The shifts to lighter, more fuel-efficient motor vehicles and innovations in steelmaking seem to grab most of the attention these days in stories about the metals industry's progress in sustainability. But as housing and commercial construction begin to creep back to healthy levels, the increasing enthusiasm for energy and product efficiencies in buildings is creating important new markets for metals.
While U.S. construction and design jobs have declined since 2008, green building has been rising as a share of the construction market. According to McGraw-Hill Construction, the share of non-residential construction that's “green” has risen from 2% in 2005 to 41% in 2011. And Harvey Bernstein, vice president of industry insights for McGraw-Hill Construction, predicts that nearly half of all commerc
ial construction projects will be green by 2015. “What may have looked like a fad truly isn't now,” says Bernstein. “The shift has been amazing.”
Green jobs already comprise more than one-third of all projects in the architectural, engineering and contractor communities, and that's just the start. Pike Research, a Boulder, Colorado, consulting firm that specializes in clean technology research, predicts that the global market for retrofitting commercial and public buildings to make them more energy-efficient will nearly double from $80.3 billion in 2011 to $151.8 billion by 2020. That creates an opportunity for manufacturers, fabricators and distributors in the metals industry willing to fill the rising demand for green products.
Already, a growing number of state and municipal governments—stretching from California to Vermont—have begun rewriting commercial building codes that require new buildings to operate with smaller carbon footprints. According to the American Institute of Architects, more than 1 in 5 U.S. cities with populations greater than 50,000 now have policies that promote green buildings.
On the federal level, President Obama added to the momentum last December when he pledged $4 billion in government and private-sector funds to retrofit more than 1.6 billion square feet of commercial real estate with energy-efficient materials. “Investments in building retrofits and energy efficiency can make a real difference in the American economy by creating jobs, growing our industries, improving businesses' bottom lines, reducing our energy bills and consumption, and preserving our planet for future generations,” said former President Bill Clinton, who spearheaded the effort.
How Green is That?
A trash-to-steel process shows promise.
The words “green” and “steel” have taken on a startling new association for Veena Sahajwalla. Growing up in Mumbai, India, Sahajwalla remembers the mountains of used tires, bottles and other rubbish that lined the streets—and the widows and orphans who picked through them for sustenance.
“Women would collect these bottles to exchange them at the scrap guy,” she recalled in an essay last December. When she studied engineering in the mid-1980s at the Indian Institute of Technology, Sahajwalla decided her cause was to find new uses for the world’s waste: “I wanted to turn waste into a valuable resource, not just give rubbish a facelift.”
Over the past decade, the University of New South Wales researcher has honed a revolutionary process for making “green steel” by mixing plastic and rubber waste into the scrap-reprocessing phase. The plastic waste creates carbon reactions that are cleaner and more efficient—and that reduces the amount of coal needed in the process.
“It’s such an exciting opportunity,” says Paul O’Kane, a technical manager at Sydney-based Arrium Limited, an Australian steelmaker that has licensed Sahajwalla’s technology. “Originally, this project was all about environment: ‘What can we do to get rid of landfill?’ Once we started the trials, we saw there was a major improvement to our productivity and a reduction in our electrical energy and our costs.”
At a time when public awareness of global warming and appreciation of manufacturing sustainability is rising, innovations like this show the benefits that await metals companies embracing the green movement. The steel industry already has a good story to tell: Over the past 30 years, the industry has reduced the energy needed to produce 1 ton of steel by 50%, and Sahajwalla’s work shows the potential for further gains.
As Edwin Basson, director general of the World Steel Association, told attendees in June at the United Nations Conference on Sustainable Development in Rio de Janeiro, Brazil: “Sustainable development in the next half-century will be impossible without steel.”
– Dean Foust
The Energy Price Question
But with energy prices falling, the question remains whether corporations—which have a much shorter investment horizon than governments—will maintain enthusiasm for green building. For one, the advent of new drilling technologies such as fracking, which has helped lower the U.S. wellhead price for natural gas by 81% since June 2008, could reduce the short-term payoff from making buildings more energy-efficient. And the size of the market remains relatively small: Pike Research notes that just 0.2% of the 5 million commercial buildings in the United States have been certified green. That's either a sign of the opportunity ahead, or, to skeptics, an indication that this remains little more than a niche market.
Of course, there's no certainty energy prices will keep falling. And while the energy savings and tax credits can be incentive enough, they are only a few of the reasons why companies are investing in green offices, factories and warehouses.
For companies, going green also helps burnish their environmental credibility with younger consumers—and workers—who are more environmentally conscious. In a 2008 survey of large employers that had implemented green retrofits, Deloitte Consulting and Charles Lockwood found that 93% reported a greater ability to attract talent, 81% claimed greater employee retention and 100% claimed an increase in their brand equity.
For their part, developers and landlords have concluded that going green gives their project a distinctive edge in a crowded market. A 2010 study by researchers from the University of California at Berkeley and Maastricht University in the Netherlands found that U.S. green buildings earning LEED or Energy Star certifications are able to charge 3% to 8% higher rent, enjoy greater occupancy rates and sell for 16% more than comparable properties.
“For policymakers and regulators, this research shows that certain industries already adopt green real estate practices, without regulatory coercion,” says the study, led by Piet Eichholtz, a real estate and finance professor at Maastricht. “The higher initial outlay that may be needed for a newly constructed, sustainable office building, or for the refurbishment of an existing office building, can be recouped through energy savings and lower risk premiums, or through higher net rents.”
