This is a transcript of an episode of the LeaseSmart Podcast.
Craig: I am here today with Victor Olgyay. I’m extremely pleased to have him on the show. He is with the Rocky Mountain Institute, which in my opinion is one of the very best organizations. They are a blend of science and business. Even though they can address environmental issues and energy efficiency issues and all types of things, they always come straight from the science. One of my favorite quotes in the world is by their fearless leader Amory Lovins who says “In God We Trust. All Others Bring Data.” We have Victor on the line with us who knows just about all there is to know about building design and the best way to do things, whether you’re a retailer renting or building some space or an office user or industrial. I’m gonna ask Victor to maybe tell us the cutting edge science that he’s been seeing in building design and maybe share with us some before and after stories before, or success stories, or horror stories or whatever he thinks will be best for us to hear. I am all open ears. I hope you will be too. Hello Victor!
Victor: Greetings Craig! Nice to hear your voice.
C: Thank you.
V: Thanks a lot for having me here on your show and I’m glad to tell you what I know. When you give me such a glowing introduction I feel a little like it might be hard to live up to it but I’ll do what I can.
I’ve been an architect for about 35 years, and what I find really exciting about the cutting edge information that we have today – the bulk of it as a matter of fact – goes back really quite far. A lot of it is old information that we’re rediscovering. Back in the day, I started by doing underground houses in North Carolina doing construction and design on these little solar houses that were going up and the houses were very comfortable. They were well insulated and they were open to the southern sun. They were shaded from the summer heat. They had good ventilation. All those little design moves easily drove the energy use down 50% – 70% compared to the houses that were built right next door.
We’re doing the same thing today frankly. Of course, we are working with bigger buildings, bigger districts and larger projects in general.
C: Including the Empire State Building if I remember correctly.
V: Yes, including the Empire State Building and the Empire State Building is an example of a building which basically saves 40% of its energy use on an annual basis with about a 3 year payback and a lot of the things that were done there are simply the same passive solar and basic science ideas that have been known for millennia. Of course we have things that we didn’t have 30 years ago or a hundred years ago. We put in these really great windows in the Empire State Building that block a lot of the heat gains. We replaced all of the 6,000 plus windows in that 100 story building and we put different windows on the north side of the façade than we did on the west and the south. So the east and north have clear windows that let in a lot of daylight where the ones on the south and the west sides, those have a lower amount of solar heat gain coming in, and that reduced the overall loads in the building. So simply a matter of tuning the windows of the building allowed us to do quite a bit of a downsizing of mechanical systems and by having smaller mechanical systems we were able to increase the amount of comfort at a lower capital cost, that subsidized the windows and something that which normally not have been cost effective – switching out all those windows -ended up being really cost effective because of that avoided capital cost.
C: Oh yeah! I know the reason but just before we go too far, I see buildings built all the time with no thought to which direction they’re facing, but would you tell our listeners why are the different sides of the building different?
V: Sure. You now it’s all about climate. It’s all about how the building sits in relationship to the wind and the sun and so forth. You don’t have to be Amory Lovins or a rocket scientist to do this. All you have to do is look at your dog or your cat and they’ll naturally find a place in your house which is the sunny spot or the cool spot or whatever they’re needing at the moment. But the sun rises in the east or excuse me, it appears to rise in the east, actually the Earth is moving, but what happens is you have these different impacts on the roofs and the facades of the building at different times of the day and those are pretty predictable. You have 2 choices. You can fight it like a gorilla to try and keep through shear force and will of air conditioning, to keep your building comfortable or you embrace this context and when there’s a need for heat gain, you allow it to come in the building by the design and when there’s a need for ventilation, you’re able to accommodate that within the building design. So you can actually use the design of the building almost as kind of an environmental filter that allows you to let in beneficial energies when they’re desired and also to block them when they’re not desired. So it really does make a difference.
Here in Colorado we have the Rocky Mountains to our west there’s a real tendency for people to want to capture that view with an enormous floor-to-ceiling piece of glass. Well that comes with a price, right? If you actually can frame the view with a smaller, well-shaded window, you can still get the wonderful western view of those Rocky Mountains without the same amount of heat gain. So really where you put windows and how you are in the building makes the huge difference.
