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Always a leader in environmental issues, California has produced an array of legislation and regulations addressing environmental challenges in the past few years. They are aimed at things like curbing water use, toxic content in products and increasing energy efficiency in homes and buildings.

Often overlooked in discussion of these initiatives is the fact that their implementation is creating new markets for green products and service. Here are some recent examples:

CALGreen – California’s Green Building Code

CALGreen, the state’s new “green building code,” which became mandatory on January 1, puts into code building standards that call for reducing the environmental impact of construction practices. As builders, architects, engineers, construction workers and manufacturers rush to become familiar with the nation’s first mandatory green building code, they also see huge opportunities for new business.

In 2007, under Governor Schwarzenegger’s direction, the California Building Standards Commission began work with state agencies to adopt a comprehensive set of green building standards for residential, commercial and public building construction.

In 2010 the code was adopted and required, among other things, a 20 percent mandatory reduction in indoor water use, with voluntary goals for 30, 35 and 40 percent reductions; temperature or moisture-based controls for irrigation systems; diversion of 50 percent of construction waste from landfills, increasing voluntarily to 65 to 75 percent reduction for new homes and 80 percent for commercial projects; mandatory inspections of energy systems for nonresidential buildings over 10,000 square feet and requirements for low-pollutant emitting interior finish materials such as paints, carpet, vinyl flooring and particle board.

Products exist to fill these needs; what is changing the fact they will now be required for all new construction projects in the state.

Charles “Russ” Russell, vice president of VCA Green, a green consulting, training and commissioning company, has been conducting CALGreen seminars in California over the past year (see related interview). When it comes to indoor water savings, he says, the more the new codes are followed, the higher the demand will be for environmentally friendly appliances and equipment – low-flow toilets, shower heads and the like. “Appliance manufacturers are coming out with water factor numbers on their equipment that will let you see how much water a clothes washer or dishwasher uses. New designs are getting pretty exotic, but they are still in the upper price range. They should become more readily available, more cost effective.”

With 12 percent of water usage going to leaks in plumbing systems, Russell says there will be opportunities for plumbing contractors who can detect leaks and equipment innovations that can solve leak problems in a cost effective manner.

Another example of market innovations that could be spawned by CALGreen, says Russell, will be a way to deal with capillary breaks in concrete slabs caused by vapor. “There needs to be some sort of industry accepted solution that meets code requirements,” he says. “The person who comes up with that design will accomplish a great deal.”

Diverting construction waste from landfills, another tenet of the green building code, runs into trouble because the documentation needs to be standardized throughout the state, says Russell. “A business venture that streamlines this process of achieving compliance will provide a great service. Building officials would be able to refer building owners seeking compliance to these companies. “Right now, each jurisdiction has to come up with its own process,” he says, “and some are stumbling trying to figure out how to do it.”

Another potential market related to the CALGreen code is in the area of green product identification. “Right now, there are a lot of products out there,” says Russell, “composite wood products, for example, that don’t have any identifying marks or labeling to show that they are in compliance with CALGreen. Some sort of standardized labeling process, a stamp or color coding on the product itself would make it more efficient.”

Companies that are involved with commissioning will be able to develop and offer another service besides LEED or Green Point certifications. When it comes to low-polluting finishing materials, Russell says that most of the large companies already produce things like low-VOC paints and flooring. “But we have to educate the contracting public to make sure they know how to comply with the CALGreen VOC limits.”

AB1881 : The Water Conservation in Landscaping Act

The California legislature has amended the 2006 Water Conservation and Landscaping act requiring local water agencies, no later than January 1, 2010, to adopt an updated Model Local Water Efficient Landscape Ordinance (MWELO), or “another water efficient landscape ordinance that is at least as effective in conserving water as the updated model ordinance” provided by the state.

If agencies do not adopt their own ordinances, the state ordinance would automatically become law. The legislation mandates more efficient use of landscape irrigation, watering systems and minimizing runoff into gutters and storm drains. It applies only to commercial or institutional buildings over 5,000 square feet, but many involved hope the guidelines will be adopted as routine landscape design standards.

Bob Simpson is president of AquaSave, a membership organization of contractors, maintenance companies, architects, manufacturers and suppliers committed to water conservation. He feels that it will take awhile for this law to be implemented on a broad scale.

“Not many people are even aware of it,” he said. “Our organization is hoping to assist in this educational process whereby people outside the industry understand the scope and breadth of this legislation so they can begin implementing it.” Simpson says that while AB 1881 is only a requirement for large commercial buildings, even those not required to comply would be “well advised to do it because it’s good, sound water conservation technology.”

