Green construction takes root in Indiana

March 9, 2009

Businesses have seized on environmental responsibility as a marketing mantra. But many have made their products, processes and facilities greener. Some are motivated by philosophical reasons, and others by rising energy bills and out of anticipation of federal regulations on carbon dioxide. Six experts in green issues shared their outlook during IBJ's Power Breakfast Feb. 13 at the downtown Westin Hotel.

The panelists:

Bill Brown, an associate partner at Browning Day Mullins Dierdorf Architects.

David Forsell, president of Keep Indianapolis Beautiful, a not-for-profit that promotes beautifying the city and improving the environment.

Jesse Kharbanda, executive director of the Hoosier Environmental Council, an advocacy and research group.

Scott Prince, managing director of EnerTech Capital Partners-Midwest. Based in Wayne, Pa., EnerTech invests in energy and clean-energy companies.

Kristina Tridico, a partner at Ice Miller and chairwoman of the law firm's green initiative.

Kellie Walsh, executive director of the Central Indiana Clean Cities Alliance, a U.S. Department of Energy-sponsored program promoting alternative fuel vehicles.

The discussion was moderated by Chris O'Malley, IBJ's environmental reporter. Following is an edited transcript of the discussion.

Plenty of Growth: Could each of you give an example or two of the kinds of green projects your organizations have been working on?

BROWN: I don't know that this gathering would have happened five years ago in Indianapolis. Indianapolis has gone from three LEED [Leadership in Energy and Environmental Design]-registered projects five years ago to 140 today, with over $1 billion in construction. There are 16 certified projects now in this market.

Our firm is working on a range of projects, from higher education to mixed use to commercial office space to some netzero-energy libraries — two in Indiana. So there is a wide range of interest. We are getting requests for proposals now for our LEED experience ... [from] all kinds of clients, these days.

FORSELL: First, our new headquarters, which has just been a dynamite experience. Keep Indianapolis Beautiful is a non-profit with 14 full-time employees, another 20 or 25 part-time, and 45,000 volunteers. With that growth came a need for us to expand and we thought our headquarters ought not just be a solution for us, but we said, 'How can our building be a solution for this community, a place that can be a demonstration site, a place for folks to learn?' And so that has been an incredible experience. We have submitted for our LEED certification through the U.S. Green Building Council and we have great confidence that we will be a LEED gold-certified building. The cool thing is that we have had more than 3,000 folks come to see it to learn, folks from ardent environmentalists to facilities managers from Lilly and architects for Simon Property Group.

The other thing that you may have heard of that we are working on at Keep Indianapolis Beautiful is the program called Neighbor Woods. We plan to plant 100,000 trees in 10 years.

KHARBANDA: We are Indiana's largest environmental policy organization and we are committed to the philosophy that economic growth and environmental protection can go hand in hand. And more generally it is that there is a very compelling case to be made for improving the environment in that it will help boost Indiana's long-term economic growth, help raise the levels of public health in the state, and of course give something to the next generations in terms of pristine open spaces. We are very interested in capturing the key strategic challenges facing the state with respect to the environment.

We believe those to fall in three categories: energy, agriculture and transportation. And one of the mechanisms by which we are trying to bring about change in terms of the sustainability of the state is through legislation. So we are very involved right now in the middle of the 2009 legislative session in trying to advance cost-effective, compelling, powerful pieces of legislation that will help to reduce the carbon footprint of the state, make our farms more sustainable, and increase the amount of public transportation.

PRINCE: I saw the opportunity for an investment platform around venture capital and this whole new developing category called clean energy. I have been exposed to it quite extensively on the West Coast, but saw that the Midwest had a whole lot of inherent assets related to manufacturing availability, central distribution — just a heritage of building products and services relevant to a lot of the new clean-tech-labeled sectors.

EnerTech has been around for about 15 years, launching its first fund in the early 1990s, and the energy technology fund. They have three funds under management, almost $400 million, and have had 51 investments and experienced 29 exits. And so we are looking to extend that trend line of success of EnerTech here into a Midwest-centric effort with Indiana at its core.

