The Bay Area is a fruitful place to be. You can have meetings with interesting industry people, with smart colleagues, and at the same time produce papers. Let's start with the latter. Today I presented a revised version of the paper "Sustainability and the Dynamics of Green Building." The paper now has a more flashy title (this is the new version: "The Economics of Green Building") which will hopefully trigger some people to read it. We're able to relate the financial performance of commercial office buildings to the underlying energy efficiency (i.e., real energy consumption, data from the Environmental Protection Agency) or greenness (i.e., their LEED score, provided by the US Green Building Council). Interestingly, we find that tenants and investors pay more for buildings that consume less energy, or that have more green features (Dutch taxpayers, be aware: the Dutch Consulate in San Francisco is in a LEED Gold building). Seems obvious, but so far there was no hard evidence on this relation.
Of course, I don't forget about good old Holland. Together with my colleague and friend Dirk Brounen (RSM Erasmus), I studied the diffusion of the recently introduced energy performance certificatie (also known as the energy label) in the Dutch residential housing market. (See our paper "On the Economics of Energy Labels in the Housing Market.") Sadly, the introduction of the label was not well-organized (to say the least) and the adoption rate of the label has been relatively low. This is mostly caused by negative news in the popular media and loud screaming by the Association of Realtors (who are of course afraid that a label reveals too much information about the home that they want to sell with the least effort possible...). The good news for consumers is that the label increases the transparency in the energy efficiency of a home, and energy hogs are punished by the market: we find that homes labels A, B, or C (considered energy efficient) sell for a premium relative D-labeled homes, whereas labels E, F, and G lead to substantial discounts. With the current government incentives (subsidies), it's cheap to upgrade your home, and you'll be rewarded at the time of sale as well.
But, I've been doing more than just sitting behind my desk. My colleague Matt Kahn is in town. Matt writes a superb blog, is a great economist, and my leading example. We're trying to set up a project that will disentangle the determinants of energy consumption in commercial buildings. Understanding the role of the building versus the occupants versus the building manager/technology is important for the various programs that try to reduce energy use in buildings. So far, we've mostly talked over coffee, but a paper will be out sometime this year. To better understand the role of technology versus the role of building engineers in optimizing the energy consumption of a building, I had interesting conversations with Dave Pogue, Head of Sustainability at CBRE, and with Mike Zimmermann, CEO of an Australian start-up, BuildingIQ. Dave told me interesting stories about building engineers and their view on technology. Most of these guys seem to think that they're better at tweaking the building systems than computers, and sometimes just switch them off. That contrasts the view of Mike, who installs smart software in (commercial) buildings. This software first "reads" the behavior of the building and how it reacts to different climatic conditions. It then starts to switch of systems when they're redundant anyway (at night, early morning, weekends, etc). Most important, the software interacts with local weather stations, pre-cools the building on hot days, and pre-heats the building on cool days. This leads to energy savings up to 30%! I'm a strong believer in the computerization of building management systems (but I should tell you that I'm an advisor to BuildingIQ).
Last, my wife is getting famous. Her Holland-Hollywood Connection, a network for Dutch people working in the Hollywood movie industry and for people that aspire to work there, has been in the news almost continuously over the past weeks. This front-page article in the NRC (a quality newspaper) makes me proud (and this related cartoon is funny!
