</li><li>Promote energy service companies (ESCOs) as effective energy managers for building owners, especially public housing authorities</li><li>Promote onsite renewable generation for all new low-rise buildings<br /></li></ol>It’s not clear that China can find the political will to implement all these policies and get to the Transformation level. But at least this case study provides yet more evidence that he Chinese government should undertake these policies knowing that both the economic case is pretty solid. Again, the overall economics are not the problem; rather it is the many structural barriers listed above.<br /><br /><span style="font-weight: bold;">Building energy efficiency isn’t free</span><br />One of the more surprising conclusions of the report was this idea that building energy efficiency investments will cost more than many (me included) assume.<br /><br />The authors divide the investment into three batches: those with paybacks of 5 years or less, those with paybacks of 5-10 years, and those with paybacks of more than 10 years. The authors suspect that there are about $150 billion worth of annual investments with paybacks of less than 5 years that will result in 40% carbon reductions by 2050. There is also about $150 billion worth of annual investments with paybacks of 5-10 years that will result in an additional 12% carbon reduction, totaling 52% below business as usual. The authors do not calculate a figure for investments with paybacks over ten years. As I’ve mentioned before, I have a problem with payback period, but this is still interesting to see so many good investment opportunities with less than 10-year paybacks. When energy savings are added to the ~$300bn in investment<br />shown above, this results in a net annual cost of about $250bn.<br /><br />The authors also note that despite this relatively large cost number (1.5% of global GDP), building energy efficiency investments have much better economics than carbon reduction opportunities in other sectors. Building energy efficiency can also be implemented immediately and creates jobs, further lowering the net overall cost.<br /><br /><span style="font-weight: bold;">A carbon price alone won’t be nearly enough</span><br />As the report notes:<br /><blockquote>EEB modeling shows that increasing the price of energy or carbon will only slightly increase the implementation of energy-efficient options. In fact, reductions would only marginally increase from 52% at today’s energy prices to 55% with an incremental carbon cost of US $40/ton.</blockquote>This fits very well with <a href="http://chinagreenbuildings.blogspot.com/2009/02/another-look-at-carbon-finance-for.html">my earlier analysis</a> showing that at current carbon prices, the CDM or other carbon price only gives a 20% sweetener to energy efficiency investments, probably not enough to make a whole lot of difference.<br /><br />This unfortunate fact means that mere passage of a cap and trade bill will not be enough to get us to where we need to be. It also reinforces a statement made by Michael Hoexter, author of the indispensable <a href="http://terraverde.wordpress.com/2009/02/04/carbonpricing2/">Green Thoughts blog</a>:<br /><blockquote>The premise of carbon pricing as a complete climate solution, as opposed to “command and control” regulation, is that regulators and the designers of a carbon pricing do not know the technological solutions to reducing carbon emissions, in keeping with the monetarist/free market tendency to view scientific knowledge as limited in scope and not generalizable. The market becomes a “black box” that produces innovation or favorable and/or efficient social results. In practical terms this could mean that designers of the policy are thought not to be cognizant of industry inside knowledge or that no one can know what the future will bring in terms of technological development. Entering into a carbon pricing system then means embarking on a technological and economic “voyage of discovery”.<br /><br />If one believes that one knows or we know at least a portion of the technological solutions to reducing carbon emissions, carbon pricing would be in many instances a roundabout solution for supporting those solutions.</blockquote>We know most of the solutions needed to drastically reduce building energy use and carbon emissions. I’ve blogged about many of them, including <a href="http://chinagreenbuildings.blogspot.com/2009/02/heating-in-china-inefficiency-and.html">improved insulation</a>, <a href="http://chinagreenbuildings.blogspot.com/2009/02/building-combined-heat.html">combined heat and power</a>, and <a href="http://chinagreenbuildings.blogspot.com/2008/12/beijing-energy-network-talk-on.html">integrated design</a>. Most of them are fairly mature technologies or processes and most are fairly low-cost. The issue is the many barriers to implementation listed above. Therefore, a carbon price alone will not be enough to access all of the emission reduction opportunities the built environment has to offer.<br /><br />As the WBCSD says, “building professionals, owners and users do not grasp the urgency and remain unmotivated to act.” Governments and citizens need to start motivating these actors to achieve energy savings and emission reductions in the built environment.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com1tag:blogger.com,1999:blog-8821030105982252839.post-87749835380120804152009-05-07T04:16:00.000-07:002009-05-07T08:20:29.041-07:00More on Ministry of Construction’s Three Star Rating SystemOne of the hardest parts about studying green buildings in China has been the difficulty of finding accurate, publicly available information on green building policies. Nowhere has that been more true than with the Ministry of Construction/ Ministry of Housing and Urban Rural Development Green Building Evaluation Standard, or “Three Star System”.<br /><br />I was lucky to get the <a href="http://chinagreenbuildings.blogspot.com/2009/02/ministry-of-construction-green-building.html">English translation of the Three Star System</a> that I previously posted. This has been my most popular post to date, so I’m following that up today with a presentation that should shed more light on the Three Star Rating System.<br /><br />Gunnar Hubbard, a LEED expert and Principal at <a href="http://fore-solutions.com/about/">Fore Solutions</a>, recently gave a great presentation at a green building event at the Canadian Embassy in Beijing detailing the differences between Three Star and LEED. I’ve embedded that presentation below.<br /><br /><div style="width: 425px; text-align: left;" id="__ss_1399054"><a style="margin: 12px 0pt 3px; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; display: block; text-decoration: underline;" href="http://www.slideshare.net/geoff848/gunnar-hubbard-leed-vs-three-star-green-building-rating-systems-1399054?type=presentation" title="Gunnar Hubbard- LEED vs Three Star Green Building Rating Systems">Gunnar Hubbard- LEED vs Three Star Green Building Rating Systems</a><object style="margin: 0px;" height="355" width="425"><param name="movie" value="http://static.slidesharecdn.com/swf/ssplayer2.swf?doc=beijingratingsystemcanadianembassyunlocked-090507050553-phpapp01&stripped_title=gunnar-hubbard-leed-vs-three-star-green-building-rating-systems-1399054"><param name="allowFullScreen" value="true"><param name="allowScriptAccess" value="always"><embed src="http://static.slidesharecdn.com/swf/ssplayer2.swf?doc=beijingratingsystemcanadianembassyunlocked-090507050553-phpapp01&stripped_title=gunnar-hubbard-leed-vs-three-star-green-building-rating-systems-1399054" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" height="355" width="425"></embed></object><div style="font-size: 11px; font-family: tahoma,arial; height: 26px; padding-top: 2px;">View more <a style="text-decoration: underline;" href="http://www.slideshare.net/">presentations</a> from <a style="text-decoration: underline;" href="http://www.slideshare.net/geoff848">geoff848</a>.</div></div><br /><br />On slide 22, Gunnar notes that the growth of LEED registered projects in China and Dubai far outpaces any other non-US country. China has nearly 150 LEED registered projects and about 20 LEED certified projects.<br /><br />According to statistics from my advisor Borong Lin, associate professor in Tsinghua University’s Department of Building Sciences, China has only 10 buildings certified under the Three Star Rating System. But growth is strong: there are between 50-100 buildings going for certification this year.<br /><br />Professor Lin says that the government is currently drafting a regulation that will require all new government buildings to achieve at least a 1-star rating. The government will also be drafting a list of incentives for developers who pursue certification. These incentives will include tax breaks, lower interest rates and preferential financing, and increased <a href="http://en.wikipedia.org/wiki/Floor_area_ratio">Floor-to-Area Ratio</a> incentives. All of these incentives will bring down the upfront cost premium for Three Star buildings, currently about 2% for 1-Star all the way up to 10% for 3-Star. Both of these policies are expected to be unveiled next year. This is great news, and these steps are exactly what I advocated for in my <a href="http://chinagreenbuildings.blogspot.com/2009/04/two-pronged-approach-bottom-up.html">Bottom Up Approach</a>.<br /><br />Pegging incentives and regulations to Three Star will be a huge driver for growth in the number of buildings seeking certification. One of the big reasons so many buildings in the US have pursued LEED is because municipalities and states have pegged their policies to LEED. As China increasingly pegs their policies to Three Star, expect to see more buildings pursuing this system. I would also expect that any Chinese building seeking LEED will also seek Three Star. This dual certification ensures the best of all worlds: an international, third-party certification that appeals to multinational tenants as well as a local certification that allows for accessing of green building incentives and helps drive market transformation.<br /><br />Professor Lin captured the interplay between LEED and Three Star with a great metaphor: LEED and Three Star are like two climbers taking different paths to the top of a mountain. LEED already has already started trekking up the mountain, and Three Star has been able to learn what worked and what didn’t work by watching LEED's path. Both hope to get to the top, but it isn’t a race. There is room for everybody at the top, and hopefully they can help each other out on the way. The important thing is that they reach the top of the mountain. As Gunnar notes on Slide 5, the goal of ALL rating systems is market transformation. Hopefully the Three Star Rating System will reach the top of the mountain soon and achieve the goal of transforming the real estate market in China into a greener, healthier place.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com3tag:blogger.com,1999:blog-8821030105982252839.post-31556982820762875662009-05-06T04:07:00.000-07:002009-05-06T04:27:09.544-07:00Green jobs in China’s built environmentGreen jobs are hot. The idea of green jobs - <a href="http://www.greenforall.org/resources/greener-pathways-jobs-and-workforce-development-in">family-supporting jobs that contribute significantly to preserving or enhancing environmental quality</a> - has gained significant traction in America over the last two years, culminating in President Obama’s appointment of <a href="http://en.wikipedia.org/wiki/Van_Jones">green jobs guru Van Jones</a> to Special Advisor for Green Jobs, Enterprise and Innovation.<br /><br />While the concept hasn’t been as hot in China, the opportunity for green jobs is massive. This post will explore the opportunities for green jobs in China, particularly those in building energy efficiency.<br /><br /><span style="font-weight: bold;">Unemployment in China</span><br />Despite China’s strong growth over the last quarter century, many Chinese across the age and skill spectrum still have trouble finding good jobs. In this blog post, I will focus on two particular types of people having trouble securing good jobs, migrant workers and recent college graduates.<br /><br /><span style="font-style: italic;">Migrant worker unemployment</span><br />The global economic crisis has hurt Chinese migrant workers particularly hard. <a href="http://china.blogs.time.com/2009/02/02/more-migrant-workers-unemployed/">20 million migrant workers have lost their jobs</a> since the start of the downturn, nearly 15% of the total migrant labor pool. Many of these migrant workers were employed in factories in the Pearl River Delta region or in the construction trades throughout the country. These migrant workers are generally untrained and have limited skills, with <a href="http://www.blogger.com/www.jil.go.jp/event/itaku/sokuho/documents/20040924/china.pdf">one study (PDF) indicating</a> that less than 20% of migrant workers have received any type of training. <a href="http://news.bbc.co.uk/2/hi/asia-pacific/7864293.stm">The government is worried</a> about the potential for these large numbers of unemployed migrant workers to cause social unrest.<br /><span style="font-style: italic;"><br />Youth unemployment</span><br />But it’s not just low skilled migrant workers. youth in China also face severe employment pressure. In fact, youth account for a majority of the unemployed: over 70% of the unemployed are under 35, <a href="http://www.blogger.com/www.jil.go.jp/event/itaku/sokuho/documents/20040924/china.pdf">according to an academic study (PDF)</a>.<br /><br />And while a college degree certainly improves the chance of finding a job, only 70% of college graduates find jobs upon graduating. This means that <a href="http://news.xinhuanet.com/english/2009-01/11/content_10639139.htm">nearly 1.5 million college graduates</a> failed to find jobs in 2008.<br /><br /><span style="font-weight: bold;">Greening the Built Environment</span><br />Greening the built environment is a huge opportunity to find employment for both of these groups and many others. As I’ve mentioned time and again in my blog, the Chinese built environment is extremely inefficient, but many low-cost solutions exist to make it much greener. Implementing these solutions will require significant manpower, particularly from migrant workers and college graduates. In this post I will profile two possible solutions, but many, many more opportunities exist for the creation of good green jobs that simultaneously lift Chinese people out of unemployment and poverty and result in a greener, healthier built environment.<br /><br /><span style="font-style: italic;">Retrofitting poor insulation</span><br />As I noted in <a style="color: rgb(0, 0, 0);" href="http://chinagreenbuildings.blogspot.com/2009/02/heating-in-china-inefficiency-and.html">my post on China’s inefficient heating systems</a><span style="color: rgb(0, 0, 0);">, Chinese buildings have extremely poor insulation:</span><br /><br /><span style="font-weight: bold; color: rgb(0, 0, 0);"></span><blockquote style="color: rgb(0, 0, 0);"><span style="font-weight: bold; color: rgb(204, 204, 204);"><br /></span><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8VRY9U7g5u4TD6tMnvZEps-VMEKWeWjl_-_tjP7Y97YUtguDKBmsu7b1JLF7yfwC2RJxMvCbHwa2LcovFtIFNdli44WFO_p9425HY7QNSLhRiBdnzQN3Gdt9vRubqFhpTCetO0oojn9Dw/s1600-h/Asia+Business+Council+Building+Energy+Efficiency.pdf.jpg"><img style="cursor: pointer; width: 400px; height: 231px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8VRY9U7g5u4TD6tMnvZEps-VMEKWeWjl_-_tjP7Y97YUtguDKBmsu7b1JLF7yfwC2RJxMvCbHwa2LcovFtIFNdli44WFO_p9425HY7QNSLhRiBdnzQN3Gdt9vRubqFhpTCetO0oojn9Dw/s400/Asia+Business+Council+Building+Energy+Efficiency.pdf.jpg" alt="" id="BLOGGER_PHOTO_ID_5304867132698760866" border="0" /></a><br /></div><span style="color: rgb(0, 0, 0);">As the results of the </span><a style="color: rgb(0, 0, 0);" href="http://www.asiabusinesscouncil.org/BEE.html">Asia Business Council expert interviews</a><span style="color: rgb(0, 0, 0);"> above show, the primary factor affecting a building’s heating load is the building envelope and the insulation it provides between the interior of a space and the outdoor environment. The worse the insulation, the more energy transfer between the indoor and outdoor environment. When it’s cold outside, this means the cold air comes in, and the hot air goes out, resulting in a lot of wasted energy as well as occupant discomfort.</span><span style="color: rgb(0, 0, 0);"> </span><span style="color: rgb(0, 0, 0);">As the graph below shows, insulation in Beijing (and the rest of China) is significantly worse than the developed world’s, and allows much more heat (in the form of energy) to escape to the outside.</span> <div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxl3goDJz8oh8WXuNLn7sPFlgjm1HhFOfhFmY7WHPC5Yhln6E1O5QW7-hxGoRHNIRSRs2Gg102nIat54lFDK4Y5776XKg83Bx9B1eiiGCL1YTTjoj00I_xRIqmFLq8QVO0Y0fTxaxolQpB/s1600-h/heating+inefficiency+in+china.jpg"><img style="cursor: pointer; width: 400px; height: 250px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxl3goDJz8oh8WXuNLn7sPFlgjm1HhFOfhFmY7WHPC5Yhln6E1O5QW7-hxGoRHNIRSRs2Gg102nIat54lFDK4Y5776XKg83Bx9B1eiiGCL1YTTjoj00I_xRIqmFLq8QVO0Y0fTxaxolQpB/s400/heating+inefficiency+in+china.jpg" alt="" id="BLOGGER_PHOTO_ID_5304867136714201202" border="0" /></a><br /></div><div style="text-align: center;"><span style="font-size:85%;">Graph based on data from Chinese Academy of Building Research<br /><br /></span></div><span style="color: rgb(0, 0, 0);">My anecdotal evidence backs this up: I can feel the cold when I put my finger against the glass of almost any window in Beijing, even in high-end apartment buildings. One major exception thus far was the </span><a style="color: rgb(0, 0, 0);" href="http://www.blogger.com/chinagreenbuildings.blogspot.com/2009/02/linked-hybrid.html">Linked Hybrid</a><span style="color: rgb(0, 0, 0);">, which as I mentioned here, focused on high-quality insulation.</span><span style="color: rgb(0, 0, 0);"> </span> <span style="color: rgb(0, 0, 0);">Investing in improved insulation is a win-win-win, resulting in higher thermal comfort for occupants, and less energy use and GHG emissions at low cost. Insulation works “year round”, in the sense that improved insulation reduces heating energy use in the winter, but also reduces cooling energy use in the summer. This is really important, since as we can infer from the LBL graph above, in addition to the southward creep of space heating units, there is also a northward creep of air conditioning units.</span><span style="color: rgb(0, 0, 0);"> </span><span style="color: rgb(0, 0, 0);">Maybe the best part about investments in insulation is that they are also a win financially. As the </span><a style="color: rgb(0, 0, 0);" href="http://www.blogger.com/www.mckinsey.com/clientservice/ccsi/pathways_low_carbon_economy.asp">McKinsey global GHG abatement cost curve </a><span style="color: rgb(0, 0, 0);">below shows, investments in insulation are one of the lowest cost sources of carbon emission reductions available.</span> <div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjcRUTg-fSOi9XgPlVcy7PLqDtakY4tCV-e9x6U5gnE5v2nsCbARBRenGh6KBQ9z2cXLZ5yxPj9sMRL2ySb1JHGEg44n17zRv-yGj9SM6lgbEANMUMLEYaqFazvrfqPf6EqxIkixAhKnXrn/s1600-h/insulation+retrofits.jpg"><img style="cursor: pointer; width: 400px; height: 293px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjcRUTg-fSOi9XgPlVcy7PLqDtakY4tCV-e9x6U5gnE5v2nsCbARBRenGh6KBQ9z2cXLZ5yxPj9sMRL2ySb1JHGEg44n17zRv-yGj9SM6lgbEANMUMLEYaqFazvrfqPf6EqxIkixAhKnXrn/s400/insulation+retrofits.jpg" alt="" id="BLOGGER_PHOTO_ID_5304867255337057042" border="0" /></a><br /></div><br /></blockquote>In that post, I also noted that improved insulation is a win-win-win: more thermal comfort; less energy use and CO2 emissions; and a low cost that quickly pays for itself. And because upgrading all that insulation requires significant hands-on labor, we can add yet another win: <span style="font-style: italic;">green jobs</span><span style="font-weight: bold;">.</span><br /><br />Improving insulation is straight out of Van Jones’s playback. <a href="http://greeninc.blogs.nytimes.com/2009/02/27/biden-luminaries-promote-green-jobs/">He is well known for saying</a> inner city youth should “put down those handguns and pick up those caulking guns” and start saving energy by improving insulation in buildings.<br /><br />Putting some of the 20 million migrant workers (many of who were in construction trades before) into retrofitting building insulation would be a great way to simultaneously increase employment and reduce energy use and CO2 emissions.<br /><br /><span style="font-style: italic;">Poor code compliance</span><br />As I described in my <a href="http://chinagreenbuildings.blogspot.com/2009/04/two-pronged-approach-top-down.html">post on the Top Down Approach</a>, compliance with Chinese building energy codes is dismal:<blockquote><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5i6yvqvFuYBNw7Eg0WxiPEUuhWpvqK7d7InSaAi-SyQOx26SShz70x0BoYLjkA-xcFykjlSlwvkho6VeJ_quJW87rOn3o9RbGoK5mKkuNVi6RJhLLWY7Pb1j2-udBwXZEufByl15wnFVm/s1600-h/IEA+presentation+on+Buildings.pdf-1.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 299px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5i6yvqvFuYBNw7Eg0WxiPEUuhWpvqK7d7InSaAi-SyQOx26SShz70x0BoYLjkA-xcFykjlSlwvkho6VeJ_quJW87rOn3o9RbGoK5mKkuNVi6RJhLLWY7Pb1j2-udBwXZEufByl15wnFVm/s400/IEA+presentation+on+Buildings.pdf-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5324771057711758226" border="0" /></a><br /><a href="http://www.blogger.com/www.iea.org/textbase/work/2008/meeting_goals/Hinge_Buildings.pdf">As the data shows (PDF)</a>, compliance with energy codes in China is poor throughout the country. The disparity between design and construction compliance also shows the willingness of developers to <a href="http://www.chinadaily.com.cn/bizchina/2008-01/14/content_6391282.htm">“cheat” when faced with the perception of increased costs</a>. Given that many Chinese building dont even currently comply with mandatory building energy codes, it seems unlikely that these developers and owners will be willing to voluntarily take the jump to green buildings.<br /><br />Therefore, the Chinese government must step in and force these laggard developers to improve their energy efficiency. The current mandatory building energy code, which mandates 50% savings over 1980 levels for new buildings, is a good start. But now the hard work of actually enforcing this code must begin. Several US groups, including <a href="http://www.nrdc.org/air/energy/china/greenbuildings.asp">NRDC</a> and the <a href="http://www.pnl.gov/news/release.asp?id=337">US DOE Pacific Northwest National Laboratory</a>,are working with Chinese government to help them develop the capacity needed to enforce the codes.</blockquote>One of the big reasons buildings don’t often comply with building codes is that MOHURD (formerly MoC) doesn’t have enough employees to check every building. Certifying and establishing energy use levels for the millions and millions of Chinese buildings will require significant skilled manpower. As the NRDC notes in their <a href="http://docs.nrdc.org/international/int_09021801.asp">recent strategy paper on US-China cooperation on climate change</a>,<br /><blockquote>In China in particular, this new paradigm [stopping climate change] will also require heavy investment in effective environmental enforcement, including accurate environmental monitoring and reporting, well-trained environmental regulators and enforcement officials. </blockquote>As part of this program, Kevin Mo, the director of NRDC’s China Sustainable Building program, will be lobbying the Chinese government to expand their hiring and training of building energy code certifiers. And who are the likely candidates to fill these jobs? Ideally, the many unemployed Chinese college graduates. Most will lack the specific skills needed for these jobs, but have the necessary capacity to learn these skills. The government will then provide the specific skills training and the jobs. In this way, young Chinese will be able to find good jobs and help reduce energy use in the built environment at the same time.<br /><br /><span style="font-weight: bold;">Efficiency is WIN-WIN</span><br />In addition to being the largest source of cheap carbon emission reductions, building energy efficiency is also the largest source of good green jobs. The <a href="http://www.ilo.org/public/english/region/asro/beijing/whatwedo/greenjobs.htm">UN’s International Labor Organization notes</a> that:<br /><blockquote>The great majority of efficiency measures, especially in the building sector, show positive employment and economic effects. A study undertaken in 2000 by the British Government concluded that, for every $1.4 million (€1 million) invested in residential energy efficiency, 11.3–13.5 full-time equivalent (FTE) jobs were created. Half the economic potential for efficiency gains in buildings is located in developing countries, but no data on existing or potential jobs are available for that part of the world.</blockquote><br />Given how inefficient Chinese buildings are, it will take a lot of manpower to fix them up. China should embrace the built environment as the best place to simultaneously reduce carbon emissions and create green jobs.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com1tag:blogger.com,1999:blog-8821030105982252839.post-52978807753204956962009-04-30T03:38:00.000-07:002009-05-05T19:59:15.168-07:00Green Building Economics 102: Affordable Green HousingThe key takeaways from my last post on <a href="http://chinagreenbuildings.blogspot.com/2009/04/green-building-economics-101.html">green economics</a> is that green building is more valuable and many people are willing to pay more for green buildings. This is great for the high-end of the market, but what does this mean for affordable housing? Obviously if green housing is more valuable, i.e. more expensive, this means green housing might be less affordable for potential buyers. How can we balance the need to keep green housing affordable with the green economics I presented last time? That is the focus of my post today.<br /><br /><div style="text-align: left;"> (In this post, I will make the assumption that affordable housing is owned by the occupant. Of course, this is not always the case, but this simplifying assumption doesn’t actually change the underlying economics and makes it easier to write this post. If you are interested in how this would apply to renters, please email me and I would be happy to talk with you.)</div><p></p> <b>Affordable housing in China<br /></b><span style="letter-spacing: 0px;">In China, as elsewhere, “affordable housing” usually means keeping upfront cost as low as possible. A pillar of China’s affordable housing program has been government subsidized development of affordable housing under the 经济适用房 or “Economical and Comfortable Housing” program. This program consists of a combination of subsidies in the form of land grants and reduced taxes and caps on developer profits to keep upfront prices low. For more info on this policy, see this <a href="http://www.jchs.harvard.edu/publications/international/w05-7.pdf">Harvard Joint Center on Housing Study report (PDF)</a>. </span><span style="letter-spacing: 0px;">Although I am not an affordable housing expert, this program seems to have been pretty effective in creating affordable housing: in 2003, for example, Economical and Comfortable Housing accounted for nearly a quarter of all housing units sold in Beijing. Despite these successes, </span>China still does not have enough affordable housing to satisfy its lower- and middle-class populations and the government is trying hard to fix this situation. The government is <a href="http://www.china.org.cn/government/central_government/2009-03/31/content_17527092.htm">embarking on the construction of 7.5 million affordable urban homes</a> between now and 2011, and an additional 2.4 million affordable rural homes.<p></p>On the surface, this approach of minimizing upfront costs makes sense. Certainly, those less well-off will have less ability to save and purchase homes. So subsidization means that more families are able to afford the down payments needed for these home. However, this narrow focus on upfront cost ignores any element of lifecycle costs. In many cases, the cheaper upfront option is actually much more expensive over its lifecycle, and in some cases, significantly more expensive.<br /><br /><span style="letter-spacing: 0px;">In the case of this affordable housing program, I suspect that something like this happens: the developer designs the building one way and convinces the authorities to allocate his pre-determined profit margin based on those estimated costs. When it comes time for construction, the developer then has an incentive to cut as many corners as possible in order to reduce costs and max out profit. This is certainly a skeptical view, but given the compliance rates I showed in a <a href="http://chinagreenbuildings.blogspot.com/2009/04/two-pronged-approach-top-down.html">recent post</a>, this is unfortunately a likely reality. </span><p></p> <span style="letter-spacing: 0px;">The result? In most cases, the developer uses cheaper insulation and poorer insulating materials. The developer then sells off the property and washes his hands of any responsibility for the long-term operating costs of the building. The new owners, who were ostensibly buying this home because it was affordable, are now saddled with an energy inefficient home. Every year for the life of the building, the new owners will have to pay more in utility costs. Moreover, when it comes time to sell, what do you think will happen to the value of this home? That’s right, it will have depreciated greatly thanks to poor quality and high energy bills. So as we can see, even though this home was cheaper upfront, it carries a much larger lifetime cost. Who could call this affordable?</span><p></p> <span style="letter-spacing: 0px;"><b>What does affordable really mean?