Workshop in Mexico City Explores Opportunities and Barriers for Net Zero Energy Buildings in Mexico

Globally, buildings account for 40 percent of total energy consumption and 33 percent of all greenhouse gas (GHG) emissions.  In order to reduce energy consumption and combat climate change, the Net Zero Energy Building (NZEB) consortium is working to scale up an innovative kind of building—one that meets 100 percent of its energy needs through on-site renewables on a net annual basis. This net zero energy building is the most ambitious model of high performance buildings today and currently only about 15 buildings in the world have been certified as NZEB. Although none currently exist in Latin America, the NZEB consortium is looking into options for financing and implementing the project in Mexico City, Monterrey and other Mexican cities. With efficient technologies already available in the market, there is potential to reduce energy consumption between 30 percent and 80 percent in buildings, creating economic and environmental benefits for people and the city. 

On March 10, 2016 a workshop organized by CESPEDES—affiliated with the World Business Council for Sustainable Development (WBCSD)—in partnership with CTS EMBARQ Mexico and the Citi-WRI-C40 project of WRI Ross Center for Sustainable Cities explored the potential options for financing and implementing Mexico’s first net zero energy building. The discussions revolved around four hypothetical scenarios: an office building or hotel in Mexico City, an office building in Monterrey, and an academic building in Merida. Stakeholders from national and local governments as well as private and non-governmental organizations discussed the opportunities and challenges for the country, from finance, technical feasibility and regulation to market demand and awareness of the end user.

Participants reached a consensus that three elements will be critical to catalyzing a market for net zero energy buildings in Mexico.

Demonstrating a Return on Investment (ROI)

While a NZEB’s operational costs are thought to be lower than those of standard buildings, little data currently exists to support this. However, NZEBs require much more initial investment than conventional buildings in Mexico and elsewhere. This creates a financing challenge, given that the Mexican construction industry—as in most places—operates on shorter timeframes of two to four years, while the expected payback of an NZEB is at least 7-10 years, depending on features like energy and material costs.

Overcoming this barrier will require demonstrating that NZEBs generate a real return on investments, and generating data to prove this. In the short term, there is a need for champions from both the public and corporate sectors to show leadership, for example by renovating their own buildings and sponsoring demonstration projects. In the medium term, it will be important to increase the return on investment through win-win business models, such as those in which developers achieve greater economies of scale by jointly purchasing net zero energy construction materials and services in bulk.

Overcoming Misaligned Incentives

Throughout the workshop, participants returned to a major challenge for NZEBs: the fact that there is a disconnect in the value chain between those who construct buildings (developers) and those who use them (office workers, residents, hotel visitors). “Building cheap to sell quickly” is a common phrase in the construction sector, both in Mexico and internationally. However, for a NZEB to work, those people who benefit from the potential savings must be able to communicate to developers that they prefer high performance buildings.

Participants noted that integrating and aligning incentives along the value chain would not only build trust in the NZEB market, but would also lead to a greater return on investment.  For example, coordinating the sizing of a building’s heating and cooling systems can avoid inefficiencies, which are a frequent cause of higher project costs. This requires that designers, engineers and technical actors work closely with one another. However, if there are no incentives to find a common solution, systems risk being mismatched and project costs much higher.

Aligning Building Design and Operations

A third theme of the workshop was the importance of managing energy use during the operational phase of a building. Many energy-saving technologies already exist, and good design can help reduce energy demand by as much as 80 percent. This includes passive design, air sealing to prevent leakages, and interconnecting large neighboring buildings to better manage energy use. Sharing renewable energy installations between buildings is also a potential way to make NZEBs work in some of Mexico’s more extreme climates, as were technologies like geothermal heat exchanges  and photovoltaic panels that can be integrated into a building’s façade.

Good building design, however, must be complemented by good building operations. Automated building management systems can help control a building’s energy consumption. But building owners, operators, and end users also need to better understand the value of their net zero energy building and how it affects consumption habits and energy use in order for NZEBs to truly work.

Creating a market for NZEBs in Mexico

Lastly, Vicente Saiso, Corporate Director of Sustainability at Cemex, noted that while the current regulation is not directly a barrier, it does little to encourage market transformation. Martha Niño, Director of Urban Sustainability at SEMARNAT, added that demonstrating the feasibility of NZEBs will help the market move above Mexico’s minimum building standards. The NZEB consortium will continue to work with developers by providing the necessary knowledge, tools and forum for open dialogue. This ongoing conversation will continue to explore financing options and innovative business models that take into account stakeholder expectations and capabilities to ensure that momentum for Net Zero Energy Buildings grows throughout Mexico. 

The partnership between WRI, the Citi Foundation and C40 helps develop locally-customized business models that can accelerate the implementation of sustainable solutions around the world. Learn more here