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International

New DOE Definition of Zero-Energy Buildings is a Base Hit, Not a Home Run

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The global market for zero-energy buildings is projected to achieve explosive growth from $629.3 million in 2014 to $1.4 trillion by 2035. But what exactly is a zero-energy building? A number of different definitions for zero-energy buildings (ZEBs) have been used across the industry, including buildings that use zero electricity, site energy, or source energy, or that produce zero greenhouse gas emissions. Some definitions include additional caveats such as prohibiting direct combustion of fuels in the building and exclusion of off-site renewables where additionality cannot be demonstrated. 

However, the U.S. Department of Energy (DOE) recently released a standard definition of zero-energy buildings, campuses, portfolios, and communities: the entity shall be considered zero-energy (or, synonymously, net-zero energy or zero net energy) if the “annual delivered energy is less than or equal to the on-site renewable exported energy” on a source energy basis, measured over a full year of operation. This suggestion of a single, standard definition basis applies a standard accounting method for comparing the various fuels and energy sources used in a building as well as addressing the use of renewable energy credits (RECs). The DOE definition is a closer approximation of the actual non-renewable energy consumption attributed to a building, compared to the common alternative of using a site energy basis. Though a more complicated calculation than site zero energy, this is a more robust analysis that reflects whole-systems thinking.

However, by using nationwide average source energy conversion factors, it missed an opportunity to incentivize optimal fuel choices based on geographic location or energy supplier and to encourage grid-interactivity of high-performance, smart ZEBs on an increasingly renewable electric grid. Using more granular source energy conversion factors, a minor additional step in complexity, would make this definition a home run.

Zero-energy Trend

A significant number of zero-energy projects have already been built and publicized, with many more in the process of verification or construction, including RMI’s new Innovation Center headquarters in Basalt, Colorado. A growing number of institutions are drafting long-term plans to achieve zero-energy portfolios, from the nation’s largest landlord, the U.S. General Services Administration, to our local Boulder Valley School District, both of whom have enlisted RMI to conduct zero-energy planning and design workshops. Organizations such as Architecture 2030, New Buildings Institute, and International Living Future Institute are driving awareness of ZEBs, and states such as California and Massachusetts are using policy to support them. With so many emerging, disparate market players, this DOE definition seeks to level the playing field among zero-energy claims, which garner press attention and can have demonstrable value beyond energy cost savings.

How the Definition Works

The DOE definition has two notable components. First, it does not allow the purchase of RECs to satisfy renewable energy generation requirements for ZEB status. It does, however, recognize RECs under a separate designation, REC-ZEB, accommodating cases where facilities are physically unable to generate all of their energy on site, as with tall buildings on constrained sites or buildings like hospitals with high process loads. The definition does not mention other specific, innovative methods of procuring renewable energy, such as community solar, off-site power purchase agreements, or virtual power purchase agreements, though the REC-ZEB definition could seemingly be extended to include these, assuming the associated RECs are retired along with the renewable energy procurement. This off-site renewable energy option will be important for large corporate portfolios, such as those participating in RMI’s Business Renewables Center.

Second, the definition requires both delivered energy and exported on-site renewable generation to be converted to source energy terms using conversion factors specific to each fuel or energy form, as shown in the table below. These conversion factors account for the additional energy used or leaked upstream during extraction, processing, transport, electricity generation, transmission, and distribution. For example, in today’s grid, electricity on average requires more than three units of source energy (utility-scale gas, coal, nuclear, hydro, etc.) to generate every one unit of electricity that arrives at the building, with the vast majority of this upstream inefficiency being thermal losses at coal, gas, and nuclear plants. By the DOE definition, generating one unit of electricity on site, most often using solar photovoltaics (PV), likewise avoids more than three units of source energy.

Though it garners the most attention, electricity is not the only fuel used in buildings, and in the U.S. represents only 55 percent of commercial and 43 percent of residential site energy consumption. By the DOE definition, if a building generates renewable electricity in excess of the electricity it consumes annually, the excess renewable generation can be used to offset the consumption of other fuels or energy forms imported into the building. The excess electricity generation must be exported from the site, which could mean either sending it back to the grid or, for example, charging electric vehicles that are then driven off site. In contrast to the net-zero-energy certification requirements of the Living Future Institute, the DOE ZEB definition does allow in-building combustion of fuels, of which natural gas is the most common, but requires that such fuel consumption be offset by excess renewable energy generation. This will be an important economic factor in the choice between various heating fuels in ZEBs.

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Offsetting Non-Renewable Energy

The source energy conversion factors determine how much excess PV generation would be required to offset non-renewable energy consumed on site. For example, 1 unit of exported PV electricity (equal to 3.15 units of source energy) can offset 2.89 units of natural gas (also equal to 3.15 units of source energy), using DOE’s natural gas conversion factor of 1.09. Such excess PV generation can be a major cost and space consideration. The source energy conversion factors thus have significant ramifications on an integrated life-cycle cost analysis, affecting the feasibility of achieving ZEB status and influencing fuel choices.

The DOE definition uses source energy conversion factors that are national averages. It justifies that decision by stating that it avoids rewarding or punishing projects based on their utility provider. However, it sends a poor signal that buildings are inert and distinct from the energy systems that supply them. The definition could be improved by using energy conversion factors that reflect geographic specificity of the electric grid heat rate, fossil fuel content of the electricity supply, or the greenhouse gas emissions of its fuel mix. Such a granular factor could be related to the U.S. EPA’s eGRID emissions factors or perhaps even related to the specific electricity suppliers. Similarly, not all district heating or cooling is created equal, so those conversion factors should also be source specific, thus rewarding district energy suppliers who operate efficiently or run on renewable energy by incentivizing their customers. Going further, a granular natural gas conversion factor could be an opportunity to reward natural gas suppliers who actively control methane emissions, currently a hot topic and an area of much variation and uncertainty. At the very least, the DOE definition should outline a separate compliance path using granular conversion factors that, similar to the ASHRAE 105 standard it references, can be left to the authority or institution adopting the ZEB definition.

The diagram below illustrates how a more granular electricity conversion factor would change the requirements for on-site renewable generation to offset gas consumption, between a location with a cleaner electricity supply, California, versus a coal-heavy electricity supply, Colorado. Depending on the utility agreement, the building owner may get compensated little or nothing for excess, exported renewable electricity. In California, it would become more expensive to offset natural gas, pushing ZEBs toward electric heating. In Colorado, it would do the opposite.

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Greater than Zero

Smarter conversion factors would create a strategic feedback loop as zero-energy buildings begin to comprise a significant portion of the building stock and interact with the grid. In a future grid that is dominated by renewables, the source energy conversion factor for electricity should be correspondingly reduced, encouraging more ZEBs to run on renewable electricity. A critical mass of smart buildings on the grid can, in turn, offer demand flexibility services back to the highly-renewable grid, balancing against intermittencies of solar and wind power.

With expectations of a rapid growth of zero-energy buildings, granularity of the source energy conversion factors and a roadmap for ratcheting down the factors would set a pathway toward appropriately valuing and capitalizing on-grid interactivity of electrically heated buildings. The leading-edge institutions, businesses, and individuals who are driving a high-performance economy by constructing zero-energy buildings should not think of their energy-consuming systems as inert financial liabilities at the terminus of the power line, but rather should regard them as valuable instruments in the symphony of an intelligent, high-performance electric grid.

Image courtesy of Shutterstock.