Smart green buildings spell success for municipal recovery

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The world’s urban population will more than double its current size by 2050. As a result of unsustainable construction practices, buildings — where urban residents live, play, and work — account for almost 40% of energy-related greenhouse gas emissions.

Prioritizing green investments and smart building retrofits will help municipalities stimulate a sustainable post-pandemic recovery. A green investment strategy will create local jobs, reduce the burden on utilities, and improve government operating budgets.

An IFC analysis brings welcome news to municipalities. Building retrofits represent a $1.1 trillion investment opportunity, and could create 25 million new jobs globally by 2030. Policies to stimulate green construction could create another $25 trillion in investments in the same time span.

A recovery focused on smart retrofits and green construction is a significant job creation engine.

Building retrofits have the highest job creation rate per capital investment, three times that of wind power and 50% more jobs than from investment in industrial efficiency , according to the International Energy Agency. These construction jobs usually stay local, and additional manufacturing jobs are also created in materials and equipment supply.

'Building retrofits represent a $1.1 trillion investment opportunity and could create 25 million new jobs globally by 2030.'

Municipalities can implement a green recovery strategy in several ways. Decision-makers can prioritize retrofitting a government-owned real estate portfolio. Simple measures such as lighting improvements can significantly reduce operating costs, bringing welcome relief for limited budgets.

Civic buildings like hospitals, libraries, and schools can fall under municipal green procurement policies. The city of Gabrovo, Bulgaria committed to a 30% energy reduction in its public buildings, tracking progress through audits. South Africa instituted energy performance certificates for large government buildings and privately-owned buildings.

Public-private partnerships are another vital strategy for achieving innovation, especially in social housing. In Cape Town, South Africa, the Madulammoho Housing Association developed Belhar Gardens, a green social housing complex. Design decisions, like the lower window-to-wall ratio and installation of low-flow sanitary ware, optimized resource efficiency and kept incremental costs low. The estimated cost-increase for this forward-thinking construction strategy is usually less than one percent.

As a result, residents pay less on their utility bills and conserve natural resources. The resulting reduction of domestic water use from the project is an especially valuable asset in this drought-prone area.

Cities can lower the operation costs of the buildings in their real estate portfolio by installing rooftop solar systems. The installation can be structured to avoid upfront investment by following energy-as-a-service or leasing arrangements. Instead of purchasing solar panels, for example, municipalities can enter into Power Purchase Agreements to buy clean electricity.

Alternately, cities can lease the equipment mounted on their own rooftops. Such approaches involve energy services companies (ESCOs) which finance the solar photovoltaic systems. ESCOs are then repaid through the savings from the lower electricity costs.

Smart devices and data management tools are key components of any retrofit. Without data from smart meters, buildings are black boxes, offering little information about technical functionality. Smart devices can analyze performance, implement intelligent controls, and even change occupants’ behavior.

International Housing Solutions, a leading investor in affordable housing in Africa, studied energy use and utility costs using smart-meter readings from their rental properties. They found that green design saved the average tenant the equivalent of one month’s rent per year. The renters can use these savings toward purchasing a home or moving into a larger space as their families grow. It’s not hard to imagine residents of future smart cities taking ownership of their own buildings.

In the private sector, municipalities can influence decision-making by offering incentives and education. Many policy makers don’t realize that non-fiscal incentives, which do not deplete any scarce fiscal resources, can be just as effective as tax incentives.

Peru saw a surge in green homes after several municipalities introduced more generous building height allowances for green-certified properties. In South Africa, eThekwini Metropolitan Municipality created a solar planning tool to help residents and businesses estimate energy cost savings for retrofits with solar components. The municipality also led by example, installing 300KW of rooftop panels on city buildings.

IFC supports municipalities in green building efforts, especially in emerging markets. Tools such as Apex allow cities to understand which instruments result in the biggest greenhouse gas emissions cuts. The free EDGE App enables municipal officials and building developers to quantify the costs and benefits of different carbon-reduction strategies. Other nations could follow Mongolia’s example, where EDGE serves as the basis for energy performance certificates.

It is critical to help cities and their partners finance necessary interventions, ensuring that common green building standards allow access to international green finance flows. To date, IFC has financed over $6.5 billion in green buildings worldwide.

Globally, cities stand to benefit from solar panels and smart meters, as well as energy-conscious retrofits and smart new construction. Urban residents will enjoy lower utility bills, making housing more affordable, while alternative energy sources will add considerable security to local power grids.

These strategies create local jobs and save on operating costs. The time for action is now.


Rusmir Music

Operations Officer, IFC

Dan Shepherd

Principal Operations Officer, Upstream Infrastructure, Middle East & Africa region, IFC

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