Understanding the barriers to market transformation
Change in construction markets can be glacially slow, especially when it comes to adopting new products and processes. As Technoform marks its 20th year of serving North America with solutions that enable the design and delivery of high-thermal performance fenestration systems, I am reflecting on the complex challenges of market transformation laid out in a recent research study that Stephen Selkowitz and I conducted for the Façade Tectonics Institute (FTI).
The technology and products for high-performance fenestration and façade systems are available in the U.S. market, but their use is not widespread. The figure below shows the history of innovation in polyamide (PA) thermal barrier technology and its state of adoption worldwide. The U.S. remains behind much of the developed world in adopting high-thermal performance fenestration.
The commercial building sector has been even slower to move toward higher performance levels than the residential sector. Higher installed fenestration performance has been driven in residential markets due largely to the positive impact of the combination of the residential window EnergyStar® program and homeowner tax credits. No similar combination of fenestration or façade focused above-code standards and tax incentives is available in the commercial sector.
The U.S. Department of Energy supported the yearlong FTI research project to understand the depth and breadth of the barriers to adopting high-performance façades in non-residential and multi-family buildings. The research involved the input of more than a hundred participants in the design, construction and material supply value chain across North America through in-person and virtual roundtables, one-on-one interviews and surveys. Valerie Block, FTI staff (retired executive director), was instrumental in assembling a cross-section of the owner, design, construction, fabricator and material supply community for these roundtables.
The output is a detailed report and accompanying briefing package that discusses the broad and complex interconnection of many barriers, each with multiple root causes. It also includes six case studies that identify places and/or projects where building envelope market transformation is happening faster, the drivers, the façade provisions, what is working and the market consequences. These case studies and input from the participating stakeholders supported the development of 10 cross-cutting strategies and specific first steps. The report provides a blueprint for government and industry action.
Over the next few blogs, I will explore some of the key findings and the blueprint for action. This month, we will start by reviewing some of the barriers. The image below provides an overview of the identified seven high-level barriers to adoption.
Behind each main barrier is a cascading series of interlinked causes that underscore the complexity that prevents market transformation. Mapping these cascading causes was akin to completing a 5-Whys analysis, often used in problem-solving to find the real root cause (see figure below).
You may wonder why “code stringency” does not appear in the high-level barrier list. This is because code stringency is one of the direct causes of the first barrier: High-performance facades significantly increase over business-as-usual (BAU) performance.
Codes set the cost baseline in the market. This is because few buildings are built to above-code performance. This means that any significant performance increase above code costs more than BAU. Why do codes not require higher façade performance? There are several reasons for this, driven by yet further causes:
- Slow state-wide model code adoption: As of April 2024, no states had adopted the most recent 2022 version of ASHRAE 90.1. Fourteen states have adopted the 2019 version, and 10 states are still on the 2010 version or worse. According to the Northeast Energy Efficiency Partnership, the main drivers for slow code adoption are cost and political will, which are intertwined. They identified disagreements over the change in construction cost, the relative impact and the costs to implement and enforce codes and the cost to build capacity in the workforce. Other causes include a lack of policymaker knowledge, awareness and process engagement.
Slow stringency improvements in new versions of the model codes: Three root causes were identified that appear to throttle improvements.
- The cost-effectiveness of increases in stringency must be shown and must be based on the cost of energy savings alone. Savings in the cost of carbon or other potential benefits from reducing HVAC system costs are not considered.
- The façade industry’s fragmentation means that it does not act as one unified front, and often, different segments have conflicting goals.
- Industry special interests act to preserve the status quo.
- Model code structure doesn’t provide an envelope-first approach: Four root causes for this related to the performance compliance path were identified by the FTI research:
- Requires designers to show equivalent or better energy cost relative to a baseline building – not energy or carbon savings. Since energy costs are still relatively low in many parts of the U.S. and do not include the fully burdened cost of damages from the associated carbon emissions, compliance can be shown without a high-performance façade.
- Allows designers to trade off envelope performance with shorter lifetime mechanical and lighting system performance. The combination of lower-performance envelopes and higher-performance mechanical systems is typically installed because this is usually the less expensive option. Duane Jonlin, City of Seattle, noted that the performance path is always used to make a lower performing façade. He states, “That’s the only reason that owners will pay an energy modeler to do the simulations.”
- Does not show the impact of thermal bridge mitigation because most current codes ignore thermal bridging and assume the based building is “perfect.” The 2024 International Energy Conservation Code and ASHRAE Standard 90.1-2022 took the first steps to recognize thermal bridging, but they have not been adopted yet.
- There are no absolute targets for building performance, like energy use intensity, just a relative comparison to a base building. This incentivizes designers to make their base building look as bad as possible to minimize the needed performance of the proposed building.
In addition to the large impact of codes, several other reasons why high-performance façade systems are more expensive than BAU were identified:
- A risk-based price premium is applied to higher-performance systems because they are new and/or different from the status quo. The cost associated with re-glazing or remediating a façade is significant, and this risk premium is designed to cover the potential costs of unknowns related to the unfamiliarity of the installation, schedule delays, and the potential for rework or replacement of an unfamiliar or new product. Contractors may provide a high price to discourage using new or unfamiliar systems because of perceived risk.
- There are insufficient high-performance solutions for a competitive market. Innovating in the construction markets is challenging because codes don’t require high performance and do not signal how they will change over time. The perceived risks of adopting new products result in the market requiring a 10-year track record for new products and three equivalent-or-equal products in specifications. Both elongate the product adoption lifecycle and reduce the return on investment (ROI) for innovating companies. Many firms prefer to be fast followers rather than to be first to market with new products.
- There are insufficient resources in design firms to do adequate research and development (R&D) in façade design. Unlike making cars, façades are not mass-produced. Many are custom-designed and fabricated. Some level of R&D is required to optimize designs and evaluate different assembly options or installation methods. Typically, this research is done only if budgets allow as part of the billable hours on a project. Risks of taking on new designs and assemblies could be reduced if design firms had the resources to do this work upfront and outside of billable hours.
The multiple root causes of Barrier 1: High-performance facades are a significant cost increase over BAU, which continues to maintain the status quo cost differential between code minimum performance and the higher performance needed to deliver low-carbon, sustainable buildings that also support human well-being. Barrier 1 directly links to Barrier 2: There is insufficient ROI of high-performance façades. The high cost of high performance relative to BAU costs sets the premium that must be paid back in an ROI.
I will discuss the dynamics of ROI next month. In the meantime, if you want to learn more about this work, please join us at the FTI World Congress in Salt Lake City, Oct. 8-10, 2024, where Steve Selkowitz and I will present it. Ivan Lee will join us from Morrison Hershfield in Vancouver and James Smith of Related in Boston, who will provide insights into the market transformations happening in those jurisdictions.