</b></span><p></p> <span style="letter-spacing: 0px;">In order to properly define affordable, we must move beyond this narrow definition of affordability and consider total cost of ownership (TCO). TCO measures how much it costs to occupy a house or apartment annually, and includes everything from rent (or mortgage) to utilities, maintenance and taxes and can even include transit fees related to daily commute. Using this definition, homes with lower TCO are affordable, while homes with high TCO are not. After all, an avoided expense is just as good as money in the bank, in the sense that both increase a citizens ability to save and spend. </span><p></p> <span style="letter-spacing: 0px;"><b>Total cost of ownership for green homes is lower</b></span><p></p> <span style="letter-spacing: 0px;">As I said in my post on green economics last week, it’s obvious that operating costs for green buildings are lower than comparable buildings. Therefore, it also makes sense that TCO for green homes should be lower than their energy-guzzling brown counterparts. </span><p></p> <span style="letter-spacing: 0px;">A <a href="http://blog.michellekaufmann.com/?p=1331">recent study by Michelle Kuafmann</a>, a green home guru in Northern California, confirms that TCO is lower for green homes</span><span style="letter-spacing: 0px;">. Even with a 3% cost premium for green features and the larger resulting mortgage, green homes still cost less, thanks to lower utility bills. Unfortunately, the increase in mortgage costs due to the green premium drowns out a lot of the utility bill savings, resulting in a pretty meager $2 in gross savings over the conventional building. (Note: Unlike the US, China does not have tax deductibility of mortgage interest, so ignore the net calculation here.)</span><p></p><span class="Apple-style-span" style=";font-family:Georgia;font-size:16;" ><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEguuMztb3Nx0BKKVlLrj_zwif1KGlKBsf7pOCjFpkr9oNU1uP0LQhWJikK9pKDdFqBKTjy2sa-E5iokiwZP39Kkuzp6e6qhSV3MuVf3oARQIs3xp3ftoVwzunV3N0jBInh3w95jV3xy3aGy/s1600-h/Michelle+Kaufmann+redefining_cost_white_paper.pdf-2.jpg"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEguuMztb3Nx0BKKVlLrj_zwif1KGlKBsf7pOCjFpkr9oNU1uP0LQhWJikK9pKDdFqBKTjy2sa-E5iokiwZP39Kkuzp6e6qhSV3MuVf3oARQIs3xp3ftoVwzunV3N0jBInh3w95jV3xy3aGy/s400/Michelle+Kaufmann+redefining_cost_white_paper.pdf-2.jpg" alt="" id="BLOGGER_PHOTO_ID_5330438950061745426" style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 355px; height: 400px;" border="0" /></a></span><p></p><span style="letter-spacing: 0px;">But in fact, Kaufmann’s analysis understates the case for green building, at least in the US. As I mentioned before, insurance companies are offering lower insurance rates for green homes and some banks are offering lower interest rates. Most green homes focus on proximity to public transit, which means shorter commute times and less commuting expense compared to their sprawling brown counterparts. Furthermore, as energy and water prices rise in the future, this TCO case for green buildings will get even better. </span><p></p> <span style="letter-spacing: 0px;"><b>How to get from here to there?</b></span><p></p> <span style="letter-spacing: 0px;">It’s clear that green homes have much lower TCO than their brown counterparts. But unfortunately, this doesn’t change the fact that green homes often cost more upfront. And although we should focus on TCO when analyzing affordability, this doesn’t mean we can totally ignore upfront cost. So how can we minimize TCO while keeping upfront cost low? </span><p></p> <span style="letter-spacing: 0px;">We can use two primary policy tools: incentive alignment and green financing. </span><p></p> <span style="letter-spacing: 0px;">First, government could and should require developers of affordable housing to have a long-term stake in the operating cost of the buildings. Government could set up a scheme whereby developers guaranteed some sort of typical level of energy costs for the residents. Any costs above this amount would be borne by the developer, and any savings below this amount would be split between the developer and the tenant. This would give the developer a big incentive not to cut corners and save energy over time. If government is interested in lowering TCO as they should be, this policy would be a useful lever to align the incentives of both developer and tenant. </span><p></p> <span style="letter-spacing: 0px;">Second, government should encourage banks to step up their green financing programs for customers to purchase green homes. Banks should offer a mix of lower interest rate “green loans” that will lower TCO further and also larger loans that will help reduce the upfront cost to purchasers. The mortgage is almost always the largest expense on a home and lower interest rates would further lower TCO. For example, let’s take another look at Michelle Kaufmann’s numbers. In the analysis below, I used the same figures but assumed the bank offered a 0.25% interest rate reduction for green homes. As you can see, this frees up significant savings, bringing the cost advantage for green from around $2 to nearly $87.</span><p></p><br /><p></p><span class="Apple-style-span" style=";font-family:Georgia;font-size:16;" ><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhs9H32eDlhO1ChQ9JGlpzo2DlCzm1FhRSCm17fL8zYZZSl5avw0g3MDdVF2bDETj1acmL6IvcQ0LW_34jRSQ9hkWaklt2A-p-Pz34R3LbISebhQVtrP2fdLImeY_dg1tgqctEdvJYEhEyg/s1600-h/affordable+housing.pdf.jpg"><img src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhs9H32eDlhO1ChQ9JGlpzo2DlCzm1FhRSCm17fL8zYZZSl5avw0g3MDdVF2bDETj1acmL6IvcQ0LW_34jRSQ9hkWaklt2A-p-Pz34R3LbISebhQVtrP2fdLImeY_dg1tgqctEdvJYEhEyg/s400/affordable+housing.pdf.jpg" alt="" id="BLOGGER_PHOTO_ID_5330438945776119666" style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 168px;" border="0" /></a></span><p></p> <span style="letter-spacing: 0px;">This type of green financing program is not unprecedented in China. The Chinese government has been using <a href="http://www.worldwatch.org/node/5604">green loans to encourage other sectors to go green</a>, but hasn’t done much for green financing of buildings, and nothing for green financing of affordable housing. Hopefully Chinese banks will expand this to individual customers, particular those in the lower- and middle-income brackets.</span><p></p><span style="letter-spacing: 0px;"><b>The future</b></span><p></p> <span style="letter-spacing: 0px;">Eventually, I think building a green home will actually cost less than building a conventional home. <a href="http://www.zetacommunities.com/">Zeta Communities</a>, for example, is working on making pre-fabricated net-zero housing that costs less than standard brown housing. But until these cost breakthroughs occur and green buildings are superior on both total cost of ownership and upfront costs, government policy will have to help drive adoption. </span><p></p>Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com0tag:blogger.com,1999:blog-8821030105982252839.post-28854604139622141332009-04-22T00:34:00.000-07:002009-04-22T02:31:05.346-07:00Green Building Economics 101As promised, today’s post will describe the economics of green building and why green buildings are so much more valuable than their brown counterparts. I will follow this up with a post describing how developers can use these economics to make affordable green housing work financially.<br /><br /><span style="font-weight: bold;">How to value real estate- DCF basics</span><br />The Discounted Cash Flow method and the Direct Capitalization method are the fundamental tools for valuing real estate investments and I will use that to inform the discussion today.<br /><br />The Discounted Cash Flow (DCF) valuation method attempts to account for all future cash flows from an investment and discount them to a present value. So to make that more concrete, let’s say I buy a building today. I can assume I will get rent every year for the life of the building, and also assume that I will have to pay expenses over the same period. The difference of the rent income and the expenses is my profit. But as everyone knows, a dollar of profit today is a lot more valuable than a dollar of profit in the future, so we have to discount the future cash flows to today’s value using the <a href="http://en.wikipedia.org/wiki/Time_value_of_money">time value of money</a>. We also can’t be certain that we will continue to receive rent in the future, so we should also discount the future cash flows to reflect this uncertainty.<br /><br />The DCF is the best theoretical way to value real estate, but it is somewhat more complex than the direct capitalization method I will focus on today. Direct capitalization generally captures nearly all of the important nuance of DCF, but does so in a much easier-to-understand formula. Therefore, I will focus on capitalization today. But if you want to understand more about the differences between capitalization and DCF, please see <a href="http://www.blogger.com/recenter.tamu.edu/pdf/1051.pdf">this article</a> or email me.<br /><br />The direct capitalization method involves taking the current net operating income (NOI) of a building and capitalizing (multiplying it by a large number- generally between 10 and 20) to reflect the face that this income will continue into the future<br />.<br />So the direct capialization valuation method works like this:<br /><br /><ol><li>To calculate NOI, we simply add up all of the revenues (rent and other revenue) and then subtract all of the operating expenses (management fee, utilities, etc). It’s important to note that we only subtract operating expenses, so we don’t subtract things like taxes or interest payments. Although obviously important, these expenses don’t factor into NOI.</li><br /><br /><li>We then take the NOI and divide it by a capitalization rate. The capitalization rate is a percentage that takes into account 3 things: NOI will continue indefinitely into the future and in many cases grow over time; future NOI needs to be discounted to today’s value; future NOIs need to be discounted for risk and uncertainty. Capitalization rates are generally between 5 and 10%, but can be lower or higher depending on circumstances.<br /></li></ol><br />So then, the value of a building is roughly equal to:<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZ10H81fbha5VMS4UjJgRBcezjASlZfFRqPSV_ZobDjooz5RmpeIOnDyK7dgIUGLRF0BOyqSo4mSnhppzSKcxTppuXhlOLBywLzr5UM5VZ5IU788IkBArp_KNMY8Glp4N7VJfgcY7vs0PY/s1600-h/building+value+formula.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 50px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZ10H81fbha5VMS4UjJgRBcezjASlZfFRqPSV_ZobDjooz5RmpeIOnDyK7dgIUGLRF0BOyqSo4mSnhppzSKcxTppuXhlOLBywLzr5UM5VZ5IU788IkBArp_KNMY8Glp4N7VJfgcY7vs0PY/s400/building+value+formula.jpg" alt="" id="BLOGGER_PHOTO_ID_5327419908610900338" border="0" /></a><span style="font-weight: bold;"><br />Other valuation methods</span><br />Of course, DCF and direct capitalization are not the only valuation methodologies. Another extremely useful type of valuation tool is comparables. Comparables involves taking two or more similar assets and comparing their values. If, for example, we wanted to value Prosper Center, we could use the value of the neighboring Kerry Center as a proxy. For example, Prosper Center and Kerry Center should have similar capitalization rates. Of course we’d have to do slight tweaks to account for variations, for example, but their valuation should be in the same ballpark (although as I will show Prosper should have a lower cap rate since it's green and Kerry is not).<br />Comparables is a very good way of valuing marketable assets, but I will leave this valuation method aside and focus primarily on DCF today.<br /><br />Another valuation method often used by real estate developers is simple payback period. Simple payback period measures how many years it takes to recoup an investment. One knock on many green systems is that they have a long payback period. Since many developers usually have a limit on their desired payback period, say 5 years, they often will not make investments that have longer investments.<br /><br />While it may be true that some green building systems have long payback periods, this totally misses the point in my mind. Simple payback period makes no sense as a rigorous valuation tool for several reasons. First and most importantly, payback period has no concept of revenues. For example, imagine an investment that required $1 today, and then made no revenues for the first 5 years, but made $1,000,000 in the 6th year. If a developer were to strictly use the simple payback period with a 5 year limit, they would miss this clearly profitable investment. This may be an extreme example, but captures a serious flaw in the simple payback period method of valuation. For this reason, I do not consider the simple payback method to be a useful method of valuation. While it generally is true that investments with short paybacks have good returns, it is not necessarily true that investments with longer payback periods do not have good returns.<br />Therefore I will ignore simple payback entirely and focus instead on direct capitalization today.<br /><br /><span style="font-weight: bold;">How green building drives increased building value</span><br />One more time, direct capitalization works like this:<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPpiMcivkmdObRFPxGDF_d4jnb5u17EzBhyphenhyphenajK40JKY3CdnGv4l_Dj6Z3p4SFE-i5imBKNHqHiy5oj3_ER6pvYwidpmyUkri7DzV3e7QBvZ-Z75m91ZjjC4cn5mh9kHIlE4syzCFe-zTtZ/s1600-h/building+value+formula.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 50px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPpiMcivkmdObRFPxGDF_d4jnb5u17EzBhyphenhyphenajK40JKY3CdnGv4l_Dj6Z3p4SFE-i5imBKNHqHiy5oj3_ER6pvYwidpmyUkri7DzV3e7QBvZ-Z75m91ZjjC4cn5mh9kHIlE4syzCFe-zTtZ/s400/building+value+formula.jpg" alt="" id="BLOGGER_PHOTO_ID_5327419904604324786" border="0" /></a>As we can see from this equation, in order to maximize value, we need to maximize revenue, minimize costs, and minimize the cap rate. Green building helps do all three of these things, and in turn increases building value.<br /><br />(Note: for this discussion, I will assume that we are talking about an office building, where tenants rent the building on a gross lease, i.e. one monthly payment from the tenant to the landlord that covers utilities, maintenance, insurance, and taxes in addition to rent. Other lease structures, such as <a href="http://en.wikipedia.org/wiki/Net_lease#Triple_net_lease">triple net</a>, are more common, but the green valuation issues remain the same. Please email me or use the comments box for any questions that relate to different lease structures and I will be happy to respond.)<br /><br /><span style="font-weight: bold;">Reduced costs</span><br />The first way green buildings increase building value is through lower operating costs.<br />Obviously, a green building that uses less energy will have lower utility bills. Since LEED rated buildings on average use <a href="http://www.goodenergies.com/news/research-knowledge.php">33% less energy than regular buildings</a>, this means utility costs are about 33% lower. Since utilities account for <a href="http://www.facilitiesnet.com/energyefficiency/article/Energy-Brings-Real-Returns-to-REIT--5218">~25 to 30% of an office building’s operating expenses</a>, this adds up to big value. Smaller water and waste bills also make for better economics.<br /><br />Green buildings can also lower other less-obvious expenses. For example, the Fireman’s Fund, a leading insurance company, offers <a href="http://www.knowledge.firemansfund.com/en/climate_change/green_buildings_ffic.html">lower insurance rates for LEED certified buildings</a>. Other possible cost saving measures for green buildings include <a href="http://www.nytimes.com/gwire/2009/04/06/06greenwire-green-banks-sprout-from-ruins-of-economic-cris-10437.html?pagewanted=2">lower interest rates through green banks</a> (although again this doesn’t affect NOI, only returns to the owner) and lower maintenance costs thanks to smaller systems and better commissioning processes.<br /><br />The result is less operating expenses for green real estate, which means higher building value.<br /><br /><span style="font-weight: bold;">Increased revenues</span><br />Green buildings also benefit from higher revenue, primarily through increased rents.<br /><br />Several recent surveys and studies show that green buildings command higher rents. A <a href="http://repositories.cdlib.org/iber/bphup/working_papers/W08-001/">study by economists for the Berkeley Program on Housing and Urban Policy</a> showed that green buildings on average rent for 2-6% more than their non-green counterparts, after controlling for other variables like location and building age. This green premium even exists in China, where <a href="http://www.joneslanglasalle.com/Pages/ResearchDetails.aspx?TopicName=&ItemID=1160&ResearchTitle=Building%20Momentum">a recent JLL report</a> shows that nearly 70% of high-end real estate tenants are willing to pay more for green real estate.<br /><br />Why do green buildings command these premium rents? Two reasons primarily. First, workers in green buildings are more productive than workers in brown buildings. Thanks to more daylighting, higher air ventilation rates, improved indoor air quality, and other attributes of green real estate, occupants of green buildings tend to be more comfortable and more productive. The <a href="http://www.usgbc.org/DisplayPage.aspx?CMSPageID=77#occupant">US Green Building Council website</a> links to numerous studies showing that productivity in green buildings is higher. Since green real estate space is more productive than regular brown space, tenants are willing to pay more for the productivity benefits. This productivity-driven rent premium for green buildings will continue, as brown buildings just cannot match the many productivity-boosting benefits of green buildings.<br /><br />Second, the supply of green buildings is low relative to demand, meaning the large and growing number of companies who want to occupy green space need to pay a premium to get access to the limited supply. This likely will not persist much longer, since the supply of green buildings will expand dramatically. However, what we will see then is a switch, whereby brown buildings actually require a rent discount in order to lure tenants away from the abundant supply of green buildings. So this will also guarantee continuing premium rents over brown buildings.<br /><br />Since higher rents means more NOI, higher rents therefore drive higher value for green buildings.<br /><br /><span style="font-weight: bold;">Lower cap rate</span><br />The capitalization rate is essentially a measure of the future outlook of the property. This includes both expected growth in NOI as well as the perceived risk of future NOI. On both accounts, green buildings do better and therefore should receive lower cap rates.<br /><br />Let’s first look at expected growth of NOI. As more and more companies demand green real estate and are willing to pay more for the productivity benefits, I think it’s safe to say that we can expect rents and NOI at green buildings to grow faster than those at brown buildings. Or conversely, when green building becomes the norm, very few tenants will be willing to pay the same price for brown real estate, meaning negative rent growth for many brown properties. The result is still faster NOI growth for green buildings, and therefore lower cap rates.<br /><br />Green buildings are also less risky than their brown counterparts. Since green buildings use more advanced building techniques and are more likely to satisfy the needs of tomorrow’s tenants, there is less risk of functional obsolescence for green buildings. Moreover, thanks to lower environmental impact, green buildings also face less regulatory risk. The result? Again, lower cap rates for green buildings.<br /><br /><span style="font-weight: bold;">Green buildings have higher value</span><br />So let’s take these results and run through a quick thought experiment. Let’s start with a hypothetical building with rent of $1,500,000, expenses of $500,000 and a cap rate of 10%. Now what happens when we take the same building but assume it’s green? Well now rents will be 2-6% higher, utilities will be 33% lower, and I'll assume the cap rate will be lower by 0.5 - 1%. As we can see from my calculations below, we get a big value increase.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpYWw1ivolTR61ktodXel5154EERL5Y1vkTuFz7DivMuTWj-BZzJKZTqnkO_1MKg6iwquz-_4vpjJ0UumyFLQs5jDqc1n5fsg0x0T5dzmzd39TkBp75iX6Pp0cb26onsjxpLRqOQ77f1HF/s1600-h/green+building+value.pdf.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 62px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpYWw1ivolTR61ktodXel5154EERL5Y1vkTuFz7DivMuTWj-BZzJKZTqnkO_1MKg6iwquz-_4vpjJ0UumyFLQs5jDqc1n5fsg0x0T5dzmzd39TkBp75iX6Pp0cb26onsjxpLRqOQ77f1HF/s400/green+building+value.pdf.jpg" alt="" id="BLOGGER_PHOTO_ID_5327419775094635810" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9l6mwKsOBdFcLs0__O3_u8OtlvUOmQeSlyN2fJDE-nZkZfjdomoiPoLIxCodrmEJa47dOmcAOWo1aoaRYnAM4n3yAk3RhczHHJ-TJKZM-TUSbgUyJvn7p1sJ_vQpwhTkZSQYMjO8lPQnN/s1600-h/green+building+value.pdf-1.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 59px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9l6mwKsOBdFcLs0__O3_u8OtlvUOmQeSlyN2fJDE-nZkZfjdomoiPoLIxCodrmEJa47dOmcAOWo1aoaRYnAM4n3yAk3RhczHHJ-TJKZM-TUSbgUyJvn7p1sJ_vQpwhTkZSQYMjO8lPQnN/s400/green+building+value.pdf-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5327419906570602978" border="0" /></a><br />At the low end, we should expect green buildings to be worth 12% more, and at the high end, green buildings could be worth as much as 25% more than their brown counterparts. Of course this is just a hypothetical example, but the takeaway is clear nonetheless: green buildings are more valuable.<br /><br /><span style="font-weight: bold;">What does this mean for developers and owners?</span><br />For developers, I think this means build green from the start. Even for developers who build to sell immediately upon completion, green building is still compelling. The purchaser of the building will have an interest in owning for the longer-term, and should be willing to pay more for green. So even if developers don’t believe the 12% valuation premium example that I laid out above, it seems they can easily get 5+% for all of the reasons I described. This means as long as that developers can hold the cost premium for green below this 5%, they will be making more money than they otherwise would by building brown. If a developer can build green at 5% but get a 10+% valuation increase, well, now the developer is really doing well financially (not to mention socially and environmentally). As more developers start to understand green building economics, I think building green will become increasingly more profitable and eventually become the only way to build.<br /><br />For owners, I think this means retrofitting to green standards right now. As my hypothetical calculations showed, the benefits of retrofitting and getting green certification are huge. Not only will the building benefit from higher rent, lower operating costs, better corporate image, less risk, etc etc, but it will most likely pay for itself through immediately increased building value. For example, if a building owner could perform a large retrofit on a building for 10% of the building value, the investment would immediately pay for itself thanks to higher post-retrofit building value. Although increased building value isn’t exactly the same as cash in hand for the building owner, the increased building value provides significant security for this investment in energy efficiency and green features.<br /><br />The bottom line is that green building makes sense for the bottom line. As more and more developers, owners and tenants realize this, I expect to see green building become the norm for those who can afford to pay for the green benefits, particularly those in Class A office buildings, luxury apartments and international quality industrial facilities. The trick then will be to figure out how to make green building economics translate into something that works for those other sectors of the market that I’ve been talking about so much recently. Stay tuned for my next post for some initial ideas on how to use these green building economics to make green building affordable- and widespread.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com0tag:blogger.com,1999:blog-8821030105982252839.post-35894716657086558452009-04-22T00:16:00.000-07:002009-05-05T20:10:54.267-07:00Upcoming green building eventsDear China Green Building watchers-<br /><br />I just want to quickly alert to you a few great green building events that are taking place over the next few months.<br /><br />First up is <a href="http://www.asiasociety.org/greencities/">Scaling Up: From Green Buildings to Green Cities in the U.S. and China</a>.<br />The event will be held on Friday, May 1st in San Francisco and is being sponsored by the Asia Society, who incidentally has been really making a move into the green China arena with their recent reports on <a href="http://www.asiasociety.org/taskforces/climateroadmap/">climate change</a> and <a href="http://www.asiasociety.org/taskforces/water/">water security</a>.<br /><br />Second is <a href="http://www.greentechmedia.com/events/live/gbs/gbs.html">Green Building Summit: Greentech Media's Forum on the Future of Building</a>. The event will be held on Thursday, June 11th in Menlo Park. <a href="http://www.greentechmedia.com/">Greentech Media</a> is a great source of info for all news related to cleantech, and does some great coverage of <a href="http://www.greentechmedia.com/articles/more-startups-following-serious-materials-into-green-walls-6015.html">Serious Materials</a> and the other emerging green building cleantech companies.<br /><br />Next is the <a href="http://www.ecoexpo.com/EcoExpo2009/">China Eco-Expo</a>, held June 18-20 in Beijing and sponsored by the Ministry of Construction (although it's interesting to note that the MoC no longer exists, having recently changed names to MOHURD- Ministry of Housing and Urban Rural Development.)<br /><br />Last, but certainly not least, is <a href="http://www.greenbuildingsasia.com/en/home.html">GreenBuild Asia 2009</a>. This event will be held July 7-9 in Hong Kong.<br /><br />UPDATE: <a href="http://www.asiaisgreen.com/2009/04/16/china-sustainable-building-summit-2009/">China Sustainable Building Summit 2009</a> to be held June 29- July 1 in Shanghai.<br /><br />If there are any other green building events in Asia or the US, please let me know and I will be happy to add them to this blog post. Thanks!Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com2tag:blogger.com,1999:blog-8821030105982252839.post-35386570565225093092009-04-14T21:26:00.000-07:002009-04-14T21:47:27.628-07:00Two Pronged Approach: Top Down<span style="font-style: italic;">This is the last of a three part post on my two-pronged approach for greening China’s buildings. The two-pronged approach consists of both a bottom up and a top down strategy for transforming the market for green buildings in China. The<a href="http://chinagreenbuildings.blogspot.com/2009/03/two-pronged-approach-for-greening.html"> first post</a> focused on how China achieved its success with LEED buildings thus far and what this says about market dynamics. The <a href="http://chinagreenbuildings.blogspot.com/2009/04/two-pronged-approach-bottom-up.html">second post</a> described the need for bottom up green leadership by real estate developers and some policy steps to encourage this. The third post will make the case that particularly in China, this bottom up approach is not nearly enough and introduce a top down approach to supplement the bottom up approach. </span><br /><br />In last week’s post, I described the power of the bottom up approach to transform the Chinese real estate market and make building green standard. This assertion rested on two main ideas, or feedback cycles as I referred to them. First, as the building industry develops the capacity to build green, costs will come down to the point where there is no perceived cost premium for green. Second, as tenants become aware of the benefits of occupying green buildings, they will demand green buildings in large quantities. I really believe this framework will transform the market for green buildings in China. However, even if this bottom up effect works exactly as well as I describe, there is still an unfortunately large minority of builders who will refuse to adopt green building practices until they are forced to by policy. The top down approach, therefore, focuses on ensuring that green is adopted by all, even those who otherwise wouldn’t want to adopt green methods.<br /><br /><span style="font-weight: bold;">The Laggards</span><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEibmqJz5hg102cthnMYc5YUlp6_04dq1tXPcoWdKeiLaX9-XnEnODM2ErlK6avgsT0shgah_DA0UIPCuogZ1o9tmRP9ZB_3-N8eBoNgddyKqCfvaRELgs0yYs7W0tWO0Q4X5O5VhFvbWkt2/s1600-h/Summary_Diffusion_Theory.pdf-1.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 187px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEibmqJz5hg102cthnMYc5YUlp6_04dq1tXPcoWdKeiLaX9-XnEnODM2ErlK6avgsT0shgah_DA0UIPCuogZ1o9tmRP9ZB_3-N8eBoNgddyKqCfvaRELgs0yYs7W0tWO0Q4X5O5VhFvbWkt2/s400/Summary_Diffusion_Theory.pdf-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5324771062556872610" border="0" /></a><span style="font-size:85%;"><a href="http://www.blogger.com/www.enablingchange.com.au/Summary_Diffusion_Theory.pdf">Source</a></span><br /><br /></div>Laggards are those who lag behind in adopting new practice. Everett Rogers first created this theory in his seminal work <a href="http://en.wikipedia.org/wiki/Everett_Rogers#Diffusion_of_Innovations"><span style="font-style: italic;">Diffusion of Innovations</span></a>, which Malcolm Gladwell then popularized in <a style="font-style: italic;" href="http://www.gladwell.com/tippingpoint/index.html">The Tipping Point</a>. In this case, I refer to the laggards as those who won’t adopt green building practices even after the market has been transformed and green buildings are the norm.