Re: GBlist: need info on financial/market benefits of green bld

GC-Etchison, Michael (ETCHISON.GC@EMAIL.PUC.TEXAS.GOV)
Tue, 04 Mar 1997 15:11 CST

Ian Shapiro 3/4 opines :

>I believe a strong reason developers/financers do not have an interest
in energy/environmental issues is that the benefit of the investment (for
example, lower energy costs) accrue to the owner, not to them.

I am personally trying to evaluate the benefit of doing various green
things rather than conventional. I know my way around a
not-too-complicated spreadsheet, and know what NPV is. Similarly, if I
were looking at a developer's house, I could ask him to show me what the
financial benefit to me of green options was. In theory, if the NPV of
green was greater than the NPV of the additional cost, I'd go for it.
(Of course, I know that actual consumers don't seem to do that, which is
why CFs and better insulation are such a hard sell.)

But -- I also know that embedded in my calculations (and of the
developer's) are assumptions about interest rates, inflation, prices of
electricity, and so on. I am sure how to use an inflation rate of, say,
6.12% to an NPV calculation. I, frankly, have no business being sure
that 6.12% is the _right_ number. So, in effect, I include the
assumptions' sensitivity by the rough method of being skeptical of
benefits. If, say, natural gas prices go down for 10 years -- or Amory's
fuel cell turns out electricity that's too cheap to meter -- then I will
have made an unnecessary investment.

As a developer, I would be slow to put myself in a position of trying
first to sell unconventional stuff and then to persuade the buyer to
believe the assumptions behind my projections. A reasonably canny
customer will start out skeptical about me in general; if I start looking
shifty on the weird stuff I'm trying to add on, that customer is on his
way down the highway. So the developers' reluctance is not hard to
understand.

Michael Etchison

[opinions mine, not the PUCT's]

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