Going Green Power Breakfast Transcript-WEB ONLY

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.

IBJ: 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. So I think here is an example of some of the things that are changing in the Indianapolis market. 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 net-zero-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. So things are changing very rapidly in this market.

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. And how many are there in the state-gold buildings?

BROWN: That would be number three.

FORSELL: The cool thing is that we have had more than 3,000 folks come to see it to learn, folks from the sort of the 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. Trees provide not only beauty, but obvious benefits for air and water quality … [and also] property value.

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 that are going on right now.

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., and partnering with Kentucky, Tennessee and in Alabama along the way.

In October, we celebrated the conclusion of that event, opening up 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 over to plug-in technology and are seeing about 90 miles per gallon right now with those two vehicles and hope to see that improve as more testing and fine-tuning are done.

We also are working on submission of some projects for a funding opportunity that’s out there right now 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.

IBJ: 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.

IBJ: 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 … that was done 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.

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

KHARBANDA: Well, the context is, as many of you know, 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 done by Purdue[University] that suggested rates might go up as much as 40 percent by 2030.

So I think 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. And for us, you know, two specific policies that we have been championing are something that would begin to diversify us away from coal 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 gas 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.

IBJ: 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, and that is because we have this robust manufacturing sector in Indiana even if it has taken some real big hits over the last few years. 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.

IBJ: Is there anything in the Indiana General Assembly this session that stands out in terms of providing incentives for green projects?

TRIDICO: There is everything from a sales tax exemption for home energy assistance to looking at those energy codes and standards and building codes and [promoting] green design from a legislative perspective. So it really spans the spectrum from the green building side to the renewable energy portfolio standards that Jesse mentioned in terms of having a standard which folks have said will [promote] the type of growth and development in long-term infrastructure opportunities that have some mention in the Hoosier Environmental Council report.

IBJ: 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 different geographies, where you put the carbon that 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-what your liabilities are, what sort of indemnification you have, and what the insurance products are.

Every day you hear about new insurance products protecting people that are entering into these agreements and making the types of representations and warranties about their products, whether it is the technology that [Walsh] mentioned or your ability to design to a standard that may eventually obtain a building with certification.

IBJ: Kellie, are you looking at growing in Indiana an infrastructure for plug-in hybrid cars? GM is planning to introduce the Chevy Volt next year. Are we going to see recharging stations in parking garages, for example, as the next big push?

WALSH: We haven’t seen any of those come to fruition in the area. With the project that we are working on with the Lugar Center and the Energy Office and IPL, we are raising awareness. I think you will see, as you mentioned, the Volt that will be coming out in a couple of years, and the other manufacturers are working on that, too.

I think the exciting thing they are talking about down the road is that those vehicles could even provide power back into an electric grid to help an electric utility even out their peaking and so forth because those are typically plugged in at night when the demand is down. So it would help the electric utilities with that as well. There are a lot of things being talked about right now with the plug-ins. I think before you see them on the road everywhere like you are seeing a Prius or a hybrid vehicle now, it is another maybe five, 10 years down the road before they’re mainstream. That technology is there but we can’t forget about the other technologies that are there today and viable and ready to use. We can’t wait to reduce our environmental impact and our foreign oil consumption for 25 more years or 10 more years even.

IBJ: Let’s take some questions from the audience. What’s the possibility that either our state legislators and/or leading municipalities will create incentives for sustainable development practices to encourage private development and investment?

BROWN: There is a 100-percent chance in Indianapolis. There is the new mayor, Greg Ballard, who has continued the work of former Mayor Peterson with the Green Commission. He has established an Office of Sustainability that is very ably run by Karen Haley and her staff of four people, and one of their charges is to create incentives for green development and green buildings in Indianapolis. They are making great progress, and I think we will see an announcement soon from them about … incentives for green development, green buildings and also green infrastructure with storm-water quality and monitor control.

The mayor has made it a high priority. He has been willing to invest in the professional staff to pull that off. In terms of the state, the governor issued an executive order last summer for energy-efficient buildings. That ball has been picked up by the Legislature and they are trying to flesh that out and make that into law as well. We are also seeing incentives all across Indiana in other communities that have signed on. We are seeing universities also signing on to the American College of University Presidents Climate Change Agreement. Ball State [University] announced that they are going geothermal and taking some of the coal-fired boilers off line. So that kind of progress is happening in Indiana and it’s happening very quickly.