TRIDICO: Our real estate practice looks at zoning and municipal efforts, looking at renewable technologies and clean technology projects, funding those from municipal and tax sides, supporting those on both the real estate developer and project developer side, the siting of some of the projects. We were talking about wind turbines, green buildings, the clean technology ventures and making sure that they are supported and understood here in central Indiana. We look at advising our clients in every aspect of the development and maintenance of those renewable energy technology projects, everything from the sticks and the dirt of the green buildings to the intellectual property that supports the advanced manufacturing that we have and hope to continue to grow here in central Indiana.

WALSH: We focus on the transportation sector and the green initiatives there and alternative fuels and related technologies. In the last two years, we have been working — partnering with our state energy office and the lieutenant governor's office — on a project to take E85 all the way from the Great Lakes down to Mobile, Ala.

In October, we celebrated opening that I-65 corridor to where flex-fuel vehicle owners can utilize E85 and travel the distance of I-65 on that fuel. We have also been partnering with, again, our state energy office, Indianapolis Power & Light, and the Lugar Center at IUPUI in the development of a plug-in [Toyota] Prius. [We] converted two vehicles to plug-in technology and are seeing about 90 miles per gallon, and hope to see that improve as more testing and fine-tuning are done.

We also are working on submission of some projects for funding from the U.S. Department of Energy. I am working with several fleets around the state on implementing natural gas, adding natural gas into their fleet as well as propane for those who don't have access to natural gas.

We are paying very close attention to the stimulus package and what funding and opportunities will come out for further projects in that announcement.

Benefits of green construction: Locally, it seems like a lot of investment is focused on creating buildings that are energy-efficient and have lower impact on the environment by virtue of their design or their building materials. Give us the business justification for spending more on a green building, especially now.

BROWN: The question should be, "How much can I save by going green?" And what we are seeing in major studies like Gold Star, NBI — they will tell you that, of 1,300 green-registered certified buildings, on average the savings for energy were 30 [percent] to 45 percent [with a] three- to five-year payback on that initial investment. We are seeing some projects, like Adobe's headquarters, where the investment was paid back in less than a year. So that's more than a 100-percent return on investment. How many of you are getting more than a 100-percent return on your investment?

BROWN: What we are seeing, even in a down economy, is that people are realizing that green buildings are a good investment. For new buildings, for existing buildings, any kind of building, they are going to look at that building and see how it is performing.

When we buy a box of Cracker Jack, a label on the side tells us what's in that box. If we buy a $40 million building, typically nobody asks how well does this building perform and how well will it perform over the next 20 or 30 or 50 years of its life, and how does that relate to our operating costs? And if you build a typical brown building, you have built something that's going to be sucking away from your bottom line every month. If you build a green building, it is an investment that pays you back every month. So that's why we are seeing this exponential growth.

Local investing in green building is doubling in size every year for the last four years. There is a tremendous amount of interest and that relates to the business case. All these people are not going green to save the environment, unfortunately. They are going green to save money. And that's a good thing for all of us.

FORSELL: We have been in our headquarters since June and we are starting to actually understand now how the building is functioning, how the site is functioning. The early returns are looking terrific. So I guess I would encourage folks to think about green building and green construction, not only in those hard dollar paybacks, but also as a value proposition for your business and for your company.

As far as some of the hard dollars and some of the hard data, we are using only about 75 percent of the energy we otherwise would have been had we used typical or standard HVAC and other energy and lighting strategies. That is going to translate for us to about $5,000 to $10,000 annually in savings.

A couple other things: We think that we are saving about 70,000 gallons of water from coming into our building and out of it through our cistern. We aren't using water out of the city tap; we are using rain water for all of our outdoor operations and watering of our grounds.

Costs for LEED: Is a premium paid when it comes to LEED?

