Zero Carbon Buildings are not only good for the planet, but a good financial investment too: CaGBC
Canada’s built environment is a significant contributor to GHG emissions, with 17 per cent of GHGs coming from residential, commercial and institutional buildings. The standard approach for decreasing GHG emissions associated with Canada’s building stock remains the reduction of energy use required to heat, cool and power buildings through energy efficiency. By investing in energy efficiency measures, and as a result of cleaner electrical grids, Canada’s GHG emissions associated with buildings have trended downward.
However, current projections reveal that GHG emissions associated with buildings will grow modestly by 2030 unless further action is taken. To effectively reduce GHG emissions at the building level, and to help ensure Canada meets its GHG reduction commitments, both energy use and carbon emissions need to be reduced simultaneously, which can be accomplished cost effectively by taking a Zero Carbon Building (ZCB) approach.
By turning existing and new buildings into ZCBs, Canada can significantly reduce its GHG emissions, decrease the demand for carbon intensive energy, and support Canadian real estate owners in optimizing the returns and resiliency of their portfolios. ZCBs can do this because they are designed to minimize carbon emissions and then offset any remaining emissions by generating clean, renewable energy onsite or offsite, which can reduce life-cycle costs and mitigate exposure to carbon pollution pricing.
ZCB is a new approach in Canada that is not yet well understood by the development and construction industry, governments, and the real estate sector with regards to the business case and necessary considerations for their implementation. To address this knowledge gap, the Canada Green Building Council (CaGBC) commissioned WSP, supported by A.W. Hooker and Associates, to evaluate the financial viability and impact of constructing new buildings as ZCBs. The study examined seven building archetypes — low-rise office; mid-rise office; low-rise multi-unit residential; mid-rise multi-unit residential; primary school; big box retail; and warehouse — in the cities of Vancouver; Calgary; Ottawa; Toronto; Montréal; and Halifax.
The study applied a tailored package of carbon reduction measures across all building archetypes, including: wall and roof enhancements; window upgrades; enhanced user controls (i.e., smart controls); efficient ventilation systems; better heating and cooling delivery systems; fuel switching; and the use of onsite renewable power, such as photovoltaics (PV). The financial, energy and carbon reduction outcomes of the ZCBs were examined and compared to a baseline design that reflected the 2011 National Energy Code for Buildings.
Meaningful Carbon Reductions and Positive Financial Returns
The study found that by 2030, over four million tonnes (Mt) of carbon dioxide equivalent emissions per year (CO2e/yr) could be avoided cost-effectively if the building types studied are built to be ZCBs. This represents over 22 per cent of the 20 Mt of GHG reductions that the Pan-Canadian Framework recognizes as potential savings from the buildings sector. By 2050, over 12 Mt CO2e/yr could be avoided. The emissions reductions could be delivered at a total incremental capital cost of $3.3 billion per year, which would fund the construction of approximately 47,500 new residential units and 4,800 new commercial/institutional ZCBs annually.
This level of carbon reduction can be achieved with existing market-ready technologies and approaches for the building types evaluated. The study also confirmed that ZCBs are financially viable: on average, ZCBs can be achieved with a positive financial return of one per cent over a 25-year life-cycle, inclusive of carbon pollution pricing, and require a modest eight per cent capital cost premium. As the cost of carbon rises over time, the financial return from ZCBs will only grow.
Nationally, the different archetypes yielded the following financial outcomes:
- Mid-rise and low-rise offices offer the highest life-cycle returns at close to three per cent;
- Warehouses and big box retail facilities can yield returns of one to two per cent;
- Multi-unit residential buildings (MURBs) and primary schools are cost neutral or nearly cost neutral.
Regionally, the outcomes for ZCBs are strongest in Halifax due to the high carbon intensity of the Nova Scotia electricity grid (which results in higher carbon cost savings potential) and the relatively low cost of electricity relative to natural gas (2:1 compared to almost 5:1 in Ontario). These factors make switching from natural gas to electricity for heating and hot water more financially advantageous.