IBJ: If there are significant savings from green buildings and relatively fast payback, why isn’t that incentive enough to build green? Why do we need legislative mandates to usher this along if the economics are there to begin with?

BROWN: That’s an excellent question. I guess the opposite way to look at that is, can we really afford to build public buildings in the next three to five years that are the old, brown buildings instead of the new green buildings? How many millions of dollars will we be spending wasting taxpayer money over that time if we wait for everybody to get the message?

I think the corporate world gets the message. The higher education world has gotten the message loud and clear. But I think there are still some sectors that need to ramp up and set an example. I think the government sector is starting to do that now, but there are still some folks that are building brown buildings, and if they are doing that with taxpayers’ money, we are all paying for that.

FORSELL: I guess I would argue that, for me, even if it is a five- to 10-year payback in real dollars, why not figure out ways to move the ball forward? I think the issues of air and water, particularly in this city, [are] that critical. And why not [motivate] and why not be creative and help the private sector move along?

IBJ: How can states like California justify a proposed ban on existing construction equipment engines, with the resulting hardship on companies that make them and use them?

WALSH: Even though the Coalition of Clean Cities as a whole looks at on-road vehicles, if you will, and what you are referring to is in the off-road vehicle category, a lot of those engines are diesel engines. Now, I am not going to fault California for what they do or don’t do-they have a lot of emission issues out there. The California Air Research Board, Resource Board and air quality requirements trump any of EPA’s even on what they are doing so they kind of can do their own thing in California with their emission standards and regulations.

It could very well go to the point of seeing those businesses go defunct if they can’t replace that equipment. Their option out there is to use biodiesel. You know, here in Indiana we use it, it is soy-based, but out there it might come from a whole other feed stock.

California even banned drive-throughs on new construction because of the idling. So they are to an extreme that I don’t think and I hope we don’t ever see Indiana get to.

IBJ: How environmentally friendly are municipal zoning codes in Indiana and do any cities and towns stand out as exemplary?

BROWN: Bloomington just revamped their codes. They are very flexible. They have overlay districts for different kinds of functions and I think that’s one to look to.

TRIDICO: They are under review in a variety of municipalities. [They] are looking at models from around the state and the country that could help to [[change] just from a practicality standpoint, licensing and permitting, the time it takes to construct and maintain one of these buildings. One of the things we are seeing on the construction side is that [while] it is great to have all the technologies on green roofs and some of the others, they have to be appropriately constructed and maintained for that jurisdiction. You want to make sure that it fits into the code and the people understand what those new technologies are. So there is a bit of a learning curve and understanding what the next generation of building products is and how those need to be cited within the code and the jurisdiction.

BROWN: One thing that is happening here is that we are looking at a multibillion-dollar fix for the sewer system-the combined overflow sewer issue-and one thing that the city has learned is, if you do like Keep Indianapolis Beautiful did and other people are doing, you slow the water down with green roofs or other types of storm-water control. You take care of the water on the surface, which is much less expensive than taking care of it under the ground and in huge pipes. So they are seeing that they can save billions of dollars by looking at some of these green technologies as opposed to some of the old-fashioned ways of doing things, and that’s something that they are beginning to write into their guidelines as we speak.

IBJ: Scott, in what green areas is EnerTech investing and what about ethanol’s viability?

PRINCE: Opportunities have clustered together with the help of Fortune 2000 [companies], the university network here, the utility network here. Certainly, biofuels and second-generation derivatives are a topic, as are the electrification of the car, the smart grid concept and independent power generation. Those things would be the four main clusters that are forming here, and we are excited about those.

On the fuel side, we haven’t [invested in ethanol]. We are not looking for capital intensity, and when you talk about investing in an ethanol plant, you are talking about a lot of money. So we like investment models that may be at the $5 million to $15 million range for their series A, first institutional round of funding, but not necessarily raising $750 million overall for the next five years.

We are looking at the value chain around ethanol plants. We see a viable future for bio derivatives that work for fuel.

