Agenda for promoting sustainable building in Portugal

The following is a condensed version of comments made by John Tranmer, Managing Director of AlmaVerde Village & Spa at the SB10 regional conference on Sustainable Building held at the Hilton, Vilamoura on 17 – 19 March, during the Plenary Session VII Financing and procurement.

John Tranmer

Buildings are responsible for up to 50% of world energy use and that housing accounts for more than half of this. Energy efficiency in housing – mainly heating and cooling – is therefore a huge factor in the global energy equation.

With new housing, energy efficiency can be designed in from the start. Basic principles – insulation, thermal mass and control of solar incidence – can be applied at the design and specification phase, leading to buildings that are more energy efficient and more comfortable to live in.

At the outset of the AlmaVerde project, we took a fresh look at how energy-efficient houses might be built in the Algarve, how to apply basic principles of green design in the local climate, and how to source suitable materials and systems.

We took an integrated approach, developing a specification that employs an external insulation envelope as well as high levels of thermal mass provided by sun-dried clay bricks formed on site. We paid close attention to the management of solar gains. We developed a low-energy comfort cooling system that brings air in through underground tubes.

We monitored the performance of the first houses that were built, and the results were dramatic. Internal temperatures remained basically constant day and night over a 2-month summer period, at around 26oC, while external temperatures varied from lows of 18oC to regular highs of 38oC. The peak cooling effect was up to 12oC. The final report can be found at:

http://www.softech-team.it/Coolweb/CoolHouse-Monitoring-PT.pdf

We had succeeded in completely stabilizing the internal temperature at a relatively comfortable level, at the cost equivalent of a 60 watt light bulb. Thanks to the adobe, the internal humidity levels also stayed within a narrow, healthy band as well. The engineers calculated an energy saving of 94% compared to conventional air-con.

With 76 more houses now built to the same specification, AlmaVerde remains one of the only leisure developments in the world to have seriously attempted energy-efficient construction on a commercial scale.

The extra costs

Independent monitoring has demonstrated that AlmaVerde houses deliver a high level of thermal comfort at low energy cost. Now, with the addition of solar hot water heating, all new-built houses at AlmaVerde are achieving an A+ Energy Efficiency Certificate, currently granted to less than 1% of housing units.

I have heard it said that “energy-efficient construction” only needs a marginal (3 – 5%) increase in build costs. While this might be true in some contexts, I do not believe that it is realistic for Portugal, considering the relatively low base standard.

My experience is that, compared to a so-called “good quality” build, such as you will find in resorts up and down the Algarve, AND with the addition of a ducted air-conditioning system, our specification adds about 15% to the overall turnkey cost of a house, with fittings, pool and landscaping.

How can this extra cost be financed?

Add it to the price?

It would be great to be able to say that the extra cost can simply be added to the price of the villa, but this is not my experience.

Over the past 10 years most of the new resort housing in the Algarve has been purchased by British and Irish buyers, who have typically based their decisions on location and price. The specification of the villa only became an issue when comparing two properties in an equivalent location and price band.

These buyers have simply not been educated to look at the build specification. In their home markets, few buyers get involved in questions about the build quality. They are already well protected by strong building codes and 10-year guarantees.

So, despite Almaverde’s unique market positioning, and its string of awards, the appeal of year-round thermal comfort at low energy cost mostly fell on deaf ears.

The exceptions were building professionals. It is no coincidence that more than 30% of our owners are in property and construction-related businesses – chartered surveyors, property lawyers, architects, contractors, other developers or agents – this is one niche market that is prepared to pay a premium for better construction.

Other discerning buyers did take on board the message, and we did achieve higher prices than might be typical for another urbanization at the same level of development, but it remains true to say it has not been possible to recoup all of the additional eco-build costs through higher pricing.

Use it to gain market positioning?

I can justify some of the additional eco-build cost as the price for a unique market position. As a pioneer in this area, establishing a unique identity through inexpensive editorial coverage, rather than expensive advertising, has been relatively easy for AlmaVerde.

John Wanamaker, founder of a famous US department store, famously said that half of an advertising budget is wasted – the trouble is you don’t know which half.

However, when you’re spending, not on ephemeral marketing impressions, but on improving quality, the money is never actually wasted. It is being used more “sustainably” to build client satisfaction over the long-term, ultimately leading to recommendations, referrals and repeat business.

Getting marketing pay-back from additional eco investment would not be so easy today, as it seems that every new project announced is “eco-friendly” or “sustainable” even though the measures proposed may be only the most superficial.

Borrow it from the banks?

In financing speculative construction, there is an additional difficulty. Bank valuers work with well-established construction costs. Banks are not geared up to funding the additional build costs of a premium eco specification.

Get it elsewhere?

So, at least as far as resort real estate is concerned, if:

• you can’t recoup it in increased prices
• you can’t justify it in terms of market positioning, and
• you can’t get the banks to lend it to you

then how do you obtain or justify the additional funding inherent in sustainable construction?

There is no bullet-proof answer to this question today, but there is an agenda for those who support and value a lower carbon future:

Energy Certification

The EU-wide energy certification process provides a mechanism, albeit imperfect, to push the market towards better rewarding energy efficient construction. We can:

• Support a public awareness campaign aimed at promoting the value of an A or A+ certification in terms of lower running costs and superior comfort.
• Push for improvements in the certification criteria so that the rating more accurately reflects the true energy equation in any given build. There are many ways to achieve a similar result. For example, there is currently no credit for higher levels of thermal mass, and no credit for a low-energy cooling system such as Coolhouse.

Taxation (IVA)

The government can support energy-efficient construction through selective taxation. It can:

• Reduce or eliminate IVA (value added tax currently at 20%) on construction materials that are clearly going to have a positive effect on energy efficiency: external insulation systems, insulated roof panels, etc.
• Refund some IVA on the total construction cost of a building that achieves an A+ energy efficiency rating.

Taxation (IMT)

• Reduce IMT (property transfer tax, currently at 6%) on transfer of properties with a high rating.

Taxation (IMI)

• Reduce IMI (local authority property taxes) on properties with a high rating. I believe that some Portuguese local authorities are already doing this.

Such measures should start to see energy-efficient construction attracting higher prices in the marketplace, as well as providing solid economic reasons for developers to start building more sustainably.

The full schedule of SB10 conferences can be found at:

http://www.cibworld.nl/site/sb10-11conferences.html