In Montréal, Ottawa, Toronto and Calgary, the outcomes for ZCBs are economically strong with any upfront capital cost premium mitigated over the life-cycle by higher operating and emissions savings.
The financial outcome of ZCBs is less strong in Vancouver because of the low-carbon intensity of the electricity grid (which results in lower carbon cost savings potential), the low cost of natural gas, and the milder climate, which reduces the demand for energy. While the current economic case in Vancouver is less favourable than in the other cities, the financial returns will improve over time as the cost of carbon rises, which will lead to a higher price on all types of fossil fuels, including natural gas. The closer that electricity and natural gas come in price, the stronger the economic case for ZCBs. Vancouver’s milder climate also enables alternate approaches to ZCB design, such as the use of air-source heat pumps and lower levels of building envelope performance, that would yield superior financial results.
The study results confirmed that ZCB can be achieved using only onsite carbon reduction measures in over 70 per cent of the scenarios evaluated. In other cases, it is necessary to offset emissions by purchasing green power generated offsite. In this study, offsite green power is assumed to take the form of renewable energy credits (RECs). Where required, the financial impact of purchasing RECs is modest.
Unlocking the Potential for Owner-Operators and Design Teams
The business case for building owner-operators is strong, as they often pay both capital and operating costs over the entire life-cycle and are likely to have broader carbon reduction targets and commitments for their organizations. Furthermore, the incremental capital cost for developing ZCBs is expected to come down over time as building codes are strengthened and the price of carbon pollution increases. To unlock the value of ZCBs, building owner-operators and their design teams are encouraged to:
- Evaluate ZCB options to maximize carbon reductions and associated carbon costs today: It is important to consider the risk of escalating carbon pollution pricing in the years ahead. Owner-operators should use life-cycle costing that factors in tightening building codes and increasing carbon pollution pricing as a tool to make future-proofing decisions early in the building development cycle;
- Use existing financial incentives to achieve a ZCB design: There is a wide range of incentives and capital improvement grant opportunities to draw on to advance the development of ZCBs. Owner-operators can inform governments and utilities that they are willing to go beyond code — even going carbon neutral now — with the support of incentives targeted at the uptake of effective carbon reduction measures;
- Accept the challenge to be innovative: Following an integrated design, construction and commissioning process can optimize carbon savings relative to capital costs and deliver a building that achieves its targets (including savings) during operation. The carbon reduction approaches and bundles evaluated for each archetype in this study could be further optimized through a properly leveraged integrated design process that includes early interaction with cost and construction experts.
Owner-operators can seek to maximize opportunities for carbon reduction measures and the benefits of an integrated design, especially at the bid development and contracting stages. Owner-operators can also recognize and promote the non-financial benefits of ZCBs to tenants/occupants and market peers, such as improved occupant comfort and increased resiliency.
Accelerating To Zero
The need for climate action is growing. In its recent report on limiting global temperature rise to 1.5°C, the United Nations’ Intergovernmental Panel on Climate Change (IPCC) updated their recommended targets to 50 per cent GHG emissions reduction by 2030 and 100 per cent reduction by 2050. The latest recommendations require accelerated reductions between now and 2030.
This study demonstrates that Canada can significantly and economically advance its current targets and those advised by the IPCC by taking a ZCB approach in the real estate sector, achieving up to 22 per cent of the building sector’s 20 Mt GHG reduction potential recognized in the Pan-Canadian Framework.
The cost of not adopting a ZCB approach increases with each passing day. Every building built today that is not designed to achieve near-zero carbon emissions is contributing to a continued increase in carbon emissions. Buildings not built to be ZCBs will require major investments in retrofits of mechanical equipment, ventilation systems and building envelopes (walls, roofs, and windows) by 2050 to meet Canada’s targets. These retrofits will be costly and disruptive to building owner-operators and tenants, and will likely need to occur before the normal 25 to 40-year cycle of re-investment in major equipment and building upgrades.
Working together, Canada’s building owner-operators, their design teams, and governments at every level can demonstrate leadership in proving the economic case for ZCBs and normalizing the processes and technologies that will make ZCBs the Canadian industry standard for value and resilience.