<br /><br />Unfortunately, the real estate is particularly noteworthy for having laggards. The World Business Council for Sustainable Development <a href="http://www.wbcsd.org/plugins/DocSearch/details.asp?type=DocDet&ObjectId=MjU5MTM">recently conducted a survey</a> of over 1400 building professionals (developers, architects, engineers, building owners and corporate tenants) in eight countries, including China. This chart below shows the responses to the question: <span style="font-weight: bold;">What do you as see the role of your company in the adoption of sustainable building practices?</span><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjrkU6kQ74bJtwsMqDyc0dkdZwHJkJ8vrif7JNFsXrHbODjbXTN2EK7-SL4bpIPPYuSCL9RjFVNaFsi5CszdxYtWowkRwh-SaFs5cg1uCb0pXtJOmL2GNYxZGeIDZl0jRTkFn52DIHqQt2Q/s1600-h/WBSCD+EEB-Facts-and-trends.pdf-2-1.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 399px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjrkU6kQ74bJtwsMqDyc0dkdZwHJkJ8vrif7JNFsXrHbODjbXTN2EK7-SL4bpIPPYuSCL9RjFVNaFsi5CszdxYtWowkRwh-SaFs5cg1uCb0pXtJOmL2GNYxZGeIDZl0jRTkFn52DIHqQt2Q/s400/WBSCD+EEB-Facts-and-trends.pdf-2-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5324771059463777026" border="0" /></a><br />This data provides a useful reality check for my bottom up approach. First, it shows that innovative developers are out there. Second, more than 25% of building professionals adopt practices as soon as they are tried and tested. A further 25% of building professionals then adopt practices incrementally. This is an extremely large nascent base of buildings who will adopt green building practices as soon as leading edge developers prove them. This data matches well with the trend lines that Rogers’ described above- with the first group as the innovators, the second group as the early adopters, and the third group the early majority. Moreover, significant adoption of green building by the first two groups has a strong chance of influencing the behavior of tenants and activating the “demand side” feedback loop that I mentioned in my first post. As this demand side snowball is activated, clients are likely to demand green features in many of their projects. This makes it likely that the “late majority” of those who only adopt practices as clients require it will adopt green building practices relatively soon after the early majority.<br /><br />The real problem though is the embarrassingly large group of laggards: nearly a quarter of global building professionals adopt innovations (and presumably green building practices) only as required by policy! It’s sort of sad because this group of laggards is larger even than Rogers predicts (<a href="http://en.wikipedia.org/wiki/Everett_Rogers#Diffusion_of_Innovations">he predicts 16%</a>). But it’s really sad because, absent good policy, these laggards are allowed to build polluting, energy hogging buildings that will last for decades.<br /><br /><span style="font-weight: bold;">Application to China</span><br />As bad as the WBCSD chart makes it look for laggards globally, builders in China can be even worse. To get a realistic look, we should probably add even another line to the bottom of that chart: <span style="font-weight: bold;">Not even adopting practices as regulations require</span>. This is an allusion to the extremely poor building energy code compliance in Chinese buildings.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5i6yvqvFuYBNw7Eg0WxiPEUuhWpvqK7d7InSaAi-SyQOx26SShz70x0BoYLjkA-xcFykjlSlwvkho6VeJ_quJW87rOn3o9RbGoK5mKkuNVi6RJhLLWY7Pb1j2-udBwXZEufByl15wnFVm/s1600-h/IEA+presentation+on+Buildings.pdf-1.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 299px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5i6yvqvFuYBNw7Eg0WxiPEUuhWpvqK7d7InSaAi-SyQOx26SShz70x0BoYLjkA-xcFykjlSlwvkho6VeJ_quJW87rOn3o9RbGoK5mKkuNVi6RJhLLWY7Pb1j2-udBwXZEufByl15wnFVm/s400/IEA+presentation+on+Buildings.pdf-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5324771057711758226" border="0" /></a><br /><a href="http://www.blogger.com/www.iea.org/textbase/work/2008/meeting_goals/Hinge_Buildings.pdf">As the data shows (PDF)</a>, compliance with energy codes in China is poor throughout the country. The disparity between design and construction compliance also shows the willingness of developers to <a href="http://www.chinadaily.com.cn/bizchina/2008-01/14/content_6391282.htm">“cheat” when faced with the perception of increased costs</a>. Given that many Chinese building dont even currently comply with mandatory building energy codes, it seems unlikely that these developers and owners will be willing to voluntarily take the jump to green buildings.<br /><br /><span style="font-weight: bold;">The need for policy with teeth</span><br />Therefore, the Chinese government must step in and force these laggard developers to improve their energy efficiency. The current mandatory building energy code, which mandates 50% savings over 1980 levels for new buildings, is a good start. But now the hard work of actually enforcing this code must begin. Several US groups, including <a href="http://www.nrdc.org/air/energy/china/greenbuildings.asp">NRDC</a> and the <a href="http://www.pnl.gov/news/release.asp?id=337">US DOE Pacific Northwest National Laboratory</a>,are working with Chinese government to help them develop the capacity needed to enforce the codes.<br /><br />Enforcing the existing code is necessary, but not sufficient; the Chinese government will have to do more. They will have to continually raise the bar on this standard, and more importantly, make sure that these codes are enforced. Ideally, government policy will set an ever-increasing minimum standard for environmental performance that looks like this:<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxgIllPmyvR58nWxBVzGLCag5p6rHkO-eHZ0zISUdm0zB7N7YrGmc6olAX-tWIfWRhoRY8jhASWjBpHCrUg5LCac5Wp7Z3hXoo7K7xhk0BSAZ8JnlZR8GNfok8gU7C71xVgN9dzmmVVHlZ/s1600-h/bottom+up+and+top+down+graphic-2-1.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 234px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxgIllPmyvR58nWxBVzGLCag5p6rHkO-eHZ0zISUdm0zB7N7YrGmc6olAX-tWIfWRhoRY8jhASWjBpHCrUg5LCac5Wp7Z3hXoo7K7xhk0BSAZ8JnlZR8GNfok8gU7C71xVgN9dzmmVVHlZ/s400/bottom+up+and+top+down+graphic-2-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5324771054986186850" border="0" /></a>This government policy can be complemented by a host of other measures, many of which are described in a terrific <a href="http://www.camcoglobal.com/reeep/">recent report by the Renewable Energy and Energy Efficiency Partnership</a>. But the fundamental goal of the top down approach is to force the laggards to improve the environmental performance of the built environment.<br /><br /><span style="font-weight: bold;">The goal</span><br />When the bottom up and top down approaches are combined, we will get consistent improvements in environmental performance across the market, from the top end to the bottom end, from innovators to laggards.<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4wQB3A9ce5FVX1G_ZM84Lo6MUiiRnX5U8h0T6LDan4q5V928SK9A_K8kTp6j3zETEIRVUG9fG5ybLOZqVOmuA5vOudib7jmhn_AKge8wD-9N3kyz4PTzvnP_yztTeqnMrShoVi2nNtSdP/s1600-h/bottom+up+and+top+down+graphic-3.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 265px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4wQB3A9ce5FVX1G_ZM84Lo6MUiiRnX5U8h0T6LDan4q5V928SK9A_K8kTp6j3zETEIRVUG9fG5ybLOZqVOmuA5vOudib7jmhn_AKge8wD-9N3kyz4PTzvnP_yztTeqnMrShoVi2nNtSdP/s400/bottom+up+and+top+down+graphic-3.jpg" alt="" id="BLOGGER_PHOTO_ID_5324771055416140050" border="0" /></a><br />Ultimately, some variation of my two pronged approach is necessary to transform the market in China. This will involve leading developers and the government striving for great environmental performance across the market: Class A office, government buildings, workforce housing, etc. This push will eventually lead to snowballs in these markets, causing transformations that result in green building becoming the norm. We must not forget the reality of laggards though, particularly amongst developers in China. The government will have to step in and mandate and ensure compliance with energy and related environmental codes. China is already taking good first steps in this direction with the LEED snowball in the Class A office market and the national building energy code. Let’s hope they now quickly start taking the next steps so sorely needed to transform the market and ensure a green future for the Chinese built environment.<br /><img src="file:///Users/geoff/Library/Caches/TemporaryItems/moz-screenshot.jpg" alt="" /><img src="file:///Users/geoff/Library/Caches/TemporaryItems/moz-screenshot-1.jpg" alt="" /><img src="file:///Users/geoff/Library/Caches/TemporaryItems/moz-screenshot-2.jpg" alt="" />Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com0tag:blogger.com,1999:blog-8821030105982252839.post-70863591392384643532009-04-10T02:39:00.000-07:002009-04-10T03:47:31.630-07:00Two Pronged Approach: Bottom Up<span style="font-style: italic;">This is the second of a three part post on my two-pronged approach for greening China’s buildings. The two-pronged approach consists of both a bottom up and a top down strategy for transforming the market for green buildings in China. </span><a style="font-style: italic;" href="http://chinagreenbuildings.blogspot.com/2009/03/two-pronged-approach-for-greening.html">The first post</a><span style="font-style: italic;"> focused on how China achieved its success with LEED buildings thus far and what this says about market dynamics. This second post will describe the need for bottom up green leadership by real estate developers and describe some policy steps to encourage this. The third post will make the case that particularly in China, this bottom up approach is not nearly enough and introduce a top down approach to supplement the bottom up approach.</span><br /><br />As I argued last week, LEED buildings in China’s Tier 1 Class A office markets are beginning to snowball and will continue on this path thanks to the self-reinforcing nature of this type of growth.<br /><br />But where are the snowballs in the other parts of the market? Unfortunately, nowhere to be found. It’s possible that the LEED snowball will eventually trickle down from the Class A market to the broader Chinese real estate market, but almost certainly not fast enough to help solve the climate crisis in any meaningful way. So how do we create snowballs in all the other parts of the market today?<br /><br /><span style="font-weight: bold;">The need for demonstration projects</span><br />The positive feedback of snowballs means that we can “track” the development of these types of markets. Just as with natural ecological cycles, snowballing systems have growth and expansion. It’s almost as though each LEED building in China has spawned two more. This simple chart tracks LEED development in China, but a similar chart could be built for New York City or Portland, Oregon where LEED has really taken off.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQbdVQ89tGShXzcn54OeGcqoe3fV7pHmnjyQKiGwtdrS9VJPI-pSWuQXaTYpiiZW3k8pgZ8NUbeTJwDOyr0XgEl9Wx3s2RGsy2tJyhV2dMJEqYie0uz97eifsLHmrV0BdepaMPAvXaMm1m/s1600-h/green+building+spawns.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 183px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQbdVQ89tGShXzcn54OeGcqoe3fV7pHmnjyQKiGwtdrS9VJPI-pSWuQXaTYpiiZW3k8pgZ8NUbeTJwDOyr0XgEl9Wx3s2RGsy2tJyhV2dMJEqYie0uz97eifsLHmrV0BdepaMPAvXaMm1m/s400/green+building+spawns.jpg" alt="" id="BLOGGER_PHOTO_ID_5322999751544942194" border="0" /></a>A corollary from the snowball discussion then is that the snowball cannot start until some green projects are built. Demonstration projects like ACCORD 21 are critical to transforming the market because they activate both snowball cycles. As tenants of ACCORD 21 begin to understand the many benefits of green building occupancy, word spreads and demand for green building increases. At the same time, the design, construction and operations teams get hands-on experience with green building and knowledge about green building best practices. As this information is institutionalized and disseminated, the premium for green building comes down, further increasing demand.<br /><br />The bottom up approach therefore focuses on using targeted demonstration projects to create snowballs in the still untransformed sectors which make up the bulk of China’s real estate market.<br /><br /><span style="font-weight: bold;">Developers must lead the way</span><br />The fundamental motive that drives real estate development and investment in China is profits. At the end of the day, most Chinese developers value profits above all, no matter how much their marketing may say otherwise.<br /><br />This profit motive is one of the main reasons why developers and owners have been reluctant to build green buildings. Since most developers have been making good money building energy inefficient buildings for the past few decades, they are quite competent at making these types of buildings. Therefore, changing the process to build green looks like a needlessly risky and costly process to these developers.<br /><br />In fact, in many cases, every successful project that a developer builds makes the developer that much less interested in changing their process for the next project. “Hey, I made money last project. Why fix something that ain’t broke?” The best way to make the process of building brown buildings “broke” is for leading developers to make more money by building green. Only when green is seen as the more profitable way to build will it start to snowball. And once it snowballs, it will eventually force all market participants to build green.<br /><br />Leading green developers, therefore, need to step up and start building green projects across all sectors of the market and show that the economics do work (I’ll do a post on green building economics 101 next week that will show why green buildings are so financially superior to brown buildings). They’ve gotten off to a good start at the high end of the market (<a href="http://chinagreenbuildings.blogspot.com/2008/11/peal-river-tower.html">Pearl River Tower</a>, <a href="http://chinagreenbuildings.blogspot.com/2009/03/steven-holl-strikes-again-shenzhens.html">Vanke Center</a>, <a href="http://chinagreenbuildings.blogspot.com/2009/02/linked-hybrid.html">Linked Hybrid</a>, <a href="http://chinagreenbuildings.blogspot.com/2008/10/prosper-center-beijing.html">Prosper Center</a>, etc). They now need to move this down-market and expand their reach. At the end of this post, I will describe what sorts of projects should be prioritized.<br /><br />Will this take a few developers to step up and take a little risk? Yes, absolutely. But the rewards could be huge, especially if they believe my snowball theory of green buildings.<br /><br /><span style="font-weight: bold;">Just because it’s “bottom up” doesn’t mean the government has no role to play</span><br /><span style="font-style: italic;">Government as occupant</span><br />The Chinese government must also make the commitment to greening their own buildings.The government owns and occupies a significant amount of real estate in China. Think of the many buildings occupied by central, provincial and local authorities throughout the country. Although hard statistics are not available, this has to account for a significant portion of total building energy use.<br /><br />The Chinese government, through their role as an occupier of building space, should “walk the walk” and start demanding green space. ACCORD 21 was a good start, and the government should extend this target for all government buildings, both new and existing. This would have a significant effect on the green building market in China and push the private markets to start snowballing. The building professionals who green the Chinese government buildings will get hands-on experience that can be institutionalized and disseminated, lowering the costs of green building for everyone and bringing the market closer to snowball.<br /><br />Ideally, the Chinese government would seek <a href="http://chinagreenbuildings.blogspot.com/2009/02/ministry-of-construction-green-building.html">Three Star ratings</a> and help drive the uptake of the locally-made rating system. This type of action has international precedent: the General Services Administration, the landlord of the US federal government, played a similar role in pushing LEED by requiring all new buildings to be built to LEED standards. The GSA now occupies <a href="http://www.gsa.gov/Portal/gsa/ep/contentView.do?contentType=GSA_OVERVIEW&contentId=18005">30 LEED certified buildings </a>and has many more registered to seek certification.<br /><span style="font-style: italic;"><br />Government as policy maker</span><br />The Chinese government should encourage their big developers to build the green demonstration projects I argued for earlier in this post. China can do this in two primary ways. The first and more obvious way is through financial incentives. Tax credits, rebates, low-interest loans, and other carrots can be given to developers to lower the cost of these demonstration projects and encourage developers to build them.<br /><br />The second way is for the Chinese government should also apply subtle (or even not-so-subtle) pressure to developers to start building the demonstration projects that are so sorely needed. In some cases, this type of pressure could be enough for an already forward thinking developer to go ahead and do a cutting-edge demonstration project.<br /><br />The Chinese government could also apply pressure to large state-owned enterprises to adopt policies that mandate occupying green buildings. This would help activate the tenant demand side of the snowball cycle and encourage more developers to supply green buildings in order to meet the increased demand.<br /><span style="font-weight: bold;"><br />What markets need snowballs?</span><br /><span style="font-style: italic;">Green workforce housing</span><br />The primary starting point for demonstration projects should be green<a href="http://en.wikipedia.org/wiki/Workforce_housing"> workforce housing</a>, or affordable housing. Given the intended market, these demonstration projects should focus on minimizing costs by using no- and low-cost green building technologies. These buildings would absolutely use passive solar design techniques, with a focus on <a href="http://chinagreenbuildings.blogspot.com/2009/02/heating-in-china-inefficiency-and.html">high quality insulation</a>, daylighting, and building orientation. These projects would probably use <a href="http://chinagreenbuildings.blogspot.com/2009/01/solar-hot-water-in-china.html">solar hot water heaters</a> and <a href="http://chinagreenbuildings.blogspot.com/2009/02/building-combined-heat.html">combined heat and power technologies</a>. These types of green housing projects are not meant to be a show of technical or architectural wizardry, but instead should focus on showcasing how cheap and efficient green buildings can be.<br /><br />These projects will resonate with middle class Chinese consumers who appreciate the energy saving cost benefits of green buildings as well as the health and environmental benefits of green buildings. As understanding of the benefits spreads, the demand side of the snowball will be activated. Simultaneously, the building professionals responsible for putting the building together will learn low-cost green building techniques, activating the supply side of the snowball.<br /><br /><span style="font-style: italic;">Sustainable communities</span><br />Given the massive rural-to-urban migration currently underway in China, sustainability will have to eventually move beyond just greening single buildings and eventually focus on delivering sustainable communities. It is therefore extremely encouraging to see projects like <a href="http://www.arup.com/eastasia/project.cfm?pageid=7047">Dongtan Ecocity</a> and the<a href="http://greenleapforward.com/2008/11/16/creating-a-better-life-a-closer-look-at-the-sino-singapore-tianjin-eco-city-project/"> Tianjian eco-cities</a>, but these projects still need to be completed and proven. Hopefully many of the other eco-cities that are <a href="http://greenleapforward.com/2009/02/27/eco-infrastructure-letting-nature-do-the-work/">currently on the drawing board</a> (<a href="http://chinagreenbuildings.blogspot.com/2009/02/ecoblocks.html">EcoBlocks</a>, for example) will also move from plan to reality.<br /><br />And we shouldn’t forget that although most Chinese will be urban residents by 2030, many will still live in the countryside. Healthy and efficient green rural housing should be pursued.<br /><br /><span style="font-style: italic;">Retrofits</span><br />And last but certainly not least, China must start retrofitting its existing buildings. I’ve mentioned before how poor insulation is in Chinese buildings. Upgrading this insulation and performing related retrofits is a win-win-win-... strategy that provides more of what’s good and less of what’s bad. More comfort. More jobs. Less energy waste. Less coal power plants. Less air quality problems. Where does this start? Well, again, government as occupier will play a big role here. The governments existing space footprint is huge, and they should take the commitment to upgrading their buildings and using less energy. Big real estate owners should also upgrade their holdings. I recently blogged about how owners like <a href="http://chinagreenbuildings.blogspot.com/2009/02/another-look-at-carbon-finance-for.html">CapitaLand and Soho could even try to pursue CDM credits</a> to sweeten these retrofit investments. <a href="http://chinagreenbuildings.blogspot.com/2008/10/escos-and-building-retrofits-in-china.html">ESCOs</a> will also play a role here.<br /><span style="font-weight: bold;"><br />The payoff</span><br />What will be the result? Hopefully, green snowballs in each and every real estate market in China. As leading developers and occupiers start to transform the market and increase overall environmental performance, the targets will just keep getting higher and higher.<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKCdaHxLoZeYcIsqykG4x07MGdAbbEkE9USJB1z13Q7wMwFp14dxzE7OessBVlIm14LHqd2yWMZh1-hGmQKRpmwuSDyT3G8IIXLTbNELHM5HtVi5z0xGPPI4MYRiHA0JMxSNpjsICELAl_/s1600-h/bottom+up+and+top+down+graphic-1.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 274px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKCdaHxLoZeYcIsqykG4x07MGdAbbEkE9USJB1z13Q7wMwFp14dxzE7OessBVlIm14LHqd2yWMZh1-hGmQKRpmwuSDyT3G8IIXLTbNELHM5HtVi5z0xGPPI4MYRiHA0JMxSNpjsICELAl_/s400/bottom+up+and+top+down+graphic-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5322999746324674658" border="0" /></a>The goal now is retrofits and green workforce housing, but if and when green eventually becomes the norm in China, these goals will ramp up further. The Chinese government and China’s leading developers should step up to the plate and take the first steps needed to make this green vision a reality.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com0tag:blogger.com,1999:blog-8821030105982252839.post-65281559438117415702009-03-26T08:31:00.000-07:002009-03-26T20:30:58.230-07:00Two-Pronged Approach for Greening China’s Buildings, Part 1: The LEED Snowball<span style="font-style: italic;">This is the first of a three part post on my "two-pronged approach" for greening China’s buildings. The two-pronged approach consists of both a bottom up and a top down strategy for transforming the market for green buildings in China. The first post will focus on how China has achieved its success with LEED buildings thus far and what this says about market transformation. The second post will describe the need for bottom up green leadership by real estate developers and describe some policy steps to encourage this. The third post will make the case that particularly in China, this bottom up approach is not nearly enough and introduce a top down approach to supplement the bottom up approach.<br /><br /></span>LEED in it’s current incarnation is most certainly not the end goal of the green building movement. LEED doesn’t go nearly far enough: even if every building globally achieved the <a href="http://www.google.com/url?sa=t&source=web&ct=res&cd=2&url=http%3A%2F%2Fwww.goodenergies.com%2Fnews%2F-pdfs%2FWeb%2520site%2520Presentation.pdf&ei=hqDLSfXyNIGI6gPkmfmrBw&usg=AFQjCNFPiGgUMcCqEtNjg7N4V7w7h9Slvg&sig2=1rZ-A0on84n8UNV8l9yr4Q">33% energy savings</a> common in LEED buildings, the world would still be far from achieving the CO2 emission reductions <a href="http://gristmill.grist.org/story/2009/1/13/143132/585">needed to forestall the worst effects of global warming</a>. However, LEED has been an important stepping stone in the journey toward a green built environment. Importantly, LEED has provided a good real world case study in how to successfully transform parts of the real estate market. By studying how LEED transformed the US real estate market and parts of the Chinese real estate market, we can better design a plan for transforming the rest of the Chinese market and achieving the vision of green buildings for everyone, everywhere.<br /><br /><span style="font-weight: bold;">The LEED snowball</span><br />LEED has seen massive growth in the US and globally. LEED registrations, i.e. projects committing to seek LEED certification (and paying money to say so), grew from 1000 in 2006 to <a href="http://www.buildinggreen.com/auth/article.cfm/2009/2/26/LEED-Projects-Doubled-in-2008/">over 20,000 in 2009</a>. <a href="http://www.greenerbuildings.com/greenbuildingimpactreport/html?page=0%2C1">The Green Building Impact Report</a> estimates that "new construction sector penetrations [are] approaching a whopping 40%." This seemingly unstoppable growth is a lot like a snowball rolling down a hill. <a href="http://www.solonline.org/aboutsol/who/Senge/">MIT’s Peter Senge</a> describes the snowball concept in his recent book <a style="font-style: italic;" href="http://www.businessweek.com/innovate/content/jun2008/id20080611_566195.htm">The Necessary Revolution</a>: <blockquote>Snowballs arise from an underlying system structure where change feeds on itself to produce more of the same, and soon it snowballs into a pattern of self-reinforcing growth.</blockquote>The underlying system structure of the market for LEED-rated green buildings is a snowball with two parallel and complementary feedback cycles that drive growth.<br /><br />The first cycle is the demand side. As more green buildings are built, tenants begin to occupy that space and benefit from the green features. As these benefits become publicized and more widely understood, more tenants demand green buildings. Thanks to increased demand, developers build more green buildings. The cycle builds on itself, and the result is more green building.<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIb2PKgrmKM74flqr0JF7Vyn1x-ZgkWwuXUi1FHqJBO97XR2gYr-Vv0U6PX8IZJDZU8B_SiWtnFdlwfHDFJhxeXMBSZ2I0ZFFn6HnooeBBXWu_zk5NMBAzM1QBh7F89M1dxhFmNCOgOwK6/s1600-h/feedback+loops+for+green+buildings-3.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 305px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIb2PKgrmKM74flqr0JF7Vyn1x-ZgkWwuXUi1FHqJBO97XR2gYr-Vv0U6PX8IZJDZU8B_SiWtnFdlwfHDFJhxeXMBSZ2I0ZFFn6HnooeBBXWu_zk5NMBAzM1QBh7F89M1dxhFmNCOgOwK6/s400/feedback+loops+for+green+buildings-3.jpg" alt="" id="BLOGGER_PHOTO_ID_5317702653149368370" border="0" /></a>At the same time, there is a parallel supply side cycle. As more green buildings are built, developers and builders begin to learn how to make green buildings better and more cheaply. As a result, more tenants can afford green buildings and therefore demand for green buildings increases. This cycle also builds on itself, and the result is more green building.<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigZPtcIZzT7-KvUAxATHFLvt20P0ZBZSfHSGfKWiCReHBF8fNH2a4zvCZGsQWoDFDuDKNI1EjKWSYsL-PiefeN4xDeXDdwM_B55W8CEOgEWjQIb1cO4zJKy500qHOH3srkOJR5OARWdTJK/s1600-h/feedback+loops+for+green+buildings-2.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 304px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEigZPtcIZzT7-KvUAxATHFLvt20P0ZBZSfHSGfKWiCReHBF8fNH2a4zvCZGsQWoDFDuDKNI1EjKWSYsL-PiefeN4xDeXDdwM_B55W8CEOgEWjQIb1cO4zJKy500qHOH3srkOJR5OARWdTJK/s400/feedback+loops+for+green+buildings-2.jpg" alt="" id="BLOGGER_PHOTO_ID_5317702652072058898" border="0" /></a>More importantly, these two cycles reinforce each other and will eventually result in green building becoming the standard in the market place. The result of this snowballing growth then is nothing less market transformation. The snowball feedback loop helps explain the explosive growth in LEED building. In other words, once the snowball gets big enough, nothing is going to stop it from rolling down the hill. This holds true not only in the US, but also in Tier 1 Chinese Class A markets like Beijing and Shanghai. The same dynamics even seemed to be <a href="http://greenbuildinginsider.blogspot.com/2007/10/dubai-leeds-in-green-building.html">at work in Dubai</a> before its real estate market collapsed.<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhPaYsGxFIwsdOrSuit3snomb4QuKwp5M9p00Ql-XaBs6shFUl-UWFGV0_GwjLgDvNSbi3ozfIoUf5f5DTG3dQY2mJyEXrL-rTDYEogrE033PFQyb7ihxqU5HWYfmX4HEDY23oCAIxg9Szw/s1600-h/feedback+loops+for+green+buildings.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 353px; height: 400px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhPaYsGxFIwsdOrSuit3snomb4QuKwp5M9p00Ql-XaBs6shFUl-UWFGV0_GwjLgDvNSbi3ozfIoUf5f5DTG3dQY2mJyEXrL-rTDYEogrE033PFQyb7ihxqU5HWYfmX4HEDY23oCAIxg9Szw/s400/feedback+loops+for+green+buildings.jpg" alt="" id="BLOGGER_PHOTO_ID_5317702657276210258" border="0" /></a><br /><br /><span style="font-weight: bold;">The need for snowballs</span><br />Interestingly, LEED has achieved this snowballing growth from the bottom up. LEED filled an unmet need in the market place and was able to tap a nascent demand for better, healthier and greener office space. Although the federal and state governments certainly played a role in helping LEED along in the US, the heavy lifting was really done from the bottom up. And in China, besides the Ministry of Science and Technology’s role in Accord 21, almost nothing was done on the part of the government to promote LEED, which illustrates just how thoroughly bottom up LEED’s growth has been in China.<br /><br />In my next post, I will build on these principles of snowballs market transformation to introduce the “bottom up” approach to achieve snowballing growth in the Chinese building markets that are currently being left untransformed.