Better buildings soon? Energy and climate bill would set national energy codes

The Waxman-Markey bill has a very strong set of building efficiency codes (see Section 201, page 214 of the bill — a big PDF). Our guest blogger, Craig A. Severance, discusses what the bill requires in a post first published on his blog. Craig, a practicing CPA and former Assistant to the Chairman and to Commerce Counsel, Iowa State Commerce Commission, did one of the most detailed cost analyses publically available on the current generation of nuclear power plants being considered in this country (see “Exclusive analysis, Part 1: The staggering cost of new nuclear power”).

The greenhouse gas cap-and-trade title of the Waxman-Markey bill gets most of the attention, as it should, but the bill has many other provisions, some good, some lame.

It’s important to “get things right” when a new building is constructed. More so than perhaps anything else we create, new buildings will be with us for a very long time.

Mistakes We Have to Live In. Our gas guzzler cars and trucks will rust away to the scrap heap in little more than a decade. Appliances and machinery share a similar fate. This quick turnover assures us our mistakes of the past will not stay with us very long.

Not so with buildings — an energy hog building will likely still be around a hundred years from now. Thoughtlessness in design and orientation of buildings creates inefficiencies that are often impossible or prohibitively expensive to fix. As energy costs rise, such buildings will be a burden to their owners and renters.

Almost Half of Our Energy Use. While it is fashionable to talk about wind farms and hybrid cars, buildings are the “elephant in the room” seldom discussed, though they are responsible for almost half of U.S. energy use.

Climate scientists have concluded we must cut global warming emissions by at least 80% within just 40 years, or face catastrophic climate disasters. If we don’t start making better buildings now, we have no hope of meeting this goal.

Stop Doing Things Wrong. For all of these reasons, strong measures are urgently needed to stop new buildings from being built the wrong way, when we know how to build them right.

I know many builders who would like to build better, more energy-efficient houses. They don’t do it, because “the builder down the street” is not doing it. Most energy efficiency measures are literally invisible. Since the added advantages don’t “show well”, they are not perceived by buyers to add value. No builder can add extra features without recovering the cost, so we keep “building stupid buildings” even though we have known for 30 years how to build smarter.

Getting All the “Builders Down the Street” On Board. The way improvements in building technology achieve widespread adoption is through building codes. If everyone has to do it, everyone does it.When the Waxman-Markey comprehensive energy & climate bill (which is also known for its “Cap and Trade” program for greenhouse gases) was first introduced as a Discussion Draft on March 31st, many criticized its failure to take strong action on buildings. Though the draft called for a national “model” energy building code that states should adopt, it had no teeth. An arduous campaign would have ensued for adoption in all 50 states, where special interest lobbying campaigns would likely stop or delay many. If someone like Alaska Governor Sarah Palin wanted to grandstand and oppose requirements for better energy efficiency in buildings, there was then nothing in the bill that could be done about it. Pockets of America would continue with no advancements in building energy codes.

This might be acceptable if there were no overarching national and global crisis. However, global warming now threatens to inundate our coastlines and turn vast stretches of fertile American farmland into dustbowls.

The Committee “got it” and strengthened the bill. The bill (H.R. 2454) that passed the full House Energy & Commerce Committee last week no longer speaks of a national “model” energy building code. Instead, it establishes enforceable “national energy effficiency building codes” for new residential and commercial buildings. States and local governments will be required to adopt the new national codes, or codes that achieve equal or better energy savings. Noncompliance will result in loss of significant funding. If they still do not do so, the Federal government itself will step in and enforce the national energy efficiency building codes. (Nobody actually wants that to happen, but you have to be willing to do it to enforce compliance.)

In other words, if the bill becomes law in its current form, new buildings around the country will actually need to be built better, to achieve greater energy savings. It will actually happen. (The building energy efficiency codes are contained in “Section 201” of the Bill).

How Much Better Buildings? Major reductions in building energy use are required by the Bill — over time, reaching 75% reductions from current energy use standards.The Bill begins with “Baseline” standards which are the minimum energy efficiency requirements in the 2006 IECC code for residential, and the 2004 ASHRAE code for commercial. It then sets “Target Dates” for % reductions from these Baselines.

