Why green buildings make business sense

Bottom-line benefits like consistent increases in gross rentals, lower operating costs and less capital expenditure over a building’s life-cycle are three key reasons why property investors are embracing green buildings around the globe.

And at the third annual Green Building Council of SA (GBCSA) Convention & Exhibition, sponsored by Nedbank Corporate Property Finance, next month, those investment benefits of green buildings will be in the spotlight – and under scrutiny – for South Africa’s property investment community.

“The economic benefits and financing of green buildings are high on the agenda for investors as well as for built environment professionals,” says GBCSA CEO Nicola Douglas.

A respected sustainability expert Lisa Michelle Galley, managing principal at San Francisco-based Galley Eco Capital, a green real estate finance consultancy, will be one of the international speakers at the Convention.

She will tackle the topic of The Global Real Estate Game Change: Positioning Portfolios for Success and make a financial case for property investors to go green. Galley will also be facilitating a more detailed seminar on The Fundamentals of Green Building Investment Analysis, which is aimed specifically at commercial property investors, developer and financiers, and takes place on the Monday preceding the main Convention programme.

Galley uses no less an example than the Empire State Building in New York to illustrate her point.

“Tony Malkin, who owns the building, said at a conference recently that building is achieving a 38 Return on Investment on its retrofit measures,” she says.

“He also highlighted the fact that the property now attracts a whole new segment of brokers and tenants – in addition to the ones who were always interested in the building.”

For investors who are still sceptical, Galley points to three features of green buildings, confirmed by research that has universal appeal to property owners, whether in SA or elsewhere.

First, green buildings consistently show above average increases in gross rentals.

She points to faster take-up rates, a reduction in turnover vacancy rates, and higher retention rates of existing tenants.

“That translates into lower tenant installation costs on new leases.”

Second, green buildings have lower operating costs. Utility costs, maintenance expenses and insurance costs all tend to be reduced in energy-efficient and sustainably-managed buildings.

“Investors find that improved green operations and maintenance protocols mean fewer service calls from tenants,” she adds.

Third, green buildings require less capital expenditure over the building lifecycle, taking pressure off the property investor’s cash flow.

“Not only do investors reap the savings of more efficient systems, those systems also last longer and don’t need to be replaced as frequently,” she explains.

The bottom-line, she says, is that tenants prefer green buildings.

“The good news is that some of the most conservative landlords are reporting that their energy efficiency and green building programs are paying big dividends,” she says.

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Gauteng warned of more quakes

Johannesburg – Residents of the Witwatersrand may in future experience more and bigger earthquakes due to water rising underground in mined-out basins.

It is unclear what will happen in reality, but the possibility exists that earthquakes will occur more regularly in Johannesburg and that some of them could register up to 5 on the Richter scale, said Olaf Goldbach, a geophysicist at the CSIR.

He was speaking at the CSIR’s bi-annual summit about the relevance of science and the application of research.

Far-reaching consequences

Goldbach said it was crucial that research is carried out soon about the link between the rising water levels and the increase in seismic activity, as it has far-reaching consequences for people and infrastructure such as buildings and roads.

“This again will have financial implications for insurers when buildings suddenly collapse.”

He referred to the earthquake last Thursday evening, which shook parts of the Witwatersrand, saying he believed it was linked to the rising water levels.

The earthquake registered 2.8 on the Richer scale and caused roof tiles to fall off.

“I sat in my home in Weltevreden Park and watched TV just after 21:00 on Thursday when the ground started shaking. I really think we will be experiencing more of this in future,” said Goldbach.

He only found out the next day that the earthquake’s epicentre was 11km southwest of the University of the Witwatersrand (Wits).

Acidic mine water

Goldbach said mine-related earthquakes are common in South Africa and yet residents don’t know what to expect.

He believes that earthquakes which register 5.3 on the Richter scale, like the one in Welkom in 2005 in which two people died and many houses suffered structural damage, could be waiting for the Witwatersrand.

Earthquakes also occurred in the vicinity of the Katze Dam shortly after the dam wall was completed and while it was being filled with water.