C: Some of these things that you are talking about are no additional cost. It’s just a thoughtful design.
V: That’s right. I think that’s the really fun part about it as an architect, just being aware of these things actually gives you really exciting design information, ways to think about and how you’re going to do things so that it’s not a cost issue. It really is just an issue of thinking about how the sun is going to impact your building, how the wind is going to impact your building or people are going to impact your building.
C: Most of our listeners are, of course, in the lower 48 and most of them are business people who are trying to make the best profit they can so they’re very concerned about return of investment. What type of building improvements should they make when they move into a building or when they are considering one building over another. I know I do run into people who’ve already made up their mind, they’re not spending anything extra on anything. They just want me to get them into the building. I’m wondering, do you have any before and after stories or horror stories or any other information you could share with us as to why that might not be a good idea and some real simple low-hanging fruit they should pluck?
V: It’s really exciting actually. Buildings come in every size and shape so the recommendations of one kind of building in one place are going to be completely different from a pizza parlor in Chicago to an office building in Florida.
The thing that’s similar actually is that there is almost always pretty ripe, low-hanging fruit as you said. There are easy things to do which can dramatically bring down your energy-use cost effectively. So this is the part that keeps me in business, but ti’s surprising to me that all you have to do sometimes is step back and think a little bit about it and you can come up with great energy saving or efficiency ideas.
In new buildings, we already talked a little bit about how you can make sure that your building works with the weather and climatic context and there are more things like that too, it’s the way you operate the building. You know, if there are a lot of people coming in one spot, maybe there’s a way of storing heat.
We worked on a building here in Denver for the General Services Administration Federal Building, the GSA. This building, Byron Rogers, faced southwest and it was built in the mid-60s I guess.
C: I hear heat gain coming.
V: That’s right! So the southwest side is always really hot and the other interesting thing about this is of course the northeast façade tended to be cold. So the building, pretty much all year round, was having simultaneous heating on the north side and cooling on the south west side. This is the hairy gorilla desperately trying to wrestle the energy. Keep the building comfortable through all of this. It ended up happening that there was a need for renovation of the building for other reasons: asbestors, blast protection and things like that, and so at that point we did an energy review and were able to replace some of the base mechanical systems and we used the hydraulics systems. That’s a water-based system and basically we’re able to remove heat on this warm side of the building and store it in tanks in the basement and then when it was required, move that heat over to the north side of the building where it could heat that side.
Similarly, there was cooling that could be stored as well in tanks of water and be brought over to the south side. Instead of having this air conditioner and furnace running all the time to try and battle it out between these 2 sides of the building, we just pump water around the building. We hardly have to run the furnace or a chiller at all.
Se use this metric called EUI or Energy-Used Index and it’s the amount of energy and BTUs per square foot per year, so the EUI in this building was 120, which is a little high for an office building but not unusual, and now it’s down around 35 or something.
C: Holy Molly!
V: You know 65% – 70% savings of energy just by doing something very simple, which is basically moving the heat around and maybe that’s my first point here: if you are actually doing something to your building to renovate it, it could be just change in tenancy, it can be that there is some other kind of necessary code improvements or you need to refurbish it for some other reason – that’s a great time to actually start to slide in a lot of these energy issues because then suddenly they really are cost effective if you’re already thinking about a new tenancy in a space, then why not think about how the daylight comes in the building to coordinate with the electric lights, and have ceiling finishes and wall finishes, that reflect the light and have furniture systems that are going allow the daylight to penetrate and all that stuff is really cost effective when you’re already doing the renovation anyway.
C: Right. If you’re going to replace the windows anyway, you’re going to repaint anyway, you’re going to rip up the floors and the walls, the incremental cost may be very small if at all or it could be more but then if your payback is really quick and you’re not only saving cash but keeping your employees and customers happy and comfortable then that would be good, too.
V: It is actually interesting just to say that. Sometimes it is incrementally a little bit more. Sometimes it’s actually less. We’re thinking about how to do things really effectively like I mentioned with the Empire State Building, there is some synergy between the windows and the cooling system. There are all kinds of things. It’s just a matter of taking it into consideration and thinking a little bit more broadly than people typically do. Rather than say “Oh! This is my carpet budget. This is my paint budget.” Let’s think about it together.
