Expensive not to go green


YES, you read it correctly. It is expensive not to go green. This runs against the commonly held misconception in Malaysia that green buildings are expensive, as if they are an unnecessary luxury item that we cannot afford. Nothing could be further from the truth.

This will become evident, when we start to apply the numbers in the Malaysian context – both with regards to initial construction cost and operational cost. To set the tone, let me quote the former national board member of the US Green Building Council, Jerry Yudelson (2008), who said: “If you’re involved with a new project, and you are not making it as green and low energy as possible, it will be functionally obsolete the day it opens and economically disadvantaged for its entire lifetime.’’

This quote also rings true for Malaysia where green buildings typically have a three-year payback time from operational savings alone.

Green buildings can be built with little or no additional cost. The key to keeping cost down is sensible climate-responsive architectural design and making sure that green building takes advantage of the cost savings from downsizing the systems, for example, the cooling plant. As such, green buildings can become cost-neutral – or even the cheapest choice, as we found out when participating in an open tender bidding for a Malaysian office building.

Typically, a green building will have an additional construction cost of 1% to 3%, and even the most ambitious green buildings rarely exceed 5% additional cost, unless large quantities of solar photovoltaic (PV) panels are installed. So, the misconception that green buildings are expensive and add significantly to the cost is simply not true.

Nevertheless, as most buildings are sold upon completion, the focus by the builder is invariably narrowed down to reducing initial construction costs, instead of reducing lifetime cost. Hence, even a 3% extra cost of going green is seen as “expensive”, as the builder or developer in the not-yet-mature green building market of Malaysia worries that it might not add value to the building upon the point of sale, even though figures from overseas show otherwise. Equally important, the builder or developer does not benefit from the operational savings, once the building is sold.

This structural problem of not incentivising the builder or developer to optimise the buildings for lifetime cost, is not unique to Malaysia, and can be addressed through monetary incentives, building energy efficiency labelling and legislation. Otherwise, Malaysia will end up with poorly designed buildings that run inefficiently for the rest of their lifetime.

This is much akin to a mountaineer, who wastes a lot of his energy because the rucksack he carries is much too heavy as it was shoddily packed by somebody else who did not care about its weight. The building sector must be restricted in such a way, so the builders or developers in a metaphorical sense must “carry their own rucksacks” and therefore, are given an incentive to “pack the rucksacks better”.

This proper “packing of the rucksack” was observed in the tender for the new headquarters of the Public Works Department, Kuala Lumpur. One of the tender requirements was for the building to reduce its energy consumption (BEI) to 100 kWh/m2 per year, which is about a 50% reduction of ordinary buildings. Seven of the bidders sought our assistance for the energy optimisation of the building while the rest of the bidders did not.

When plotting the open tender results of price versus energy efficiency, an interesting trend was observed: The more energy efficient buildings also had the cheapest construction cost. This became possible, because we helped the bidders to downsize the building system – particularly the colling plant, which for a building with only half the energy consumption can be significantly reduced in size.

Unfortunately, unless presented with convincing energy simulation studies, many engineers are uncomfortable downsizing their systems.

In fact, the principal concern of the engineers is that the mountaineer does not run out of supplies and therefore, the rucksack easily becomes too heavy.

For example, over-dimensioning of cooling systems for buildings has a double monetary penalty, namely a higher initial cost as well as inefficient operations because the system was incorrectly dimensioned.


Green buildings: from the user’s perspective

The biggest beneficiaries of green buildings are the occupants – as they get to enjoy the healthy and conducive indoor environment of a green building. Occupants in green buildings experience higher well-being, are more productive and have fewer sick leaves – which are of great benefit – also financially, though it is difficult to stick an exact figure to this benefit.

For office buildings in Malaysia, for example, the bulk of the operational expenses do not come from the office rental and the energy bill, but rather from the salaries paid to the employees. Hence, the expense for greening the office can easily be economically justified even by a modest increase in the productivity of the employees.

Interestingly, a study of the test scores of 21,000 United States (US) students found that students in the classrooms with the most daylight had 7% to 18% higher test scores. It is fair to assume a similar increase in performance for occupants of green buildings in Malaysia.

And, even if this was not the case, would you still not want your employees to benefit from green building features like good daylight, healthy air to breathe, thermal comfort, quiet air-conditioning system and views to the outside?


Green buildings from the building owner’s perspective

In 2013, NAPIC (The National Property Information Centre) found that green buildings fetch higher monthly rental rates than conventional buildings, namely higher by RM0.50 to RM2.25 per sq ft. The study also found that green buildings had a higher rental growth of RM0.50 to RM1.00 per sq ft as compared to conventional buildings.

The energy savings of green buildings was found to be RM0.16 per sq ft as compared to conventional buildings. Given the novelty of green buildings in Malaysia, the study was unable to establish the increase in the selling price of green buildings. But, an equivalent national study in the US found that green buildings had a 64% higher selling price than conventional buildings (Burr, 2008).

Moreover, going green is becoming “the right thing to do” as an integral part of company policies internationally – and also among Malaysian companies.


Green buildings from a national perspective

One of the 9th Malaysian Plan (9MP) background studies by Danida (2005) determined that energy efficiency in Malaysian buildings was a good investment for the country with an economic internal rate of return well above the 10% threshold.

In fact, implementing energy savings in commercial buildings and residential buildings was found to have an economic internal rate of return of a whopping 23% and 100%, respectively.

This was true for both new and existing buildings.

However, despite the good economics of green buildings, about 80% of the economically viable energy efficiency measures are never implemented according to the World Economic Outlook report (2012).

As such, it would be in the nation’s interest to put mechanisms in place so profitable energy savings in the building sector come to fruition – also in light of the depleting fossil fuel energy resources and impending threat from global climate change.

Expensive not to go green


>> Gregers Reimann is the managing director of IEN Consultants Sdn Bhd, a pioneering green building consultancy in Malaysia with several award-winning building projects.

>> References: “Economic issues on green office buildings in Malaysia”, National Property Information Centre, 2008; “Daylighting in Schools: An Investigation into the Relationship Between Daylighting and Human Performance”, Heschong Mahone Group, 1999; “Energy Star and LEED Buildings Outperform Peers”, Andrew C. Burr, CoStar, 2008 and the chart above of the new and retrofitted building projects that were undertaken by IEN Consultants.


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