According to Building Green, the suit was filed on behalf of mechanical systems designer Henry Gifford, owner of Gifford Fuel Saving. Among other allegations, the suit argues that USGBC is fraudulently misleading consumers and fraudulently misrepresenting energy performance of buildings certified under its LEED rating systems, and that LEED is harming the environment by leading consumers away from using proven energy-saving strategies.

Those are some very damning allegations, if they are true. The crux of Gifford’s allegations revolve around this:

The suit alleges that USGBC’s claim that it verifies efficient design and construction is “false and intended to mislead the consumer and monopolize the market for energy-efficient building design.” To support this allegation Gifford relies heavily on his critique of a 2008 study from New Buildings Institute (NBI) and USGBC that is, to date, the most comprehensive look at the actual energy performance of buildings certified under LEED for New Construction and Major Renovations (LEED-NC). While the NBI study makes the case that LEED buildings are, on average, 25%–30% more efficient than the national average, Gifford published his own analysis in 2008 concluding that LEED buildings are, on average, 29% less efficient.

USGBC hasn’t commented yet, obviously due to the pending litigation, but Gifford is certainly talking…

Gifford said, “I’m afraid that in a few years somebody really evil will publicize the fact that green buildings don’t save energy and argue that the only solution [to resource constraints] is more guns to shoot at the people who have oil underneath their sand.”

“Nobody hires me to fix their buildings,” he said. Though not an engineer, Gifford is respected in energy efficiency circles for his technical knowledge. He told EBN that he has lost out because owners are fixated on earning LEED points, and he doesn’t participate: “Unless you’re a LEED AP you’re not going to get work.” That’s unfair, he claims, because while USGBC says that its product saves energy, it doesn’t. Gifford says that his services actually save energy, and he’s prepared to prove it by sharing energy bills from buildings he has worked on.

What about in this economy?

Prior to the recession, LEED-certified buildings enjoyed noticeably faster lease-up times and lower vacancy rates in addition to commanding higher rental premiums compared with their non-green peers.

However, currently, vacancy rates have remained relatively high for Class A LEED-certified buildings, with a national average of 37.6% compared with 25.8% for all Class A office.

Why?

Many of the new Class A office buildings that started development before the recession and came online after the economy had begun to weaken were LEED certified buildings. As a result of the economy, many new office buildings have struggled to attract tenants and have higher than average vacancy rates.

Miller then analyzed two sets of office buildings: pre-recession new builds (completed 2000-2005) and post 2005 new builds.

Pre-recession completed Class A LEED office buildings average $28.50 per square foot in rent with an average vacancy rate of 6.5%, compared with $25.89 per square foot in average rent and an average vacancy of 10.7% for all Class A office stock. That’s a 10% rent premium!

In post 2005 completed buldings, the LEED certified buildings average $33.24 per square foot compared to $30.11 per square foot for all Class A office. Again, that’s over 10% rent premium!

However, the national vacancy rate for all Class A LEED office properties was 36.4% at the end of the first quarter of 2010, compared with 31.1% for all Class A multi-tenant office property. That makes it about a push in this economy, but as the economy strengthens that rental premium will pay big long-term dividends. Plus, annual operating expenses should be less in the LEED building, tilting the balance again to green.

Don’t forget that Green Squared promotes Green that makes cents! — (i) “green”, as in environmental sustainability, and (ii) “green”, as in cost savings. That’s Green²; that’s Green Squared!

USGBC’s certifications for LEED for Existing Buildings (LEED-EB) jumped sharply from less than 15% of all certifications in early 2008 to more than 35% in second-quarter 2010. At the same time, the proportion of LEED for New Construction (LEED-NC) awards has fallen from nearly 60% of all certifications in late 2008 to about 30% at midyear 2010.

I view that as a very positive sign in the green retrofit space, but it is also an indicator of the drastic slowdown in all new construction. It likely also has something to do with the rush in late 2008 to get grandfathered in under the “old” LEED NC rules, versus the new LEED NC 2009 rules.

The city of Houston announced a new initiative called the Green Office Challenge with the goal of getting property owners and managers across the city to reduce their energy consumption, water use and waste, as well as encourage more office tenants to do things like recycle, car pool and use eco-friendly products.

A key component of the initiative includes an energy-efficient loan program that would provide an incentive to those concerned about the costs of going green. Later this fall, the city plans to offer low-cost loans to property owners and tenants, providing the money goes to reducing their energy usage. This will be part of Houston’s answer to some of the issues surrounding PACE financing. (See earlier blog article titled, “Four Texas cities eye PACE program”)

“People like the idea of doing energy-efficiency improvements, but they still get nervous about that upfront capital,” said Laura Spanjian, the mayor’s director of sustainability.

