Green Buildings - A Strategic Analysis of the North American Markets

Published: 31 Aug 2006

Energy Management Issues Strengthen the Case for Green Buildings

Increasing, unpredictable energy prices and the noticeable effects of climate change due to greenhouse gas-induced global warming are driving a demand-based focus on energy in the United States and Canada. As a result, green buildings have been gaining much attention since they not only reduce energy consumption (energy savings of 20 to 50 percent are possible in green buildings) and green house gas emissions, but also consume less water (thus relieving municipal water and wastewater provision burdens), and add building value. While government incentives such as tax credits provide added incentives to establish green buildings, there are also new financing options for the green technologies that are helping reduce the cost constraints associated with these buildings. Besides, green building market participants are further adding to the attractiveness by delivering more comprehensive solutions such as incorporate distributed and onsite energy solutions, as well as performance contracting and non-performance-contracting fee-based activities.

However, real and perceived budget constraints, particularly first costs which include leadership in energy and environmental design (LEED) certification, commissioning, innovative technologies, and on-site renewable energy alternatives have restrained the growth of the green energy, water, and building facilities management markets. "High-performance building technologies or design features in new construction often have had a cost increment ascribed in North America in contrast to Europe, where typically, new construction has a higher budget for a higher quality expectation, and so building green does not necessarily involve an additional cost premium," notes the analyst of this research service. ‘The North American premium differential for green buildings is particularly true where technologies such as photovoltaics (PV) and green roofs are used, or where there is an expectation of high building performance,"

Energy Management Markets Remain the Most Advanced

Among the individual market segments, it is the energy segment that is seen to be most advanced. The segment is now beginning to expand its activity beyond the most common lighting and HVAC initiatives, although addressing these two issues alone can significantly reduce energy and enhance productivity. The facilities management markets are only beginning to develop, and the green water management market is further ahead of the facilities management market, but also still a bit nascent. In the water management market, performance contracting for water management is a growing business development opportunity, combining measures with financial incentives for water conservation. LEED is a key tool driving efficiency measures to save water, reduce treatment and energy costs, limit irrigation over watering, and can also reduce insurance risk and mitigate municipal expansion.

Overall, the U.S. green building council (GBC) for LEED registrations and certifications indicate that the market’s growth potential is between 20 and 30 percent annually, a really good indication to the overall market potential and growth. "In order to raise their market attractiveness, energy service companies must deliver distributed or onsite energy, performance contracting as well as non-performance-contracting solutions," says the analyst. "Such solutions are targeted at minimizing the burdens of rising energy prices, efficiently utilizing high energy consuming processes, and reducing rising greenhouse gas pollution, as well as operational risks of a power outage."

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