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com0tag:blogger.com,1999:blog-8821030105982252839.post-54587818146645089882009-03-17T01:28:00.000-07:002009-03-18T01:53:26.203-07:00Green Buildings for Everyone, Everywhere: How China Can Achieve This Vision<span style="font-style: italic;">I was recently in Hong Kong and Macau at the Fulbright midterm research conference. When talking with my fellow Fulbrighters, I was often asked to describe my research findings about green buildings thus far. This event was a great chance for me to reflect upon what I’ve learned about green buildings during my time in China. Sometimes in the course of focusing on specific topics on my blog, I lose track of the bigger picture. This post will describe the key findings from my research so far: while China has made progress with green buildings, it hasn’t gone nearly far enough. I will focus the rest of my time here on finding solutions to how China can realistically tackle the many barriers to green buildings and achieve a vision of green buildings for everyone, everywhere. </span><br /><br /><span style="font-weight: bold;">Buildings are huge polluters</span><br />When people imagine the chief causes of greenhouse gas emissions in China, many think of coal power plants. While true on the surface, this popular perception misplaces the real blame. After all, where does that electricity produced by coal power plants ultimately go? To power buildings, primarily. The reality is, the energy used in buildings- both in their operation and construction- represents almost <a href="http://www.nrdc.org/air/energy/china/greenbuildings.asp">45 percent of China's total annual energy use</a> and a similar share of China’s greenhouse gases. This means that buildings in China alone account for more greenhouse gas emissions than <a href="http://mdgs.un.org/unsd/mdg/SeriesDetail.aspx?srid=749&crid=">all of Japan and Russia</a>, combined. In addition to greenhouse gas emissions, buildings also consume large amounts of land, water and material resources.<br /><br /><span style="font-weight: bold;">More and more buildings</span><br />The environmental impact of buildings is growing rapidly. <a href="http://www.mckinsey.com/mgi/publications/china_urban_summary_of_findings.asp">According to McKinsey</a>, China will have one billion urban residents by 2030. Providing housing and employment for the urban billion will require China to continue its unprecedented construction boom. The result will be an estimated 40 billion square meters of construction between now and 2030, spread over 5 million new buildings.<br /><br />Although China currently boasts one of the lowest building energy uses per capita, this is quickly changing for two primary reasons. First, as incomes rise, Chinese are demanding more and more floor space per capita. For example, floor area per capita in Beijing <a href="http://news.xinhuanet.com/english/2007-08/16/content_6542450.htm">doubled from 2001-2006</a>. The result is more buildings and therefore more energy use per capita.<br /><br />Second, as services like heating, cooling and hot water become more common, each square foot is using more energy. <a href="http://china.lbl.gov/node/180">According to Lawrence Berkeley National Labs</a>, only 20% of office buildings nationwide had cooling in 2000. By 2020, this is expected to nearly triple to 55%. The result will be much more energy use per square meter. For example, highly-developed Shanghai’s energy consumption per square meter increased 31% from 1998 to 2005 thanks to a mix of increased energy use for heating, cooling, lighting and water heating. As other cities and provinces catch up with Shanghai and demand similar levels of comfort, this will result in continued increases in energy intensity nationwide.<br /><br />When this data is coupled with the growth in overall floor area, the energy use and greenhouse gas emissions scenarios for China’s buildings look bad. Add to this mix the fact that inefficient buildings built today will continue to pollute and use energy for 40+ years, and the situation is downright scary.<br /><br /><span style="font-weight: bold;">LEED Silver lining not nearly enough</span><br />Despite this dirty and worsening picture of China’s built environment, there is a small bright spot emerging: the number of LEED-certified high performance green buildings in China is growing rapidly.<br /><br />LEED-rated buildings can save significant energy, water, and materials resources and reduce carbon dioxide emissions. LEED first came to China in 2006 when the Ministry of Science and Technology demonstration building called <a href="http://www.nrdc.org/international/chinagbldg/intro.asp">Accord 21</a> achieved a LEED Gold rating, using 73% less energy than the average government building in Beijing and 60% less water.<br /><br />Since Accord 21’s completion, LEED has seen dramatic growth in China. As of February 2009, over 118 Chinese buildings had <a href="http://www.usgbc.org/LEED/Project/RegisteredProjectList.aspx">registered to seek LEED certification</a>, and many more businesses have registered their intent to green their offices according to LEED standards. In fact, <a href="http://en.wikipedia.org/wiki/Robert_K._Watson">Rob Watson</a>, an international green building expert, <a href="http://www.greenerbuildings.com/blog/2009/01/29/a-tree-grows-china">estimates that over 50% of class A office building</a> coming online in Beijing and Shanghai over the next two years will seek LEED certification. This is fantastic news, almost on par with American cities noted for their greenery, like New York or Portland.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioQP08m9pGxd5i2rlbJfGXG4FvROj8vbkYolXgWSwnetvqxn-3aNKzfISjDFC9pP3aELeEBY8XJPvL9UzicIeo3HB5CDyfqFj7HdAb7vPdfh_2TaBLx9urTSS1YhI7orSMCVj8K9YCfenH/s1600-h/JLL+China+tier+2+and+3+cities+.pdf-1.jpg"><img style="margin: 0pt 0pt 10px 10px; float: right; cursor: pointer; width: 320px; height: 250px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioQP08m9pGxd5i2rlbJfGXG4FvROj8vbkYolXgWSwnetvqxn-3aNKzfISjDFC9pP3aELeEBY8XJPvL9UzicIeo3HB5CDyfqFj7HdAb7vPdfh_2TaBLx9urTSS1YhI7orSMCVj8K9YCfenH/s320/JLL+China+tier+2+and+3+cities+.pdf-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5314078032593237394" border="0" /></a><br />The problem is, this high level of penetration is primarily confined to the tier 1 cities. LEED projects have sprouted up in tier 2 cities like Tianjin and tier 3 cities like Wuhan, but most LEED buildings continue to be in the highly developed areas near Beijing, Shanghai and Shenzhen. This is problematic because the <a href="http://www.chinadaily.com.cn/bizchina/2009-03/11/content_7569573.htm">vast majority of building is occurring outside</a> of these tier 1 regions. Moreover, the growth in construction in the tier 2 and 3 cities is actually much faster than that in tier 1 cities, meaning more construction will be in these secondary markets in the future.<br /><br /><br />More worrisome is the fact that LEED buildings are almost exclusively confined to the high-end of the market: Class A office, luxury apartments, and factories owned by multinational corporations. Unfortunately, this does not even come close to covering the entire market. The urbanization statistics shown earlier imply that a significant amount of space is going to have to be created for people who have yet to be urbanized. This certainly won’t be luxury apartment space. And what about for all those companies not ready or willing to occupy Class A office space? While 100+ LEED buildings is promising, this is nothing compared to the 5 million buildings to be built between now and 2030.<br /><br />Clearly, LEED alone cannot even begin to stem the tide of increasing greenhouse gas emissions and energy use in Chinese buildings. Unfortunately, while the government continues to show strong interest in building energy efficiency programs, I haven’t seen much happening outside of LEED.<br /><br /><span style="font-weight: bold;">What's next</span><br />China should not accept this state of affairs. Much, much more can and must be done to reduce the environmental impact of China’s buildings. Green buildings for everybody, everywhere will have to be the goal for China to reduce greenhouse gas emissions and other environmental impacts while making room for unprecedented urbanization.<br /><br />But how can China spread green buildings to Tier 2 and 3 cities and the countryside? How can China spread green buildings to all segments of the market? How can they do it within the timeframe needed to avoid locking-in future carbon emissions and prevent catastrophic global warming? Most importantly, how can they transform the market at an acceptable cost, or even at a net benefit?<br /><br />Trying to answer these questions will be the focus of the rest of my blog posts and my research in China.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com1tag:blogger.com,1999:blog-8821030105982252839.post-82604015946302561872009-03-08T06:01:00.000-07:002009-03-08T18:27:59.740-07:00Steven Holl Strikes Again- Shenzhen’s Vanke Center Aiming for LEED PlatinumSteven Holl didn’t stop with the <a href="http://chinagreenbuildings.blogspot.com/2009/02/linked-hybrid.html">Linked Hybrid in Beijing</a>, he is also the architect for the <a href="http://stevenholl.com/project-detail.php?type=construction&id=60">Vanke Center in Shenzhen</a>, a new mixed-use “horizontal skyscraper” aiming for LEED Platinum. I was lucky enough to visit the construction site last week, and this post will describe the unique concept and display some of my photos.<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhD-pY3OY23jSCTuK2vHJbi_GUeecyTvB4d1c0pF-RJU_Bh5wselNvCWL8gOdepnN7vZOaWjMhH0xqKKz8fpLmZ-Q96JGQ_6yQAbsdhYfjHky3mOKe7WmlnuKnbbXh3Bm9kCvLEgvJvzE5A/s1600-h/SHA-Vanke-08-10-6032-WHOR.jpg"><img style="cursor: pointer; width: 400px; height: 300px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhD-pY3OY23jSCTuK2vHJbi_GUeecyTvB4d1c0pF-RJU_Bh5wselNvCWL8gOdepnN7vZOaWjMhH0xqKKz8fpLmZ-Q96JGQ_6yQAbsdhYfjHky3mOKe7WmlnuKnbbXh3Bm9kCvLEgvJvzE5A/s400/SHA-Vanke-08-10-6032-WHOR.jpg" alt="" id="BLOGGER_PHOTO_ID_5310993545367729938" border="0" /></a><br /><br /></div><span style="font-style: italic;">(Quick caveat: most of this info was provided to me in Chinese... I’m pretty good with the language, but I might have missed something...)<br /><br /></span><span style="font-weight: bold;">“Horizontal Skyscraper” Maximizes Open Space</span><br />The Vanke Center, despite being only 35m tall, is one of the largest skyscrapers in the world. It just happens to be horizontal. In fact, if the Vanke Center were stood up vertically, it would be as tall as the Empire State Building. The building houses apartments, condos, offices, and a hotel, and will be the new headquarters for China Vanke, one of the country's largest real estate developers.<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmsvFgajIG7l2a1PvkcdQUCZmMx5lBqkCAiwDmLt9jqbNruMtYWXlB7SZ6V9ne9N_6jbKE4GHoE8K48YaQD_6X-kuOwkKT7FLkzfQj3-aV1FdBfFN2W9SijwrCKrnYJCgBiulKFMI7FmvH/s1600-h/size-comparison---W-PROJECT.jpg"><img style="cursor: pointer; width: 400px; height: 300px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmsvFgajIG7l2a1PvkcdQUCZmMx5lBqkCAiwDmLt9jqbNruMtYWXlB7SZ6V9ne9N_6jbKE4GHoE8K48YaQD_6X-kuOwkKT7FLkzfQj3-aV1FdBfFN2W9SijwrCKrnYJCgBiulKFMI7FmvH/s400/size-comparison---W-PROJECT.jpg" alt="" id="BLOGGER_PHOTO_ID_5310993539183874850" border="0" /></a><br /></div><br />And in addition to just looking cool, this interesting form actual has multiple green functions.<br /><br /><span style="font-weight: bold;">Open space</span><br />The building essentially has zero footprint on the ground, which creates more space for social interaction as well as more greenery. Although this landscaping could create additional environmental pressures, the designers have thoughtfully minimized this impact through the use of a rainwater capture system. Shenzhen’s wet, tropical climate provides plenty enough rain to keep the plants green, and rainwater gutters on the roof collect this water and use it for irrigation and filling the several fountains throughout the grounds. Moreover, the additional green space means there is more opportunity for rain water to percolate into the ground before running off into local sewers, lessening the strain on municipal water infrastructure.<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6HV1nkh-3H82SfRKVoyroXRcJK044z9byQPp8zE-zvwTaJxwq-xWu5e9AUpzDJSQ1wpzYFCykZNLRqSI7pFBEapbp6WpVCPy0JCfwqpnbk1oc9zPKj6LkFbj-PXVed4D8HGDQD1Nlv5AI/s1600-h/Picture-3_e_5---W-PROJECT-H.jpg"><img style="cursor: pointer; width: 200px; height: 150px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg6HV1nkh-3H82SfRKVoyroXRcJK044z9byQPp8zE-zvwTaJxwq-xWu5e9AUpzDJSQ1wpzYFCykZNLRqSI7pFBEapbp6WpVCPy0JCfwqpnbk1oc9zPKj6LkFbj-PXVed4D8HGDQD1Nlv5AI/s200/Picture-3_e_5---W-PROJECT-H.jpg" alt="" id="BLOGGER_PHOTO_ID_5310816218371529762" border="0" /></a><br /></div><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjsQYiimmmFVayhLhle009uVG8cei4oEoQPMblUAU6PXbRTs0f-pRRfGVS5tT3NRX5yR2ZrxrxLgMgeuY0oUgQ0ENoUndc7mMdq-qLnN0iFdpbOTNY32qwI97MUznMudblZEvxVYE5QYIZE/s1600-h/_032.jpg"><img style="cursor: pointer; width: 240px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjsQYiimmmFVayhLhle009uVG8cei4oEoQPMblUAU6PXbRTs0f-pRRfGVS5tT3NRX5yR2ZrxrxLgMgeuY0oUgQ0ENoUndc7mMdq-qLnN0iFdpbOTNY32qwI97MUznMudblZEvxVYE5QYIZE/s320/_032.jpg" alt="" id="BLOGGER_PHOTO_ID_5310818460228021026" border="0" /></a><br /></div><div style="text-align: center;"><span style="font-size:85%;">rain water collection</span><br /></div><br />Second, the raised building creates a cool microclimate beneath it. The building is sited at the foot of a fairly large hill, and the raised structure allows cool breezes from the hill to pass through the open area. This cools the building and reduces the need for air conditioning during the hot Shenzhen summers. It also creates for a more comfortable outdoor experience, encouraging more occupants and visitors to take advantage of the extra open space.<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSvxgY83r2nuPae9f944Oj3Y2cJb9G9j2swjZRk-Exbs9QHryumZn3zDlUf6o7lcebO4U1tFXiJLH0ZKNbK5mFqGSooh0HtH10xo8MH5SCDMTThLUl1uKUh1VdynKMbsgTkRjDcdLTiAmw/s1600-h/maximize-landscape---W-PROJ.jpg-1.jpg"><img style="cursor: pointer; width: 254px; height: 88px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSvxgY83r2nuPae9f944Oj3Y2cJb9G9j2swjZRk-Exbs9QHryumZn3zDlUf6o7lcebO4U1tFXiJLH0ZKNbK5mFqGSooh0HtH10xo8MH5SCDMTThLUl1uKUh1VdynKMbsgTkRjDcdLTiAmw/s200/maximize-landscape---W-PROJ.jpg-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5310816209398897426" border="0" /></a><br /></div><br />Third, the raised structure creates the largest possible number of views. Since the building’s lowest floor is at the same height as an average building’s third floor, more occupants have views to the outside. When coupled with daylight sensors, this means less energy used for lighting the indoor spaces. Moreover, the raised structure also creates “floorlights” on the first floor, whereby light bounces up from the open space below to provide additional natural light. Significant skylighting on the roof provides additional light, and louvered windows and double-paned glass allow in maximum light while minimizing glare. The result is a highly productive and comfortable space that uses less energy and is better connected with it’s outdoor environment.<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8NI30b6hTAFsr456bW5BhCdiLd5L9TvDNVZGEEC0T_u0c4LWwiOXiynF6CMfWULOaomOJvOTvU0vBTq9Lh0j76HdFTmT-vhyTCJdFBgELzs0rq7Qlg-0paR5MtJjgxnTO4VIZbhoBd2vr/s1600-h/maximize-views---W-PROJECT-.jpg"><img style="cursor: pointer; width: 200px; height: 150px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8NI30b6hTAFsr456bW5BhCdiLd5L9TvDNVZGEEC0T_u0c4LWwiOXiynF6CMfWULOaomOJvOTvU0vBTq9Lh0j76HdFTmT-vhyTCJdFBgELzs0rq7Qlg-0paR5MtJjgxnTO4VIZbhoBd2vr/s200/maximize-views---W-PROJECT-.jpg" alt="" id="BLOGGER_PHOTO_ID_5310816213116820498" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxIbdBfNH_LZ1IZwsMM6Qa799mo1L86DK3gqtTEf4CeTUgO9424Ej7iVWWvUcHwjv1zuq6jtpYWGY8wxHMW0ci2vK8FyYBdfN4MS_yJ8VQoq6fgQCtor-YYiTICJlDJzvjJAv5mlwVEaGC/s1600-h/_061.jpg"><img style="cursor: pointer; width: 320px; height: 240px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxIbdBfNH_LZ1IZwsMM6Qa799mo1L86DK3gqtTEf4CeTUgO9424Ej7iVWWvUcHwjv1zuq6jtpYWGY8wxHMW0ci2vK8FyYBdfN4MS_yJ8VQoq6fgQCtor-YYiTICJlDJzvjJAv5mlwVEaGC/s320/_061.jpg" alt="" id="BLOGGER_PHOTO_ID_5310818442594320530" border="0" /></a><br /><span style="font-size:85%;">"floorlights" to be<br /></span><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxDdwkzmjWLCmzoLkVhTD41Sk4L7yzuGUxplDbiGGAnKTC5Zfm2gNAJpjFiC7pXqURSqkISQe-x647Gr_cAVT7WhErLCGZtP4d2rvFvS-L3LhyphenhyphenITDCCB9YEBdA2FTWsOQXJ7lE2OX3Z22h/s1600-h/_035.jpg"><img style="cursor: pointer; width: 320px; height: 240px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxDdwkzmjWLCmzoLkVhTD41Sk4L7yzuGUxplDbiGGAnKTC5Zfm2gNAJpjFiC7pXqURSqkISQe-x647Gr_cAVT7WhErLCGZtP4d2rvFvS-L3LhyphenhyphenITDCCB9YEBdA2FTWsOQXJ7lE2OX3Z22h/s320/_035.jpg" alt="" id="BLOGGER_PHOTO_ID_5310818455351406674" border="0" /></a><br /><span style="font-size:85%;">windows with louvers shown blocking out glare<br /></span><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjohXrvuqq6BBU2RqAn9eV37CllcqUJ2Ni4Ejwe8ugDNJSYpz1gGo2CnUOHA8KaXubl1r2M-Cn5HxUGPKdfE0MZxnPoR-ja3o033b8q5p-JmxMWjVO91Yr9rFRNNNZ70WZ7s9txchwmaS-z/s1600-h/_040.jpg"><img style="cursor: pointer; width: 320px; height: 240px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjohXrvuqq6BBU2RqAn9eV37CllcqUJ2Ni4Ejwe8ugDNJSYpz1gGo2CnUOHA8KaXubl1r2M-Cn5HxUGPKdfE0MZxnPoR-ja3o033b8q5p-JmxMWjVO91Yr9rFRNNNZ70WZ7s9txchwmaS-z/s320/_040.jpg" alt="" id="BLOGGER_PHOTO_ID_5310818439169449874" border="0" /></a><br /><span style="font-size:85%;">skylighting on the roof can replace significant indoor lighting</span><br /><span style="font-size:85%;"><br /></span><span style="font-size:85%;"><br /></span><br /></div>Fourth, the horizontal design creates much more rooftop space. Holl takes advantage of this roof space in two ways. First, the building has a significant rooftop solar panel installation. These PV panels provide 12% of the power for Vanke’s offices. And where PV panels aren’t installed, the rest of the roof sports a roof garden. This green roof will reduce the building’s cooling load and keep additional rainwater from entering the sewers.<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpX_qun-P07WyiVw6uKnYM462aZQ7_WXuoolS6h1-hF16gIr3awesOioQ_9S0FWRS_J4TgUZUeDQym7H4nuwwKrGPnrcY7sIAsqi8HQOR-Xxz_OHeTZxcE0iSEx4s69Un56woMIDNyZXBB/s1600-h/_029.jpg"><img style="cursor: pointer; width: 320px; height: 240px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpX_qun-P07WyiVw6uKnYM462aZQ7_WXuoolS6h1-hF16gIr3awesOioQ_9S0FWRS_J4TgUZUeDQym7H4nuwwKrGPnrcY7sIAsqi8HQOR-Xxz_OHeTZxcE0iSEx4s69Un56woMIDNyZXBB/s320/_029.jpg" alt="" id="BLOGGER_PHOTO_ID_5310818452357490162" border="0" /></a><br /></div><div style="text-align: center;"><span style="font-size:85%;">Housing for solar panels<br /><br /></span></div>All these green features that flow from the building’s interesting design, as well as a few more interior features like <a href="http://www.cbe.berkeley.edu/underfloorair/Default.htm">underfloor air distribution</a> and <a href="http://en.wikipedia.org/wiki/Thermal_energy_storage#Air_conditioning">thermal energy storage</a>, contribute to the building’s lofty green goal: LEED platinum. (Note: the building is actually split into 4 different buildings, and only Vanke’s offices will be going for LEED platinum. I’m a bit confused about the split and will try to find out more.) The building was originally scheduled to be completed in mid-2009, but has been pushed back to late 2009 or early 2010. I guess that means the race between the Vanke Center and Parkview Green is on to be the first LEED Platinum building in China.<br /><br /><table style="width: 194px; text-align: left; margin-left: auto; margin-right: auto;"><tbody><tr><td style="background: transparent url(http://picasaweb.google.comhttp://lh5.ggpht.com/s/v/46.19/img/transparent_album_background.gif) no-repeat scroll left center; height: 194px; -moz-background-clip: -moz-initial; -moz-background-origin: -moz-initial; -moz-background-inline-policy: -moz-initial;" align="center"><a href="http://picasaweb.google.com/geoffplewis/VankeCenter?feat=embedwebsite"><img src="http://lh3.ggpht.com/_Kp1mQeobrgo/SbO_wbU3vpE/AAAAAAAAAT4/t256g27UFuI/s160-c/VankeCenter.jpg" style="margin: 1px 0pt 0pt 4px;" height="160" width="160" /></a></td></tr><tr><td style="text-align: center; font-family: arial,sans-serif; font-size: 11px;"><a href="http://picasaweb.google.com/geoffplewis/VankeCenter?feat=embedwebsite" style="color: rgb(77, 77, 77); font-weight: bold; text-decoration: none;">Vanke Center</a></td></tr></tbody></table><div style="text-align: center;">Link to full photo slideshow of my site tour<br /></div><br /><span style="font-weight: bold;">Vanke</span><br />This building represents another step forward for Vanke, one of the biggest developers in China. <a href="http://en.wikipedia.org/wiki/China_Vanke">Vanke was the second company to list</a> on the Shenzhen stock exchange in 1991, and was the most valuable company on the exchange in 2006. It develops residential real estate all over China, accounting for about 2% of China’s residential real estate market. That may not sound like much, but is huge for a market as fragmented as Chinese real estate. As a result, what Vanke does sets a tone for the entire market.<br /><br />This is not Vanke’s first green project. Vanke has been exploring prefabricated housing to cut down on materials waste, and received an <a href="http://archrecord.construction.com/ar_china/BWAR/0804/0804_bestclient/0804_bestclient.asp">Architectural Record Best Client award</a> in 2008 for their commitment to good design. This makes sense, since Vanke manages all its properties, which gives them incentive to make their properties profitable over the long-run.<br /><br />Vanke is an established leader in the real estate market, and I think the cutting-edge Vanke Center will really get other developers thinking about how they can implement green principles into their own projects. Cheers to Vanke for pushing the envelope. Let's hope other developers follow suit.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com3tag:blogger.com,1999:blog-8821030105982252839.post-74963830504766834882009-02-26T19:31:00.000-08:002009-05-06T02:06:07.638-07:00EcoBlocksThis post will describe the Eco Block concept and what the government will have to do to encourage developers to build with this type of whole-systems design.<br /><br /><span style="font-weight: bold;">EcoBlocks</span><br />EcoBlocks aim to be mass replicable, economically viable, and nearly entirely resource self-sufficient communities. EcoBlocks are an alternative way to meet the huge and growing demand for urban space in China, currently filled by inefficient and wasteful apartment blocks. The EcoBlock concept is still a only a concept, but it’s creator <a href="http://www.ced.berkeley.edu/ced/people/query.php?id=54&dept=all&title=all">Harrison Fraker</a>, former dean of the UC Berkeley School of Architecture, has worked with Arup to prove the concept and is in talks with various Chinese cities to build an EcoBlock. The slide show below is Professor Fraker’s full introduction to the concept, and I will focus on a few key slides in my post today.<br /><div style="width:425px;text-align:left" id="__ss_1393236"><a style="font:14px Helvetica,Arial,Sans-serif;display:block;margin:12px 0 3px 0;text-decoration:underline;" href="http://www.slideshare.net/geoff848/harrison-fraker-ecoblocks?type=presentation" title="Harrison Fraker- EcoBlocks">Harrison Fraker- EcoBlocks</a><object style="margin:0px" width="425" height="355"><param name="movie" value="http://static.slidesharecdn.com/swf/ssplayer2.swf?doc=harrisonfraker-panel3c-090506040335-phpapp02&stripped_title=harrison-fraker-ecoblocks" /><param name="allowFullScreen" value="true"/><param name="allowScriptAccess" value="always"/><embed src="http://static.slidesharecdn.com/swf/ssplayer2.swf?doc=harrisonfraker-panel3c-090506040335-phpapp02&stripped_title=harrison-fraker-ecoblocks" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="355"></embed></object><div style="font-size:11px;font-family:tahoma,arial;height:26px;padding-top:2px;">View more <a style="text-decoration:underline;" href="http://www.slideshare.net/">presentations</a> from <a style="text-decoration:underline;" href="http://www.slideshare.net/geoff848">geoff848</a>.</div></div><br /><br /><br /><span style="font-weight: bold;">Whole Systems Design</span><br />Professor Fraker has done a masterful job of using whole systems thinking to design the EcoBlock. As the schematic below shows, the EcoBlock considers the many interactions between the energy, water, and waste systems. The anaerobic digester is a prime example: water used to flush the toilets goes into the septic tank as waste, which then goes through the digester where it is turned into energy. This is an interesting example of <a href="http://www.mcdonough.com/writings/c2c_design.htm">“waste equals food”</a>, a concept Will McDonough and Michael Bruangart champion in <a style="font-style: italic;" href="http://www.mcdonough.com/cradle_to_cradle.htm">Cradle to Cradle</a>.<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioCyTjBVmhM0HZJRRBrpEAotyxVsOftJdsYZxjRIO6GST-TENu5GhqGG63QxUIKT-9gXMVyuEE4VIEiw3k7fdGn7vK_38vaTJqoRhyW_6vng4pERokW2PlpHn_-ibizVSM4JnSt2nA64cR/s1600-h/whole+systems+thinking.jpg"><img style="cursor: pointer; width: 400px; height: 299px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioCyTjBVmhM0HZJRRBrpEAotyxVsOftJdsYZxjRIO6GST-TENu5GhqGG63QxUIKT-9gXMVyuEE4VIEiw3k7fdGn7vK_38vaTJqoRhyW_6vng4pERokW2PlpHn_-ibizVSM4JnSt2nA64cR/s400/whole+systems+thinking.jpg" alt="" id="BLOGGER_PHOTO_ID_5307317316035852434" border="0" /></a><br /></div><br />The upshot of this whole systems thinking is a development that is almost entirely self-sufficient from a resource perspective. As the chart below shows, thanks to significant energy efficiency measures and on-site generation, EcoBlocks is a net-zero energy community and doesn’t need to be connected to the grid.<br /><br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0NWhp0lFYmciy3cvCtd6zimt74MbrLUgCT6J6dbsZfrZ2QnYEtI01WmnZyJJFMd0QmwLGIkF59Jr87PM-gWdYawcMw3moSNqIJ9G6hwrOFuSSpo2Z5rAeBBaAz8fxfCh_YWYUIxw4pXoa/s1600-h/reducing+reliance+on+grid+based+energy-1.jpg"><img style="cursor: pointer; width: 400px; height: 286px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0NWhp0lFYmciy3cvCtd6zimt74MbrLUgCT6J6dbsZfrZ2QnYEtI01WmnZyJJFMd0QmwLGIkF59Jr87PM-gWdYawcMw3moSNqIJ9G6hwrOFuSSpo2Z5rAeBBaAz8fxfCh_YWYUIxw4pXoa/s400/reducing+reliance+on+grid+based+energy-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5307317311790513458" border="0" /></a><br /></div><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihfz8VB1SBSBdmgtp6sTKwYf5vCctJ_8f43JDHVPI29FFvGk0WaQ5vnLYDunKWwnKu_tMgvOvkmGBBVjeNK0cCDGaPWYov7tXvVdyZ-7j97_fJHZDAasMT-8hv4qfiD-_zfDDFs093AqbA/s1600-h/HarrisonFraker-Panel3c.pdf+%2859+pages%29-3.jpg"><img style="cursor: pointer; width: 400px; height: 256px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihfz8VB1SBSBdmgtp6sTKwYf5vCctJ_8f43JDHVPI29FFvGk0WaQ5vnLYDunKWwnKu_tMgvOvkmGBBVjeNK0cCDGaPWYov7tXvVdyZ-7j97_fJHZDAasMT-8hv4qfiD-_zfDDFs093AqbA/s400/HarrisonFraker-Panel3c.pdf+%2859+pages%29-3.jpg" alt="" id="BLOGGER_PHOTO_ID_5307317305968888226" border="0" /></a><br /></div>As a result of water conservation measures and extensive on-site treatment, EcoBlocks are entirely self sufficient from a water perspective. The EcoBlock also tries to close the waste loop. All sludge, food waste, and green waste is sent to the digester where it is used for energy generation. Unfortunately, the waste loop is not completely closed, and about 17% of the complex’s waste (primarily non-recyclable solid waste) will have to be sent to the landfill.<br /><br />The EcoBlock’s community design aims to create a pedestrian-friendly environment, maximizing the room for social interaction and minimizing emissions related to automobiles.<br /><br /><span style="font-weight: bold;">First costs</span><br />But of course, the primary barrier keeping EcoBlocks from moving from concept to reality is cost, or rather, the distribution of costs and benefits among different players.<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuaF5cMzBKR0Z7a4Cp0_WrFiepPIYpR0mPPGdX11vi9LO-H2MlzQfSxQYt831pD4s2PcnBfDMtNlVtfKiKmgg4OU-4aTPlsJpBoVw47WbabHpmVksZljiEaO6OZY2UzXKvx6UbdEa9I6cf/s1600-h/the+bottom+line.jpg"><img style="cursor: pointer; width: 400px; height: 268px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuaF5cMzBKR0Z7a4Cp0_WrFiepPIYpR0mPPGdX11vi9LO-H2MlzQfSxQYt831pD4s2PcnBfDMtNlVtfKiKmgg4OU-4aTPlsJpBoVw47WbabHpmVksZljiEaO6OZY2UzXKvx6UbdEa9I6cf/s400/the+bottom+line.jpg" alt="" id="BLOGGER_PHOTO_ID_5307317310043142594" border="0" /></a><br /></div><br />The EcoBlock’s additional sustainability initiatives are expected to increase the upfront costs by 5-10% over a standard development. On it’s face, that seems pretty remarkable: a completely net-zero energy and water and nearly net-zero waste community for just 5-10% more than a standard resource-inefficient development.<br /><br />But an extra $7 million in upfront development capital can significantly affect the project’s economics: Professor Fraker estimates that this investment will take a 10.1 year payback period. 10 years is a long time for developers anywhere, and light years in China’s fast-moving development market, and is likely to be a big deterrent to Chinese developers.<br /><br />But the real financial barrier with the EcoBlocks is not necessarily this cost increase per se, but rather a mismatch between costs and benefits. All the costs- solar panels, digesters, wind turbines, wastewater treament facility, etc- are borne by the developers. On the other hand, most of the benefits are enjoyed by either the tenants or the government.