The details of the program are not yet finalized but it sounds as though the city will have about $7 million to make energy-efficiency loans at less than 3%.

Other Houston Greening Facts:
No. 8 in the nation in the number of LEED-certified buildings with 89
No. 6 in the nation in the number of Energy Star-rated buildings with 133

For more Houston green facts, see our notes from the recent Clean Air Through Energy Efficiency where Spanjian spoke.

The conference was opened by Austin Mayor Lee Leffingwell, C. Donald Babers, Regional Administrator for Region VI, U.S. HUD and Texas Public Utility Commission Chairman Barry Smitherman.

Smitherman provided some interesting Texas/ERCOT stats:

+ 1.7 million smart meters are installed as of July 31
+ 6 million will be installed by 2013
+ 9300 megawatts from wind in ERCOT footprint (900 MW more in Texas but out of ERCOT footprint)
+ 18,500 megawatts from wind in ERCOT planned by 2013 (that would be 20-25% of load)
+ There is a proposed rule for NON-WIND renewable target of 500 MW (most likely, solar)

From Dub Taylor of the State Energy Conservation Office, he provided this data of the fuel mix in Electricity in Texas for 2009:
+ Natural Gas 51%
+ Coal 34%
+ Nuclear 10%
+ Renewables (basically wind) 4%

One of the highlights of the conference, of which there were many, was the presentation by the new City of Houston Sustainablity Director, Laura Spanjian (we touched on Spanjian earlier this month on this blog here), summarizing the Houston’s achievements in sustainable growth. In March of this year the City of Houston was recognized for being ranked sixth on the U.S. Environmental Protection Agency’s 2009 list of cities with the most energy efficient buildings.

Ms. Spanjian woke the crowd up after lunch with an inspired delivery of City of Houston accomplishments.

Solar and Wind initiatives include: A 100KW solar system at George R. Brown Convention Center funded jointly by the Houston Endowment ($850k), BP ($100k) and CenterPoint ($50k) and the purchase of 2 billion kwh (50 MW of power) from Texas Wind Farms over the next 5 years. The EPA ranks the City of Houston as the #1 in terms of renewable energy purchased by a municipality.

Other energy efficiency initiatives include the LED traffic lights at 2,000 intersections which have a cost savings of $3.6M per year, the LED Streetlight Pilot Project which are up to 50% more energy efficient and 755 hybrid vehicles (the 3rd largest municipal fleet in the country). It should also be noted METRO is purchasing is purchasing 100 hybrid buses a year and will have 449 in total by 2011.

Houston is “LEED”ing the way for all new construction, as mandated in 2004, and the Looscan Library was the City’s first LEED Certified building with a LEED Gold on Central Permitting Center and Fire Station 90 not far behind. Add to all of this the Residential Program for kWh reductions, the Weatherization Program, improving air quality using MAAM and DIAL technologies and Houston is well on its way to leading the nation in energy strategies.

We applaud the new Mayor Parker and her selection of Laura Spanjian as Sustainability Director.

It was a great presentation!

By the way, the event was held at the AT&T Executive Education and Conference Center on UT’s campus. The facility is LEED Gold.

David Roth of gbNYC (Green Building in NYC) nails it with “What happened at 375 Hudson is a smashing success, but it’s also really nothing more than a pretty down-the-middle retrofit done well. It’s tough to imagine a better advertisement for green commercial retrofits than that.”

Roth continues, “This is common-sense stuff, not a revolutionary leap forward. It’s low-flow fixtures and improving fixtures, not slapping on some solar panels and hoisting a wind turbine. It is, in short, a basic green retrofit — one that happens to grade very highly in terms of LEED points and the sort of building performance metrics Energy Star measures, but not one that would be beyond the reach of most Manhattan office buildings. Which, in a way, is what makes it most extraordinary.”

Now you see why I said I love this story.

From the official press release, here are the main items which earned the LEED GOLD:

+ reduced electricity consumption by nearly 110,000 kWh per year by making changes to the HVAC and mechanical systems and installing variable frequency drives on the cooling tower fans;
+ reduced steam consumption by improving heat exchangers and making other HVAC improvements that reduced heating demand;
+ reduced annual water consumption by 1 million gallons by replacing original restroom fixtures with low flow aerators and new water closets;
+ adopted an expanded recycling program that encompassed not only office paper and waste, but batteries, electronic waste and construction debris;
+ implemented a building-wide Green Cleaning policy focusing on improving air quality and ensuring the purchase of sustainable cleaning and janitorial paper supplies.