Goldbach said government had to urgently look into seismic activity, along with the devastating effects that acidic mine water is having on the environment.

The latest research pointed to mine water at some places being between 400m and 500m from the surface and rising by up to almost 1m per day.

Goldbach said it will cost an estimated R1bn to erect permanent infrastructure for the pumping out of water, while the pumping will cost R8m per month. “Who is going to pay it? Probably the taxpayer because the mine bosses are long gone.”

Scopa blasts department over mines

Cape Town – The slow pace of cleaning up South Africa’s abandoned mines is leading to an ecological and environmental disaster, MPs on the Standing Committee on Public Account (Scopa) said on Wednesday.

MPs launched a scathing attack on the department of mineral resources’ mine rehabilitation programme.

ANC MP Roy Ainslie said the department’s plan to rehabilitate the polluting mines was “virtually non-existent”.

“It seems it was put together yesterday because it was anticipated we would ask about an implementation plan,” he said.

“It implements structures, it talks about policy, but there is no action plan.”

Slow pace

Ainslie said according to his calculations, cleaning up South Africa’s 5 906 abandoned mines would take around 3 000 years if the programme continued at its current rate.

“You rehabilitated five mines in three years. That is 1.5 mines a year, but let’s give you the benefit of the doubt and say you’ve rehabilitated two mines a year.

“We have 5 906 abandoned mines. Two into 5 906 goes 2 953 years.

“My question is by when do you plan to have rehabilitated these 5 906 abandoned mines?”

Inkatha Freedom Party MP Narend Singh said the slow pace of the cleanup was leading SA to an “ecological and environmental disaster”.

“By that time we will have sink holes, we’ll have contaminated water. It will be an ecological and environmental disaster.

“It is just not on for us to be hearing here that we have a serious problem in this country with abandoned mines and it is going to take that long to recover.”

Potential crisis

DA MP Marke Steele said the department had known of the potential crisis for years.

“In the 2002 the MPRD Act (Mineral and Petroleum Resources Development Act 28 of 2002) was passed, so the department knew what was coming. In 2004 the act came into effect.”

He said in 2006 the department had instructed the department of geosciences to develop a national strategy for abandoned mines in SA.

The cost of the cleanup was estimated at R30bn. The amount was included in financial statements of the department as “a contingent liability” in the financial years 2007/08 and 2008/09.

“Every year the department had a contingent liability of R30bn for the cost of rehabilitating mines,” Steele said. “It knew what was coming.”

Steele laid into mineral resources director general Sandile Nogxina‘s “inactivity and incompetence” in dealing with the issue.

“I want to know, chair, who was the DG in office in all of this time of inactivity when it came to planning and total incompetence, when it came to preparing for what everybody knew was going to happen – there was going to be a crisis.

“Who do we hold accountable for not planning properly? I think we will follow with executive authority over this total failure to plan responsibly.”

No plan

“The DG then was Sandile Nogxina – myself,” Nogxina replied.

He agreed that the department had seen the crisis coming.

“I agree, all this time we saw this coming. What we did may have been inadequate, but I don’t agree nothing was done in order to address the issue.”

He said the department did not have a long-term plan to rehabilitate mines.

“The plan we have is a plan that covers this financial year.

“We are going to come up with a long term plan that will enable us to understand how long it will take us to rehabilitate all those 6 000 ownerless and derelict mines.”

Nogxina said holding mining houses responsible for cleaning up the mines was “a serious problem”.

Life and death

“Morally they are obliged to do it. Unfortunately the kind of legal dispensation we had at the time when they generated this kind of problem was not holding them accountable for that.

“So there is a legal dispute between those people and the government because they are saying that when they operated those mines at the time, the law did not require them to do what we require them to do right now.”

Scopa chair Themba Godi said the rehabilitation of the mines had to be given “absolute priority”.

“We want to have this element given absolute priority, otherwise it might render everything else we do pointless,” he said.

“Building RDP houses, building hospitals and schools for communities around affected areas will be wasted expenditure if those areas are going to become difficult to live in.