<br /><br />The benefits that flow to the tenant are obvious: a net-zero energy and water community means no monthly electricity or water bill. Theoretically, these utility saving benefits could potentially be capitalized upfront and included in the price of the units. However, that would likely make the units prohibitively expensive for the average urban Chinese resident, limiting the usefulness and scalability of the EcoBlock model.<br /><br />Most likely, government support in the form of a financial subsidy to developers will be needed to get EcoBlocks off the ground. Luckily, I think the government has a real incentive to do this. Besides the many obvious environmental benefits of this type of development, the EcoBlock could also save the government a lot of money in capital spending. Since EcoBlocks are net-zero energy and net-zero water, the government doesn’t have to provide any power or water infrastructure to the community. If many communities pursued this mode of low-impact development, this could result in the reduction of an entire water treatment plant or coal-fired power plant, saving the government significant amounts of infrastructure spending. Government therefore has an economic incentive to encourage mass implementation of EcoBlock-like low-impact communities.<br /><br />The chart below shows one kind of government subsidy model that Fraker envisions. Essentially, the government gives a financial subsidy to the developer, who is then incented to build a resource efficient EcoBlock development. After completion, users pay the developer a phantom “utility bill” to the developer instead of a real utility bill. Essentially, the idea is for those who get the long-term benefit (government, users) to pay the developer, the actor with the most control over the design.<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjUAHilT67IXOlRLOK_pLy3AHoYi1iWsvNigdl2QQIXVgqJxyhurKqBCxvu9T70kW5klIP7DQDX266mtVaP61f1HtXFriCfzqnt8NR_t4s0DTvYhbzPluOAJuyghIWJmTgssYuyADF2KGkS/s1600-h/HarrisonFraker-Panel3c.pdf+%2859+pages%29-2.jpg"><img style="cursor: pointer; width: 400px; height: 277px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjUAHilT67IXOlRLOK_pLy3AHoYi1iWsvNigdl2QQIXVgqJxyhurKqBCxvu9T70kW5klIP7DQDX266mtVaP61f1HtXFriCfzqnt8NR_t4s0DTvYhbzPluOAJuyghIWJmTgssYuyADF2KGkS/s400/HarrisonFraker-Panel3c.pdf+%2859+pages%29-2.jpg" alt="" id="BLOGGER_PHOTO_ID_5307317300868048978" border="0" /></a><br /></div><br /><span style="font-weight: bold;">The future role of government in green building</span><br />Thus far, the green real estate market in China (and the US to a lesser extent) has consisted almost entirely of Class A office buildings and luxury apartments in Tier 1 cities. Developers are willing to build green for these high-end markets because they can make more money in three primary ways: higher rents since <a href="http://www.joneslanglasalle.com/Pages/ResearchDetails.aspx?TopicName=&ItemID=1160&ResearchTitle=Building%20Momentum">companies will pay more for green space</a>; lower operating costs as a result of lower energy bills; and a <a href="http://www.deloitte.com/dtt/article/0%2C1002%2Csid%25253d2232%252526cid%25253d213564%2C00.html">better competitive position</a> thanks to the green features.<br /><br />But green buildings cannot just be an isolated, high-end phenomenon; in the future every building- from the cheapest hutong all the way to the most luxurious hotel- will need to be green. And for that vision to be achieved, green building payoffs can't be based on higher rents alone.<br /><br />The <a href="http://www.asiabusinesscouncil.org/BEE.html">Asia Business Council’s report on green buildings</a> showed that investing in energy efficiency is 4-6x cheaper than investing in new power plants. The problem is, this statistic takes the societal viewpoint. From the viewpoint of the average Chinese developer, sustainability is an extra cost and the benefits will be enjoyed by somebody else. Government must step in and change this economic calculus: In order for developments like the EcoBlock to be competitive and mass-replicable in the short term, the government must step in and provide financial incentives to developers.<br /><br />But maybe it doesn’t have to be the Chinese government. The recent <a href="http://www.brookings.edu/reports/2009/01_climate_change_lieberthal_sandalow.aspx">Brookings Institution report</a> on overcoming obstacles to US-China cooperation on climate change recommends that the US and China announce a major headline green initiative that “capture[s] the public’s imagination”. Could EcoBlocks in China- and financial incentives from the American government to build them- fit the bill?Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com0tag:blogger.com,1999:blog-8821030105982252839.post-67458833028238157722009-02-24T00:12:00.000-08:002009-02-24T03:46:54.372-08:00Ministry of Construction Green Building Evaluation Standard- The “Three Star” SystemToday’s post will describe China’s green building evaluation standard and compare it the US Green Building Council’s LEED rating system.<br /><br />An English translation of the Chinese rating system can be found here:<br /><br /><a href="http://docs.google.com/Doc?id=ddfqxmx9_29hs74dhgv">Part 1: full rating system </a><br /><br /><a href="http://docs.google.com/Doc?id=ddfqxmx9_26gsrmmdhd">Part 2: notes and scoring system</a><br /><br />(note: from the google doc's site, you can download the rating system in PDF or Word)<br /><br /><span style="font-weight: bold;">The Three Star System</span><br />The Ministry of Construction’s Green Building Evaluation Standard is China’s first attempt to create a local green building standard. As the introduction of the rating system notes, the purpose is to create a voluntary rating system that will encourage green development:<br /><blockquote>Our country is now in the phase of rapid economic development, ranking world No. 1 in terms of annual building volume, with significantly growing consumption of resources year by year. Therefore, scientific development philosophy must be steadily created and seriously implemented, and the concept of sustainable development must be adhered to, to strongly develop green buildings... The purpose of formulating this standard is to regulate evaluation on green buildings and promote the development of green buildings.</blockquote>The evaluation system, introduced in 2006, is credit-based, and allows developers to choose which credits they want to pursue.<br /><br />The evaluation system has two different standards: one for residential buildings and one for public (i.e. large commercial) buildings. As the rating system describes,<br /><blockquote>Considering current construction market in our country, this standard will mainly evaluate residential buildings that are huge in quantities and public buildings that consume much energy and resources, like office buildings, mall buildings and hotel buildings. For evaluation on other buildings, this standard can serve as reference.</blockquote>The evaluation standard rates buildings with a variety of prerequisites (called “control items” in the Chinese system) and credits (called “general items” in the Chinese system) in six categories:<br /><ol><li>Land savings and outdoor environment</li><li>Energy savings</li><li>Water savings</li><li>Materials savings</li><li>Indoor environmental quality</li><li>Operations and management<br /></li></ol>A seventh category called “Preference items” contains strategies that are both cutting-edge and harder to implement, such as brownfield redevelopment, more than 10% on-site renewable power generation, etc.<br /><br />The China green building system grants three levels of ratings: 1-star, 2-star, and 3-star, hence the nickname “Three Star System”. The charts below show the different ratings for residential and public buildings:<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVUFNt3lojo8NRYvm5GLwTB2UlbK2dma3xKs6iNyopx9S1MTB7wzse57lDEDqT98M6CMLrcrViEOiePlKi23zIRxPiQMSqzLnxWERpA9oAjuvn1naJc9u5RUyz5qk2uFRAAWs0-N_uh1oM/s1600-h/ChinaGreenBuildStd2_English+residential-1.jpg"><img style="cursor: pointer; width: 400px; height: 219px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVUFNt3lojo8NRYvm5GLwTB2UlbK2dma3xKs6iNyopx9S1MTB7wzse57lDEDqT98M6CMLrcrViEOiePlKi23zIRxPiQMSqzLnxWERpA9oAjuvn1naJc9u5RUyz5qk2uFRAAWs0-N_uh1oM/s400/ChinaGreenBuildStd2_English+residential-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5306275018138116642" border="0" /></a><br /></div><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQlTv2PV-8llByHvifi4MN0GCZ6RznagyRsibd0SlNN_BU9IMiePMQyNsq-gp_oSJnpTT_FhSaatDwSmwNsDWqO61LxblrLnRq2wEM3VgfycdT4jdv46E7yiJqA7fzjJW2NnMH_itbv_AE/s1600-h/ChinaGreenBuildStd2_English+public+-+Google+Docs-1.jpg"><img style="cursor: pointer; width: 400px; height: 190px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhQlTv2PV-8llByHvifi4MN0GCZ6RznagyRsibd0SlNN_BU9IMiePMQyNsq-gp_oSJnpTT_FhSaatDwSmwNsDWqO61LxblrLnRq2wEM3VgfycdT4jdv46E7yiJqA7fzjJW2NnMH_itbv_AE/s400/ChinaGreenBuildStd2_English+public+-+Google+Docs-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5306275017346477874" border="0" /></a><br /></div> <span style="font-weight: bold;">Similarities between Three Star System and LEED</span><br />Those familiar with the LEED rating system will notice many striking similarities between LEED and the China standard.<br /><br />First, both are credit based systems rather than command and control systems. This gives the developer maximum leeway over what credits they wish to pursue, although some critics of LEED have said this reduces the level of sustainability in LEED rated buildings. China’s system does have more prerequisites (32 in residential, 26 in public buildings) than LEED (7 in <a href="http://www.blogger.com/www.usgbc.org/ShowFile.aspx?DocumentID=1095">LEED for New Construction [PDF]</a>).<br /><br />Second, the categories are almost the same, save for the Three Star's additional operations and management category. Moreover, the credits within those categories are very similar; things like minimum energy performance, water savings, local materials, and others are seen in both systems.<br /><br />Third, the rating categories are very similar: 1-, 2- and 3- stars in the Chinese system and Certified, Silver, Gold and Platinum in LEED.<br /><br /><span style="font-weight: bold;">Complement to LEED</span><br />One interesting aspect of the Three Star System is that it a rating can only be awarded after one year of property operation:<br /><blockquote>Evaluation on newly built, expanded or reconstructed residential buildings and office buildings, mall buildings and hotel buildings belonging to public buildings, shall be conducted in one year after turnover to the property owner.</blockquote>I think this is a good idea for China, because it requires real, measurable reduction. One <a href="http://www.green-buildings.com/content/78419-redemption-leed">complaint about LEED</a> is that many credits are based on energy savings predicted by energy modeling, rather than actual certified energy savings. <a href="http://www.newbuildings.org/downloads/Energy_Performance_of_LEED-NC_Buildings-Final_3-4-08b.pdf">Although New Buildings Institute data [PDF]</a> shows that on average, the models accurately predict energy savings, this can vary widely on a building to building basis. The Three Star System remedies this by basing results on hard data, and collection of this data may be an important first step toward better measurement of building energy use in China.<br /><br />However, I worry that this post-facto certification process could slow the market transformation that LEED has driven so efficiently in America. The LEED Core and Shell system allows developers to submit their design and achieve “pre-certification”, which they can then market to prospective tenants before the building is built. This allows developers to capture some of the benefits of going green by getting higher rents and faster lease up and ultimately drives more developers to build green.<br /><br />Luckily, LEED and China’s Three Star System can work together and complement each other quite nicely. This will allow developers who want to get the marketing benefits of green to pursue LEED Core and Shell pre-certification and then ensure that the predicted energy savings were achieved by going for Three Star certification.<br /><br />As Rob Watson, “father of LEED” and CEO of <a href="http://www.ecotech-intl.com/">EcoTech International</a>, a green building consultancy in the US and China, says:<br /><blockquote>I really don't see LEED or other international green building standards as "competing" with the MOHURD [Three Star] green standard. The real competition is with the standard non-green developments. The MOHURD [Three Star] green standard is more geared for the Chinese market and should appeal to a broader base of developers than LEED. However, key segments of the market are demanding LEED and everyone agrees that the market should not be interfered with. I also believe that, as the cost to certify comes down, I expect the reach of China's green standard and LEED to expand.</blockquote>Watson expects to pursue both the Three Star standard and LEED standards on the projects he works on in China.<br /><br />All in all, the Three Star System seems to be a good start for China’s nascent green building market. As the market begins to accept this system, I hope we will see the Three Star System begin to gain popularity and become much more widespread than LEED, which still remains almost exclusive to Class A office and luxury apartment development. After all, for China to get serious about green development, all buildings will have to be green, not just those at the top end of the market. Hopefully the Three Star System will eventually help make the Chinese real estate market greener, healthier and more prosperous.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com5tag:blogger.com,1999:blog-8821030105982252839.post-28137681698125400582009-02-23T03:36:00.000-08:002009-02-23T20:31:13.397-08:00Building combined heat and power: a key strategy for GHG reduction in ChinaThis post will describe building combined heat and power (BCHP) and what role it could play in helping China reduce it’s emissions in the near term, and also what role it can play in laying the groundwork for China to significantly reduce it’s emissions in the long term.<br /><br /><span style="font-weight: bold;">BCHP</span><br />Building combined heat and power (BCHP) refers to technologies that simultaneously provide both electricity and heating and/or cooling inside buildings. The idea is pretty simple: take all the waste heat that comes from normal power generation processes and use it for something useful, namely heating the building. Using the fuel for two processes really drives efficiency. Most BCHP systems operate between 70% and 90% efficiency, as compared to the mid-50% range for high efficiency natural gas plants and the mid-30% range for a standard coal plant.<br /><br />Buildings are uniquely well-suited for combined heat and power because they almost always need both electricity and heat and/ or cooling (the thermal heat can be used to drive cooling processes). Generally, BCHP systems are sized to provide enough power to the building to match the building’s electrical or thermal baseload, i.e. the lowest amount of energy that will be used during the day or throughout the year. BCHP will provide the baseload and then the grid or other onsite renewables will provide power to meet peak loads.<br /><br />CHP is not new to China, although it has primarily been used in larger applications, and not sized down to the building level. <a href="http://www.asiapacificpartnership.org/pdf/Projects/REDGTF/PSU/RDG-06-07-PSU.pdf">According to a recent report led by the US EPA (PDF)</a>, China already produces 13.5% of it’s electricity from CHP units. Most of this CHP capacity is coal-fired district heating units. The report notes that although China’s share of CHP electricity generation is growing,<br /><blockquote>China [still] has a large district heating sector that relies primarily on heat-only boilers, rather than on more efficient and less polluting CHP. Compared to other countries with large district heating sectors and many industrial consumers of heat, China has a relatively low share of CHP in both electricity and heat production.</blockquote>So although I will focus on BCHP in this post, wider adoption of CHP for district heating would help reduce the energy use and carbon emissions related to the <a href="http://chinagreenbuildings.blogspot.com/2009/02/heating-in-china-inefficiency-and.html">inefficient Chinese space heating system I described last week</a>.<br /><br /><span style="font-weight: bold;">BCHP advantages</span><br />BCHP are good sources of carbon reductions for two reasons. First, the high efficiency of BCHP means 25% less fuel is used for the same level of heating and electricity as compared to conventional separated heat and power systems. 25% less fuel means 25% less emissions, both global GHG emissions and locally harmful pollutant emissions. Second, the fuel for BCHP is most often natural gas, which provides even further emission savings. Since natural gas is cleaner than coal, ie produces less CO2 per unit of energy, this “fuel switching” provides additional GHG reductions. As this <a href="http://www.localpower.org/nar_publications.html">analysis by the World Alliance for Distributed Energy (WADE) shows</a>, BCHP could save significant amounts of carbon emissions in China:<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYcrryFrdsWZ_tA1QeEtM3O8fP-Lv8h4dIbv6QxIbEBNFcBoj29FxFbcYs8bcFsQUB9npz1tp2ruZJnZ4pQQtmYiflxP5EEXMhJWLfhUjPtgPOIFIG5916HkiNlhG3HyDIuOdN7C4zEhBF/s1600-h/WADE+building+integrated+distributed+renewable+rpt.pdf-1.jpg"><img style="cursor: pointer; width: 400px; height: 261px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYcrryFrdsWZ_tA1QeEtM3O8fP-Lv8h4dIbv6QxIbEBNFcBoj29FxFbcYs8bcFsQUB9npz1tp2ruZJnZ4pQQtmYiflxP5EEXMhJWLfhUjPtgPOIFIG5916HkiNlhG3HyDIuOdN7C4zEhBF/s400/WADE+building+integrated+distributed+renewable+rpt.pdf-1.jpg" alt="" id="BLOGGER_PHOTO_ID_5305958392247757906" border="0" /></a><br /></div><br />Importantly, unlike other “clean” fossil fuel technologies like coal CCS, BCHP is a well proven technology, with many units around the world working reliably. The US already gets about 8% of it’s electricity from CHP, most of which is in the form of distributed BCHP units. Transferring this know-how from the US to China could be a key piece of a program of <a href="http://chinagreenspace.blogspot.com/2009/02/clintons-visit.html">technology transfer that must be expanded </a>as a centerpiece of US-China collaboration on climate change.<br /><br />Most importantly for China, the economics work for BCHP. As the WADE analysis shows, the cheapest way for China to meet its expected electricity demand in 2020 is through DE, or distributed energy, such as BCHP, thanks to much lower transmission and distribution (T&D) costs:<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0-VLR8vBSe68q0uAbQihyphenhyphenFva-zvIWe6c4u4HG7JF3FseyrOK3oYQooZhOH73dL7HSm7bctdIwP7rhZXzCuPHf8WyaI0i8LNL-KsF2ygjTr9P9cejNcnHceZ0XGbtfTh4yb0Ur2OR_Naw_/s1600-h/WADE+building+integrated+distributed+renewable+rpt.pdf-2.jpg"><img style="cursor: pointer; width: 400px; height: 228px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0-VLR8vBSe68q0uAbQihyphenhyphenFva-zvIWe6c4u4HG7JF3FseyrOK3oYQooZhOH73dL7HSm7bctdIwP7rhZXzCuPHf8WyaI0i8LNL-KsF2ygjTr9P9cejNcnHceZ0XGbtfTh4yb0Ur2OR_Naw_/s400/WADE+building+integrated+distributed+renewable+rpt.pdf-2.jpg" alt="" id="BLOGGER_PHOTO_ID_5305958393085128338" border="0" /></a><br /></div><br />So as China inevitably gets serious about reducing emissions, BCHP as well as community level CHP will be one of the obvious places to start. Indeed, China’s NDRC has already announced a goal of 200 GW of CHP generation by 2020, which is expected to account for 22% of installed power capacity at that time.<br /><br /><span style="font-weight: bold;">Is CHP a good long-term strategy?</span><br />Although BCHP would certainly be a good step forward in the sense that it results in serious emissions reductions in the short-term, one problem is that it might be considered a “second best” solution over the long-term. As Michael Hoexter <a href="http://terraverde.wordpress.com/2009/02/11/carbonpolicy3/">wrote recently in Green Thoughts</a>,<br /><blockquote>A carbon pricing system, especially in its first years, will encourage investment in what might be called “local minima” or the currently less expensive carbon reduction technology or practice. In some cases, these local minima may be zero-carbon or potentially part of a net zero carbon emitting economy, but in most cases these choices will entail the more efficient use of fossil resources or switching to “second-best” alternative fuel systems like substituting natural gas for petroleum... However commitments to second-best, long-lived infrastructure with a useful lifetime of 40 or 50 years that commits us to a lot of carbon emissions during that period appear to be ultimately a waste of resources.</blockquote><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtLpm_dUOktwjxPVO70Wv6pO3p-jXW92QO9rik6iBqq3nLY2nXFlaL_dMTBdIIODMjf5YWuuDyZW8JMnYA3obLesCOHucWFrKEbQOrbQ-vf4isGH56mKltwlnxaIP8hM93PiYq6GOyBnob/s1600-h/Green+Thoughts.jpg"><img style="cursor: pointer; width: 317px; height: 353px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtLpm_dUOktwjxPVO70Wv6pO3p-jXW92QO9rik6iBqq3nLY2nXFlaL_dMTBdIIODMjf5YWuuDyZW8JMnYA3obLesCOHucWFrKEbQOrbQ-vf4isGH56mKltwlnxaIP8hM93PiYq6GOyBnob/s400/Green+Thoughts.jpg" alt="" id="BLOGGER_PHOTO_ID_5305958392260990066" border="0" /></a><br /></div><br />The 25% GHG emissions reduction that BCHP provides is certainly a big reduction, but does not get to the 80% below 1990 CO2 emissions levels by 2050 <a href="http://april.stepitup2007.org/article.php?id=29">considered necessary by IPCC scientists</a>. Of course, if China were also to switch from coal to natural gas as they move to BCHP, the emissions savings could be even larger and make BCHP look better.<br /><br />However, widespread fuel switching in China would depend heavily on a serious build out of natural gas infrastructure. According to the US EPA report, natural gas only provides about 3% of China’s current energy needs, although this figure has been growing recently.<br /><br />China is also <a href="http://www.iea.org/Textbase/publications/free_new_Desc.asp?PUBS_ID=1094">pouring lots of money into building out its natural gas infrastructure</a>. But in a zero carbon world, it seems likely that even natural gas will eventually have to be abandoned, making it a “second best” option and ultimately a waste of resources. On the other hand, WADE suggests that since natural gas is limited, China should maximize the value out of it by investing in high-efficiency BCHP:<br /><blockquote>The fact that gas reserves are located in western China and the biggest demand for gas use in buildings is in the eastern part of the country means that bringing gas to market requires large-scale capital investment. To get the most value from infrastructure investment the Chinese will want to ensure it is burned in a manner which minimizes waste. BCHP is perhaps the best application for optimising the value of the incoming gas supplies.<br /></blockquote>Biofuels and biodiesel may also soon become low-carbon realities and help displace some of the natural gas requirements. Although given the water difficulties China is facing, I find it hard to believe that biofuels will be anything but a “second best” solution for China.<br /><br /><span style="font-weight: bold;">CHP is a good move forward for China</span><br />Despite the serious issues relating to fuel above, I believe BCHP is a key step toward the long-term imperative of a carbon neutral China for three reasons.<br /><br />First, a build out of BCHP will provide a learning curve for the Chinese to figure out how to make distributed generation work. As I mentioned in my <a href="http://chinagreenbuildings.blogspot.com/2008/11/peal-river-tower.html">post on the Pearl River Tower</a>, China’s current grid policy does not allow for “running the meter back”, which prevented the installation of CHP at that project. If China starts ramping up BCHP, this policy will likely be changed as more and more building owners will want to have both BCHP and access to the grid. Moreover, China's grid operators do not have much experience integrating distributed and centralized power generation. More grid-connected BCHP would push grid operators and regulatory bodies to create a "smart grid" that can seamlessly take both distributed and centralized power and provide it to customers. A smarter, more interconnected grid is a key part of further development of net zero energy buildings and distributed renewable power generation, which will likely be the centerpieces of a future low carbon society. BCHP would be a good next step toward a smart grid.<br /><br />Second, wide scale installation of BCHP will help slow the growth of coal plants and avoid “locking in” future CO2 emissions. BCHP technology is a proven, cost-effective way to reduce China’s carbon emissions in the short-term. Given China’s still unresponsive attitude toward climate change, BCHP likely represents one of the few real short-term alternatives to continued growth in Chinese coal power plants.<br /><br />Third and most importantly, BCHP will spur more systems thinking, particularly a focus on the inherent linkages between power plants and buildings. For most of the modern area, power plants have been built further and further afield. This makes obvious sense for coal plants, since no one wants a coal plant and all the emissions it produces in their backyard and would much rather have it “out of sight and out of mind”. However, with much cleaner burning BCHP power generation, the logic of far flung power starts to disappear and “relocalizing” generation begins to make sense. As power generation becomes relocalized and integrated into buildings, designers will be forced to think about the buildings energy load and how to provide the power for that load. In the extreme, if it becomes the norm for building owners to foot the bill for their power rather than just outsource it to utilities, designers will become much more conscious of the energy impact of their design decisions.<br /><br />Ultimately, better design will have to be the solution to the climate crisis. Widespread adoption of BCHP and relocalization of power generation are steps China can take right now to help drive better design.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com0tag:blogger.com,1999:blog-8821030105982252839.post-16200201943627836952009-02-20T05:12:00.000-08:002009-02-23T17:49:55.147-08:00Heating in China- Inefficiency and OpportunityToday’s post will focus on China’s extraordinarily inefficient heating system and how to fix it.<br /><span style="font-weight: bold;"><br />Heating in China</span><br />Due to China’s geography, heating is required in many regions of the country. As the map below shows, much of China faces cold winters, some of which are severely cold. <a href="http://www.dleex.com/read/?14586">According to the World Bank</a>, 19% of residential floor area is in “severe cold” regions and 27% is in “cold” regions. As a result, significant amounts of space heating is required to keep occupants comfortable (I use the term “comfortable” verrry loosely, as I will touch on later).<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcubwVqInqc50IG8spF8IJXVymLVyMIBc450zo4xn7NMWufJutM1roNJ0_tYHUQbJpQX4mug2y-UQ_Vuy4vnTe-5F09bB9QkMMoI-9ba1hTn74lUvvWb-B2UZtsUm5-Ij-IsGcfKBquKgL/s1600-h/http___www.asian-forum.net_pdf_2006_CR-PPT2.pdf.jpg"><img style="cursor: pointer; width: 400px; height: 297px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcubwVqInqc50IG8spF8IJXVymLVyMIBc450zo4xn7NMWufJutM1roNJ0_tYHUQbJpQX4mug2y-UQ_Vuy4vnTe-5F09bB9QkMMoI-9ba1hTn74lUvvWb-B2UZtsUm5-Ij-IsGcfKBquKgL/s400/http___www.asian-forum.net_pdf_2006_CR-PPT2.pdf.jpg" alt="" id="BLOGGER_PHOTO_ID_5304867140495358962" border="0" /></a><br /></div>Nowadays heating is slowly creeping southward and entering the “hot summer and cold winter” zones. There was no provision of central heating in these regions until the very late 1990’s, and central heating remains limited. But it’s clear that as China (and particularly southern and central coastal China) continues to get richer, citizens throughout the nation will clamor for more comfortable condition. <a href="http://www.chinadaily.com.cn/opinion/2005-12/13/content_536913.htm">This China Daily editorial</a> nicely captures that sentiment in it’s title: “freezing Shanghai needs central heating”.<br /><br />Since the hot summer and cold winter zone accounts for 37% of China’s residential floor area, this southward trend has the potential to dramatically increase the amount of heating in China. Indeed, <a href="http://der.lbl.gov/new_site/seminars/NZhou_ECEEEChinaCommercial.pdf">LBL expects space heating (PDF)</a> to be in 55% of Chinese commercial buildings by 2020, up from 35% in 2000, “as the country’s ‘heating zone’, historically limited to northern China, continues to expand into many southern regions.”<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8zt8QeoblrFLsXzvC9MiCWUjZGGlUoxTryADs98e5Slf-xFqn38pyEPfZYWo87CVUaGnygp0-cAuyqrrdLWWmJA-8ZfEAf3mthTGRurgcTMneJ2crN3YqHFEtdrK7YY3ISTE3Np5pDn7F/s1600-h/http___der.lbl.gov_new_site_seminars_NZhou_ECEEEChinaCommercial.pdf.jpg"><img style="cursor: pointer; width: 400px; height: 293px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8zt8QeoblrFLsXzvC9MiCWUjZGGlUoxTryADs98e5Slf-xFqn38pyEPfZYWo87CVUaGnygp0-cAuyqrrdLWWmJA-8ZfEAf3mthTGRurgcTMneJ2crN3YqHFEtdrK7YY3ISTE3Np5pDn7F/s400/http___der.lbl.gov_new_site_seminars_NZhou_ECEEEChinaCommercial.pdf.jpg" alt="" id="BLOGGER_PHOTO_ID_5304867137532774962" border="0" /></a><br /></div><span style="font-weight: bold;">Heating is inefficient and uncomfortable</span><br />The problem is China’s space heating is extremely energy inefficient. <a href="http://www.blogger.com/asian-forum.net/pdf_2006/CR-PPT2.pdf">Wang Qingqin of the Chinese Academy of Building Research estimates (PDF)</a> that buildings in China use 2-3x more energy per square meter for heating than buildings in comparable temperature zones in Europe or the US.<br /><br />Yet despite all that extra energy use, thermal comfort is significantly lower in China.