Energy efficiency and buildings sector

Radhika Khosla | Updated on March 09, 2018 Published on January 17, 2012

Transitioning to low-carbon buildings will spur a market for new services and technologies.

Current norms for ‘green' buildings should be made mandatory, rather than voluntary.

In 2008, for the first time ever, the urban global population outnumbered that of the rural. This visible pattern has escalated during the last couple of decades; projections suggest that by the end of the twenty-first century, 80 per cent of the global population will live in cities (which occupy 0.05 per cent of the Earth's surface).

Rapid urbanisation is creating vast opportunities through an unprecedented demand for the construction of buildings, which already account for more than 30 per cent of India's total electricity consumption. In line with expanding development, the country's buildings sector is expected to increase five-fold from 2005 to 2050. India is at a unique crossroads, where two-thirds of the commercial and high-rise residential structures that will exist in 2030 are yet to be built. Implementing energy efficiency in buildings that are being constructed in the next ten years thus presents a singular opportunity to lock in energy and cost savings for the next several decades.

The imperative for efficient construction is much more crucial than individual savings, from which owners and end-users benefit. India's total energy requirement is projected to grow at 6.5 per cent per year between 2010-11 and 2016-17, to support the country's projected 9 per cent growth rate. The meeting of this demand, however, is fraught with the challenges of peak demand shortages, dependence on energy imports and vulnerability to the volatility in international energy prices. Furthermore, India is en route to becoming the second largest emitter of greenhouse gases globally. Each of these challenges can be met simply and effectively by addressing the energy-guzzling nature of the booming buildings sector, and by making energy efficiency a central plank in the country's long-term growth planning.


The current policy environment is beginning to promote energy efficiency and the execution of national and state-level programmes will be the key determinants of its success. India's National Action Plan on Climate Change (2008) points to building efficiency measures as essential to carbon emission reduction.

As a starting point, it is important that there are clear frameworks that can be reference points for quality. To facilitate this, the Bureau of Energy Efficiency (BEE) launched the Energy Conservation Building Code (ECBC) in 2007. The ECBC establishes minimum requirements for energy-efficient design and construction for buildings, with a connected load of 100 kW/120 kVA or more, and provides guidelines for building design, including the envelope, lighting, heating, air-conditioning, and electrical systems. In addition to the code, the presence of independent rating standards is important. Currently, this is managed by two private building rating systems: Leadership in Energy and Environmental Design (LEED) and Green Rating for Integrated Habitat Assessment (GRIHA), both of which incorporate ECBC requirements.


In spite of these initial policy instruments, barriers exist to wide-scale efficiency adoption. The key challenges can be grouped into three main categories: inadequate information and awareness, economic, and structural constraints. The ECBC is currently voluntary, which has resulted in its slow uptake and a reliance on the market to steer progress. In the absence of mandatory policies, the decision to invest in efficiency is driven by developers, building owners, and end-users, all of whom don't have access to reliable information on the advantages that efficiency offers to them. Additionally, the absence of skilled expertise on how to employ the measures impedes implementation, even when there is a will to invest.Efficiency technologies also have a higher upfront cost, which deters investors seeking to make nearer-term economic returns. As there is no rigorous source of information on the return on investment for the higher upfront cost, real estate developers are reluctant to include an additional budget for efficiency. This want of information on the business case has so far inhibited financial institutions from offering attractive products (e.g., loans with reduced interest rates for efficiency) that can incentivise investment by reducing the burden of the higher first-cost. An additional constraint is that while building owners undertake the expenditure, the benefits of lower energy bills are accrued by the tenants who pay the utility bills.


In order to overcome barriers and transform the buildings market, action is required by a variety of public and private decision-makers. Making the ECBC mandatory will ensure that all applicable new buildings constructed meet a minimum level of efficiency in their energy use. While the code remains voluntary at the national level, some states — Rajasthan, Orissa, Delhi, Maharashtra, Uttar Pradesh, Haryana, Tamil Nadu, Andhra Pradesh, Karnataka and West Bengal — have announced plans for a mandatory code by 2012, recognising this low-hanging opportunity. However, the success of these efforts will lie in the code compliance achieved.

To enable this, state governments can create compliance-conducive environments, by focusing on local adaption of the ECBC to their particular climactic conditions; incorporate the code into the region's building bye-laws; develop mechanisms for third-party verification; and train municipal officers, architects and engineers on code technicalities. Having structures in place for monitoring and enforcement are key to the successful uptake of efficient construction by the community.

Analogously, the private sector can play an important role in leading the market. Real estate developers, as drivers of the demand for building development, have significant influence on the adoption of efficiency practices by end-users. As the ultimate financial decisions regarding investment in efficient construction lies with this group, they have vast potential to showcase the opportunities that arise from the favourable business case that these buildings attract — through cost savings, short payback times, and increased premiums and occupancy rates. Piloting “green leases” that align the costs and benefits of efficiency investments between landlords and tenants can help overcome some of the financial barriers. Financial institutions can include services for energy efficiency in their portfolio of products and gain from the significant untapped opportunity of expanding the efficient buildings market.

Transitioning to a low-carbon buildings sector will spur a market for new services and technologies, requiring a skilled workforce that the new wave of construction will demand. As ECBC compliance gets more stringent, there will be an increased need for professionally accredited third-party verifiers who can measure and verify the savings that are taking place. India's commercial energy consumption is projected to double by 2035. With the correct combination of policies, incentives, and structural support, an efficient built-environment will enable India to successfully meet its economic and environmental development goals, while achieving its national commitments to address climate change.

This article is by special arrangement with the Centre for the Advanced Study of India, University of Pennsylvania.

(The author is a Welch Fellow at the Natural Resources Defense Council, New York.)

Published on January 17, 2012
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