BROWN: That's probably the biggest misconception about what typical costs are for LEED projects or for green projects. The first study showed an average premium of 2 percent up front. What we are seeing now in the latest [national] study that came out is, they could find no discernable difference in the cost of green projects, certified projects, versus non-certified projects.

We are seeing in certain markets like libraries that certified green libraries actually cost less than typical libraries. We haven't figured that out yet, but we think it's because those architects have had the experience to know how to work with the system and integrate systems to the point where they have actually made it a more efficient design process than a typical building.

We have seen, for example, there is a library that will open next month that produces as much energy as it uses using geothermal and solar. So the cost tends to be over-emphasized ... and what we see is a lot of people underestimate the savings that they can achieve with that investment.

I think as more and more projects are done and more and more architects and engineers get familiar with the process, more and more contractors get familiar with the process, that competition is going to drive that cost down just like any new industry. It is going to become, I think, a huge mistake to build the typical building.

In Indiana, we have an outdated energy code that if you build to the code you're building an energy-inefficient building.

Carbon regulations: How should Indiana respond in terms of policy to the prospect of federal carbon regulations?

KHARBANDA: We are heavily dependent on coal. Somewhere between 94 [percent] to 97 percent are the statistics I have seen in the last couple of years [percentage of electricity generated by coal-fired power plants]. That implies obviously that we are a carbon-intensive state. I read over and over that we have the fifth-largest greenhouse gas emissions in the country. The implication there is that if we stick with business as usual, our electricity rates will go up pretty significantly under federal carbon regulations. There was a study by Purdue[University] that suggested rates might go up as much 40 percent by 2030.

That implies a real urgency for state policymakers to look at the key sectors which are responsible for greenhouse gas emissions and figure out how we can begin cutting greenhouse gas emissions now. We have been championing something that would diversify us toward renewable energy — energy-efficiency in a form of a state renewable electricity standard and, of course, also trying to increase funding for public transportation.

One of the ways [is], we can reduce our dependency on cars. The electricity sector counts for about 50 percent of the greenhouse emissions in the state — the automobile sector about 20 percent. So we really make some big inroads in cutting carbon dioxide by focusing on those two sectors.

Green jobs: Jesse, the Hoosier Environmental Council just put out a report that said Indiana could see about 40,000 new jobs in the green sector and potentially over $6 billion in economic development.

KHARBANDA: The Hoosier Environmental Council in the last two years did really make the case that there is tremendous economic opportunity for green jobs in Indiana. And the focus in the last few years has really been about the kind of immediate job jolt that would arise when you are constructing wind farms or biomass plants in the form of construction and operation and maintenance jobs. But the other facet of job growth that occurs is the manufacturing area, because we have this robust manufacturing sector. It could be retooled to produce components for renewable-energy manufacturing products, inputs for these wind farms and biomass plants, solar systems and so on.

Other hot issues: Are there any other underlying legal trends regarding climate change and sustainability that could be hot this year?

TRIDICO: One of the areas receiving the most press is on the trades, renewable energy standards and what we are going to do with carbon, both from the legal side as well as the potential science behind the sequestration of carbon. [It involves] what that means in different regions and geographies, where you put the carbon you capture, what you do with it and how safe it is once you have it, which is a legal issue that we are looking at in terms of liability.

One other legal trend we are seeing, also on carbon, as both states and the federal government wrestled with these issues, are states' attorneys general such as the state of New York looking at their state securities laws and compelling folks to do a carbon audit and to disclose that information. And so we are seeing potential for increased litigation across the country as people try to find whether states' attorneys general or the states look at ways to [motivate] through legal or litigation process, or otherwise, to look at their carbon footprints.

So the increase in litigation potential across the country is something that is a hot trend. [It's] also just in terms of advising our clients on being proactive and looking at their agreements. If you are developing a green building — working with your architect, working with your builder, working with your contractors and suppliers on the representations and warranties that you are making in those agreements — know what your liabilities are, what sort of indemnification you have, and what the insurance products are.

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