<br />Why is this? Well, a number of causes actually. Some central heating systems don’t allow for user control of the heat, so sometimes windows have to be opened to compensate, which is an obvious waste of energy. The billing system also doesn’t help, which I’ll explain later. But certainly the major cause of this inefficiency is extremely poor insulation in Chinese buildings.<br /><span style="font-weight: bold;"><br />Poor insulation</span><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8VRY9U7g5u4TD6tMnvZEps-VMEKWeWjl_-_tjP7Y97YUtguDKBmsu7b1JLF7yfwC2RJxMvCbHwa2LcovFtIFNdli44WFO_p9425HY7QNSLhRiBdnzQN3Gdt9vRubqFhpTCetO0oojn9Dw/s1600-h/Asia+Business+Council+Building+Energy+Efficiency.pdf.jpg"><img style="cursor: pointer; width: 400px; height: 231px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8VRY9U7g5u4TD6tMnvZEps-VMEKWeWjl_-_tjP7Y97YUtguDKBmsu7b1JLF7yfwC2RJxMvCbHwa2LcovFtIFNdli44WFO_p9425HY7QNSLhRiBdnzQN3Gdt9vRubqFhpTCetO0oojn9Dw/s400/Asia+Business+Council+Building+Energy+Efficiency.pdf.jpg" alt="" id="BLOGGER_PHOTO_ID_5304867132698760866" border="0" /></a><br /></div>As the results of the <a href="http://www.asiabusinesscouncil.org/BEE.html">Asia Business Council expert interviews</a> above show, the primary factor affecting a building’s heating load is the building envelope and the insulation it provides between the interior of a space and the outdoor environment. The worse the insulation, the more energy transfer between the indoor and outdoor environment. When it’s cold outside, this means the cold air comes in, and the hot air goes out, resulting in a lot of wasted energy as well as occupant discomfort.<br /><br />As the graph below shows, insulation in Beijing (and the rest of China) is significantly worse than the developed world’s, and allows much more heat (in the form of energy) to escape to the outside.<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxl3goDJz8oh8WXuNLn7sPFlgjm1HhFOfhFmY7WHPC5Yhln6E1O5QW7-hxGoRHNIRSRs2Gg102nIat54lFDK4Y5776XKg83Bx9B1eiiGCL1YTTjoj00I_xRIqmFLq8QVO0Y0fTxaxolQpB/s1600-h/heating+inefficiency+in+china.jpg"><img style="cursor: pointer; width: 400px; height: 250px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxl3goDJz8oh8WXuNLn7sPFlgjm1HhFOfhFmY7WHPC5Yhln6E1O5QW7-hxGoRHNIRSRs2Gg102nIat54lFDK4Y5776XKg83Bx9B1eiiGCL1YTTjoj00I_xRIqmFLq8QVO0Y0fTxaxolQpB/s400/heating+inefficiency+in+china.jpg" alt="" id="BLOGGER_PHOTO_ID_5304867136714201202" border="0" /></a><br /></div><div style="text-align: center;"><span style="font-size:85%;">Graph based on data from Chinese Academy of Building Research<br /><br /></span></div>My anecdotal evidence backs this up: I can feel the cold when I put my finger against the glass of almost any window in Beijing, even in high-end apartment buildings. One major exception thus far was the <a href="http://www.blogger.com/chinagreenbuildings.blogspot.com/2009/02/linked-hybrid.html">Linked Hybrid</a>, which as I mentioned here, focused on high-quality insulation.<br /><br /><span style="font-weight: bold;">Insulation is a great investment</span><br />Investing in improved insulation is a win-win-win, resulting in higher thermal comfort for occupants, and less energy use and GHG emissions at low cost.<br /><br />Insulation works “year round”, in the sense that improved insulation reduces heating energy use in the winter, but also reduces cooling energy use in the summer. This is really important, since as we can infer from the LBL graph above, in addition to the southward creep of space heating units, there is also a northward creep of air conditioning units.<br /><br />Maybe the best part about investments in insulation is that they are also a win financially. As the <a href="http://www.blogger.com/www.mckinsey.com/clientservice/ccsi/pathways_low_carbon_economy.asp">McKinsey global GHG abatement cost curve </a>below shows, investments in insulation are one of the lowest cost sources of carbon emission reductions available.<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjcRUTg-fSOi9XgPlVcy7PLqDtakY4tCV-e9x6U5gnE5v2nsCbARBRenGh6KBQ9z2cXLZ5yxPj9sMRL2ySb1JHGEg44n17zRv-yGj9SM6lgbEANMUMLEYaqFazvrfqPf6EqxIkixAhKnXrn/s1600-h/insulation+retrofits.jpg"><img style="cursor: pointer; width: 400px; height: 293px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjcRUTg-fSOi9XgPlVcy7PLqDtakY4tCV-e9x6U5gnE5v2nsCbARBRenGh6KBQ9z2cXLZ5yxPj9sMRL2ySb1JHGEg44n17zRv-yGj9SM6lgbEANMUMLEYaqFazvrfqPf6EqxIkixAhKnXrn/s400/insulation+retrofits.jpg" alt="" id="BLOGGER_PHOTO_ID_5304867255337057042" border="0" /></a><br /></div><br /><span style="font-weight: bold;">The need for government policy</span><br />So why isn’t their more investment in good insulation, or even more importantly, why isn’t it just built into the buildings from the beginning?<br /><br />This is primarily a question of government policy. Theoretically, the government mandates higher levels of insulation, but due to lack of enforcement, these levels are not achieved. But as I will describe in a post next week on building codes, many if not most buildings in China don’t actually meet code.<br /><br />Just as important is the inefficient pricing system for heating in the northern part of the country. The Chinese government views provision of heat in the north as a public good, and therefore has historically mandated that Chinese companies provide heating for their employees. <a href="http://www.chinadaily.com.cn/english/doc/2005-12/19/content_504441.htm">After reforms to that system in 2007</a>, heat is now paid for by tenants, but is still generally sold per the square meter, rather than by the BTU or the KWH. Under this system, no matter how much or little heating a Chinese apartment actually uses, the heating charge is still the same. This helps explain the lack of insulation.<br /><br />Given the lack of proper pricing structure, there is no financial incentive for the building owner or an ESCO to invest in better insulation. This is why developers usually just skimp upfront on proper insulation. To make matters worse, since Chinese building codes theoretically mandate higher levels of insulation, CDM financing cannot be used to bring these buildings up to code (although as I wrote in a<a href="http://chinagreenbuildings.blogspot.com/2008/12/clean-development-mechanism-ignoring.html"> previous post</a>, this should be changed to reflect the reality of the code compliance situation in China).<br /><br />Luckily, the slow gears of policy change are starting to turn. The government is convinced of the need to price heat properly, and is now just figuring out how to roll out the system without harming low-income Chinese. As <a href="http://www.chinadaily.com.cn/english/doc/2005-12/19/content_504441.htm">this China Daily article noted</a>, some residents already struggle with their heating bill: <blockquote>But low-income households still find it tough to afford. "We will have to pay 1,700 yuan (US$ 210) for the heating of a 70 square-metre flat under the new system," said 45-year-old laid-off worker Jiang Yongfu in Beijing. "That's almost triple my monthly income."</blockquote>Hopefully along with pricing heat properly, the government can also start a weatherization program to help lower-income residents like Jiang upgrade their insulation and save money by using less heat.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com0tag:blogger.com,1999:blog-8821030105982252839.post-80091073706793589732009-02-18T01:27:00.000-08:002009-02-18T01:40:22.297-08:00Land Use Rights in China: an Opportunity for Green Policy?This post will focus on the unique real estate laws in China and what these laws might mean for green building.<br /><br /><span style="font-weight: bold;">The development of land use rights</span><br />Since China is still technically a communist nation, land is government owned. But as we know from my blog posts on the Nokia campus, the Linked Hybrid, and Prosper Center, private developers and corporations can obviously buy the rights to use the land.<br /><br />This policy of private land use rights in China is a relatively recent development. The <a href="http://www.lincolninst.edu/pubs/PubDetail.aspx?pubid=793">Lincoln Institute of Land Policy</a> provides a nice introduction:<br /><blockquote>By the end of the Cultural Revolution in 1976, nearly all land was owned by collectives or by the state. Private property rights virtually disappeared and land transactions were banned.<br /><br />Modern land reforms began in the mid-1980s. Following a successful experiment in Shenzhen (a Special Economic Development Zone on the border with Hong Kong), in which state-owned land was leased to foreign corporations, the Constitution was amended in 1988 so that “land use can be transacted according to the law.” In 1990, China officially adopted land leasing as the basis for assigning land use rights to urban land users.<br /><br />In the current property rights regime, use rights for specified periods can be obtained from the state through the up-front payment of land use fees. The fees are determined by the location, type and density of the proposed development.<br /><br />This separation of land ownership and use rights allows the trading of land use rights while maintaining state ownership of land. For the Chinese government, this separation offered three advantages: first, market mechanisms could help guide the allocation of land resources; second, land use fees would provide local government with a new source of revenues; and third, by retaining state ownership, social and political conflict would be minimized.</blockquote>This change to the Constitution spurred private development of property and provided a legal basis for real estate transactions, since these land use rights are transferable. This property rights regime laid a foundation for the massive Chinese construction boom of the last 20 years.<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgii169ZGfibn0pT6Lvxm1i_sWdbJRyJzlaOXexdRINWcoc9Gf6DPa-SRA_B54XANuF1OQjMe2bJZ1WotRy2KWZlNCqx3zEC4lYIskKmZTfjmkYDf1nUeTqlkl_Jd5m9uJUYFaZlvclKvXj/s1600-h/shenzhen+farm.jpg"><img style="cursor: pointer; width: 375px; height: 300px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgii169ZGfibn0pT6Lvxm1i_sWdbJRyJzlaOXexdRINWcoc9Gf6DPa-SRA_B54XANuF1OQjMe2bJZ1WotRy2KWZlNCqx3zEC4lYIskKmZTfjmkYDf1nUeTqlkl_Jd5m9uJUYFaZlvclKvXj/s400/shenzhen+farm.jpg" alt="" id="BLOGGER_PHOTO_ID_5304069406161225298" border="0" /></a><br />Shenzhen in the 1980's was a small fishing village<br /></div><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpzZigNL1Oa1q817HvqlibhzGAAhyphenhyphen0N-tGmsKlCXGdzACcC_rciQGVgg12nINWZ1G2cIQoaG3PsazRIMRM8rdVwDIEul24qpWdTdUabDoJBjFAnTzMh4vZOiP8n0_omIieJhYoqPajnVMw/s1600-h/shenzhen20skyline.jpg"><img style="cursor: pointer; width: 400px; height: 269px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpzZigNL1Oa1q817HvqlibhzGAAhyphenhyphen0N-tGmsKlCXGdzACcC_rciQGVgg12nINWZ1G2cIQoaG3PsazRIMRM8rdVwDIEul24qpWdTdUabDoJBjFAnTzMh4vZOiP8n0_omIieJhYoqPajnVMw/s400/shenzhen20skyline.jpg" alt="" id="BLOGGER_PHOTO_ID_5304069411009972546" border="0" /></a><br /></div><div style="text-align: center;">Shenzhen today<br /></div><div style="text-align: center;"><br /></div><br />But this early property rights regime created some uncertainty. Land use rights were transferred to property for a fixed time period: residential property for 70 years; industrial and commercial property for 50 years.<br /><br />While a 50-70 year period was long enough to be ignored when the law was initially written, as the real estate market grew and matured, it eventually became clear that the government was not actually going to reclaim most of these properties at the end of the ground lease and would have to clarify things. For residential properties, China clarified the situation in the Property Law of 2007. As Amy Sommers, Partner at Squire, Sanders & Dempsey, LLP, says:<br /><blockquote>With respect to Land Use Rights (LUR) for residences, the Property Law has now clarified that the contracts will definitely be extended; the only question is the price. As I understand it, the government is considering a couple of different alternatives. One would include using an annual property tax approach, similar to what we have in the US, which would then generate regular revenue streams. However, whether to take this approach or to use some hybrid of it and the payment of 'grant fees' remains to be sorted out.<br /></blockquote>But it’s not so clear for other types of property. As Sommers notes, “For other types of rights, it has yet to be sorted out.”<br /><br />China will likely have to resolve this uncertainty soon. Since land reform started in the mid-80’s, an office building in Shenzhen could conceivably be half way through it’s alloted land use right period of 50 years. While 25 years seems like a long way off, this uncertainty could conceivably affect a real estate investors decision making process:<br />Assume Investor A buys this office building today and expects to sell it 10 years later to Investor B, who will also hold it for 10 years. A major part of the return on investment for Investor A will be the sale of the building in 10 years. But Investor B will also have the same logic, and plans to sell it to Investor C. But Investor C will have to deal with the huge uncertainty surrounding the property rights, which will lower the price Investor C is willing to pay for the building. This will also lower the price Investor B is willing to pay for the building, and as a result reduce the price Investor A will pay today. Of course this assumes that these investors actually value this uncertainty and don’t just ignore it, which might not always happen. But as the time to end of lease draws closer, it’ll be more and more important for China to fix this problem.<br /><br /><a href="http://www.chinalawblog.com/2007/05/china_real_estate_laws_part_i.html">China Law Blog</a> further laments about the uncertainty of the whole process:<br /><blockquote>This system results in a great deal of uncertainty about real estate ownership in China. What happens when the time limit for the land use right comes to an end? Will the state act reasonably in granting extensions and in limiting the imposition of new fees, or will the state see this as an opportunity to earn a windfall profit from new fees? Will the state seize productive commercial property with no compensation? Will the state seek to engage in social engineering by restructuring ownership interests to accommodate new conditions?<br /></blockquote> <span style="font-weight: bold;">Opportunity for progressive green building policy</span> Certainly China Law Blog’s concerns are legitimate. It’s important the state not act unreasonably by seizing productive commercial property with no compensation. But why should the government just give away these valuable land right extensions for nothing?<br />I propose that the Chinese government trade land use rights extensions for progress on building energy efficiency. Essentially, the government will automatically grant the rights to a developer or building owner who undertakes energy efficiency retrofits. The land use rights extension period can even vary depending on the level of efficiency achieved. So for example, if a developer reduces energy usage by 20%, maybe they get a 10 year extension. But if they reduce energy usage by 50%, maybe they get a 25 year extension. This process will then repeat itself: it will require continuous improvement in building energy performance in order to maintain land use rights.<br /><br />This approach is modeled on the EU’s <a href="http://www.buildingsplatform.org/cms/index.php?id=19">Directive on the Energy Performance of Buildings</a>, which came into force in 2006. The directive requires that anytime a building is sold, the owner is required to obtain an energy performance certificate (EPC) from a qualified building expert. The EPC requires that the building meet minimum energy standards. In some ways, an EPC also functions like nutritional label, but instead of alerting the consumer to saturated fat or sugar content of a particular food, it alerts a tenant to energy use characteristics of a particular building. This law is extremely progressive because it gradually requires all buildings to measure their energy usage. And of course once people measure something, they usually try to manage it, which should have the effect of driving down overall energy use in the built environment.<br /><br />The Chinese government could and should take this model from Europe and mold it to their own needs. By trading energy efficiency improvements for land use rights, China could seize a unique opportunity to kill two birds with one stone: remedy the current uncertainty relating to land use rights and simultaneously make buildings greener.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com1tag:blogger.com,1999:blog-8821030105982252839.post-17622480724473754542009-02-12T01:14:00.000-08:002009-02-26T20:11:06.395-08:00Linked Hybrid<div style="text-align: center;"><div style="text-align: left;"><a href="http://www.stevenholl.com/project-detail.php?id=58">As Steven Holl writes</a>, the new 160,000 square meter Linked Hybrid (LH) in Beijing “aims to counter the current urban developments in China by creating a new twenty-first century porous urban space, inviting and open to the public from every side.” As I discovered on my recent tour of the place, while the project may not necessarily reach Holl’s lofty vision, it is nonetheless a step in the right direction of vibrant triple bottom line communities in China. Hopefully it can serve as a good example for other developers and architects to follow.<br /><br /></div><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqd5Hu28JpBkINfyRUuNT5zlStGxfrw98CW6pWrO2b4qhy8c6VfhHlwUCOfYD9ogD1ztvom2Hmmp9r7DXfasXKYWKE2Kv7QXHgmHOhX4w7Xm-vAuH0daGj3JDgyI2Nfb3TY6WaJG8aK0lF/s1600-h/LH+at+night+from+above.jpg"><img style="cursor: pointer; width: 285px; height: 213px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqd5Hu28JpBkINfyRUuNT5zlStGxfrw98CW6pWrO2b4qhy8c6VfhHlwUCOfYD9ogD1ztvom2Hmmp9r7DXfasXKYWKE2Kv7QXHgmHOhX4w7Xm-vAuH0daGj3JDgyI2Nfb3TY6WaJG8aK0lF/s400/LH+at+night+from+above.jpg" alt="" id="BLOGGER_PHOTO_ID_5301839457402539794" border="0" /></a><br /><br /></div><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8TOZWllb-rXFxIBcsvV-DygJJn5Q4VMp62xtaBMA_kNIrpbfK95g-ubZwryPOrAL2JxOj8N5YPgab0vFLwI-AyLH9Ptz9unnASqTgWFCoa041b8FsbJaXDsvaQxcWzr5ll98opruXWVJG/s1600-h/dance_matisse.jpg"><img style="cursor: pointer; width: 315px; height: 211px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8TOZWllb-rXFxIBcsvV-DygJJn5Q4VMp62xtaBMA_kNIrpbfK95g-ubZwryPOrAL2JxOj8N5YPgab0vFLwI-AyLH9Ptz9unnASqTgWFCoa041b8FsbJaXDsvaQxcWzr5ll98opruXWVJG/s400/dance_matisse.jpg" alt="" id="BLOGGER_PHOTO_ID_5301839459146570674" border="0" /></a></div><div style="text-align: center;"><span style="font-size:85%;">H</span><span style="font-size:85%;">oll's inspiration for the Linked Hybrid: <a href="http://en.wikipedia.org/wiki/The_Dance_%28painting%29">The Dance (II) by Henri Matisse</a></span><br /></div><span style="font-weight: bold;"><br /><br />Triple bottom line communities<br /></span><a href="http://getsustainable.net/">Triple bottom line</a> expands the idea of profitability from the current paradigm, a simple focus on financial profitability, to a new, more inclusive look at financial, social, and environmental profitability. Ideally, the increased social and environmental profitability enhances the financial bottom line in the long-term, too. Triple bottom line communities then take this three pronged focus and apply it to the built environment. Instead of just considering economics and simple payback period, how can the development benefit the community, the environment and still give the developer a good financial return? The LH in many ways makes a good first step in this direction.<br /><br /><span style="font-weight: bold;">Environmentally efficient</span><br />While the LH doesn’t necessarily benefit the environment, it is much “less bad” than other communities going up around Beijing. The Linked Hybrid is aiming for <a href="http://www.usgbc.org/DisplayPage.aspx?CMSPageID=148">LEED for Neighborhood Development</a> Gold certification.<br /><br />The key green feature for the LH is a massive <a href="http://en.wikipedia.org/wiki/Geothermal_exchange_heat_pump">geothermal heat exchanger system</a>. The system relies on 100m deep wells (660 of them in total) to use the relatively constant temperature of the deep earth to keep the building warm in winter and cool during the summer. According to Steven Holl’s Hideki Hirahara, the lead architect for the project, the geothermal system will provide 78-80% of the buildings heating and cooling needs in a carbon-free way. Of course, the building also features an extremely well-insulated building envelope and a <a href="http://www.greenengineer.com/ideas/dv.htm">displacement ventilation system</a> to reduce overall heating and cooling needs.<br /><br />The LH also saves significant water resources through a graywater recycling system. The system takes water from non-toliet household uses (dishwashing, showers, sinks, etc), then centrally purifies this water and uses it to flush the toilets or irrigate the grounds. Holl’s Hirahara estimates this system saves 41% of fresh water usage.<br /><br />Other green design strategies include local and rapidly renewable materials (bamboo, locally-sourced aluminum, stonework, etc), smart building controls and occupancy sensors. The site itself is also important. <a href="http://archrecord.construction.com/projects/portfolio/archives/0807linkedhybrid-1.asp">Architectural Record claims</a> the site was a brownfield that used to be a factory, although I haven’t seen this claim anywhere else. Regardless, the location is tightly in the city center and is fairly well connected to transit.<br /><br /><span style="font-weight: bold;">Modern Group</span><br />Modern Group, the developer of the LH, ostensibly did pretty well financially. Tough as with most real estate groups, Modern is privately held and will certainly never reveal their financial results on LH. But sales look good. Despite the slowing market, 7 of the 8 LH towers are completely sold out and are starting to be occupied. Most of these spaces went for 20,000 yuan per square meter ($275 per sf) when they were first offered in 2006, about average for Beijing luxury residential prices at the time <a href="http://www.cbre.com.cn/china/eng/document/MarketReports/prc%20mv%20q4%2008%20eng.pdf">according to CB Richard Ellis (PDF)</a>. Amazingly, the last few apartments (with great views, I must admit) are now going for 45,000 yuan per square meter, or nearly $600 a square foot.<br /><br /><a href="http://www.forbes.com/global/2007/1112/062.html">Forbes Asia also had an interesting piece</a> on Zhang Lei, the head of Modern Group, in it’s 2007 China’s “richest list” (Zhang was listed at #276). Zhang and the Modern Group have seized on green as their core brand and expect to roll it out to other properties.<br /><br /><div style="width: 425px; text-align: left;" id="__ss_1019943"><a style="margin: 12px 0pt 3px; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; display: block; text-decoration: underline;" href="http://www.slideshare.net/geoff848/linked-hybrid-photos?type=presentation" title="Linked Hybrid photos">Linked Hybrid photos</a><object style="margin: 0px;" height="355" width="425"><param name="movie" value="http://static.slideshare.net/swf/ssplayer2.swf?doc=linked-hybrid-1234432095471392-2&stripped_title=linked-hybrid-photos"><param name="allowFullScreen" value="true"><param name="allowScriptAccess" value="always"><embed src="http://static.slideshare.net/swf/ssplayer2.swf?doc=linked-hybrid-1234432095471392-2&stripped_title=linked-hybrid-photos" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" height="355" width="425"></embed></object><div style="font-size: 11px; font-family: tahoma,arial; height: 26px; padding-top: 2px;">View more <a style="text-decoration: underline;" href="http://www.slideshare.net/">presentations</a> from <a style="text-decoration: underline;" href="http://www.slideshare.net/geoff848">geoff848</a>. (tags: <a style="text-decoration: underline;" href="http://slideshare.net/tag/green">green</a> <a style="text-decoration: underline;" href="http://slideshare.net/tag/architecture">architecture</a>)</div></div><br /><br /><br /><span style="font-weight: bold;">A new type of community in China</span><br />In my view, LH’s most important contribution to China’s architecture is its openness. In my writing on this blog, I often focus on the environmental or financial but ignore the social aspects of real estate and development. The social aspects of the LH cannot be ignored.<br /><br />In stark contrast to most gated, single-entrance communities in China, LH has no gates: it is open to all from multiples sides. Public green spaces like the courtyard and rooftops encourage community and spontaneous interaction. Even the sky links will be open to the public and encourage building residents to explore the space beyond their own apartment. This openness also pushes back against the increasingly privatized lifes of Beijingers. As the car proliferates, city residents have less and less interaction with each other; they step into their cars in their gated communities and step out at their offices in the CDB and never interact with their fellow citizens. The openness encouraged by the LH is by no means a cure for all the ills of modernization and industrialization, but at least helps humanize its edges.<br /><br />The LH also encourages a freedom of movement that is foreign to Beijing. The few public spaces in Beijing are large, monolithic, almost empty structures: Tiananmen Square or the Central Business District for example. Although one can freely walk around Tiananmen, there is no life there. No one lives there, no one works there. It’s merely an occasional gathering place. The courtyard of the LH, by contrast, feels full of life: residents coming and going, shops filling and emptying.<br /><br />LH is by no means perfect: the community lacks low-income housing and the socioeconomic diversity that often accompanies it. And the life-like feel probably would have been enhanced by some office space. But LH pushes back against many of the worst architectural impulses of China and encourages openness and creativity.<br /><br /><span style="font-weight: bold;">Steven Holl in China</span><br />Steven Holl seems to have made a name for himself in China: he is also designing green buildings in <a href="http://www.stevenholl.com/project-detail.php?type=&id=60&page=0">Shenzhen</a> and <a href="http://www.stevenholl.com/project-detail.php?type=&id=98&page=0">Chengdu</a> that emphasize the same triple bottom line values as the Linked Hybrid. Hopefully his iconic works can continue to push the real estate market toward longer-term thinking and balanced economic, social, and environmental development.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com2tag:blogger.com,1999:blog-8821030105982252839.post-61134833476070774392009-02-11T00:59:00.000-08:002009-02-11T01:15:03.335-08:00China International Business article on LEED in ChinaThis is the <a href="http://www.cibmagazine.com.cn/Features/Focus.asp?id=820&building_the_future.html">link to my recent article</a> in <span style="font-style: italic;">China International Business</span> on LEED in China. I've also pasted it here:<br /><br /><span style="font-weight: bold;font-size:180%;" >Building the Future</span><br /><h4>By <span> Geoffrey Lewis </span> | From CIB February 2009 Print Edition</h4> <table align="right" border="0" cellpadding="0" cellspacing="0"> <tbody> <tr> <td><img style="border-color: rgb(0, 0, 0);" alt="ROLE MODEL: A rendering of Parkview Green in Beijing, what could be the country's first LEED platinum certified building" src="http://www.cibmagazine.com.cn/W_img/Edit/2009-2/20090209104747216.jpg" border="1" hspace="5" /> </td></tr> <tr> <td><span style="font-family:Comic Sans MS;font-size:78%;color:#808080;"> Courtesy of Parkview Group</span></td></tr></tbody></table>When people talk about the massive urban development happening across China, “green” is unlikely to be one of the words at the forefront of their conversations.<br /><br />In the building frenzy that has enveloped China, environmental concerns seem, at first glance, to have been forgotten. Yet, if this was once the case, developers are no longer overlooking the importance of building green in China.<br /><br />Studies have shown that green buildings will be critical to sustainable development. According to the UNEP (United Nations Environment Program), buildings already account for 25% of total energy use across the country, and a similar share of carbon emissions. This is expected to rise to 35% of total energy use by 2020 if green building strategies are not widely implemented.<br /><br />As of now, a small but growing number of buildings in China have been working to prove their green and energy-efficiency credentials by pursuing Leadership in Energy and Environmental Design (LEED) certification – an internationally recognized rating system developed in the US to evaluate the environmental performance of a structure. A recent study by Good Energies, a renewable energy investment firm, found that LEED buildings in the US on average use 33% less energy than standard buildings.<br /><br />Fourteen buildings in China have so far been awarded LEED certification, with many others currently under construction hoping for approval. According to the USGBC (US Green Building Council), a further 103 buildings across the country have registered their intent to seek LEED certification.<br /><br />While these numbers are small compared with the overall number of buildings being constructed, and they will do little to lessen the environmental strain on their own, they are indicative of a growing demand for environmentally friendly office space in China led not by local firms, but foreign multinationals.<br /><br /><strong>LEED-ING THE WAY<br /><br /></strong>For a long time, it has been suggested that multinationals operating in China have felt little need to go beyond the minimum compliance requirements when it comes to environmental regulations. Now, more and more buildings in China are being built according to sustainable design and construction principles, and it is, by and large, foreign multinational corporations that are the ones driving this forward.