C: Right. You spend a little more on one hand and save it on another. I’m guessing that most architects I go to aren’t going to think of a hydraulics system. Do we need to go to RMI or can we hire you guys to design buildings and retrofits. How do we find people to think outside the box so to speak who would know these type of things?
V: Right. Thanks for the business plug but actually we are a 501C3 non-profit and we don’t actually…
C: Oh it’s free! That’s even better!
V: Yeah. We’re non-profit and working hard at it. We do some fee for service work but really those projects are very few and far between. Those are specifically about doing demonstration projects like Byron Rogers or the Empire State Building or Denali where we have this opportunity to demonstrate specific technologies and what we’re really interested in doing is scaling that up so other people hear about these great things, understand how we make them cost effective and then emulate it. I think you said very nicely at the beginning of this program that we’re based on science, but we also have business and we really use the market to drive a lot of these innovations within buildings.
So without a doubt, what we’re trying to do is show these projects as cost effective and ones that have made people a lot of money and have been a good investment and will be emulated.
C: Let me ask you then. If it doesn’t have a return of investment, you’d probably be considered a failure then, right? Would you want to move on to another technology or idea?
V: Pretty much! Yeah. We very rarely do any projects that don’t have a return. I can’t even think of one frankly. There are some where getting a return on investment is not the primary consideration.
C: Right. So, saving the birds, the fish, etc., you’re not a tree hugging organization then. Would that be correct? You may love trees I know I do but…
V: I think our primary idea here is really about how do we drive what we would call a resource sufficient economy and one of the by products from that for sure is trees and other kinds of good environmental benefits, but we also are really looking at the economic benefits and we are definitely looking at the big picture. So we’re trying to basically get people to do smarter projects.
So if I can get back to the second half of your question which is “Do you need to hire RMI to do this kind of stuff?” There’s a renaissance in engineering which is very exciting to me. We’ve got a lot of great companies out there that are doing this. I’ve been in the business for 35-40 years and things have really improved in terms of the amount of people, service providers who are able to give you energy efficiency services, which is really exciting. Part of it has been driven by LEED, Leadership and Energy Efficient Design. Those sorts of standards have become common place now so it’s normal for people to be thinking about doing that kind of thing.
There’s also quite a bit more understanding of energy as a driver and as a very positive aspect of design. One thing listeners should know about is the AIA –the American Institute of Architects, Committee On The Environment or COTE, and they have top 10 awards every year for the Greenest Buildings that are being designed and built. They’re fantastic! This award program has been going for 30 years now and they’ve just got some of the most beautiful buildings and some of the most energy efficient buildings. A lot of these buildings basically use no energy at all over the course of the year. They produce as much as they use or some of them even produce more energy than they use.
C: They’re ugly too right?
V: There’s probably an ugly one in there.
C: But not many. I’m just thinking of what my listeners are gonna say.
V: These are architects. They care about pretty stuff, you know.
C: So we’ll go there and we’ll see some beautiful buildings that are actually off the grid using no-more energy than what they can produce.
V: Absolutely yes! So they’re really high-performance buildings. Beautiful buildings and getting back to it, there are all kinds of different engineers and architects out there who see this as a real opportunity.
One of the cool things about this is that these buildings are worth more. Again at the initial time that you invest and say “Aaaah. It’s going to cost me another 3% to install these solar portable techs in my building.” Then suddenly your building is worth 10% more. It’s a fantastic investment.
C: Right, because we know that the value of a building is based on the net income. You’re lowering my operating expenses, it’s not hard to figure that out.
