Understanding Green Building Costs:
Life-Cycle Analysis and Assessment (LCA) of Building Green

Financial Costs

To understand the financial costs of green building technologies, products, and methods, we strongly encourage you to use the methodology known as "life-cycle analysis and assessment." This method is particularly relevant to building materials, technologies and methods that impact your building's use of energy and water.

Educating your institution's leaders about financial issues such as Life-Cycle Cost Analysis can help them make responsible, long-term choices during your building or renovation project.

Life cycle analysis and assessment

The concept is straightforward. The cost of any building has two components - its initial purchase cost and its cost of ongoing operation. These two costs together make up the total cost of a building. Considering one of these costs without the other provides an incomplete picture of the true cost of any building.

So, the same reasoning holds true for individual components of your building - specific materials and technologies. Your investment in a particular green technologies or materials has two costs-- the initial purchase price as well as the cost of operation.

When you are comparing the costs of conventional and green building materials or technologies, it's critical to know what their total costs are going to be over their lifetimes. If you don't understand the life cycle costs of the materials and technologies that make up your building, you don't understand your building's true cost.

Initial costs

Here are two examples of how to think about initial costs. In addition to the purchase price of a building material, you should also consider its cost of transport and installation. Also, you often cannot evaluate the price of one aspect of your building without reference to other related aspects. For instance, by investing in more insulation than is conventionally used in order to conserve energy, you may be able to save costs by reducing the size of your heating/cooling system.

Considering individual components of a building in relation to other parts of the building is called integrated design…and it's an important way for you to save money and build green. Make sure your architect, engineers and builders/installers understand integrated design, have experience with it, and are willing and able to talk to each other and stay on the same page.

Because they inhabit the same buildings for generations, religious institutions can responsibly accept longer payback periods for "green" technologies than many businesses or homeowners, who move more frequently.

Ongoing operational costs

Here are some examples of how to think about your ongoing operational costs. For instance, assume that installing a geo-thermal heating/cooling system would cost you $20,000 more than the conventional natural gas/oil/electric system you might have otherwise installed. However, you calculate that your energy costs for heating/cooling would be $4,000 a year less with your geo-thermal system than the conventional system. You would "break even" after 5 years in your new building, and would thereafter continue to save money on heating/cooling each year…freeing up funds for other purposes . (If you are applying for LEED certification, you will undertake "energy modeling," a process in which data is fed into a computer (your building's square- and cubic-foot size, its orientation, fenestration, insulation, profile of your area's year-long temperature and humidity and daylight, your proposed heating/cooling system, etc. to let you know both whether your system will do what it is intended to, but what its operating cost is likely to be. Such energy modeling can be very helpful as you develop your budgets for construction and for operation.)

Your organization needs to think about what it would consider an acceptable "break even" period of time in order to understand how much of a "premium" you may be willing to spend for the operating cost savings which green technologies so often offer. One of the advantages religious organizations have, in this regard, is that as the owners and operators of their own spaces they usually will be using their buildings for many decades. Because of this, religious groups can responsibly accept a longer payback period than the 5-year period that is common throughout much of the construction industry.

As part of your budgeting, we suggest that you also consider how you might fund any additional up-front green building expenses. In our conversations with leaders associated with successful green projects we've heard about donors enthusiastic about making increased gifts to cover such expenses (sometimes these become "naming" opportunities) and we've heard about organizations that have obtained loans at reasonable rates for such marginal extra expense and paid off such loans from the operational savings. Be creative in your efforts to fund these additional up-front costs. Very often, it's well worth it.

Life-cycle analysis, and the net present value calculation

A final step in calculating the costs of various ways of constructing your building is to conduct a life-cycle analysis to understand the cost of your building either over its probable lifetime (or the lifetime of its major component parts) or over a set period of time that you determine (usually a self-imposed "break even" date). This is especially effective in comparing conventional against green options.

Essentially, a Life Cycle Analysis takes the form of a spread sheet listing the items to be compared (like energy monitors/regulators or waterless urinals, etc.). the spreadsheet compares the different initial costs for each item, the annual operating costs or savings (usually on an annual basis) for each item for a certain number of years, and then calculates the "net present value" of the respective items. Such a calculation specifies an interest rate - your "cost of money" - to reflect the effect of inflation on the value of a dollar.

Such calculations are a common practice for those in the banking and financial fields. Perhaps there is someone in your congregation or community with such a background who could perform this calculation for you. Perhaps you can turn to your architect (or your architect's cost estimator) to do this. It's a helpful way to turn "apples and oranges" into "apples and apples."

We encourage you to make these calculations - or to have your architect or another professional make them. Often, you'll be surprised at how much money you can save over 5, 10 and 20 years by building green.