<br /><br />Of the 14 currently certified buildings, eight were built by foreign multinational corporations, and two of the others are occupied primarily by foreign companies. LEED buildings generally take the form of owner-occupied, single-tenant buildings and corporate headquarters, which gives those responsible all the long-term benefits of the green features.<br /><br />Plantronics, a California-based maker of electronic audio equipment whose headsets were used to carry the historic message “That’s one small step for man, one giant leap for mankind” back from the moon in 1969, was the first multinational to seek LEED certification in China, for its factory and office in Suzhou, back in 2006. Since then, Nokia has followed suit with its LEED Gold campus in Beijing, and GM, Coca Cola and ExxonMobil are among others who have registered with the USGBC to construct their own LEED-rated green buildings in China.<br /><br /><strong>GREEN SELLING-POINT<br /><br /></strong>Property developers — both local and international — seeking multinational tenants have begun to recognize this growing trend, and are increasingly building rentable LEED-certified buildings. Tishman Speyer, a US-based real estate developer, is currently constructing three LEED projects in China, all of which conform to a company-wide policy adopted in 2007 to achieve certification of all new buildings so as to entice foreign tenants.<br /><br />Foreign multinationals take up most of the recently completed Gold-rated Prosper Center in downtown Beijing – buildings are rated Certified, Silver, Gold, or Platinum, depending on how environmentally friendly they are. And Carrefour, the French retail giant, is the anchor tenant of the Silver-rated LeSang Shopping Mall in Harbin. Both developments were constructed by Chinese companies but aimed at largely foreign tenants.<br /><br />Parkview Green, a new mixed-use tower in downtown Beijing which hopes to become China’s first Platinum-rated green building, exemplifies this phenomenon. Leo Hwang, director of the Parkview Group, a Hong Kong-based developer, says the building’s green credentials were critical to attracting top international tenants. “The green aspects of the building were very much driven by the fact that to differentiate ourselves from the rest of the competition, we had to give our tenants a reason to want to come to us before our competitors,” he explained. <table align="right" border="0" cellpadding="0" cellspacing="0"> <tbody> <tr> <td><img style="border-color: rgb(0, 0, 0);" alt="ECO-UNFRIENDLY: Green issues are not yet a priority for most Chinese developers" src="http://www.cibmagazine.com.cn/W_img/Edit/2009-2/20090209104952147.jpg" border="1" hspace="5" /> </td></tr> <tr> <td><span style="font-family:Comic Sans MS;font-size:78%;color:#808080;"> Chinafotopress</span></td></tr></tbody></table><br /><br /><strong>IMAGE-BUILDING<br /></strong><br />“Most [large] international companies are implementing green building-standards, including LEED, on their projects all over the world,” said Rob Watson, the “father of LEED” and now CEO of EcoTech International, a green building consulting firm with a growing number of projects in China, including Parkview Green. “These companies realize that their real-estate portfolio affects them on several levels: their corporate image, their ability to attract and retain good employees, and the reduction of operating cost and environmental liability.”<br /><br />Corporate social responsibility (CSR) policies that increasingly require firms to occupy green real-estate globally are also having a large effect. Nokia, for example, built its new green campus in part to comply with CSR. And, after the success of the Gold-rated Nokia China campus, the company has adopted a global policy of building to LEED Gold standards. CB Richard Ellis, the world’s largest commercial real estate services company, also takes environmental factors into account when making location decisions, occupying LEED space where available. Prosper Center, currently the only rentable “green” office space in Beijing, was therefore chosen for its offices.<br /><br />Foreign multinationals are generally willing to pay a premium for certified green space, and developers are aware of the higher rental charges they can charge for these properties, even taking into account the added construction expenses.<br /><br />“Rents for LEED-certified buildings are often at the highest end of the market,” said Julien Zhang, managing director at Jones Lang LaSalle (JLL) in Beijing. Indeed, Prosper Center is one of the most expensive properties in downtown Beijing, and these inflated prices are likely to stay that way for all new green office buildings in the short-term, at least until supply starts to rival demand.<br /><br />Foreign multinationals are beginning to recognize the many additional benefits of LEED-rated real estate, on top of the obvious reduction in energy costs. LEED buildings can be used as effective recruiting, retention and productivity tools. Nokia, for example, successfully used the green aspects of its new campus as a key selling point to employees wary of working out in the suburbs of Beijing.<br /><br />“Many multinationals want to present themselves to potential clients and employees as environmentally friendly firms, and occupying green office space is one way to show this,” Zhang added.<br /><br /> In China, where “green-washing” — lying about your company’s green credentials — can often go unchecked and contractors sometimes skimp on quality, the strict and internationally recognized third-party verification that LEED provides is indispensable.<br /><br />As Parkview’s Hwang noted: “It shows our tenants that we really believe in walking the walk rather than just talking the talk, which is very important in this day and age where there is a lot of green-washing.” <table align="right" border="0" cellpadding="0" cellspacing="0"> <tbody> <tr> <td><img style="border-color: rgb(0, 0, 0);" alt="LEED-ING LIGHT: Parkview Green under construction" src="http://www.cibmagazine.com.cn/W_img/Edit/2009-2/20090209105131519.jpg" border="1" hspace="5" /> </td></tr> <tr> <td><span style="font-family:Comic Sans MS;font-size:78%;color:#808080;"> Courtesy of Parkview Group</span></td></tr></tbody></table><br /><br /><strong>LOCAL FIRMS LAGGING<br /></strong><br />At present, however, demand for green office space is largely restricted to foreign multinationals operating in China. This is largely a question of economics – most Chinese firms still can’t afford rent in Class-A buildings, which averages around RMB 200/sqm/month (USD 29) in Beijing and RMB 250/sqm/month (USD 37) in Shanghai, and LEED space in China falls exclusively into this category. “Multinationals occupying space in this segment of the market far outnumber domestic firms because of affordability,” said Jones Lang LaSalle’s Zhang.<br /><br />Complying with the stringent LEED rating standards requires high-end design and construction expertise, which costs more, although not as much as some developers assume: – Tishman Speyer estimates that meeting LEED requirements adds around 3-5% to the cost of building in China.<br /><br />But even those Chinese companies which can afford to rent Class-A properties are on the whole not choosing green-certified buildings. “Due to generally lower environmental awareness in China, local firms don’t have the same kind of pressure to prove their environmental credentials,” Zhang said.<br /><br />However, he adds that it is not necessarily the case that Chinese firms are not concerned about environmental or energy-saving measures. PetroChina’s recently built Beijing headquarters is a case in point: the constructors worked hard on maximizing energy efficiency to reduce energy costs, but saw no need to get the building certified as “green.”<br /><br /><strong>THE FUTURE’S GREEN<br /><br /></strong>This may be starting to change, with growing environmental awareness and government regulations causing more Chinese companies to start thinking about occupying green space. “Actually, over the past few years, the Chinese government has done a lot to move this green building idea forward,” says Yingchu Qian, a manager at EMSI, a green building consultancy.<br /><br />The Ministry of Construction has recently released its own “Evaluation Standard for Green Building,” which, while yet to have significantly affected the marketplace, is a sign of the increasing governmental interest in green building standards.<br /><br />According to EcoTech’s Watson, the new Chinese green standard “is more geared to the Chinese market and should appeal to a broader base of developers than LEED.” He also believes that “as the cost to certify comes down, the reach of China’s green standard and LEED will expand.”<br /><br />In the long-run, this may attract more local firms to base themselves in green-certified buildings. But, for the time being, demand for LEED and environmentally friendly office space is being driven by foreign multinationals.<br /><br />That firms operating in developing countries — often perceived to be trying to evade the stricter environmental laws of the developed world in order to squeeze out more profit — are leading this drive is testament to the growing role of foreign businesses in China.<br /><br />By demanding green space, multinationals have actually begun to transform China’s real-estate market, making it greener. This is an unexpected but welcome role for them to play in China. <br /><br /><em>Geoffrey Lewis is a Beijing-based Fulbright Fellow studying green building trends in China</em>Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com2tag:blogger.com,1999:blog-8821030105982252839.post-55564793064927431642009-02-10T02:06:00.001-08:002009-02-10T20:50:23.572-08:00WSCOsChina faces a critical water situation in the northern part of the country. Ominously, this will only get worse as <a href="http://english.peopledaily.com.cn/200706/04/eng20070604_380754.html">climate change threatens the Himalayan glaciers</a> that are the source of most of China’s water. Green building strategies can save significant amounts of water use and help alleviate the strain on China’s water resources. In this post, I will describe Water Service/ Savings Companies (WSCOs, pronounced wes-co), a concept that could help China retrofit it’s buildings and factories to use significantly less water.<br /><br /><span style="font-weight: bold;">How critical is China’s water situation?</span><br />Christine Boyle, a Fulbrighter studying water issues in Northern China, gave a great overview presentation on this the other night at Beijing Energy Network, that I will use as the basis for this introduction. Her slides are available <a href="http://greenleapforward.com/2009/01/30/understanding-northern-chinas-water-crisis/">here</a>.<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZ4K-iCJtT-nyoELqUOewUMRJiaP-Z9DGuVtbqsRVOH5fCIczNQt7Qf2I9_gGIAIx7Tu8c22JFd_5WbQfYeBeN-A5UYsydsAaleGhnum2q3nqlcHlAqLt29qsPpPxh6j6dehDm5C8qhkpi/s1600-h/per+capita+water+availability+in+china.jpg"><img style="cursor: pointer; width: 400px; height: 248px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZ4K-iCJtT-nyoELqUOewUMRJiaP-Z9DGuVtbqsRVOH5fCIczNQt7Qf2I9_gGIAIx7Tu8c22JFd_5WbQfYeBeN-A5UYsydsAaleGhnum2q3nqlcHlAqLt29qsPpPxh6j6dehDm5C8qhkpi/s400/per+capita+water+availability+in+china.jpg" alt="" id="BLOGGER_PHOTO_ID_5301109807333140066" border="0" /></a><br /></div><br />The statistics on water in Northern China (also known as the Huang Huai Hai river region) are scary: Northern China accounts for 47% of China’s population, 43% of total GDP, and 65% of arable land, but only 19% of water resources. This imbalance has created a significant strain, with water ranging from 350 to 750 cubic meters per person per year. Less than 1000 cubic meters per person year is considered water scarce, the worst classification available.<br /><br /><span style="font-weight: bold;">Green buildings save significant water resources</span><br />As this graph from Christine’s presentation shows, agricultural use clearly accounts for the bulk of water use. Commenting on how to improve agricultural water efficiency is way outside my competency, so I’ll focus here on domestic and industrial use. Non-agricultural water use is not insignificant, accounting for 35% of annual water use.<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg59MAFlrux6vX6fQgzk92anXUepZWXwz2ZU5Z_OrgFhX_VQLt8Pn6YZKjTPuEYBYYe2AHKW-BtF-KUAXeUG9UlIm2wTw9elgS6gcOrSUNUSKbPQmu3QVW0Ev3G7oYE4Jyg4CcKZ-0KSV2b/s1600-h/chinas+annual+water+use.jpg"><img style="cursor: pointer; width: 400px; height: 235px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg59MAFlrux6vX6fQgzk92anXUepZWXwz2ZU5Z_OrgFhX_VQLt8Pn6YZKjTPuEYBYYe2AHKW-BtF-KUAXeUG9UlIm2wTw9elgS6gcOrSUNUSKbPQmu3QVW0Ev3G7oYE4Jyg4CcKZ-0KSV2b/s400/chinas+annual+water+use.jpg" alt="" id="BLOGGER_PHOTO_ID_5301109807974896866" border="0" /></a><br /></div><br />Moreover, as cities develop, domestic and industrial water use increases. Here is the data for Beijing in 2005, <a href="http://www.google.com/url?sa=t&source=web&ct=res&cd=1&url=http%3A%2F%2Fsiteresources.worldbank.org%2FINTEAPREGTOPENVIRONMENT%2FResources%2FReportWaterpricingBeijingENFinal.pdf&ei=lFyRSYuwLNjZkAWLh6X9Cw&usg=AFQjCNHsWnsNZCHJNmVdKeu9XEj_2psQFQ&sig2=hvsDvdu3kaCNeBRuEUxJfQ">according to a World Bank study</a>:<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiR-5lbf3cGULm2WVOYB2QHf7kOCotB3YCsk76DZcfRHyWwmnieg7fIhaP_RERmWdbyEqPfvDQi1P3e3W3mJy8gHdQDUQENALSxyJ49BB-xDyZqGCsauwtvmpxsIuiH_KJYYW6g3c31Ix7/s1600-h/StudyonWaterTariffReformandIncomeImpactsinChina_sMetropolitanAreas_theCaseofBeijing.pdf+%2888+pages%29.jpg"><img style="cursor: pointer; width: 373px; height: 106px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiR-5lbf3cGULm2WVOYB2QHf7kOCotB3YCsk76DZcfRHyWwmnieg7fIhaP_RERmWdbyEqPfvDQi1P3e3W3mJy8gHdQDUQENALSxyJ49BB-xDyZqGCsauwtvmpxsIuiH_KJYYW6g3c31Ix7/s400/StudyonWaterTariffReformandIncomeImpactsinChina_sMetropolitanAreas_theCaseofBeijing.pdf+%2888+pages%29.jpg" alt="" id="BLOGGER_PHOTO_ID_5301120391721990338" border="0" /></a><br /></div><br />Now agriculture is a much smaller part of the picture, at only 38%. This situation doesn’t seem likely to ease anytime soon, either. The <a href="http://www.blogger.com/www.ifpri.org/pubs/fpr/fprwater2025.pdf">International Water Management Institute (PDF) estimates</a> that global domestic water use will rise by 71% between 1995 and 2025, the majority of that in developing countries like China.<br /><br />So buildings use a lot of water. Fortunately, it’s quite easy to save significant resources with green building strategies. Here is what typical residential use of water looks like in Beijing according to the same World Bank study:<br /><br /><br /><a href="http://www.google.com/url?sa=t&source=web&ct=res&cd=1&url=http%3A%2F%2Fsiteresources.worldbank.org%2FINTEAPREGTOPENVIRONMENT%2FResources%2FReportWaterpricingBeijingENFinal.pdf&ei=lFyRSYuwLNjZkAWLh6X9Cw&usg=AFQjCNHsWnsNZCHJNmVdKeu9XEj_2psQFQ&sig2=hvsDvdu3kaCNeBRuEUxJfQ"></a><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7hqB6imL16mBa-5PJL7rHibLuplF_Kgh5GfoF4dMxnsNxE-Z9DVcLG6tWV6Pa4xesmxKDpSn0ddcLIjfyvGbo18ROOCLRROEON92CElN8iJlTksezTcejZR6Aey4byz3lNuRwpKRPoIRE/s1600-h/beijing+water+use+structure.jpg"><img style="cursor: pointer; width: 400px; height: 194px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7hqB6imL16mBa-5PJL7rHibLuplF_Kgh5GfoF4dMxnsNxE-Z9DVcLG6tWV6Pa4xesmxKDpSn0ddcLIjfyvGbo18ROOCLRROEON92CElN8iJlTksezTcejZR6Aey4byz3lNuRwpKRPoIRE/s400/beijing+water+use+structure.jpg" alt="" id="BLOGGER_PHOTO_ID_5301120391485665266" border="0" /></a></div>As we can see, more than 80% of water use is for washing things: faces, clothes, bathroom, etc. From this table then, the key water saving strategies are pretty obvious: reduce flow from toilets and faucets and require manufacturers to make water-efficient appliances. Reducing flow from faucets and toilets is just a matter of specifying low-flow faucets and a mix of waterless or low-flow urinals and low-flow toilets. Applying just these basic strategies in buildings can result in large water savings. In fact, <a href="https://www.usgbc.org/ShowFile.aspx?DocumentID=4317">according to the US Green Building Council (PPT)</a>, green buildings on average save 40% of water relative to standard buildings.<br /><br />Industrial facilities are also a prime source of water conservation opportunities. Of course, for industrial facilities, these fixes won’t be nearly as simple as those described above for buildings, thanks to the more highly designed industrial processes. Fortunately, these are just the types of processes that will be well-suited to WSCO water-saving retrofits.<br /><br /><span style="font-weight: bold;">What is a WSCO?</span><br />WSCOs are an innovative model to get the private sector to take an interest in saving water. The idea behind a WSCO is <a href="http://chinagreenbuildings.blogspot.com/2008/10/escos-and-building-retrofits-in-china.html">essentially the same as an ESCO</a>, but with a focus on water rather than energy. Essentially, a WSCO will partner with a building or factory owner, perform a water use audit and devise strategies to save water. The WSCO then puts up (or raises from outside sources) the capital needed to invest in the water saving strategies. This capital is then paid back through the resultant water savings. Ideally, the savings are large enough that the WSCO gets a good return on their investment and gets to share the savings with the owner. The key attribute of a good WSCO is an ability to take a complex water using system and spot cost-effective water reduction strategies.<br /><br />Industry is likely the low-hanging fruit of water savings. I came across this chart while looking at CDM last week, illustrating the “long-tail phenomenon”:<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2ucTggrutyrsJglOaehQRoJZhJ6uqfscn3mlyHsRsKAZ_1dNC5w413lvlZVdVFW1-6t4gBOcEaUdQfY4rqtvKJrGn2rBXfEFm79JkHXqo8zANG0A_kF2lBes8hzLHkHRqgqh0x8_V0Ogz/s1600-h/long+tail+of+GHG+reductions.jpg"><img style="cursor: pointer; width: 400px; height: 167px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2ucTggrutyrsJglOaehQRoJZhJ6uqfscn3mlyHsRsKAZ_1dNC5w413lvlZVdVFW1-6t4gBOcEaUdQfY4rqtvKJrGn2rBXfEFm79JkHXqo8zANG0A_kF2lBes8hzLHkHRqgqh0x8_V0Ogz/s400/long+tail+of+GHG+reductions.jpg" alt="" id="BLOGGER_PHOTO_ID_5301109804495456386" border="0" /></a><br /></div>There are a handful of large, profitable GHG reduction opportunities, primarily located in industrial facilities or huge buildings. The remainder of GHG reduction opportunities are small and fragmented, contained in the “long tail”.<br /><br />I think a closer look at water would show a similar long tail, although I don’t have the data to prove it. As the industry gets off the ground, WSCOs should take their expertise in analyzing water use in complex systems and actually make money in the “short tail” of large, granular water reduction opportunities in factories and large buildings.<br /><br />In contrast to GHG and energy reduction opportunities, many of the long-tail water reduction opportunities are obvious, as described earlier. Building owners and home owners can do the upgrades themselves in order to save water at low cost the next time they move to a new apartment or change their sink or toilet. Of course, a coordinated policy push wouldn't hurt.<br /><span style="font-weight: bold;"><br />So why aren't there any WSCOs?<br /></span>A quick internet search showed no WSCOs currently operating in China (although if you know of any, <a href="mailto:geoffplewis@gmail.com">please email me</a>!). Why not?<br /><br />As with any promising green innovation, significant barriers are holding back the WSCO model. First and foremost is economics. As Christine illustrates in her talk, water prices in Northern China are low.<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg4wLOqjhtocwaajZscmLEzzzZc6ReWXAs-jMFYWYY8fsAulkeu-GFtEJda-h-m36XQiD1MIlCr7YT5_2ZXTpdCPnbE5BZPxgkKpXb5ynkbup3BiENwXAn2BdbYWjF9vir_Xx6t2T8OB0PB/s1600-h/yellow+river+vs+colorado+river-2.jpg"><img style="cursor: pointer; width: 400px; height: 279px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg4wLOqjhtocwaajZscmLEzzzZc6ReWXAs-jMFYWYY8fsAulkeu-GFtEJda-h-m36XQiD1MIlCr7YT5_2ZXTpdCPnbE5BZPxgkKpXb5ynkbup3BiENwXAn2BdbYWjF9vir_Xx6t2T8OB0PB/s400/yellow+river+vs+colorado+river-2.jpg" alt="" id="BLOGGER_PHOTO_ID_5301109812743773250" border="0" /></a><br /></div>As the chart above shows, urban and industrial prices are about half of those in the also water- challenged Colorado River basin in the Southwestern United States. Agricultural water in China is essentially free.<br /><br />For a WSCO scheme to work, water needs to be priced accurately and dearly, since water savings make up the income stream needed to pay back the water conservation investment. The WSCO model might even work on agriculture if the government was willing to clean up the water pricing structure. WSCOs could work with big farms or municipalities to reduce water consumption and share the savings. Given the hard to ignore <a href="http://www.chinadaily.com.cn/china/2009-02/05/content_7449492.htm">warning signs of water scarcity</a> cropping up around China, the government will likely be forced to raise the price of water. Potential WSCOs should keep an eye out for government policy action.<br /><br /><span style="font-weight: bold;">Parting shot</span><br />Government policy will have to drive the move toward efficient water use. Ideally, this will be in the form of a pricing structure that incentivizes entrepreneurial WSCOs to get out and do the work in the "short tail" of water reduction opportunities, but the government will have to do the heavy lifting in the "long tail" by mandating water efficient appliances and raising the price of domestic and agricultural water.<br /><br />Water might become the environmental issue China gets serious about even before they get serious about climate change. But in order to sustainably fix the water problem, climate change cannot be ignored. Maybe an opportunity for WESCOs who focus on both energy and water savings?Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com0tag:blogger.com,1999:blog-8821030105982252839.post-14122424709967888312009-02-08T03:23:00.000-08:002009-02-09T06:13:17.583-08:00Random thoughts<span class="Apple-style-span" style="font-weight: bold;"><div>China doubles wind power in 2008<br /></div></span><div>Recently released <a href="http://www.gwec.net/index.php?id=30&no_cache=1&tx_ttnews%5Btt_news%5D=177&tx_ttnews%5BbackPid%5D=4&cHash=04fdc8c00a">figures from the Global Wind Energy Council</a> show that China doubled it's installed wind power capacity in 2008, reaching 12.2 gW, up from 6.3 gW. This is obviously huge growth and very important progress, but China still has a lot of work. </div><div>The US also passed Germany to become the world leader in installed wind capacity, with 25.2 gW.<br /></div><div style="text-align: center;"><img style="cursor: pointer; width: 400px; height: 215px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgN78cPQOhz2tEs8LEsKxoqQaDiE5fOTdcpfexVQm4Vma7Ts1a_qWDBIdUP9jAe01X_YX4SMRdZabub39uiuqY2YaVxUd02giJTvp1QUpekKNSz1FcjQZYEDAameTErQ1aAIbxm1n3lheaw/s400/GWEC+top+10+installed+capacity.jpg" alt="" id="BLOGGER_PHOTO_ID_5300393752412627570" border="0" /><br /></div><div><span class="Apple-style-span" style="font-weight: bold;"><br /></span></div><div><span class="Apple-style-span" style="font-weight: bold;">China to subsidize purchase of advanced fuel vehicles</span></div><div><a href="http://news.xinhuanet.com/english/2009-01/26/content_10723283.htm">Xinhua reports</a> that China will begin to offer subsidies for 13 big municipalities (Beijing, Shanghai, etc) to purchase advanced fuel buses, taxis, dumptrucks and postal cars. The details aren't yet clear, but the subsidies would help cities fund purchases of fuel-efficient hybrids and electric and fuel cell vehicles. This could be a big boon for BYD, SAIC and the other Chinese automakers charging into next generation fuel vehicles. </div><div>UPDATE: <a href="http://www.newenergymatters.com/">New Energy Matters reports</a> on the subsidy levels, announced today:<br /><blockquote style="font-family: arial;"><span style="font-size:85%;"> The highest levels for small cars were set at CNY 50,000 (USD 7,300) for a hybrid car, CNY 60,000 (USD 8,760) for an electric and CNY 250,000 (USD 36,500) for a fuel cell car. Buyers for large buses will get much higher subsidies, with CNY 420,000 (USD 36,500) for a hybrid, CNY 500,000 (USD 73,000) for an electric and CNY 600,000 for a fuel cell buses.</span></blockquote><tt><span style="font-size:85%;"></span></tt>This subsidy <span style="font-style: italic;">really</span> matters: the subsidy for electric cars will bring BYD's autos well within cost competitive range with normal internal combustion engine-powered cars. See my <a href="http://chinagreenbuildings.blogspot.com/2008/12/more-on-electric-cars.html">previous post on electric car economics</a>. <br /><br /></div><div><span class="Apple-style-span" style="font-weight: bold;">China gets wake up call on climate, energy</span></div><div><a href="http://climateprogress.org/2009/02/06/chinese-drought-birth-defects-coal-global-warming-premier-wen-jiabao/">As Climate Progress notes</a>, China faced a serious wake up call recently showing how important it is to move to clean energy now. First, local pollution is hurting China's children. A <a href="http://news.bbc.co.uk/2/hi/asia-pacific/7863290.stm">BBC article reports</a> that birth defects are on the rise, and a senior family planning official blames pollution related to coal. Birth defects have been most severe in coal heavy areas. </div><div>Second, symptomatic of worsening climate change, northern China is suffering the<a href="http://www.cnn.com/2009/WORLD/asiapcf/02/06/china.drought.half.century/"> worst drought in 50 years</a>. <a href="http://www.guardian.co.uk/world/2009/feb/04/china-drought-wheat-crop">As the Guardian reports</a>, the drought is seriously threatening the wheat crop in Henan province and several other locations. It hasn't rained in Beijing and other northern cities in over 100 days. (for more on water in China, see <a href="http://greenleapforward.com/2009/02/02/water-quality-and-urban-wastewater-management-in-china/">two recent presentations on the topic by fellow Fulbrighters</a>)</div><div>In order to alleviate both local pollution and global warming, China needs to move away from coal now.<br /></div><div><br /></div><div><span class="Apple-style-span" style="font-weight: bold;">Clinton plans to visit China and discuss climate change during first overseas trip</span></div><div>Against the backdrop of the worsening global warming-related problems described above, US Sec of State Hillary Clinton will make her first international trip to Asia, with a trip to China to discuss climate change, <a href="http://dotearth.blogs.nytimes.com/2009/02/04/first-trip-for-clinton-aims-at-china-climate/">reports dotEarth</a>. This very well could be <span class="Apple-style-span" style="font-style: italic;">the </span>international issue of Obama's presidency. Several reports also came out with advice for US-China climate change negotiations: <a href="http://www.brookings.edu/events/2009/0205_climate_change.aspx">Brookings Institution</a> and Pew Center for Clim/ Asia Society. </div>Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com0tag:blogger.com,1999:blog-8821030105982252839.post-87217881273538986332009-02-05T01:52:00.000-08:002009-02-05T21:59:04.807-08:00Another look at carbon finance for green buildingsToday I’m going to revisit the clean development mechanism (CDM) as a financing tool for green buildings and energy efficiency in developing countries. As I mentioned in a <a href="http://chinagreenbuildings.blogspot.com/2008/12/clean-development-mechanism-ignoring.html">previous post on carbon finance</a>, the CDM hasn’t done anything to date to finance investments in building energy efficiency in developing countries. But it’s starting to look like this may change soon. It’s time for developers in China to start thinking about how carbon finance can play a role in their projects and portfolios.<br /><br />Before I get into the post, I think it’s worth mentioning one more time why carbon finance should be funding building energy efficiency projects. As the graph below shows (source: <a href="http://www.blogger.com/www.esmap.org/filez/pubs/11212007125014_ScalingUpDemandSideEE.pdf">World Bank report [PDF]</a>), efficiency is the largest piece in the puzzle of reducing our carbon emissions.<br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisxa_kVcSL83ls30azVwMsJZ_JEArpC-JkopPiuHQeP9P3sAdpk8Het46WIWPhie5vmWZzEgWcIsMDc7budrJVMf2OV7TSlKKflL6yoIxj91wuxnGsJYV7Wnf4zEWTDhjlTnU8mdt6nmzv/s1600-h/potential+ghg+reduction+to+2050.jpg"><img style="cursor: pointer; width: 400px; height: 236px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisxa_kVcSL83ls30azVwMsJZ_JEArpC-JkopPiuHQeP9P3sAdpk8Het46WIWPhie5vmWZzEgWcIsMDc7budrJVMf2OV7TSlKKflL6yoIxj91wuxnGsJYV7Wnf4zEWTDhjlTnU8mdt6nmzv/s400/potential+ghg+reduction+to+2050.jpg" alt="" id="BLOGGER_PHOTO_ID_5299249618185848994" border="0" /></a><br /></div>But as this chart shows, the CDM is not doing nearly enough to invest in efficiency:<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYo9dLxEO1NVavVxiz73m0cYmVG65NjQRlkmVN-FHp6bT9UdGxlpgpteZGRBKzUHix-rVzKaafhVfQ63y5xjCAnL0nqEXZAXH36A1wrEti8S9koJG0CCDLAHi8-husIvdI9K1b6okoilgU/s1600-h/number+of+CDM+projects+by+sector.jpg"><img style="cursor: pointer; width: 400px; height: 238px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiYo9dLxEO1NVavVxiz73m0cYmVG65NjQRlkmVN-FHp6bT9UdGxlpgpteZGRBKzUHix-rVzKaafhVfQ63y5xjCAnL0nqEXZAXH36A1wrEti8S9koJG0CCDLAHi8-husIvdI9K1b6okoilgU/s400/number+of+CDM+projects+by+sector.jpg" alt="" id="BLOGGER_PHOTO_ID_5299249617152215618" border="0" /></a><br /></div><br />As I mentioned before, <a href="http://www.unep.fr/scp/publications/details.asp?id=DTI/1071/PA">a recent UNEP study</a> did a good job of describing why the CDM hasn’t been effective in funneling money into investments in building energy efficiency. The <a href="http://cdmrulebook.org/PageId/452">programmatic CDM</a> (pCDM) was established in 2005 to fix this problem, but hasn’t made much of an impact to date.