Under the legislation, landscapes must have “smart” weather-based irrigation controllers. There also must be no irrigation runoff onto a hard surface – meaning sidewalks, walkways or parking lots. To accomplish this a margin of 24 inches minimum around all non-permeable surfaces where no water is sprayed. “You can’t have spray heads or rotary heads except inside the 24 inch margin,” says Simpson. “Runoff picks up oil, chemicals and debris and then goes into the storm drains and into the ocean, so this is created to help heal our oceans.“

New technologies, such as surface flow or sub surface flow irrigation are much more effective to meet the criteria of AB 1881. “We did a model project complying with 1881,” said Simpson, “using a product by Jardiniere called Surface Flow, which puts no water out into the air. Rainbird, Torro and others also have products that meet the criteria to eliminate any overhead irrigation in that two-foot margin.”

GPS technology is coming online to help identify the efficiency of an irrigation system. AquaSave uses this technology. “One of the key steps in evaluating a site to do a water conservation retrofit to meet 1881 standards is to use GPS technology,” says Simpson. “It calculates the efficiency of the system, or its distribution uniformity. Not many companies do it. We partner with Green World Solutions for GPS auditing and evaluating new irrigation plans.”

AquaSave’s members are doing water auditing with AB 1881 in mind, as well as retrofits to install smart controllers and new types of heads that are more efficient and improve the distribution uniformity in new and existing landscapes. “The intent of 1881 is so sound that we are all striving for compliance,” he says.

Indoor water and energy conservation is another offshoot of AquaSave’s work. Partnering with Bottom Line Utility Solutions, Inc., they are offering indoor water use auditing as well as installation of new equipment. “It’s a huge leap,” says Simpson, “expanding from landscape irrigation efficiency into energy usage, but this is the direction now. It’s all coming together.”

Market expansion attributable to AB 1881 is also happening because individual water agencies – retailers and wholesalers – are all looking to save water for their customers. “They don’t have a fleet of employees to do water audits,” Simpson says,” so they call us.”

According to Simpson, individual water agencies are all working on their MWELO versions and are submitting them to the state for approval. “The model’s structure and content is pretty good. I think most of the individual agencies are going to adopt it the way it is. A lot of work went into it, and I think it’s broadly considered aggressive but very good legislation.”

AB 758 - Adds a section to the Public Resources Code relating to Energy Efficiency, Green Jobs and Green Buildings

Buildings account for 40 percent of all greenhouse gas emissions nationally, the largest single contributor to global warming in the U.S. Seventy-two percent of California’s 13 million residential buildings, and over 5 billion square feet of commercial structures were built before the early 1980’s when California’s energy efficiency building code (Title 24) was implemented and never had to comply with energy efficiency requirements.

AB 758 addresses this gap. It requires the California Energy Commission to develop and implement a comprehensive program to achieve energy savings in existing residential and commercial buildings. This would be achieved through energy audits, energy efficiency improvements, financing options and workforce training.

The first part of AB 758 implementation is being funded through Stimulus funds from the federal government. About 20 specific projects funded with ARRA (American Recovery and Reinvestment Act) money will serve as pilots for AB 758. According to Cathleen Fogel, a senior analyst in the Energy Division at the California Public Utilities Commission, which is working with CEC on AB 758 implementation, most of the projects are in the area of residential retrofits. There are some commercial projects as well as green workforce training.

“These are basically to develop innovative approaches in the marketplace,” she says. “AB 758 is funding creation of new assessment tools for multifamily efficiency audits, for example. This is a very hard market segment to crack because of split incentives, so developing tools and incentives that will help meet this challenge should lead to market development. There is in development a navigation tool, which is a software program to make it easy for multifamily building owners to describe their building and get directed to appropriate rebates for energy efficiency retrofits from utilities. It is being created to help folks navigate this maze.”

Fogel says that this phase of implementation of AB 758 is all about innovative marketing approaches. “In Oakland there will be a competition amongst downtown property owners and managers, a sort of ‘biggest loser’ type of competition” to see who can lower their energy usage the most. Also being funded are neighborhood-based outreach programs, and social marketing-based outreach in the Los Angeles and Bay Area will launch soon. This includes things like home makeover contests, says Fogel. “The idea is to find innovative ways to get the word out.”

One of the ideas is to develop the tools, as well as the market, For Home Energy Rating Software (HERS II), an energy efficiency analysis residential software program developed by CEC. “Hopefully this is a tool that will produce a uniform approach to assessing the energy characteristics of a home and then give the home a score, or rating, that can be compared to similar homes,” says Fogel. “As I understand it, this is one of the largest goals of AB 758. Under the ARRA program, they are funding local grant recipients to train contractors on how to use the HERS2. They’re also offering incentives, or scholarships for folks to get trained in HERS2 as well as for homeowners to use the service.”

