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News / February 02 2009 - The cost of sustainability
The cost of sustainability
Sustainable development is being enforced by Government legislation and EU directives. Local Authorities now have a duty to consider sustainability when exercising their powers. Under the Planning and Compulsory Purchase Act 2004 all new projects must contribute to sustainable development.
The code for sustainable homes are also forcing up project costs.
The new communities and local government report - cost analysis of the code for sustainable homes - indicates a best case scenario of a 13 per cent - 15 per cent cost increase above 2006 Building Regulations to achieve a Code 4 rating which is the target for most organisations. Registered social landlords, the housing associations are among those aiming to achieve Code 4 by 2012.
The difficulty is that identifying the cost overhead caused by sustainable requirements can be complicated. There are many variables including site location and size of development which means that a solution previously developed on an earlier project is extremely unlikely to be able to be directly applied to your next project.
A comparison of only capital costs also misses the point of the sustainable agenda. There are three key reasons which drive organisations to embrace sustainability:
- Legislation, as discussed above
- Corporate social responsibility/marketing
- Commercial reality
The key is in answering the latter to solve the previous two points. Our experience is that in the last two years even the most hard-nosed speculative commercial developers are now looking at the opportunity for increased rents through sustainability. We have developer clients, for example, that believe they can achieve a£2m2 premium rental for a BREEAM ‘excellent’ rated building compared to ‘very good’.
The solution is to adopt a practical and commercial approach in both the public and private sectors. The marketing hype surrounding the subject is often arrogant and unachievable. There are many organisations purporting to aim to achieve ‘carbon neutral’ status, whatever that means. This is disingenuous. The key is to set realistic, commercially viable targets and not wish lists.
Some sustainable technologies are much more likely to be viable in the UK than others, these include:
- Ground source heat pumps
- Wind turbines
However, the technology has to be relevant to the development. For example, a wind turbine of any rating in a built up environment will not be commercially viable.
There are also much more prosaic solutions. The best way to reduce the renewable energy target on a project is to ensure less energy is required in the first place i.e. optimise the insulation of the property. This is often by far the most efficient means of achieving the required rating.
The legislative requirements alone mean that demand for these technologies will continue to increase dramatically, therefore the cost of renewable or sustainable technologies will reduce over time.
There is very little useful historic benchmark cost information for the sustainable buildings we are required to develop. Each project has to be priced on its own merits. Essentially, a standardised approach to the new technologies enables early decisions to be taken with regard to a sustainable solution.
We have modelled 15 sustainable technologies on a through life cost basis for housing, offices and industrial units. This includes carbon footprint, energy, CO2 emissions and capital allowances, enabling rapid plug in of these modules into a cost model that allows comparisons without reinventing the wheel on every project.
There is another opportunity in terms of supply chain management whether residential, office, health or any other sector. There are also other major buying opportunities in aligning clients, design teams, contractors, sub contractors, and suppliers in a standard approach to the use of these relatively new technologies. There has been a high level of standardisation in some markets, such as housing and major defence framework contracts. However, we have seen no sign of bulk buying agreements for sustainable technologies as yet.
There will be market leaders that differentiate themselves by an ability to buy these now fundamental technologies at a substantial discount to the rest of the market. Technology efficiency continuously improves as energy costs rise. New technologies also enter the market. Close monitoring of these developments will deliver the more efficient solutions and the most successful businesses.
Although life cost modelling has often been regarded by some as dark art, it is now coming into its own as the need for commercially viable sustainable solutions becomes essential. Our industry must reflect this fundamental requirement, and should no longer adopt a blinkered approach based entirely on capital cost.
It’s about realism in achieving the greatest through life value for the lowest through life cost.
News / February 02 2009 - The cost of sustainability