Excerpted from LEED 2009 for Core and Shell Development
To demonstrate the economic, social, and environmental value of LEED design strategies using empirical evidence to inform the design process.
Use a Triple Bottom Line (financial, social, and environmental), benefit-cost analysis (BCA) on at least six LEED credits. This includes analyzing financial/economic, envi-ronmental, and social costs and benefits associated with the selected credits. Details are listed below.
Register for the pilot credit
LEED credits – As written in section 2 of the Requirements, a minimum of six credits must be selected at the discretion of the applicant, so long as they meet Requirement 2.
Social and environmental impacts – As identified in section 4 of the Requirements, a minimum of five social or environmental costs or benefits must be selected from the following list for analysis in the BCA:
The BCA must follow best practices. Examples are the general principles outlined in guidance from the US Federal Government around benefit-cost analysis, including Office of Management and Budget (OMB) Circular A-94, the document which provides guidance on US federal government BCA’s.
To note, not all credits will have a significant measurable impact and/or suitable economic valuation literature to credibly be incorporated into the economic assessment; as such there is some discretion that needs to be given to those conducting the economic analysis. For this reason, and for the multitude of approaches that can be used given the nature of benefit-cost analysis, the guidance in this pilot credit is less prescriptive than most other pilot credits.
There is much guidance that can be found regarding the specific steps to follow in con-ducting a BCA. There is no one prescribed approach that is recommended for this pilot credit; however, a sample generic approach can be found below.
To clarify further, typically steps 4 and 5 above prove to be the most challenging. As this BCA includes the quantification and monetization of impacts relating to LEED cred-its, project teams must work towards identifying both the quantities of the impacts and appropriate valuation methodologies to monetize the impacts. The quantities are incre-mental impacts as compared to the base case of not meeting each LEED credit; corre-spondingly there is typically an incremental cost to each investment as well – it’s these incremental differences that should be accounted for in the analysis.
While the incremental performance improvements of the proposed design versus the base case are already provided in the LEED submission documentation, additional effort needs to be made to identify what the additional costs (capital and ongoing opera-tions/maintenance) or differences in useful life would be. For this purpose, the use of cost estimation tools is permitted.
An example is provided below to provide some additional clarity.
Final summary metrics:
NPV of financial impacts: ($360,000)
NPV of environmental and social impacts: $1,067,000
NPV of Triple Bottom Line: $707,000
Methodology Example – Electricity-Related Emissions
A reduction in electricity required means a reduction in power consumed from the grid. Each power grid that supplies the area where a specific project is being developed, is composed of different mix of power sources (coal, oil, natural gas, hydroelectric, wind, etc.) and as such, each grid produces a distinct amount of pollution for every given unit of electricity (tons pollutants/kWhA kilowatt-hour is a unit of work or energy, measured as 1 kilowatt (1,000 watts) of power expended for 1 hour. One kWh is equivalent to 3,412 Btu.). The EPA eGRID collects and produces data on every generating station in the US, so electricity units (kWh) can be converted into emis-sions units (tons/kWh). Once the quantity of emissions reduced is identified, they can then be converted to dollar values through valuation methodologies ($/ton). This type of analysis could be done for other energy sources (e.g., natural gas, propane).
For further guidance, please review the case study that was prepared to present an example of what a submission may include.
There are many consulting firms as well as software tools in the market that can help project teams conduct an analysis for this pilot credit.
Comprehensively assessing projects with a Triple Bottom Line, benefit-cost analysis (BCA) is an ideal approach to assessing the net impacts of sustainable design. Ideally, this Pilot Credit would reward teams using an objective, evidence-based approach as part of the design process for LEED-influenced projects.
BCA is a widely-used, systematic process used to justify decisions and to provide a basis for comparing projects. Given the context of building/project design, this type of evaluation can add additional insight into the true value of sustainability elements and can be used to value the impacts of specific LEED credits.
A distinctive feature of BCA is that both benefits and costs are expressed in monetary units, which allows a project team to evaluate different design options with a variety of attributes using a common measure. The objective of a BCA is to translate the effects of an investment into monetary terms and to account for the fact that benefits generally accrue over a long period of time while capital costs are incurred primarily in the initial years. In this context, the project team can link specific design elements, LEED cred-its, credit categories, or the project in general with specific outcomes. By measuring incremental benefits and costs of various designs and LEED credits pursued, a project team can determine the overall value of the sustainable design, or assess and prioritize the individual LEED credits that maximizes net benefits. The size of the net benefits - the absolute difference between the projected benefits and costs - indicates whether the design is more economically efficient than another.
This analysis will allow a project team to be more informed as to the overall impact of sustainable design, as well as the life-cycle impact of sustainable design in a contextual and location-specific manner. In its essence, the goal is to create a business case for sustainable design, using this economic analysis approach to value the financial, social, and environmental impacts and to communicate this value in the pilot credit submittal.
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