Fogel says that it’s not known what the funding source will be after the initial phase of the legislation has been implemented. When it comes to marketing opportunities, one of the questions will be if there is to be a single set of tools statewide for assessment, or will it move towards a certification approach where the market can develop various tools that can compete on price and efficiency.

Either way, the big market, according to Fogel, is for assessment services. “Whatever tools get out there, the real marketplace will be for assessment and rating services for homes and commercial buildings. I think there will be a huge demand for that. I suspect the regulations will either go towards mandatory assessment or possibly – which I think would be difficult – for mandatory assessments and comprehensive retrofits. Ideally, with the assessment in place, the marketplace will work its magic where savvy building owners will want to compete and will voluntarily upgrade the assets of their buildings.”

Will Wright, director of Government and Public Affairs for the Los Angeles chapter of the American Institute of Architects, says that AB 758 will stimulate the “whole arena of professionals involved in the commissioning process. Measuring and predicting energy usage, using computer models to determine what are the most efficient methods – these are the types of jobs the architecture profession can shift into.

“Everyone is excited about a more sustainable environment,” Wright says. “Preserving existing building stock and upgrading it is much more energy efficient than tearing it down and starting over.” There is a real opportunity, he feels, for manufacturers of things like energy efficient windows, lighting and HVAC systems, insulation, “people who can provide products that help make buildings more energy efficient.”

Karen Mozes is a façade engineer with Arup Engineering, a firm heavily involved in environmental energy modeling. She feels that AB 758 will open markets “on the commissioning side of things. Smaller engineering firms can complete building audits, and manufacturers will innovate monitoring systems that are easier for individuals to use. When people can monitor their energy consumption, they’re more careful,” she says. “This [legislation] will be a good driver for our business. Anything that looks at improving efficiency existing building stock, especially if owners are required to do it, we will see it as an influx of work.”

AB 1103 – Adds a section to the Public Resources Code relating to energy consumption in commercial buildings

Under AB 1103, as of January 1, 2009, electric and gas utilities were required to maintain records of the energy consumption of all nonresidential (commercial) buildings to which they provide service. The format of the data must be compatible for uploading to the US Environmental Protection Agency’s Energy Star Portfolio Manager for the most recent 12 months.

Building upon this data collection and reporting, AB 1103 additionally requires that as of January 1, 2010, all commercial building owners and operators disclose their Energy Star Portfolio Manager data and ratings for the most recent 12 month period to prospective buyers, lesees or lenders.

Utilities such as PG&E offer uploading tools (PG&E’s Automated Benchmarking Service – ABS), which keeps the customers’ identities confidential while automatically uploading energy use data to the Energy Star Portfolio Manager.

AB 1103 sets up a requirement for benchmarking, which is a way to rate the energy efficiency of a building. It provides a score of 1-100, which ranks the building on a percentile basis against comparable buildings nationwide. Energy Star also provides the annual energy use per square foot which is useful for comparing smaller groups of buildings, according to PG&E.

Roy McBrayer, former green building program manager for Governor Arnold Schwarzenegger and deputy to the State Architect, says that AB 1103 provides two levels of marketing opportunities. “The first level,” he said, “would potentially be a market for companies that would provide the benchmarking service that meets the technical standards and intent of 1103, or even a higher standard. The information can also be used to plan out a strategy for improving the facility and for marketing purposes.

“On another level,” he continues, “the legislation will generate a market for services that actually improve the energy performance of existing buildings. Once an owner sees what his score is, he can make a decision to improve the building’s performance and find the companies that can him with installing hardware or equipment or help manage energy use better. These two levels work synergistically.”

There are also new and unknown markets for products that haven’t been thought of yet because there hasn’t been the right stimulus to create them, says McBrayer. “AB 1103 can provide that stimulus. I see it as a potentially large market. The cost of meeting the ongoing demand for new generation of electricity far exceeds the cost of reducing demand through energy efficiency.

“Almost all facilities have room to improve, and it’s probably economical for them to do it. What’s not there are appropriate mechanisms to fund such an effort. I have spoken to financial institutions about ways to finance energy efficiency through loans.” Local governments and utilities, working with financial institutions will need to design innovative ways to fund energy efficiency retrofits to meet the demands from building owners and operators who want to improve their buildings’ energy efficiency scores.

“There’s still quite a bit of vacant commercial property out there,” says McBrayer, “and I wonder how much energy use will become a discriminator in leasing. It could be quite significant.”

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