The Bill is complicated to read, and might give the impression of earlier action than will actually occur. Each date below is the date the Target must be set by the Department of Energy (DOE). and the national codes to enforce each Target would need to follow within one year, with state adoptions to be achieved by one year later than that. So, if you add 2 years to each date below, you will be at the probable time of actual enforcement:

  • 30% reduction from Baseline — immediately upon passage of the Act. — i.e. enforcement probably by 2012
  • 50% reduction from Baseline — for residential by 2014 and for commercial by 2015 — i.e. enforcement probably by 2016 and 2017 respectively
  • 55% reduction from Baseline — for residential by 2017 and commercial by 2018 — i.e. enforcement probably by 2019 and 2020, respectively
  • 60% reduction from Baseline — for residential by 2020 and commercial by 2021 — i.e. enforcement probably by 2022 and 2023
  • 65% reduction from Baseline — for residential by 2023 and commercial by 2024 — i.e. enforcement probably by 2025 and 2026 respectively
  • 70% reduction from Baseline — for residential by 2026 and commercial by 2027 — i.e. enforcement probably by 2028 and 2029 respectively
  • 75% reduction from Baseline — for residential by 2029 and commercial by 2030 — i.e. enforcement probably by 2031 and 2032 respectively
  • Further reductions? — beginning in 2033, DOE is to evaluate if further reductions should be set
  • Zero Net Energy buildings are to be supported by DOE efforts to support “distributed renewable energy technology” as part of this entire process

Actual Standard Set. While the Bill sets the above % Targets, the actual standard set by the Bill is the “maximum level [DOE] determines is life-cycle cost justified and technically feasible”. That’s a mouthful — basically it means does it cash flow, in other words do the energy savings more than pay for the cost of doing them.

If DOE determines that greater amounts of energy savings are feasible and cost-justified, it can set new codes that achieve more savings than the above Targets.

On the other hand, if DOE determines the above Targets are not feasible or cost-justified, it doesn’t have to meet them. It can instead set new codes that achieve less savings than the above Targets.

Congress is punting here to the technical experts — setting % Targets that Congress wants to see achieved, but allowing for better or worse results if the DOE says so. I think a lot of these “technical” determinations will actually depend (more than they should) upon what political party controls the White House at the time.

Implications. The only reason I am bothering to write about a Bill that still has a very long way to go (i.e., the Senate), is because of the sweeping changes to be wrought to the energy and building industries if Section 201 of this Act actually becomes law.

Some initial impressions:

  • Enormous boost to jobs related to making buildings more energy efficient — e.g. Energy Raters, insulation contractors, blower door air leak-tightening contractors, manufacturers of high efficiency windows, high efficiency furnaces and air conditioners, high reflectance roof coatings, etc.
  • Changes by lenders to incorporate energy savings may be needed. The DOE methodology will likely require boosts to energy savings if the cash flow from energy savings exceeds the extra mortgage payments to pay for it. However — will lenders be willing to loan the extra dollars up front?
  • Utility forecasts of growth in energy demand from new buildings will need to be drastically adjusted downward. This will eliminate the need for billions of dollars in new power plant construction that otherwise would have been required.
  • Achieving the higher levels of savings (e.g. >50%) is likely to involve renewable energy resources such as solar hot water, and solar photovoltaics. Many of these are already cost effective so they should meet the DOE test. (More jobs — lots of more jobs — in these fields.) Also, regional differences in codes will be needed — and this is anticipated by the Act.

Something to Fear, or Promote? Change can be frightening, and this Bill will definitely require major changes in how buildings in the U.S. are designed, built, and possibly financed. There is likely therefore, to be intense lobbying against the strong provisions described in this article. Many builders will be reluctant to change practices, and fearful of how well they can prosper with the new code requirements.

Although every one of the changes will actually have zero or negative cost — they will have a life cycle cost less than the life cycle energy savings — the biggest fear voiced will be that these measures will make buildings cost more. Congress and the lending industry need to work together to develop solutions to this “up front cost” stumbling block.

In the end, we must keep in mind why this Bill exists in the first place. The threat of climate catastrophe from global warming is real.

Do I want my new home to be energy efficient, or under water?