“It is a life and death problem.”

The chair of the portfolio committee on minerals, Mpumelelo Frederick Gona, said cleaning up the mines could “never be the sole responsibility of the government”.

He said he would allow the department space to deal with the Chamber of Mines “to determine what role they will play in dealing with the problem”.

“It would be foolhardy to expect money to come out of coffers of government,” he said.

Getting our greenhouse in order

In December 2011 the world will again be watching South Africa, focused on an event that might be remembered far longer than the World Cup — the 17th meeting of the parties to the United Nation’s climate convention.

The hope of many is that the world may finally reach a just, legally binding and ambitious agreement on cutting carbon emissions — the agreement that Copenhagen failed to deliver.

Putting aside whether that’s likely, this means that an awful lot of attention is going to be focused on South Africa and raises the question — what example are we, as the hosts, going to be setting? Assuming we don’t want to be shuffling about trying to avoid the question, there are many exciting possibilities.

The most urgent step is a real commitment to energy efficiency. It is the first and easiest way to cut carbon emissions, one that often pays for itself, one that Eskom admits neglecting (Mail & Guardian, July 11), and for which researchers suspect there is immense potential. Used to having some of the world’s cheapest electricity, we have become immensely wasteful.

We could make it illegal to build RDP houses that do not meet the basic standards for energy efficiency much less human health. Women living in basic “eco-houses” do not celebrate cutting their carbon emissions — they celebrate having children who are not constantly ill.

New revenue model
We could find a revenue model for our cities that does not depend on the perverse incentives of keeping up water and electricity sales.

We can abandon the fantasy of the pathetic Copenhagen Accord, which “sets a global goal of keeping temperature increase below 2°C above pre-industrial levels, without jeopardising economic growth”.

Because South Africa is prone to greater warming than the global average, two degrees of global warming will probably prove extremely expensive for us.

It will be impossible to turn back the clock on carbon emissions without abandoning our obsession with GDP, which Nicholas Sarkozy, the French president, has warned is “destroying more than it [is] creating”. In South Africa our current growth model is working far harder for the rich than for the poor — people living in Constantia in Cape Town consume 14 times their fair share of planetary resources.

As the acid mine drainage crisis threatening Gauteng amply demonstrates, growth as we know it is creating enormous problems even before we take climate change into account.

Of course, we still need certain kinds of growth still. But it’s time to disaggregate it, to ask finally, as did Simon Kuznets, the man who formulated the GDP measure, what kind of growth do we want and for whom?

Green GDP
China, that supposed evil behemoth of the eastern hemisphere, has experimented with dropping GDP in some provinces in favour of a green GDP measure — and has seen pollution growth slow down.

We could reduce speed limits, cutting fuel use, making our roads safer and quieter and reducing the need for over-heavy vehicles weighed down with safety features. We could build on our new love for the Gautrain and restore our moribund national rail network.

Perhaps our politicians could lead by example and start adopting low-impact lifestyles. Cycling, cold showers, veggie patches — the body politic could only profit.

We had the courage to abandon the Pebble Bed Modular Reactor, so surely we can find the courage to abandon the Kusile power station? Our current energy strategy has far more to do with the needs of big industry than of healthy growth.

A deadly mix of financial and technocratic inertia and special interests drives us ever more relentlessly towards disaster. A massive roll-out of solar water heaters would save all the energy Kusile is intended to ­supply and cost far less.

Renewable energy-based grid
Sadly, although Eskom knows how to build and manage big power stations, it doesn’t know how to manage the sprawling, messy, human complexity of an energy-efficiency programme. It can’t surrender its totemic big power stations. It doesn’t trust the notion of a sprawling, decentralised, renewable energy-based grid.

It continues to generate misleading propaganda about the need for baseload power, which is in fact a property of overall grid management and not of individual power stations. Until the start of the current electricity planning process, it had apparently never encountered the ample research showing that renewable energy creates far more jobs than coal and nuclear.

