What is LEED?

Paul Holland: My name is Paul Holland. I'm a general partner at Foundation Capital, and I'm here today to talk to you about: What is LEED?

LEED is a standard associated with green building and green construction put out by the U.S. Green Building Council. The USGBC is a collection of architects, public policy-makers, and designers, who have worked out a rating system associated with green building. And the rating system is around what we call "Leadership in Energy and Environmental Design."

So, what are the pieces that come into play as we talk about this? Well, we're all familiar with very high energy costs. We're familiar with global warming as a moral imperative. These things boil down into individual areas, such as water, energy, waste, materials, and site. So let's look at each one in turn, and as we do, let's interpret it as it relates to the LEED system.

So, as we think about LEED, LEED has various different levels associated with it, depending on the number of points that you garner as you do your project: Certified, Silver, Gold, Platinum. So let's walk through, and say, for example, with water --- water, obviously, today, is a precious commodity. It's going to become even more so over the next 10 or 20 years. Projects that are LEED Platinum tend to recycle their water or do very aggressive things to try to reuse or recycle waters in the course of the process.

Energy. Today, people are building energy-regenerative buildings, meaning the building creates more energy than it uses. Those type of buildings are making their way up the ladder and becoming what we call LEED Platinum buildings.

Waste. One of the important things we think about is: what do we do with the construction waste associated with the project? When the building is deconstructed, we want to make sure that's handled in a socially responsible way. But in addition, once you've started your new building as a commercial enterprise, how are you handling things like recycling, reuse, and so forth?

Materials. There's a whole movement taking place around green building materials, whether it be drywall or siding or whatever it might happen to be. Each one of these things are becoming greener and greener, with lower embodied energy and lower carbon off-gassing in these materials. Again, the more of these you use, then the more you work your way up the ladder toward achieving a LEED Platinum status.

And then, finally, the site. You're going to choose a site that's environmentally conscious, and in addition to that, you're going to make sure that you occupy the site in such a way that you don't interfere with your neighbors in a way that would be irresponsible.

So we've got site, water, energy, waste, materials, all playing into the various different standards associated with LEED and getting you points up the ladder to get you to the Platinum. Now, what is it all going to cost? That's the bottom line.

So let's think about it. You've got two main elements of cost associated with any construction project. You've got the capital cost, and you've got the operating cost. So, when you're building a green project today, frankly, because it's relatively new, you're probably going to pay a higher capital cost associated with the project than you would if it were a traditional construction.

However, let's look what happens over time. Over time, that green project, the operating expenses will plummet, and the traditional project, with the price of oil increasing and all the other imperatives that are happening around the energy markets, the price of operating that building is going to increase. So, over time, building green saves you money and helps you make money.