California Zero Net Energy Buildings Cost Study


A cost-effectiveness study of zero net energy in residential and commercial buildings produced by the Davis Energy Group is available from PG&E. The Executive Summary is shared below; access the report in full here.

Executive Summary. Zero Net Energy (ZNE) buildings combine energy efficient designs with renewable energy generation to zero out net annual energy consumption. These buildings constitute a very small but expanding segment of residential and commercial markets. Of the 143 buildings listed in the New Building Institute “watch list” of ZNE commercial projects, over half are listed as “emerging” projects. Federal and state initiatives, as well as increasingly rigorous California energy efficiency building standards, have generated momentum that is moving designers, builders, and building owners toward ZNE buildings. In California, the passage of AB32 consolidated future statewide goals for reducing Greenhouse Gas (GHG) emissions. Subsequently, the California Public Utilities Commission (CPUC) adopted the Big Bold Initiative, which directed that all new residential and commercial construction be ZNE by 2020 and 2030, respectively. This aggressive policy has sought to nurture a nascent market in high-performance and ZNE building design as a strategy to reduce greenhouse gas emissions.

This study explored the cost-effectiveness of ZNE buildings in the current residential and commercial marketplace through a review of literature, case studies, and interviews with ZNE experts familiar with residential, commercial, and community-scale projects. Peer-reviewed research indicates steady development of high-performance buildings and subsequent ZNE design strategies over several decades. Many of the early residential and commercial examples achieved high levels of energy performance, but at significant additional cost. The falling costs of photovoltaics (PV), combined with advanced energy modeling capabilities that support integrated design processes, have expanded market awareness of ZNE and increased the pool of experts. In addition, changing social attitudes, public policies, and incentive programs has increased the demand for highly energy-efficient buildings.

Research and interviews revealed examples where commercial buildings achieved ZNE (or near-ZNE) status at little or no additional cost. However, the current data set of available ZNE projects is insufficient to allow for statistically-significant comparison of ZNE cost parity with non-ZNE buildings. In the commercial sector, incremental costs for analyzed buildings ranged from $0-23/ft2, but many projects did not report incremental costs making comparisons difficult. . In the residential market, incremental costs for energy efficiency measures (EEMs) ranged from $2-27/ft2, after incentives or tax credits. Decreasing PV costs and power purchasing arrangements are altering the cost-effectiveness balance between efficiency and generation.

Interviews indicated that appropriate design strategies are critical to achieving high performance buildings. Establishing energy targets and utilizing an integrated design process facilitates meeting performance goals while also identifying efficiencies in construction. Successful design teams tend to be experienced and include architects, engineers, contractors, estimators, and building owners early in the design process. Ability to achieve cost effectiveness is still sector-dependent. In the residential sector, the cost for EEMs and PV is simply an incremental increase relative to the cost for standard market rate homes. In the commercial sector, building treatments and configurations vary widely, based on building function and owner preferences. Emerging ZNE commercial buildings often reflect dramatic changes in building design or highly integrated systems, for example utilization of heat recovery or use of passive heating and cooling strategies. This leads to a high variance in costs and complicates comparability analyses, especially given the small sample of projects that currently exist. In the public sector, schools and government buildings, which have established construction budgets based on standardized costs per square foot, can often approach ZNE at cost parity by the application of effective integrated design practices by experienced design teams. Thus, strategies to promote ZNE design and construction should vary by building sector and location.

Project summary findings include the following:


  1. The building industry (developers, builders, subcontractors, brokers, and appraisers) and the general public need more education on the costs, performance, and ancillary benefits of ZNE buildings. Case studies, brochures, and other media efforts, should include detailed substantiation of actual performance and costs. Passage of the SAVE Act would allow for energy cost savings of ZNE homes to be recognized in the appraisal process.
  2. Innovative contracting processes, such as that employed at NREL’s Research Support Facility 222,000 ft2 office building, have been shown to be an effective method for contractually requiring a building to operate at a prescribed energy consumption level. In the early stages of ZNE commercial projects, this requires a detailed modeling effort to define the appropriate energy target. Many of the experts interviewed feel that this approach promotes efficiency in arriving at optimal performance/cost points for the key members of the design team.
  3. The design community is still learning how to develop optimal ZNE packages that optimize the balance of EEMs and PV generation for different building types and climates. Dramatic changes in PV pricing over recent years and an ongoing evolution in cost and performance for some key technologies (e.g. LED lighting) factor into defining this balance point.
  4. According to research compiled by experts who study commercial building rents and market premiums associated with green buildings and PV systems, green buildings and PV systems are valued more highly in the marketplace. It will be interesting to observe these current trends as the ZNE market expands to a broader community.
  5. Developers of community scale projects indicate that the cost and complications related to regulatory requirements present a significant hurdle, particularly for the development of complex projects. Streamlining and simplifying the processes will benefit these projects, particularly multi-family projects where submetering rules complicate centralized plant and PV generation solutions that may offer both cost reduction and energy savings.


  1. Conventional EEM upgrades to a code-compliant new home (e.g. improved windows and insulation levels; high efficiency space conditioning, water heating, and lighting systems) to achieve about 40% reductions in home thermal and lighting energy consumption will cost roughly $2 – $8 per ft2 of conditioned floor area. More advanced design approaches that integrate advanced envelope components, efficient equipment and thermal delivery systems, passive strategies, and emerging technologies, currently may cost three to four times more. At this point, it is not clear whether these advanced approaches will “mature” to the point where they are competitive with falling PV costs (currently at about $8 to $10 per ft2 of conditioned floor area in typical applications).
  2. Innovative strategies for deriving value for the delivery of ZNE or ZNE-capable projects need to be tested and evaluated. A successful example is the Carsten Crossing subdivision in Rocklin, CA. During 2005 to 2007, 84 high performance LEED-certified homes were sold at the subdivision, with a sales rate 2.2 times that of competing neighboring subdivisions. The higher absorption rate significantly reduced the developer’s carrying costs for the project. Early on, the developer had made the decision to price his homes at a comparable level to the competing subdivisions, despite the added costs associated with energy efficiency and 2.4kWdc PV systems. The reduced carrying costs due to faster sales generated cost savings that were nearly five times greater than the incremental construction cost for these homes. Anecdotally, a limited sample of home resales (from June through November 2012) in the Carsten Crossings subdivision (seven homes) as well as neighboring “comparable” subdivisions (fourteen homes) suggest a 12% higher per square foot market valuation for the Carsten Crossing homes.


  1. Industry experts suggest that it is possible to construct ZNE commercial buildings at little or no incremental cost. There is significant variability in the costs of both code compliant and high performance commercial buildings. ZNE commercial buildings put the focus on energy performance goals, while conventional buildings may focus on building amenities and treatments.
  2. Commercial buildings offer greater opportunities for realizing cost tradeoff benefits which can reallocate construction cost savings from HVAC downsizing to other areas, such as architectural/envelope improvements, high efficiency lighting, and higher efficiency equipment. Maximizing performance synergies that reduce first costs and generate energy savings is a key part of the commercial building integrated design process.
  3. Incorporation of precise and well thought out building energy use targets in construction contracts is widely recognized as an effective mechanism in focusing the design team’s effort on an appropriate design solution. The electrical subcontractor from NREL’s ZNE Research Support Facility building suggested that following this approach resulted in a several percent cost savings in their overall bid.

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