V: That’s right. Also, specially when you’re in a position of being a landlord, then you have tenancy issues. Most recently there’s a project out in California, (we did not work on it) called Indio and it’s a market rate net zero office building and the developer went through a fairly-rigorous financial analysis to figure out how he could do this at a cost-neutral basis, to have this set of net zero building. What ended up happening is he was able to get lease upgrades much more quickly on this project than on others. It’s a nice looking project but it really is not substantially different in terms of location or other criteria that would cost it to lease more quickly. It’s all about the increased comfort and the ability of the building to essentially be islanded and have a very reliable resilient supply of electricity and lower operating cost. So all of those things have turned it into a much more profitable building for the developer, much more desirable for the tenants and it’s just good business. I hate to sound like a broken record here but that’s really, I think, the wave of the future: people not only doing this kind of energy because, like you said, they’re tree huggers and they want to do something good, but also just because it makes a lot of sense.
C: So just to be sure then. This building leased up faster than other competitive buildings?
C: I could see from, of course I do a lot of site selection with clients, I could see that if you have had a building that was off grid, had it’s own power that was reliable, so we didn’t have to worry about blackouts, brownouts going down, that would definitely be an advantage.
V: Yeah and just to be clear. I’m not saying it’s off the grid. It’s still connected to the grid but there’s enough power being generated on site that essentially you have a full back up source. So it’s much more reliable.
C: So if you did have a brownout or a blackout. It’s quite possible that you would be able to run systems and stay in business?
C: Well that’s really neat. What about, a lot of my listeners are small companies that might have 1500 ft retail store. Do you have any advice for them when they’re talking to a landlord or building their own building or doing a renovation?
V: Sure. So from both sides of the equation there there’s opportunity. I think that it’s one of these things where we think a little bit contextually about it. Where are the kind of pinch points? Where are the things where there are some common interests between the tenant and the landlord? Those are areas where you can begin to optimize and drive a better product.
Specifically the big areas that usually come up in a lease structure have to do with the cost, the operating cost and revenue. From that perspective to the degree that the owner oftentimes needs the tenant to operate the building well in order to save electricity, for example, but then the tenant also needs the operator to provide them with the ability to run that well: better control, lights and so forth. So I think within that you can create a lease structure, sometimes called a Green Lease which basically has a shared savings component so that both parties have a vested interest in a better result and actually benefit from it. So there’s a shared financial benefit from operating the building better and having the building which is easier to operate.
—Similarly, the marketing side is huge. Tenants really typically want a space that’s nice and will retain their employees. So we find a good environmental design that provides good indoor air quality, good indoor visual quality, and doesn’t have issues with noise or chemical sensitivities is going to be more desirable for the tenants to stay longer that also benefit the landlords. There’s a huge marketing component to something like LEED or other kind of Green Building Rating Systems which say “I’m essentially certifying that this building meets a certain level of criteria” and people really like that. To the degree that in some markets now, over half the buildings in a lease sub-market have some kind of green certification associated with them. It’s becoming a standard.
C: So if I were to develop a building today and didn’t build it to these standards, I may well be obsolete by the time I’m finished with construction.
V: I think it gets a disadvantage. It really is. I think this goes as well to the code structure which is usually driven by sometimes at the state level or city level but also from the industry level from ASHRAE which is the American Society of Heating, Refrigerating and Air-Conditioning Engineers and their codes every year begin to get more stringent to the point where in about 15 years, their standard buildings are going to be zero-energy buildings which you know have low such amount of energy consumption that they will be able to be heated and cooled and lit through local renewable energy sources. So that’s really exciting and what it also means is that as a developer, the typical thing is “I build my building so it meets code.”. Well you know just as you said it could be obsolete pretty soon. What you ought to be doing is asking “What’s the code going be like in 2018? Let’s try and hit that.”
C: You might enjoy this. I think I came up with the saying myself. When people come to me and say “It’s built to code.” My reply is, “Alright, so that means if it were built any worse, it would be illegal.”
V: Yeah. I’m sure people don’t get thrown in jail for this but…
C: Well, you know, it is built to code, yeah but there are advantages to building beyond code, that are monetary in many ways.
V: It’s an interesting thing because I think there is sort of this visceral, American reaction, at least out here in the west where people say “Oh, you can’t tell me what to do.” So codes have that sort of idea that there is something very anti-business about that, where as actually the way ASHRAE has done it, they’re a fairly conservative organization over the years. Maybe they’re beginning to be a little bit more leading edge, but they’ve always done it based just on economic payback so frankly, if your architect or builder is not building up to the current code, they’re actually wasting money for you. You should be not only throwing them in jail, you should be suing them because they’re not doing their job.
