The Federal Government Is Making Energy-Efficient Roofing Attractive

Small businesses are now able to deduct the full cost of replacing a roof on an existing non-residential building in the year the project was completed instead of depreciating that cost over a 39-year period, as was previously required. Photo: SOPREMA

It is fair to say that Washington, D.C., is far from dull. From the recent Tax Cut and Jobs Act to rolling debates on passing a federal budget, there is a great deal going on at the federal level that impacts the building and roofing industries. In particular, new reforms allow qualifying building owners to expense, or deduct, up to $1 million for the cost of certain building improvements in the year the work is performed, including adding insulation during roof replacement projects to meet or go beyond modern building energy code requirements. The impact can be significant for capital improvement projects. For example, a building owner that expenses the cost of a full roof replacement can reduce the net cost of the entire project by 25 percent to 30 percent.

Commercial Building Roof Replacements

The Tax Cut and Jobs Act, signed into law by President Trump on December 22, 2017, includes a provision that reduces the overall cost associated with re-roofing and significantly improves the cost-effectiveness of commercial roof replacements that comply with building energy codes. The vast majority of state and local governments require minimum insulation levels for both new roofs and roof replacements (but not for roof repairs or recovers). These requirements apply to existing buildings because the most economical time to improve a roof’s thermal performance is when the roof membrane is pulled off and replaced. Also, roof replacements are one of the best opportunities for improving energy efficiency in existing buildings, which account for 40 percent of U.S. energy use.

Starting in 2018, the new federal tax law expands the definition of “qualified real property” under the small business expensing provisions of Internal Revenue Code section 179 to include improvements to existing nonresidential roofs. Section 179 allows businesses to fully expense (deduct) up to $1 million (indexed for inflation after 2018) in one year for qualified business expenses, such as equipment purchases and specific building improvements. With this change, small businesses are now able to deduct — in the year completed — the full cost of replacing a roof on an existing non-residential building instead of depreciating that cost over a 39-year period, as was required under prior law. As a mechanism intended to limit the deduction to small businesses, the benefit is phased out for businesses that spend more than $2.5 million (also indexed for inflation) on qualified equipment and real property. This change takes effect in 2018 and, unlike some provisions of the new law, is permanent.

A typical scenario under which a commercial building roof replacement is required to comply with a building energy code is one where an older building with a low-slope roof has R-11 or R-12 insulation in the roof prior to the roof replacement. The R-12 assumption is based on a U.S. Department of Energy (DOE) study that evaluated the level of existing insulation in commercial building roofs. For most of the country, current building energy codes require roof replacements to have a minimum level of R-25 or R-30, depending on the climate zone.

The average simple payback period for meeting the energy code is 11.6 years, according to a comprehensive energy modeling study completed in 2009 (“Energy and Environmental Impact Reduction Opportunities for Existing Buildings with Low-Slope Roofs,” produced by Covestro).

The payback period is the amount of time it takes for the energy savings to equal the cost of installing the additional insulation. By allowing a building owner to deduct the full cost of the roof replacement, including the cost for installing additional insulation, the net cost of the entire project is reduced by 25 percent to 30 percent, depending on a tax payer’s tax rate. (The Tax Cuts & Jobs Act reduced the corporate tax rate to 21 percent, but the pass-through rates, which are more relevant to small businesses, are closer to 30 percent, which increases the impact of this new deduction.) More importantly, the deduction shortens the average payback period on the cost of installing additional insulation to 8.1 years, making the investment in energy efficiency even more cost effective for the building owner.

Disaster Relief Reforms and Resilient Buildings

Recent maneuvers by Congressional budget writers provided several positive reforms that will impact the resiliency of buildings in some of the most vulnerable parts of the country.

First, Congress passed improvements to the Federal Cost Share Reform Incentive that increases post-disaster federal cost-share with states from 75 percent to as high as 85 percent on a sliding scale based on whether a state has taken proactive steps to improve disaster preparedness. These steps can include the adoption and enforcement of the most recent building codes. This further incentivizes states to maintain robust and current building codes, including the energy code.

Second, under reforms to the Stafford Act, federal disaster relief funds administered by the Federal Emergency Management Agency may be used to replace or restore the function of a facility to industry standards without regard to pre-disaster condition and replace or restore components of the facility not damaged by the disaster where replacement or restoration is required to fully restore the function of a facility. This allows post-disaster funds to be more effectively used to improve the resiliency of damaged buildings and should create opportunities for higher performing roof systems to replace those damaged in disasters.

