By JoAnn Crary, Chair, International Economic Development Council (IEDC) and President, Saginaw Future Inc.
The movement towards a green economy has been transforming the economic development profession and the businesses and communities they support. Energy related issues are usually among the top site-selection factors for any relocation project, and increasingly real estate developers and investors are drawn to places with a green infrastructure and culture for relocations and expansions. Results from a 2011 IEDC survey of state economic development leaders demonstrated that the relationship between renewable energy and economic development was robust and would continue to grow. And today, more communities across the U.S. are tapping into energy efficiency and renewable energy opportunities.
However, despite the ostensible benefits of developing a renewable energy scheme – from enhancing the energy efficiency of manufacturing facilities and commercial buildings, to driving business competitiveness, to creating jobs, to improving grid reliability, and saving consumers money on energy bills – it does not come without challenges. Lack of investment capital and financing was cited as a top concern for economic development professionals for renewable energy policies in the above mentioned survey, and remains so today. With some cities, counties, and states now enacting mandatory reporting of energy consumption – notably in California and the City of Seattle – more expectations will be placed on builders nationwide.
Green Buildings Pay Off
Indeed, investors today assume that LEED (Leadership in Energy and Environmental Design) Buildings are more valuable, and Nils Kok, Ph.D., Executive Director of the Global Real Estate Sustainability Benchmark (GRESB) reports that green office buildings trade at a 13 percent premium compared to non-green properties and LEED-certified and Energy Star-rated office buildings financially outperform their non-green peers in terms of rental rates and occupancy rates.
The greening of existing buildings is also on the rise in order to increase property value and LEED for Existing Buildings Operations and Maintenance (LEED O+M) saw a big jump over the past three years. Notably, when Adobe Systems in California invested $1.4 million to retrofit its corporate headquarters, the energy savings paid back the investment in just 14 months and the firm dropped its electricity use by 35 percent and its natural gas use by 41 percent.
Developers want to be sure that they can allocate funding towards sustainable ventures, while also growing their business. IEDC research indicates that many real estate firms are aware of the vital resource that the economic development community can provide on these issues, as they seek guidance about policy shifts, financial incentives, and partnerships. Economic developers are also in tune with demographic and market tendencies, which are critical when considering new approaches for greening the economy while making a profit. Green buildings, for instance, can play an important role in designing a community’s place-making strategy and in attracting qualified talent. Looking at the almost 75 million millennials – aged between 18 and 34 – who are viewed as key to spurring local innovation and economic growth, research increasingly confirms that this group places high value on sustainability and green investments, and for them, place matters just as much, if not more than the job itself.
In Grand Rapids, Michigan, the City developed its Energy Efficiency and Conservation Strategy (EECS) in 2009 to serve as a roadmap for becoming a more energy efficient community and city leaders made a commitment to developing LEED certified public and private buildings as a means to achieving this goal. Through aggressive public-private partnerships, the city’s downtown redevelopment results have been noteworthy, and as of Fall 2014, the Greater Grand Rapids area was recognized as having the most LEED Fellows per capita by the U.S. Green Business Council and the Grand Rapids’ Downtown Market was designated as the first project in the country to receive the U.S. Green Building Council’s Urban Agriculture credit. The City’s Office of Sustainability has taken the lead on most renewable projects and works closely with the City Economic Development Department, the West Michigan Economic Development Organization, and the Right Place, to attract firms, talent, and investment to the region. In addition to the increase in projects stimulated by these LEED certified buildings, the city has become a hotspot for millennials, and has developed townhomes and lofts to appeal to the college graduates who are flocking there. “By positioning ourselves as a green leader, with LEED certified buildings and a rich urban center, we are having more success in attracting millennials and the type of talent that wants to live and work in a sustainable city”, said Therese Thill, Vice President, Business Development at the Right Place.