That’s as basic as it gets…Down the middle of the fairway stuff…things that every building should do, whether they want a LEED plaque or not.

Golf clap for Tishman Speyer and main tenants Saatchi & Saatchi, Penguin Group, and Turner Construction.

Initially, we just explained what it actually is back in February, (What is PACE financing?).

And there is this YouTube video which does some explaining in PACE 101.

We also touched on the new Florida law that was enacted just last month, and also touched on some of the obstacles around PACE spreading.

If you forgot or missed the earlier posts on what PACE financing is, it is simply a program that creates local bond financing districts, which then lend back capital to building and homeowners to fund energy retrofit projects. Owners repay the loan through their property tax bills, typically over a 15- to 20-year term.

Randyl Drummer also recently penned (can you still use that verb in this virtual world?) his own case for PACE financing. Drummer does a solid job touching on not only the promise but also the drawbacks of the plan.

Here are some of Drummer’s high points:

“The opportunities are really tremendous from an energy retrofit perspective,” Florida State House Majority Leader Adam Hasner said. “A lot of the hesitation from building owners comes from the upstream expenses and not wanting to make those expenditures. This type of financing can help alleviate some of those concerns and convince owners to make these types of investments, which are going to be cost effective as well as energy efficient in the long run.”

I love this quote from Hasner too: “It will take time to educate people. We’re still early in the first quarter of a four-quarter game. Everyone is very quick to recognize the innovations in technology in energy efficiency and new technologies. But PACE is really about an innovation in financing. It can be a very useful financial tool for commercial property owners to complete energy efficiency projects that will help them save money.”

Drummer cites a new Pike Research Report which says PACE will continue to grow in popularity in the U.S., with investment in PACE financing for commercial buildings totaling a projected $2.5 billion annually by 2015.

“Until now, private buildings such as these have had minimal access to financing for energy retrofits,” the Pike report said.

Some of the concerns are, according the Drummer’s article:

+ Potential buyers and lending institutions may be wary of existing PACE liens, including whether lenders may one day restrict the ability to tack significant energy projects onto the property tax bill (because they hold superior lien positions to the bank’s debt)

+ The lack of clarity in how GAAP treats (loan or as a lien) on a company’s balance sheet

+ Fannie Mae and Freddie Mac have expressed concern about how the agencies will be repaid if homeowners participating in PACE later default on their mortgages. (Boulder County, CO., canceled its PACE program for residential, although its commercial program is still active.)

In closing, despite the concerns noted about, Drummer quotes Clean Fund CEO John Kinney, “Frankly, taking an inefficient building and making it more efficient is much more valuable than taking a new building that is already highly efficient and simply certifying that it is in fact, highly efficient.”

Kudos, Mr. Kinney, you get it.

And there are just so many more existing buildings than new buildings, that our ability to impact the environment and our bottom line is staggering.

Underlying image CC licensed by Flickr user supafly.

Green Squared admission… I am a Top Chef fan.

So, I was particularly intrigued that Top Chef Master Rick Bayless had two of the highest certifications with Frontera Grill and Topolobampo.

They acknowledge that they may not know why, including whether the premiums observed are due to the benefits of a better image, higher productivity or lower operating costs. In addition, observed premiums may reflect short-run imbalances in supply relative to demand. They only looked at 300 or so transactions.

Either way, I appreciate the effort.

The full Green Building Survey is here.

The Jetson Green blog about the survey is here.

If you aren’t going to read the full articles, here are the high points that I found most interesting:

1. The survey found that 92.3% agree that it is worth the time and effort to build green, while only 61.7% feel it is worth the time and effort to obtain LEED certification. This response shows an increasing gap in sentiment between building green and obtaining certification for the same.

By the way, Preston Koerner, the primary blogger, also re-hashed most of the LEED certification knocks in a solid piece here from August 2009.

2. The survey found that the top reason for building green was to save energy and other operating costs. The next best factor was to improve the environment, while factors such as achieving higher rents and improving tenant productivity were important, but not as important as other factors.

3. The survey found that 88% of respondents said they were more likely to incorporate energy saving elements going forward, representing a 14% increase of last year’s survey conducted by the same group.

Green Squared helps property owners all over the country help save money with their energy and water costs. And remember, any energy efficiency measure acts as a financial hedge against rising energy costs! How much did you budget in energy cost increases in 2010?

Great stuff from Preston! You can also follow him on Twitter at @jetsongreen.