While the built environment is likely to benefit under recent Congressional action, other policy priorities for the construction and energy efficient industries have been left unresolved. For example, Congress “extended” several clean energy and energy-efficiency related tax provisions, including the Section 179D deduction for commercial building energy efficiency. However, in head-scratching fashion, this and other tax provisions were only extended through December 31, 2017. This means more work is ahead to preserve the policies for the long term and add much needed certainty to the marketplace.

Unpredictable is a polite (and likely understated) description of the policy environment in our nation’s capital. You need not look beyond the recent FY2018 budget deal for an example. Building energy efficiency advocates spent countless hours educating lawmakers on the importance of funding federal research led by the Department of Energy (DOE). Fearing a federal budget that would cripple these vital programs by slashing budgets, advocates saw an 11 percent increase to the DOE’s Office Energy Efficiency and Renewable Energy budget, which leads research on building energy performance. And while history is a poor predictor of future success, recent action impacting buildings demonstrates that policymakers understand the need for strong policies that encourage and lead to more efficient and resilient construction.

XPSA Supports Montreal Protocol Amendment Accelerating HFC Phase-Out

The Extruded Polystyrene Foam Association (XPSA) , whose members include the major extruded polystyrene foam (XPS) insulation manufacturers in North America, has announced its support for the Montreal Protocol amendment hastening the global phase-down of hydrofluorocarbons (HFCs) to protect the stratospheric ozone and mitigate the effects of climate change.
XPSA has expressed support for both the Montreal Protocol and the Environmental Protection Agency’s (EPA’s) Significant New Alternatives Policy (SNAP) Program, under which XPS manufacturers are transitioning out of using HFC-134a. XPS manufacturers have met or exceeded the timelines set forth and will continue to do so based on science and environmental stewardship. XPSA’s members are committed to eliminating HFCs from their products by the EPA SNAP deadline of January 1, 2021.
“The phase-out of HFCs will be a milestone within the XPS industry’s stewardship and sustainability objectives and a progression of our ongoing search for technology improvements to better serve our customers and protect our environment,” said John Ferraro, executive director of XPSA.
Replacing HFC-134a requires a reconsideration of the entire chemical makeup of XPS insulation products. The EPA understands that XPS manufacturers need time to identify alternatives to HFC-134a; assess and address risks of alternative components; analyze capabilities and make modifications to equipment, facilities, manufacturing processes, and worker safety and training programs; work with suppliers on equipment and component needs; build and engage in pilot- and plant-scale trials; obtain permits, approvals, and financing; and address commercialization issues such as ensuring production capacity to meet global market demand.
XPS’s properties heighten a structure’s energy efficiency, which both the U.S. Department of Energy (DOE) and EPA acknowledge to be one of the greenhouse gas (GHG) emissions reduction strategies. In fact, ASHREA and XPS industry estimates indicate that homes using XPS insulation sheathing save enough energy in the first year to heat over 500,000 homes in the U.S. XPS reduces GHG emissions by lowering the energy consumption of a structure, which diminishes the amount of energy spent in the distribution of energy, the delivery of which requires 3.34 units of energy to send 1 unit to a building for user consumption. Environmental Product Declaration (EPD) data shows that the reduced energy consumption due to XPS foam pays back the embedded CO2 multiple times over the life of a building.

There Is Evidence Cool Roofs Provide Benefits to Buildings in Climate Zones 4 through 8

FIGURE 1: Reflective roof requirements in ASHRAE 90.1 and IECC only apply in Climate Zones 1 through 3, shown here on the ASHRAE Climate Zone Map. SOURCE: U.S. Department of Energy

FIGURE 1: Reflective roof requirements in ASHRAE 90.1 and IECC only apply in Climate Zones 1 through 3, shown here on the ASHRAE Climate Zone Map. SOURCE: U.S. Department of Energy

Reflective roofs are a tried and true way to improve building energy efficiency and comfort, generate net energy savings and help mitigate summer urban heat islands. Reflective roofs work by reflecting solar energy off the roof surface, rather than absorbing the energy as heat that can be transmitted into the building and surrounding community.

The simple act of switching from a dark to a light-colored roof surface has a number of benefits. Buildings protected by these types of roofs require less energy to cool and help building owners and residents save money. Cool roofs on buildings without air conditioning can save lives during heat waves by lowering indoor temperatures. Cooler city air is safer to breathe and less polluted, which makes cities more livable and less vulnerable during heat waves. Increasing the reflectivity of urban surfaces can also offset the warming effect of green- house gases already in the atmosphere and help us address the challenges of climate change. Taken together, these benefits are worth billions of dollars to the growing number of people that live and work in U.S. cities.