Harnessing Energy Efficient Technologies
A quarter of U.S. energy use is wasted each year through inefficiencies in generation technologies and transmissions and the 2011 IEDC survey also listed inadequate transmission grids one of the top challenges to renewable energy growth. A solution can be found in combined heat and power systems (CHP) – that capture waste heat from manufacturing and other industrial processes and use it to generate electricity or to heat or cool nearby buildings. CHP systems can provide considerable benefits in relation to efficiency and costs and provide a strong example of how energy-efficient technologies provide advantages to end-user facilities and communities. Hospitals – which have become critical economic development stakeholders in communities around the nation – are increasingly embracing CHP, as it not only slashes energy bills, but it also makes a facility more resilient to extreme weather disruptions and disasters. Many universities around the country are also deploying CHP, and when Superstorm Sandy ravaged the eastern seaboard of the U.S. in 2012, CHP played a vital role in maintaining power at hospitals and universities in the region. These systems can fuel growth by keeping facilities and industry viable in times of crises and on another level, can also help to create and save jobs. The Ethan Allen furniture factory in Vermont, for example, was able to stay in business and retain 550 employees because of reduced energy costs from the installation of a CHP system. Burning sawdust rather than oil ends up being good for business, as well as the environment.
Moreover, “district energy” is an emerging trend, of which CHP is a key component. While communities around the world are using district energy, the St. Paul District Energy (today known as Ever-green Energy) in Minnesota is the most notable district energy system in the U.S., based on its use of renewable energy sources and energy conservation measures. In fact, the remarkable success story of downtown St. Paul, Minnesota is attributed to district energy and the vision of St. Paul Mayor George Latimer. At the time, Latimer lobbied state and federal governments for assistance in adopting this “new” technology that had been developed in Europe, to solve the heating problems of the city in the 1970s. Launched in 1983, it was created as a public-private partnership between the city, state, and the U.S. Department of Energy, and the downtown business community. By 2003 it converted the system from coal to waste wood as a primary green energy source and in 2011, the St. Paul system was further advanced with the installation of the Midwest’s largest solar installation.
Serving a diverse customer base of local businesses, government, and growing residential sectors, as well as hospitals and clinics, district energy is a valuable asset and St. Paul is becoming a prime destination for millennials and baby boomers that are drawn to inexpensive and reliable energy services. As summed up by Cecile Bedon, Executive Vice President at Greater MSP, “The district energy system has always been a perk to folks working and living downtown. Today, if a new company is interested in investing in downtown St. Paul, you can bet that we will talk to them about Ever-green Energy”.
Fundamentally, while harnessing energy efficient technology can require substantial investments in the initial stage, it is a way to improve energy efficiency in the long-term, while also enhancing a community’s attractiveness to investors, developers, and residents. Exelon City Solar is another example of how a local jurisdiction – in cooperation with state and federal stakeholders – capitalized on energy efficient technology for community revitalization. In 2010, the Exelon Corporate completed a 10-megawatt solar installation on a 41-acre brownfield on Chicago’s South Side, a former blighted property that had been vacant for over 30 years. Today called Exelon City Solar, the $60 million project was funded by the Exelon Corporation, with help from the federal investment tax credit for solar energy and the Illinois state investment tax credit. Significantly, the project had a positive impact on the local economy by creating 200 construction jobs initially and sourcing labor and construction materials from local south side Chicago firms. Today, the site produces coveted property taxes and provides a platform for solar technician training programs to local community colleges. The 25 year lease with the City of Chicago allows the project to continue to make long-term positive contributions to area. Despite challenges and an important capital investment the Exelon City Project demonstrates the return on the investment in such technologies can be win-win for all community stakeholders.
While all communities will take a distinct approach towards greening their local economy, these investments ultimately boost economic activity, reduce the emissions of greenhouse gases, and increase a community’s ability to remain resilient in times of crisis. Financing green initiatives will increasingly require innovative strategies and a diverse group of partners, as well as the support and buy-in of local leadership. Local EDOs are the linchpin in many communities, helping to raise awareness on new policies, regulations and incentives, and prompting green infrastructure to investors.
About IEDC
The International Economic Development Council (IEDC) is a non-profit, non-partisan membership organization serving economic developers. With more than 4,500 members, IEDC is the largest organization of its kind. Economic developers promote economic well-being and quality of life for their communities, by creating, retaining and expanding jobs that facilitate growth, enhance wealth and provide a stable tax base. From public to private, rural to urban and local to international, IEDC’s members are engaged in the full range of economic development experience including local, state, provincial and federal governments, public-private partnerships, chambers of commerce, universities and a variety of other institutions. When we succeed, our members create high-quality jobs, develop vibrant communities, and improve the quality of life in their regions.