The way ahead is reducing energy use, using what we have more efficiently and generating it from renewable resources. Our current choices will only become ever more ruinously expensive.

“The world in 2008 invested more in renewable power than in fossil-fuelled power. Why? Because renewables are cheaper, faster, vaster, equally or more carbon-free and more attractive to investors,” points out Amory Lovins of the Rocky Mountains Institute, which researches resource efficiency.

We could even look afresh at our manic determination to go nuclear. Building nuclear plants, as noted by the environmental freaks at Citigroup Global Markets in November 2009, carries construction risks, power price risks and operational risks “so large and variable that individually they could each bring even the largest utility to its knees”.

If we really had guts and vision, we could pledge, like several other countries, to become carbon-neutral. Those that have already done so are smaller than we are, with far less carbon-intensive economies.

But why should we limit our world-leading ambitions to hosting sports events?

Water workers strike on hold till Wednesday

JOHANNESBURG – The SA Municipal Workers’ Union (Samwu) has suspended a national strike in the water sector until Wednesday, a union official said on Monday.

“Samwu has decided to suspend protest action until Wednesday pending further consultation,” said Samwu national spokesman Tahir Sema.

The strike against the employer body, the SA Association of Water Utilities (Saawu), was to have started on Monday.

Sema said Samwu would hold a national executive council meeting on Wednesday in Johannesburg.

Depending on the outcome of the meeting, the union could afterwards give the final go-ahead for a strike involving about 50,000 workers, including administrators, mechanics and technicians.

Members of the National Education, Health and Allied Workers’ Union (Nehawu) working in the water sector were also expected to join the strike.

Sema said the unions and Saawu last held talks two months ago, but negotiations had failed to resolve their dispute.

“Samwu has been urging the water utility to come to bargaining table… and renegotiate, but this has not happened.

“The employer has indicated it is not willing to budge from a nine percent increase.”

While Saawu had offered the unions a nine percent wage increase, they wanted an increase of between 11 and 13.5 percent.

Sema said a strike in this “strategically important sector” would affect water supply throughout the country.

Saawu represents 18 water boards. It could not immediately be reached for comment.

Samwu is the largest union in the water sector, said Sema.

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Local power a 'time bomb'

Johannesburg – There is a backlog of about R28bn worth in maintenance and restoration of the country’s electricity distribution infrastructure, and this backlog is increasing by about R2.5bn every year.

It’s a time bomb waiting to explode, said Phindile Nzimande, chief executive of EDI Holdings, Eskom’s subsidiary that has to manage the restructuring of the country’s electricity distribution, at an energy conference on Thursday.

The backlog in maintenance work was disclosed by Ronald Chauke, National Treasury’s director for energy and telecommunications.

The EDI said R28bn was  was needed to bring the country’s distribution assets up to an acceptable standard. If these assets were not reliable, delivery of safe electricity would be seriously compromised, said Chauke at a South African National Energy Association (Sanea) conference.

At the policy level treasury and the Department of Energy were drawing up a plan for cabinet.

Nzimande said the backlog had arisen because municipal authorities, which should spend 10% of their income from energy tariffs on maintaining distribution infrastructure, have simply neglected to do so.

Every year the shortfall was increasing by R2.5bn, she said. In her view there was no legal way to force the 187 municipalities that were licensed as electricity distributors to do the maintenance work.

This was partly because the delimitation of the powers of local authorities made this impossible, and partly because the system of regional electricity distribution companies, previously known as Reds, had failed.

The constitution entrenched municipalities’ rights to distribute and sell electricity within their jurisdiction.

The nine Reds were to have been established by connecting Eskom’s distribution network and that of the municipalities into regional organisations. This had never happened because certain municipalities had refused to surrender their distribution assets without compensation.

Mbulelo Ncetezo, executive manager at the National Electricity Regulator (Nersa), said Nersa could fine municipalities that failed to do the compulsory infrastructural maintenance.

He said that Nersa could impose fines of up to R2m a day for every day that maintenance was overdue. The reality was, though, that local authorities that were behind in their maintenance work did not have money to do it. Fines would make it even more difficult to perform the work.