The energy-savings case for cool roofs in warm climates is clear. Widely adopted model building-code systems, ASHRAE and the IECC, address roof reflectivity. ASHRAE 90.1-1999 added a credit for highly reflective roofs with IECC allowing compliance via ASHRAE in 2003. ASHRAE 90.1-2010 added reflectivity requirements for new and replacement commercial roofs in Climate Zones 1 through 3. IECC added the same requirements in its 2012 version. (Figure 1 shows the ASHRAE climate zone map for the U.S.)

There is, however, an ongoing debate about whether cool roofs deliver net energy benefits in northern climates that experience cold winters and warm to hot summers (Climate Zones 4 through 8). Do reflective roofs remain beneficial as the cold weather season kicks in? The same properties that allow reflective roofs to keep buildings cooler in the summer may also cause them to make buildings colder in the winter. Theoretically, buildings with cool roofs could require more energy to reach a comfortable temperature in winter—a consequence known as the “winter heating penalty.” Furthermore, building codes tend to require more roof insulation in colder climates than warmer climates, potentially reducing the energy-efficiency benefits of roof surface reflectivity.

FIGURE 2A: Annual energy-cost savings ($1 per 100 square meters) from cool roofs on newly constructed, code-compliant buildings with all-electric HVAC. SOURCE: Energy and Buildings

FIGURE 2A: Annual energy-cost savings ($1 per 100 square meters) from cool roofs on newly constructed, code-compliant buildings with all-electric HVAC.
SOURCE: Energy and Buildings

The “winter heating penalty” and the impact of insulation are considerations when installing reflective roofs in some cold climates, but their negative effects are often greatly exaggerated. The sun is generally at a lower angle and days are shorter in winter months than summer months. In fact, in northern locations winter solar irradiance is only 20 to 35 percent of what is experienced in summer months, which means the sun has a reduced impact on roof surface temperature during the winter. Heating loads and expenditures are typically more pronounced in evenings, whereas the benefit of a darker roof in winter is mostly realized during daylight hours. Many commercial buildings require space cooling all year because of human activity or equipment usage, thereby negating the little—if any—heating benefit achieved by a dark roof.

Two new studies, along with decades of real-world examples from the marketplace, indicate that reflective roofs are an effective net energy (and money) saver even in our coldest cities.


In a study recently published in Energy and Buildings, researchers from Concordia University in Montreal evaluated the energy-consumption impact of adding cool roofs to a number of retail and commercial buildings in Anchorage, Alaska; Milwaukee; Montreal; and Toronto. The researchers looked at older, less insulated building prototypes, as well as newer buildings built with code-compliant levels of insulation. Unlike earlier work evaluating the impact of roof reflectivity on building energy consumption in cold climates, this new analysis also accounted for the impact of snow on the roof during winter months.

FIGURE 2B: Annual energy-cost savings ($1 per 100 square meters) from cool roofs installed on older buildings with all- electric HVAC. SOURCE: Energy and Buildings

FIGURE 2B: Annual energy-cost savings ($1 per 100 square meters) from cool roofs installed on older buildings with all- electric HVAC.
SOURCE: Energy and Buildings

Snow has two impacts on the roof that are relevant to understanding the true impact of roof surface reflectivity on energy consumption. First, snow helps insulate the roof. As a porous medium with high air content, snow conducts less heat than soil. This effect generally increases with snow density and thickness. Second, snow is white and, therefore, reflective. At a thickness of about 4 inches, snow will turn even a dark roof into a highly reflective surface (approximately 0.6 to 0.9 solar reflectance).

When snow is factored in, the benefits of cool roofs in cold climates be- come much clearer. Figure 2a shows the net energy savings and peak electricity reduction with and without snow for cool roofs installed on newly constructed, code-compliant buildings, assuming all-electric HVAC. Figure 2b shows savings from cool roofs installed on existing, older vintage buildings. The paper, available from the journal Energy and Buildings also includes results with gas HVAC systems.


Another argument often heard against reflective roofing in cold climates is that buildings in northern climates tend to have higher levels of roof insulation that reduce or negate the energy-savings impact of roof surface color. A new field study and model analysis of black and white roof membranes over various levels of insulation by the City University of New York and Princeton University and Princeton Plasma Physics Lab, the latter two of Princeton, N.J., clearly rebuts the “insulation versus reflectivity” tradeoff.

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