<br /><br />Luckily, things may soon change. The Executive Board of the CDM, who oversees and decides on all policy changes, called for <a href="http://cdm.unfccc.int/public_inputs/2008/PoA/index.html">public input on how to fix the pCDM</a> and will review the program at their next meeting in mid-February. Most public input provided pretty sharp criticism (see <a href="http://cdm.unfccc.int/public_inputs/2008/PoA/cfi/TN4T6XKB6BWBSFAG1ALHPH058FRN7B">this PDF for an example</a>) as well as recommendations that should hopefully be incorporated into updated guidelines for the pCDM, ideally allowing many more projects (and groups of projects) to get CDM financing. But since no one can predict how long it could possibly take a body like the Executive Board to make up their mind, I won’t speculate here. Instead, I’ll just describe what the future might look like once a working carbon finance system is in place.<br /><br /><span style="font-weight: bold;">Greening building portfolios</span><br />The key place CDM will play a role is the greening of existing building portfolios. Existing building portfolios are well-suited to the CDM methodologies for several reasons. First, the emissions reductions baseline is solid. Unlike for new buildings, where the baseline is hypothetical and model-based, existing buildings already have a baseline in the form of their operating history and historical energy usage. Second, the emissions reductions are verifiable. How much energy did the building use before, and how much less does it use now? Third, the energy-efficiency measures undertaken across a portfolio of buildings will all be pretty similar. Once some of the current pCDM roadblocks are removed, it should be pretty easy to combine these activities at different buildings into one CDM program. Essentially, once the first building is approved and verified, it should be straightforward to get the rest approved. Fourth, and most importantly, the emissions across an entire building portfolio are large.<br /><span style="font-weight: bold;"><br />How big does the portfolio need to be?</span><br />In order to make going through the hassles of the CDM process worthwhile, the portfolio of buildings needs to produce a large number of CERs. Wind projects provide a good proxy of how many CERs might be needed: general wisdom seems to be that most wind projects need to be at least 50 mW in order to make CDM financing worthwhile. A 50 mW wind plant with a 25% capacity factor in China would produce about 110,000 CERs a year (calculations available <a href="http://spreadsheets.google.com/ccc?key=p-_weVkAjxtfp-GO1tfPmDg">here</a>).<br /><br />A 150,000 square meter office building (about the size of Prosper Center) in China would normally produce 30,000 tons of carbon dioxide per year. If the building owner could prove a 50% reduction in carbon emissions through a combination of energy efficiency improvements and on-site renewable generation, this would result in 15,000 CERs per year. So a building owner would probably need a portfolio of at least 1,000,000 square meters to make the CDM financing process worthwhile.<br /><br />Several China developers fit this bill: <a href="http://www.sohochina-ir.com/eng/business/completedprojects.htm">SOHO Group</a>, with a portfolio of a million and a half square meters of property in Beijing, and <a href="http://www.capitaland.com.cn/en/53_ENU_HTML.htm">CapitaLand China</a>, with a massive portfolio in 5 different regions of China, are two good examples. I’m sure Vanke and several others also have big portfolios of real estate ripe for investments in energy efficiency.<br /><br />Carbon finance will provide a large opportunity for these companies to make good investments in energy efficiency, but will not be a panacea. At $0.10 per kWh of electricity and $20 per ton of carbon, carbon finance will provide a 20% kicker on energy efficiency investments over and above the savings on the electric bill. I was surprised by how little this kicker matters. If a developer faces a 5 year payback on energy efficiency, carbon finance would only reduce this to 4. It helps, but probably not enough to change behavior. This is part of the reason why <a href="http://greenleapforward.com/2008/10/15/stanfords-david-victor-on-coal/">David Victor and others are saying current carbon prices are just too low</a> to make much of a difference.<br /><br />It’s important to note that this carbon credit kicker will also rise (or fall) with carbon prices, as portfolio owners would be entitled to a stream of income, rather than a lump sum payment. In a world of properly priced carbon (maybe $100/ ton or more?), this kicker will really matter.<br /><br /><span style="font-weight: bold;">Opportunities abound</span><br />While the Executive Board tries to fix the pCDM, the voluntary carbon market is an option for developers who want to get ahead of the curve and learn how to use carbon finance to fund investments in energy efficiency.<br /><br />One option is for developers to contract directly with interested companies in America or other non-carbon regulated countries, allowing the developer to sell off the carbon credits from a large portfolio in bulk. The company purchasing the carbon credit could then tout it's carbon neutrality or environmental friendliness. In fact, for companies like CB Richard Ellis, who has <a href="http://phx.corporate-ir.net/phoenix.zhtml?c=176560&p=irol-newsArticle&ID=1009399&highlight=">committed to being carbon neutral in 2010</a>, this might be an interesting option. CBRE manages a lot of buildings in China, and could finance energy efficiency upgrades and then take the resulting carbon credits to reach their carbon neutral goal. And while doing this, they would get first hand experience in the emerging field of carbon finance for green buildings, a market that will undoubtedly be huge for CBRE in the future.<br /><br />Developers could also sell their credits to the voluntary markets, using the <a href="http://www.cdmgoldstandard.org/how_does_it_work.php?id=44">Gold Standard</a> or other voluntary standards. Voluntary standards, generally less stringent than the CDM, might be more receptive to the programmatic nature of building energy efficiency reductions.<br /><br />Regardless of what happens with the Executive Board, the pCDM and even the post-2012 climate treaty, carbon finance is not going away. Developers and building owners who stay up to date on the developments in the carbon markets will have a significant leg up on their competition.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com1tag:blogger.com,1999:blog-8821030105982252839.post-8675624247514548452009-02-01T01:30:00.000-08:002009-02-01T23:16:15.286-08:00Nokia China CampusI recently had a chance to visit the Nokia China Campus in Beijing’s Economic-Technological Development Area (BDA). This building is a nice illustration of solid application of green building principles, but it also left me with the distinct impression that green building practices alone are only barely scratching the surface of what can be done to reduce carbon emissions.<br /><br /><div style="text-align: center;"><span style="font-size:85%;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEie5geKomJXyd3nsvsjDPjpdI21R5FZ07gw5nKL_E2_mczMP_lXA5t_11P8xtyBWNqJ-E_ZcRa8cifFg0OGk0O-qbQ60Vx3KnEBc2xIjj9bfG3C9ADhGeM4fGRJv18jp7sjEG0xuS36CRkP/s1600-h/n13303995_33138829_6207.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 268px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEie5geKomJXyd3nsvsjDPjpdI21R5FZ07gw5nKL_E2_mczMP_lXA5t_11P8xtyBWNqJ-E_ZcRa8cifFg0OGk0O-qbQ60Vx3KnEBc2xIjj9bfG3C9ADhGeM4fGRJv18jp7sjEG0xuS36CRkP/s400/n13303995_33138829_6207.jpg" alt="" id="BLOGGER_PHOTO_ID_5297761872981456178" border="0" /></a></span><span style="font-size:85%;">From left to right: Ben Cooper, Geoff Lewis and Philippe Bouchard</span><br /></div><br /><span style="font-weight: bold;">Nokia China Campus</span><br /><div style="text-align: left;">Nokia’s China Campus will be the new headquarters and R&D facility for Nokia China. The campus is a ~75,000 sm facility that will provide office space for 2,300 employees. The building received a LEED Gold rating, Nokia’s first LEED Gold building globally, but after the success of this process, they have upped their commitment and now will go for at least LEED Gold on all new buildings globally. I thought that was a nice example of the China business leading the global business toward sustainability.<br /><br /></div>The building has a number of solid energy efficient design features. Most notable is the double skin facade. This prevents the outside temperature from affecting the indoor temperature, reducing heating and coolings needs. The double skin facade however still allows significant daylight in to the building, reducing lighting needs. Arup, hired by Nokia to design the building, <a href="http://www.arup.com/china/project.cfm?pageid=11540">estimates that the double skin facade alone</a> reduces energy use by 14%.<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgs38Co_2iKDormjxoCnDQAbrXN_-JlXRAXlmvU2jE-GnUlYCrtR9FLW5jCz7MMJyuxx7TqrIDd-k8Bfl4KZLUCmRsfZdHfopkmluM9WjZ5J05UkluRTpbhLVxxIGsP2QD5mKOMtULGvyeQ/s1600-h/n13303995_33138828_3123.jpg"><img style="cursor: pointer; width: 273px; height: 400px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgs38Co_2iKDormjxoCnDQAbrXN_-JlXRAXlmvU2jE-GnUlYCrtR9FLW5jCz7MMJyuxx7TqrIDd-k8Bfl4KZLUCmRsfZdHfopkmluM9WjZ5J05UkluRTpbhLVxxIGsP2QD5mKOMtULGvyeQ/s400/n13303995_33138828_3123.jpg" alt="" id="BLOGGER_PHOTO_ID_5297763516375715362" border="0" /></a><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgsCjHaE0xcgA2bah9Yn934M_o6GAfsZnjqdWxGfJ3SDVClwRxho5aiA4gD2MhgowUygJx2Kxzvcsguc9nf4jmg2-tWrjJl4klRvZFixAN-yIpI0xvwYBx1v-Sg-lSqBu2DXVxXnqmf99kH/s1600-h/n13303995_33138823_5894.jpg"><img style="cursor: pointer; width: 273px; height: 400px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgsCjHaE0xcgA2bah9Yn934M_o6GAfsZnjqdWxGfJ3SDVClwRxho5aiA4gD2MhgowUygJx2Kxzvcsguc9nf4jmg2-tWrjJl4klRvZFixAN-yIpI0xvwYBx1v-Sg-lSqBu2DXVxXnqmf99kH/s400/n13303995_33138823_5894.jpg" alt="" id="BLOGGER_PHOTO_ID_5297763515796649874" border="0" /></a><br /></div><div style="text-align: center;"><span style="font-size:85%;">Double skin facade<br /><br /></span></div><div style="text-align: left;">The roof also features also massive skylights and a huge atrium, which creates a nice airy feeling in addition to reducing lighting load. The integration of these and other energy efficiency strategies resulted in a 20% savings over a baseline building. The building also features many water saving features, resulting in water use 37% below comparable buildings.<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjcY-A-lyVkQUpX8bC9phzNIqWzy1JfCk43WW5AOjMlku5sdWRYTs-l8BxOISpbbIa5xK8cNEBmvr-CLdBqeNogYc6PZrYJEKaWnvpVm_-xSBnGHVc1hLsokONgU2IgCdw4keyDIQEnVjQW/s1600-h/n13303995_33138821_3694.jpg"><img style="cursor: pointer; width: 268px; height: 400px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjcY-A-lyVkQUpX8bC9phzNIqWzy1JfCk43WW5AOjMlku5sdWRYTs-l8BxOISpbbIa5xK8cNEBmvr-CLdBqeNogYc6PZrYJEKaWnvpVm_-xSBnGHVc1hLsokONgU2IgCdw4keyDIQEnVjQW/s400/n13303995_33138821_3694.jpg" alt="" id="BLOGGER_PHOTO_ID_5297766450915918274" border="0" /></a><br /><span style="font-size:85%;">Atrium<br /><br /></span><div style="text-align: left;"><span style="font-size:100%;">From a sustainability standpoint, the buildings location is less than ideal: well outside of the city near the south 5th ring in the BDA. Nokia does try to minimizes this impact, however. They provide convenient shuttle bus service to all their employees, 80% of whom take the shuttle to work everyday. Moreover, Nokia decided to make the move to the suburbs in order to consolidate its operations (and get some nice tax credits from the government), which helps to reduce travel time between the facilities. Most importantly, they have also encouraged many of their suppliers to move down to the BDA and co-locate. This has helped reduce the carbon footprint for their entire product supply chain.<br /></span><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEho_Uk5CgDIM4uIAXQ5Np6P3Ge53g8f_wjOYo1AqqLAYtwdGgTB8ODqqXJExxhi62YyJBX5KBGFSvSMEs_3xPgqBWvaqOtFcRmIYHuGQPgwVbDzGffPAvA9pJ_pdyniJ2T4xKe4nT4W2UMA/s1600-h/n13303995_33138824_4627.jpg"><img style="cursor: pointer; width: 400px; height: 268px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEho_Uk5CgDIM4uIAXQ5Np6P3Ge53g8f_wjOYo1AqqLAYtwdGgTB8ODqqXJExxhi62YyJBX5KBGFSvSMEs_3xPgqBWvaqOtFcRmIYHuGQPgwVbDzGffPAvA9pJ_pdyniJ2T4xKe4nT4W2UMA/s400/n13303995_33138824_4627.jpg" alt="" id="BLOGGER_PHOTO_ID_5297767145418184082" border="0" /></a><br /><span style="font-size:85%;">Shuttle bus waiting to take employees to CBD<br /><span style="font-size:100%;"><br /></span></span><div style="text-align: left;">The building also has a strong focus on occupant well-being and productivity. In addition to open communal space, the campus also features restaurants, a gym and a nursery and a place of worship. The daylighting strategies also allow for significant light (but not significant glare) to enter the offices, which should enhance productivity. 97% of spaces have views of a window.<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhz827fzSESKnyZrQlooBn5i7OONOcVHcXOGqbZThtK2wwm7pMU67xEAb8ST6aZ56DfyD3qgZF8XIwoVeLEr2wFo1TxWARCsKHfcHDhSvNoYsdDTxFUp0Vm3MnCWbOk9zkRV7HPSWdooFdj/s1600-h/n13303995_33138827_5574.jpg"><img style="cursor: pointer; width: 202px; height: 302px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhz827fzSESKnyZrQlooBn5i7OONOcVHcXOGqbZThtK2wwm7pMU67xEAb8ST6aZ56DfyD3qgZF8XIwoVeLEr2wFo1TxWARCsKHfcHDhSvNoYsdDTxFUp0Vm3MnCWbOk9zkRV7HPSWdooFdj/s400/n13303995_33138827_5574.jpg" alt="" id="BLOGGER_PHOTO_ID_5297767144679194866" border="0" /></a><br /><span style="font-size:85%;">View from gourmet restaurant<br /><br /></span></div>The building was made with 27% local materials (defined by LEED as produced with 500 miles of the building), which reduces embodied carbon thanks to transit. Transit of building materials <a href="http://www.building.co.uk/sustain_story.asp?sectioncode=661&storycode=3097160&c=3">generally accounts for 10-20% of embodied carbon</a>.<br /><br />Yet for all these green features, Nokia estimated it cost only 2% extra to build this LEED Gold campus. Add this building to the growing evidence that good integrated design can deliver high performing green buildings at very small additional upfront cost.<br /></div><div style="text-align: left; font-weight: bold;"><span style="font-size:85%;"><br /><span style="font-size:100%;"></span></span></div></div><span style="font-weight: bold;">Much more to be done</span><br />Despite all the cool green features of the building itself, I couldn’t help but think about the even greater opportunity to reduce carbon emissions right next door: in the older Nokia factory that produces cell phones for distribution in Asia. I don’t have hard numbers, but I have to suspect that the energy used in this production and distribution process far outweighs the energy used in the office building. This factory, built in 2001, had essentially zero integration with the recently completed campus building.<br /><br />And that is where the real opportunity lies. The next step is to take the principles of green buildings- integrated design and whole-systems thinking- and apply them much more broadly: to manufacturing processes, to factories, and even whole communities.<br /><br />I am not familiar with the particular manufacturing process of that Nokia factory, but I imagine it produces considerable waste heat. Why not take that waste heat and pump it next door to heat the office building during winter? I’m sure a closer look at the manufacturing process would reveal many more win-win strategies resulting from integration of the office building and the factory. And what about better integrating the manufacturing process with the factory building itself? It seems like most manufacturing processes are designed by mechanical engineers, and then merely placed inside the shell of a building. What opportunities are there to better integrate the process within the structure of the building, and use less energy to produce more? How can we improve resource productivity and not just labor productivity?<br /><br />These are still very much open questions. The barriers that already exist in the green building space- lack of coordination between all the different players, expertise bottlenecks, etc- are certain to be even tougher in making green factories that integrate with their surroundings. But the work will be worth it. Green factories, and particularly their integration with commercial and residential buildings, present a massive opportunity for reducing energy use and carbon emissions.<br /><br /></div></div></div>Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com0tag:blogger.com,1999:blog-8821030105982252839.post-26726368671423942642009-01-22T18:30:00.000-08:002009-02-01T01:30:27.358-08:00Solar hot water in ChinaChina is way behind the rest of the world on solar installation, right? After all,<a href="http://greenleapforward.com/2009/01/21/solar-at-a-crossroads/#more-160"> according to Julia Wu of New Energy Finance</a>, China currently only has 100 megawatts of solar PV installed, far short of the <a href="http://www.worldwatch.org/node/5449"><span style="text-decoration: underline;">almost</span> 4 gigawatts of solar already installed</a><a href="http://www.worldwatch.org/node/5449"> in Germany</a>. But this narrow focus on solar PV ignores the huge progress being made in China’s solar hot water industry, which leads the world. This post will describe the growing solar hot water industry and also touch on the leadership of Yunnan province.<br /><br /><span style="font-weight: bold;">Hot water needs</span><br />Heating hot water uses significant amounts of energy globally. <a href="http://china.lbl.gov/files/LBNL%201036E.%20The%20reality%20and%20future%20scenarios%20of%20commercial%20building%20energy%20consumption%20in%20China.%20Aug2008.pdf">According to a LBNL report (PDF)</a>, water heating accounted for 26% of building end use energy in China in 2005. That’s more than lighting, which only accounted for 17%, and a lot more than cooling, which only accounted for 9%. (The majority of end use energy was consumed by heating, accounting for 49% of end use energy consumption).<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZ_WhM1s7BPfN2xWy4aQ9NBmPE4VKJgg1Crdz8xF8aabkT_JlsN-HI9f_gZYxeJCagQ-dmz07aBtA9A4QijjzUc5ArtgchnkNga9iycHN97SbqZmFyBi9EDIS6BS-sdgFAsituHFe0ljXz/s1600-h/energy+usage+by+type.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 262px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgZ_WhM1s7BPfN2xWy4aQ9NBmPE4VKJgg1Crdz8xF8aabkT_JlsN-HI9f_gZYxeJCagQ-dmz07aBtA9A4QijjzUc5ArtgchnkNga9iycHN97SbqZmFyBi9EDIS6BS-sdgFAsituHFe0ljXz/s400/energy+usage+by+type.jpg" alt="" id="BLOGGER_PHOTO_ID_5294321148777915810" border="0" /></a><br /><br />Fortunately, cheap and proven technology already exists to significantly reduce these water heating needs: solar hot water heaters.<br /><br /><span style="font-weight: bold;">How solar hot water heaters works</span><br />Solar hot water heaters use the sun to passively heat water in a tank. Most solar hot water heaters in China consist of a water tank sitting on top of a series of glass tubes that take in sunlight. This type of system is referred to as an evacuated tube collector, since the tubes have a vacuum inside.<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgKK7q5sdrjGkmZ5VOEeigt5JclrUyov1BsruclDpavKgC8ZphSr4AoevdHsSElbpYpNaaS1kWtVj5r3otR6akOV9pTUvk3e1BnyT1ZJM0M57kXZBF5rQnaKQYJK96qgOmzqj9Iago5aTXJ/s1600-h/ETC.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 257px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgKK7q5sdrjGkmZ5VOEeigt5JclrUyov1BsruclDpavKgC8ZphSr4AoevdHsSElbpYpNaaS1kWtVj5r3otR6akOV9pTUvk3e1BnyT1ZJM0M57kXZBF5rQnaKQYJK96qgOmzqj9Iago5aTXJ/s400/ETC.jpg" alt="" id="BLOGGER_PHOTO_ID_5294321509541202114" border="0" /></a><br />As the <a href="http://apps1.eere.energy.gov/consumer/your_home/water_heating/index.cfm/mytopic=12850">US Dept of Energy</a> describes it:<br /><blockquote>The collectors are usually made of parallel rows of transparent glass tubes. Each tube contains a glass outer tube and metal absorber tube attached to a fin. The fin is covered with a coating that absorbs solar energy well, but which inhibits radiative heat loss. Air is removed, or evacuated, from the space between the two glass tubes to form a vacuum, which eliminates conductive and convective heat loss.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhG_2qU1l4Vtd3nYdjXB27OQN6o9YIxQoaUpxvjET2IJs4msg1RcXmjaz-Tmdj0AxRbZ5j-vGSfFVcxhKOhmUYGcgK_AnVJXoiKVvI0KEU8TqJUZDTYi74gOvyT0rAD7vf8le-oQxUHrii-/s1600-h/yunnanSHW1.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 268px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhG_2qU1l4Vtd3nYdjXB27OQN6o9YIxQoaUpxvjET2IJs4msg1RcXmjaz-Tmdj0AxRbZ5j-vGSfFVcxhKOhmUYGcgK_AnVJXoiKVvI0KEU8TqJUZDTYi74gOvyT0rAD7vf8le-oQxUHrii-/s400/yunnanSHW1.jpg" alt="" id="BLOGGER_PHOTO_ID_5294311219939996354" border="0" /></a><br /></blockquote>The result is a renewable, carbon-free source of hot water.<br /><br /><span style="font-weight: bold;">Success in China</span><br />China is leading the world in installation of solar hot water heaters. <a href="http://www.worldwatch.org/node/5060">According to the WorldWatch Institute</a>, China accounts for roughly 60% of total installed solar hot water capacity worldwide, with nearly 1 in 10 households in Chinese households owning one. Buying solar hot waters in China is often a financial no-brainer. The average heater costs only about 1,600 yuan ($235), and can cover 100% of heating needs during the summer and usually at least half during the winter, drastically reducing energy bills.<br /><br />Solar hot water heater growth has been running at a 15-20% clip and doesn’t seem likely to abate soon, thanks to growing government interest in the technology. <a href="http://www.renewableenergyworld.com/rea/magazine/story?id=51586">Shenzhen, for example, recently mandated</a> that all buildings under 12 stories must have solar hot water technology. Solar hot water is also big business in China: the industry consists of over 1,000 manufacturers with revenues of over 20 billion yuan ($3 billion). The industry employs 600,000 people.<br /><br />Following on the success in the local market, Chinese manufacturers are now looking to take their products and know-how to the global market. The largest solar hot water manufacturer in the world is Shandong-based Himin Group. Himin produces over 1 million solar systems annually and claims a 14% market share in China. <a href="http://www.pv-tech.org/news/_a/himin_solar_receives_major_investment_from_goldman_sachs_cdh/">Himin recently received a $100 million investment from Goldman Sachs and CDH</a>, which values the firm at more than $660 million dollars. Himin will use the money for further R&D and global expansion. Look out for more global expansion from Chinese solar hot water firms.<br /><br /><span style="font-weight: bold;">Yunnan</span><br />Yunnan province in southwestern China is leading this national move to solar hot water. I was lucky enough to visit this beautiful province earlier this month with two of my best friends, Ben Cooper of <a href="http://www.kema.com/">KEMA</a> and Philippe Bouchard of <a href="http://www.esource.com/">eSource</a>, and see the solar hot water heater industry’s progress first hand.<br /><br />I was shocked and impressed by the way solar hot water heaters dot the roofs of buildings in Yunnan. In Kunming for example, the capital of Yunnan province, <a href="http://www.worldwatch.org/node/5105">more than half of the city’s nearly 5 million residents</a> have solar hot water heaters. It’s not just the cities either: even small villages throughout the province have solar hot water heaters on almost every roof. The off-grid, distributed nature of solar hot water heaters also makes them ideal for developing countries, since they don't require much infrastructure investment.<br /><br />This is very big progress for historically poor Yunnan. <a href="http://en.wikipedia.org/wiki/List_of_China_administrative_divisions_by_GDP_per_capita">Yunnan is the third poorest province in China</a> with a GDP per capita of 9000 yuan per year, about 1/6 that of Shanghai.<br />Hopefully as the world market for renewable energy and solar hot water heaters continue to grow, Yunnan can parlay it’s early successes with solar hot water into a model of sustainable economic development.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com6tag:blogger.com,1999:blog-8821030105982252839.post-8085347720120456012009-01-21T20:22:00.000-08:002009-01-21T20:56:28.568-08:00Coal to Liquids in ChinaChina has recently started exploring the possibility of using their vast coal reserves to power their auto fleets. This is about the worst possible move China could make from an environmental perspective, and not very good from an economic perspective either.<br /><br /><span style="font-weight: bold;">CTL in China</span><br />Coal-to-liquids (CTL) is another name for coal liquefaction, the process of converting solid coal into liquid fuels as a petroleum substitute that can then be used to power automobiles. <a href="http://www.chinadaily.com.cn/bizchina/2009-01/06/content_7371483.htm">China Daily recently reported that the Shenhua Group</a>, China’s largest coal producer, opened it’s first coal to liquids processing plant in Inner Mongolia. The facility reportedly cost 10 billion yuan ($1.46 billion) and produces 1 million tons of fuel annually.<br /><br /><span style="font-weight: bold;">What about the environmental footprint?</span><br />CTL is a nightmare from an environmental perspective. Coal to liquids has the worst carbon footprint of any fuel. This graph below from the EPA sums up how shockingly bad CTL fuel is: more than twice as bad as regular gasoline. The line in the middle of the graph represents the CO2 emissions of regular gasoline. Even CTL with carbon capture and sequestration (CCS), a technology that is not proven, is 4% worse than regular gasoline.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5hWdVP2iVYdaKqw4ByiQzbSYNNvmX4HgjKq13q_eUi-fjuN7WeJ-7Fr9o48rIIdlwkEM1t6sBshP-WhjCt3ahNSSxlSNtR2Z9J0Ll2hf2Ko-bMVFIJlQdMJwRWF68BA6o8arS_8nOQ3sE/s1600-h/GHG+impacts+image_large.jpeg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 391px; height: 400px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5hWdVP2iVYdaKqw4ByiQzbSYNNvmX4HgjKq13q_eUi-fjuN7WeJ-7Fr9o48rIIdlwkEM1t6sBshP-WhjCt3ahNSSxlSNtR2Z9J0Ll2hf2Ko-bMVFIJlQdMJwRWF68BA6o8arS_8nOQ3sE/s400/GHG+impacts+image_large.jpeg" alt="" id="BLOGGER_PHOTO_ID_5293975568624853282" border="0" /></a><br />The <a href="www.nrdc.org/globalWarming/coal/liquids.pdf">Natural Resources Defense Council echoes this analysis</a>: “The total well-to-wheels emission rate for conventional petroleum-derived fuel is about 27 pounds of CO2 per gallon of fuel. If the CO2 from the liquid coal plant is released into the atmosphere, based on available information about liquid coal plants being proposed, the total wellto-wheels CO2 emissions from coal-derived fuel would be about 50 pounds of CO2 per gallon—nearly twice as high.”<br /><br />And just to drive home the fact that CTL are massive emitters of carbon, the Sasol CTL plant in South Africa is the <a href="http://www.meic.org/energy/coals-to-liquid-fuels/c2l-background">single largest point source of CO2</a> in the world.<br /><br /><span style="font-weight: bold;">Good economics?</span><br />According to <a href="http://pubs.acs.org/doi/full/10.1021/es8002074">an analysis by professors at Carnegie Mellon</a>, CTL would need to sell for $63 per barrel to break even without CCS, and $78 to make an acceptable profit if it is produced using CCS (making CCS all the less likely). This translates into approximately $1.50 and $1.85 per gallon, assuming coal prices don’t rise.<br /><br />Shenhua also reports that they can produce CTL at $45 per barrel, possibly thanks to lower cost production or better technology. Adding a 15% profit margin to this results in a price per barrel in the low $50’s. In a world of high oil prices, this simple economic analysis seems to imply that it makes sense for coal-rich countries to start producing CTL fuel.<br /><br /><span style="font-weight: bold;">Why not go electric?</span><br />But this is a bad deal when we start comparing this to the economics of an electric car. <a href="http://blog.wired.com/cars/2008/04/deutsche-bank-l.html">According to Deutsche Bank</a>, a typical monthly contract that includes car, battery, and charging infrastructure with Better Place would cost $550 and include 18,000 miles per year.<br /><br />Let's compare this to the conventional car running on CTL:<a href="http://ww.uniontrib.com/uniontrib/20080105/news_lz1dd5credit.html"> Morgan Stanley estimates</a> that a new car from Detroit costs $500 per month and doesn’t include fuel, which at 18,000 miles per year would cost about $2,250 per month, even assuming that we paid the low price of $1.50 for CTL fuel produced without CCS. This is an all in cost of about $2,750. That’s a big cost advantage for electric cars.<br /><br />Why can electric cars actually be cheaper to run? Well, that’s due to their efficiency. The internal combustion engine is not an efficient source of power. In fact, <a href="http://www.natcap.org/sitepages/pid56.php">according to Amory Lovins of RMI</a>, only about 20% of the energy used in a gasoline powered car is used to turn the wheels- the rest is lost to heat or exhaust. By contrast, electric propulsion converts nearly 90% of energy into traction that turns the wheels. The economics for electric cars are looking better and better everyday. When you include the environmental benefits of electric cars, it’s becoming clear that electric is the future and alternative liquid fuels like CTL are just a distraction.<br /><br />I do think that the next big transportation revolution will come from China. Let’s just hope it comes from BYD, not Shenhua.Geoffhttp://www.blogger.com/profile/18151566199300075979noreply@blogger.com0