According to him, setting up the Reds was a possible solution.

For Nersa it was a problem to supervise 187 electricity distributors. At some of these municipalities the electricity department consisted of a single person, he said.

CO2 tax looms large on spring day

As the deadline for introduction of the CO2 new vehicle emissions tax in South Africa approaches, government and major car manufacturers are still seeking agreement on key issues.

However, following the latest meeting on August 19, attended by the minister of finance and senior treasury officials, the parties agreed to the basic principles of the tax. The expedited introduction of cleaner Euro 4 or Euro 5 fuels in South Africa was also considered.

From September 1, 2010, CO2 emissions tax will apply to new passenger cars, including SUVs.

The emission threshold is 120 g/km and a tax of R75 per gram per kilometre (which bumps up to R85.50 when VAT is added) over the threshold will be charged.

Furthermore, it is anticipated that effective April 1, 2011, the CO2 emissions tax will apply to double cabs, too. This will be based on an emissions tax threshold of 175 g/km, in line with the European Union’s planned emissions tax regime, and a tax per gram per kilometre over this threshold still to be determined by treasury.

The introduction of CO2 emissions tax as it will apply to double cabs is a particularly sore point, though.

Clean fuels

The Minister of Finance in his February budget review said “the the emissions tax will initially apply to passenger cars.” Therefore, in calculating thresholds and levies, the sales volumes of passengers cars was considered only, excluding all light commercials, including double cabs. This was done, said the manufacturers, because there is currently no internationally accepted test method to test CO2 emissions for LCVs.

Naamsa, which represents the major car manufacturers and is supported by trade unions, dealer associations and components manufacturers, has previously also questioned Treasury’s logic in its approach to CO2 tax in South Africa.

In particular Naamsa has taken issue with the tax’s efficacy when cleaner fuels, which will automatically allow for the introduction of cleaner, more efficient engines routinely withheld by manufacturers on account of South Africa’s poor fuel quality, are not yet available.

Rather than penalise buyers of new vehicles, Naamsa proposed authorities instead consider an environmental levy on all fuels as a fair way to ensure all vehicles share the tax burden.

Since minibuses are used mainly for public transport purposes, these vehicles are exempt from emissions while the application of CO2 taxes to other light commercial vehicles will be considered at a later date.

With the introduction of CO2 emissions tax to passenger vehicles from September 1, prices of new vehicles is expected to increase by between 2.5 and 6%.

New microbe eating Gulf oil spill

Washington – A newly discovered type of oil-eating microbe suddenly is flourishing in the Gulf of Mexico.

Scientists discovered the new microbe while studying the underwater dispersion of millions of litres of oil spilled into the Gulf since the explosion of BP’s Deepwater Horizon drilling rig.

Also, the microbe works without significantly depleting oxygen in the water, researchers led by Terry Hazen at Lawrence Berkeley National Laboratory in Berkeley, California, reported on Tuesday in the online journal Sciencexpress.

“Our findings, which provide the first data ever on microbial activity from a deep-water dispersed oil plume, suggest a great potential for bacteria to help dispose of oil plumes in the deep-sea”, Hazen said in a statement.

Environmentalists have raised fears about the giant oil spill and the underwater plume of dispersed oil, particularly its potential effects on sea life. A report just last week described a 35km underwater mist of tiny oil droplets.

“Our findings show that the influx of oil profoundly altered the microbial community by significantly stimulating deep-sea” cold temperature bacteria that are closely related to known petroleum-degrading microbes, Hazen reported.

Oceanospirillales

Their findings are based on more than 200 samples collected from 17 deep-water sites between May 25 and June 2. They found that the dominant microbe in the oil plume is a new species, closely related to members of Oceanospirillales.

This microbe thrives in cold water, with temperatures in the deep recorded at 5°C.

Hazen suggested that the bacteria may have adapted over time due to periodic leaks and natural seeps of oil in the Gulf.