C: Right. So what I meant was they do build it to code. You know you have to or you are in trouble, but what I’m saying is so many times they say, “I’m done. It’s built to code. I’m done. I don’t need to go any further.” And I’m thinking that’s not necessarily the idea.
V: Yeah, it’s not necessarily a good idea for future investment, but also for the current investment because a lot of times these great ideas that are energy efficient things actually are cost effective now. So we see things like this crazy building that I have mentioned the INDIO building where it’s way beyond code, and it’s a very good investment. That’s not hard to do.
C: If I could spend an extra dollar and then save a dollar every year for the life of the building, not that you could do ever that well, but naturally as an example, you’d be crazy not to do that.
V: Well you’d think so. I think that we like to think of this total cost of ownership and try to look at a life cycle analysis to understand where’s the break even point just with very conservative economics. What’s going to make sense for people to invest in right away and a lot of times that is much more than the current code. Typically people don’t do that there are a couple of reasons for that.
One is that it takes effort so people don’t want to necessarily do anymore energy analysis than is required and they don’t want the life cycle assessment or total cost of ownership seems pretty abstract. And, then the other thing is that a lot of times people are not going to hold their buildings for more than 3 years or their leasing it out and all they really care about is the income from it. They’re not really even going to pay for the utility bills unnecessarily. In that case the compelling argument really is about these very short term income streams and the idea that you can actually do things, I can’t tell you this probably, 60 or 80 energy efficiency measures that off the shelf that you can do in the short term kind of market rate, office buildings and so forth that are going to help and when you start to add those up a lot of times there’s a top 10 within that 80 efficiency measures that are going to save you 80% of what you do. So it doesn’t have to be an easter egg hunt where you’re spending a lot of time and effort doing it. It can actually just be “I’m going to take a little bit of effort and I’m going to get a big return that I’m going to have in 3 years.” And that’s what happened with the Empire State Building. We actually ended up looking at 80 different measures. There were 8 of them that were the big winners and we have that 3-year payback so in that case you’re right. If you don’t bother to make that investment and see that the opportunity is there, you never know what you’re missing out on.
C: Well yeah. I think the very first step is to be aware that there is potential out there and to take a look at it.
V: Yeah so it’s exciting. Like I said, more and more people are doing this and I think what’s going to happen is we will actually see quite a big change right now in how buildings are starting to, not only be marketed and be used by people, but then also how they interact with the larger utility grid, which has been a merging thing. We might hear about this in California or Hawaii or some of these other places that have a large degree of solar energy and energy penetration unto the grid. The utility companies are starting to squeak. I guess Nevada is one that’s most well known for this. They think “Oh! We’re not selling enough electricity.” The poor utility companies are having to come up with different business models because frankly it actually is happening that the old business model for utilities is not adapted to high performance buildings or buildings that have a lot of renewable energy generation on site. So there needs to be a new approach and just as with the INDIO building where we’ve got a significant amount of ability to island yourself or cruise through the peaks of the utility. We’re going to have buildings that can respond really well to the grid so there are times when electricity is really expensive when everybody wants to use it. If you’ve got battery storage on site or other kinds of thermal storage, you don’t have to buy the expensive electricity. You can buy electricity when it’s plentiful and inexpensive and sell it when it’s an advantage.
C: Also, I think this is an RMI project but if you’ve got a bunch of electric cars plugged in charging, if you need that electricity just for a moment, you pull it out of the cars during peak times.
V: That’s right. The whole issue of electric cars is also having a big impact on the grid, both in terms of the amount of electricity consumed but also the time of use so you can do just what you’re saying: use cars as a vehicle-to-grid or grid-to-vehicle kind of transfer of energy and optimize that and your buildings, your cars become part of this larger system, not only again because you’re tree hugger, but also because you want to make money.
C: Right, because it works. I need to step back just a second. I don’t think people are going to believe or maybe they’ve misunderstood what you said. Are you telling us that nationwide, you expect that energy demand is going to go down and that power companies are not going to be needing to expand and open up a new power plant?