IBJ: Plug-in cars use electricity. That could mean more demand on Indiana’s coal-fired power plants and thus more carbon dioxide emissions. So basically how can plug-in cars help advance the efforts to reduce greenhouse gases?

WALSH: The plug-in technology is still new. It depends on where that power is coming from. I mean, right now they are charging at night, it is a lower rate for one, so the cost wouldn’t be there as it might be during the day in the higher-rate brackets. All those questions are good, viable questions that we are still working through. But the plug-in isn’t the only option. E85 isn’t the only option. There are a whole wealth of alternative fuels out there and idle-reduction technologies and ways to gain in miles per gallon that make sense in different vehicle segments.

You know, a plug -in vehicle isn’t going to work for an over-the-road tractor-trailer application. But it might work for a consumer who is driving back and forth. We are all still working through those newer technologies that are coming out, like the plug-in cars.

PRINCE: There are some other aspects of that which I agree with. You know, it is also about battery storage. The utilities have a source of electricity from alternatives like wind and solar and biomass. I signed up for my county’s green energy plan through my utility company so I get a percentage of my household’s power from wind and biomass derivatives, and that’s great.

But the storage component as well is important. Right now, this region has available a lot of expertise and history around how to store energy. So that will be leveraged in that equation, too. If you can graduate from a 100-percent coal-produced electricity into more of a blend-let’s say that you are storing that energy in the middle of the night, that could be used during the day or used in your community across more of a distributed model. So there are a whole lot of subtleties to this equation rather than just the sole source and sole use of electricity, and that is a real strength of this state.

IBJ: What message can companies use to promote the green advantages of their products while avoiding ‘green washing’?

BROWN: Take building. Certification systems are becoming more and more important for that reason. There was a great blog on the six sins of green washing-you can Google that and you will be entertained. One of the sins of green washing is a lack of certification, a lack of proof. So certification systems are really becoming a popular way to gauge your success. And that’s something that increasingly is worth something to have. Imagine trying to sell organic food without the organic label. I think in the future we are going to see rating systems for cities and for neighborhoods and for businesses and universities where you will have to prove that you have green buildings.

We are already seeing that with appliances. We are seeing that with buildings in Europe. I think we are going to see that very soon as a competitive advantage in the United States. Already, the real estate surveys are showing if you have a certified green building, you can get more for it, lease it faster, fill it up faster, and ultimately sell it for more over time.

FORSELL: What is the substantial data that your company has that makes it go beyond fluff and marketing to making a real difference? You know, it is pretty easy to produce a recycled paper pen, it is quite another to make real change and to have the data and demonstrate credibility.

TRIDICO: I think folks are getting more sophisticated about asking those questions and quantifying the types of data that David is talking about in my field. [In] contractual terms, what representations and warranties and statements about the effectiveness of your product can you make? So you might lure someone in the door by saying it is a green product. But when you have to put that pen to paper and say these are the statements that we will make about the effectiveness of our product and about the ability to contribute to any certification system that we might be striving for, [this is] something that we are seeing folks are asking for. And [it is] the question that-even if it is not memorialized in an agreement-should be determined if you are looking at what are the inputs, what are the projects, who are the members of our team that we are going to use to put together some of these projects.

PRINCE: There is a scrambled vocabulary right now. You hear the words “sustainable, clean tech, green tech” for example. All of us will have to learn definitions over time and I don’t know who will control that.

I think the important fact is that a lot of companies are searching for their green identity and that is important because, right now, this is the biggest investment sector in the world and it looks to be growing by leaps and bounds because it has such a profound impact on everyone’s life.

Everyone I talk to, on the West Coast, East Coast, is trying to find that identity. And what they need to do is look at a whole systems approach and say, ‘Hey, is this just kind of fluffy marketing or can I actually start measuring the energy impact my business or supply line has on the world? Everyone needs to start thinking about that no matter what kind of business you are in.

PRINCE: On the transportation side, it is easier to prove that you are using an alternative fuel and show the savings you are seeing there by using that fuel. Delivery companies are using natural gas and it will keep their charges to their end users and their customers down because of that technology. There are a lot of consumers out there that are making their purchasing decisions on how green [a] business is, and certainly how that business operates its fleet is a part of that equation.