Scientists also had been concerned that oil-eating activity by microbes would consume large amounts of oxygen in the water and create a “dead zone” dangerous to other life. The new study found that oxygen saturation outside the oil plume was 67% while within the plume it was 59%.

The research was supported by an existing grant with the Energy Biosciences Institute, a partnership led by the University of California, Berkeley and the University of Illinois that is funded by a $500m, 10-year grant from BP.

Other support came from the US Department of Energy and the University of Oklahoma Research Foundation.

Sciencexpress is the online edition of the journal Science.

Water crisis time bomb ticking

Cape Town – Trade union federation Fedusa on Wednesday warned South Africa was sitting on a water crisis “time bomb”.

Citing “inadequate management and monitoring” by water service authorities, Fedusa said it had filed notice with the National Economic Development and Labour Council (Nedlac) of possible protest action.

“Fedusa… decided that the best way to make South Africans as well as its government aware of the true state of water was by filing a section 77 in respect of possible protest action,” the federation said in a statement.

Section 77 of the Labour Relations Act gives workers the right to take part in protest action to promote or defend their socio-economic interests.

“We are sitting on a time bomb which will affect each and every person in the country,” Fedusa said.

The National Water Act stated that no person could unlawfully and intentionally or negligently commit any act or omission which polluted or was likely to pollute a water resource.

“However, little action if any is taken against transgressing municipalities.

“(Further), 104 mines in South Africa are operating without a valid water licence, of which the majority are in Limpopo province.”

Eutrophication

Fedusa said the state of drinking and waste water in South Africa had not improved at all over the past five years.

Among other things, there was poor sanitation and water service delivery; very high levels of pollution and eutrophication (excessive nutrients) in dams and rivers; poor quality drinking water; and, failing waste water treatment infrastructure.

Fedusa said it was demanding all drinking water and waste water treatment plants be placed under the control of a national project manager.

Such a manager, it said, should be tasked with drawing up a national programme of work, together with a budget, to restore the necessary infrastructure.

Further, the national government should “cut the red tape” and urgently approve such a budget.

The handing over of such restored waterworks and treatment plants to municipalities should only be done on “condition that (the) correct staff have been appointed and trained”.

Fedusa is also calling for a “fast-tracked sustainable solution” to the acid mine drainage, which is threatening parts of the country.

In terms of the Labour Relations Act, Nedlac must bring the parties to a section 77 notice together, to attempt to resolve the reasons for the contemplated protest action.

SA to pay billions in green taxes

Johannesburg – National Treasury’s coffers will receive billions this year and next year, thanks to three so-called green taxes being levied on companies and taxpayers.

The biggest of the three green taxes is the environmental levy of 2c/kWh that Eskom pays over to treasury.

This was a tax on electricity generated from non-renewable sources like coal and nuclear energy, said treasury spokesperson Kershia Singh.

Where Eskom generated electricity from renewable sources, such as wind and solar power, the utility would not be liable for the tax, she said.

Eskom generated almost all its electricity from non-renewable sources like coal, and consequently had to pay R3.7bn to treasury this year – this while it had an almost R45bn deficit in terms of financing its capital construction programme.

The levy on Eskom would go to the fiscus to fund general government priorities, said Singh.

The other green taxes that were upsetting business leaders was the tax on plastic bags, which was introduced six years ago, as well as the new green tax being levied on all new passenger vehicles from September 1.

Business leaders are concerned because the money was not in fact being applied for green purposes.

Imperial group chief executive Hubert Brody said a green tax such as that being levied on motor cars in South Africa was simply another burden hiking the cost of living.

Taxes such as these, he said, should be channelled to green projects such as research programmes for green vehicles.

The National Association of Automobile Manufacturers (Naamsa) expected that this new tax would add about 2.5% to the price of a new vehicle, and would present treasury with about R1.6bn a year.

As far as plastic bag taxes were concerned, treasury had raked in about R360m between 2004 and 2009.

Singh said that this year R140m would be collected and next year R150m.

Of this, she said, R30m would be used this year and about R35m next year for environmentally-friendly projects.