V: That’s certainly true in some places. It’s really uneven across the nation but there is a combination of phenomena at this time that includes more strict building codes. It includes a glut of natural gas. It includes a lot of different things in the landscape which you probably have heard that coal plants are being shut down and they’re not being replaced.
C: They’re not being replaced with anything?
V: There are places where there’s certainly natural gas plants being built but there’s also a lot more electricity being generated to renewable sources. Frankly, renewable sources have outpaced the growth of fossil fuel sources the last few years in terms of adding new capacity. We have this really interesting phenomenon where we do have certain amount of the electricity demand going down because of efficiency and other things and the supply increasing on the renewable side. Without a doubt, the old models of utility structures are probably not going to make it a whole lot further into the future.
C: Right. I’ve been exposed to some of that myself so it’s not new to me, but I needed to make sure my listeners understood that you weren’t exaggerating. Of course that’s a little off topic anyway. I try to speak to what my listeners find most interesting which is, I think, making their facilities most profitable and least expensive as they can, still I appreciate that and I think we all appreciate a broader picture.
V: Let me tell you one more thing Craig since we’re already off topic here
C: Yes please.
V: It’s clearly an interesting issue between the buildings and the utilities which is changing the way we do buildings and how are we going to make money off the buildings. Then the second really big influence has to do with the kind of digital communications technology which allows us to do a lot of this stuff, to sell and buy electricity and also to operate our buildings a lot more efficiently, so the interface between your Iphone and your building, I’m sure this is not new to a lot of people there, but it’s continuing to evolve, cool little technologies like the Nest thermostat, other technologies like battery storage that you can buy for buildings, other things even being able to operate your hot water heater through a digital interface so it uses electricity at times when it’s least expensive. All those things are being enabled through this digital communications technology and I think that’s going to fundamentally alter a lot of the ways that our buildings operate and how we make money off them in the near future. It’s already working that way.
C: That’s interesting. If you were a developer, then you’d really really want to be paying attention to cutting edge technology design. By the way, I hear that Dubai and again let’s go off topic a little further – I hear that Dubai, for instance, is cutting edge worldwide with the energy efficiency and building technologies. Do you see that?
V: I think that they have some really interesting projects over there and I have to say I’m not really up on what’s going on, but they certainly have a lot of LEED projects and there’s a lot of energy efficiency that’s happening actually throughout the mid-east because of a lot of different issues. There have been very low carbon, very efficient buildings and some net positive buildings that have been built out there so yeah they’re doing well. This is actually worldwide phenomenon I mean you can go to any country. There’s great stuff in Australia, Japan, all over Europe. One of the ones which is getting a lot of press actually is a building in Amsterdam called the Edge. They claim to be the most energy efficient office building in the world. I think that they are a contender in the sense that they have a lot of this digital technology that allows them to operate the building very well and they have a lot of efficiency and solar but this stuff is happening all over. I think you can go to any country and it’s interesting that it really is a global movement. I think the reason why it is as successful as it is because it makes economic sense.
C: Right. That’s great news and wonderful to hear and I know I value your time a whole lot. Before we sign off, is there anything else that you want us know about this general subject?
V: Well you know I’m deeply immersed in it so sometimes it’s difficult for me to have an objective perspective, but I would say that wherever I go I can always see areas for efficiency that are cost effective and opportunities for people to basically make this a part of their business, which doesn’t necessarily interfere with the core business activity, but to some degree really enhances it. So I would encourage people, pretty much everybody uses buildings and spends time inside buildings, to just be aware of the opportunities that are around you. Actually take the moment to investigate when you are doing some kind of renovation where you do have the opportunity to make an investment. Ensure that you’re actually getting the most out of it. Think critically about the things that are being offered to you and try and ensure that you’re going to get a great payback through application of efficiency and renewables.
C: Well that’s great advice and I appreciate that. You are Victor Olgyay with the Rocky Mountain Institute which is www.rmi.org. Any other ways that people would reach you Victor?
V: That works well. I think you can reach me through our website and that’s the way to go.
C:Alright I really appreciate your time hope to speak to you in the future with any updates to modern edge technologies.
V: Great Craig. It’s a pleasure talking to you and I’m always excited to talk further.