The Metals Opportunity
For the metals industry, the biggest opportunities lie in supplying the beams, roofing and other structural components for everything from office towers and warehouses to residential housing. The opportunities for steel are particularly broad: The Bahrain World Trade Center, in Manama, became the first skyscraper to integrate wind turbines right into the design.
It's a big market—and one that's ripe for construction materials that are more energy-efficient. Buildings currently account for as much as 68% of electricity use and 48% of greenhouse emissions. And according to the U.S. Department of Energy, about 30% of the $200 billion spent on the energy to operate commercial buildings is wasted.
As businesses, developers and government officials search for ways to close that gap, steel has shown it can be part of the solution. Steel is lightweight, cost-effective and its non-combustible properties means that developers can enjoy 62% savings over wood in builder's risk insurance—and similar savings afterward on property insurance, according to Nuconsteel, a Nucor division that makes cold-formed steel framing.
But steel's real calling card is that it's recycled, and recyclable. Today, the average recycled content of American steel is roughly 46%. Equally important, much of the steel in buildings being demolished can be used again, further reducing the waste that ends up in the landfill. That high recycled content and recycling rate are key reasons why the U.S. Green Building Council—which administers the LEED rating system—gives structural steel the maximum credit allowed. “The long-term reclamation rate for steel is something that isn't talked about, but is very high,” notes Greg Crawford, executive director of the Steel Recycling Institute.
And while wood has long enjoyed favored status among environmentalists for being naturally renewable and biodegradable, the wood industry now finds itself under attack for its deforestation of old-growth forests and its use of arsenic-laden preservatives and other toxic chemicals that can present disposal problems.
Crawford notes that while a 2,000-square-foot home built with wood would require about 45 trees— which represents an acre's worth of deforestation—only the equivalent of six scrapped cars is needed for the same sized house. And according to the Native Forest Council, if every residential homebuilder switched to steel, the change would have nearly three times the positive effect on carbon emissions than requiring every new car and light truck to be green by doubling the gas mileage.
The Metals Challenges
Still, the metals industry must overcome a number of challenges—and perceptions—before it steals market share from wood-based products. For one, the steel manufacturing process is extremely energy-intensive, even for recycled steel, and the process of extracting the raw materials used in steelmaking carries significant environmental issues. And then there are the cost differences, which can be sizable for products like steel roofing. As competitors have noted, for the cost of a fabricated steel roof you could buy a traditional shingled roof and a couple of solar panels.
But the bigger hurdle for the metal industry is builder concerns over potentially higher energy costs caused by heat transfers known as “thermal bridging.” The bridging occurs when the outside temperature is warmer or cooler than the inside space. Thermal bridging has historically been an issue for steel, because it conducts heat at much greater levels than wood. For instance, a 20-gauge (0.04-inch-thick) steel stud conducts roughly 10 times the heat of a 1.5-inch wood stud. If contractors don't take steps to minimize this heat transfer, it can result in higher energy use, require the installation of larger heating and cooling equipment, and lead to dust or mildew stains as condensation builds on the warm side of walls.
For many developers, “the thermal issue is extremely important,” notes Stanley Rhodes, president of Scientific Certification Systems, an Emeryville, California-based firm that conducts independent certifications of environmental, sustainability and safety claims. If left unresolved, it can “take steel right off the table.”
That said, Rhodes is encouraged by recent progress from research labs and the metals industry at developing new approaches for reducing thermal bridging. “When you look at the new wall systems, I think the industry has come a long way to solving the problem,” he says. For instance, housing material suppliers such as Spokane, Washington-based Scafco have developed modified steel studs that use perforations throughout the body of the stud to reduce heat transfer.
And researchers at the Oak Ridge National Laboratory have developed a system of trusses and foil-faced insulation that wraps around a steel frame to minimize thermal bridging. While this approach technically doesn't eliminate thermal bridging, recent tests indicate that it does increase the overall R-value of a wall by as much as 20% more than insulation alone. (R-value measures insulation's ability to resist the heat traveling through it.) Rhodes says that his firm teamed with researchers from Cal-Berkeley to capture overnight thermal images of four wood-framed and four steel framed homes in the Brentwood section of Los Angeles.
Compared to the steel-framed homes, “the leakage of the wood homes was amazing,” he recalls. “If you looked at the thermal images, you would have thought the houses were on fire.”
The Growing Market for Metal Roofing
And on the roofing front, industry officials note that the higher costs of reflective metal roofing are more than offset by the energy savings over traditional roofing. According to a 2004 study by the Lawrence Berkeley National Laboratory, the most recent authoritative research, installation of reflective metal roofing can save building owners 20% or more on their cooling costs. What's more, the newer metal roofing materials are coated with paints containing infrared pigments that increase reflectivity and thermal emissivity, which in turn keeps the roof as much as 22Â°F cooler than a traditional roof. That helps reduce smog, while mitigating the so called “heat island effect.”
But the real salvation for metal roofing may come from the growing installation of rooftop solar panels.
That's because it makes far more sense to install solar panels—which have productive lives of up to 40 years—on a metal roof with a similar lifespan than a shingled or membrane roof that will need to be replaced in 15 to 20 years. When the roof needs to be replaced, the cost of disconnecting, removing and reinstalling the solar panels can be prohibitive.
For all of the recent strides by the metals industry to green itself, the market is changing quickly and the competition isn't standing still. The industry must continue churning out innovative new processes and products that leapfrog the competition.
Dean Foust was a writer, editor and bureau chief for BusinessWeek for 23 years. He now produces thought leadership content for corporate clients, including a number of Fortune 500 companies.