TY - JOUR
T1 - Office building deep energy retrofit
T2 - life cycle cost benefit analyses using cash flow analysis and multiple benefits on project level
AU - Bleyl, Jan W.
AU - Bareit, Markus
AU - Casas, Miguel A.
AU - Chatterjee, Souran
AU - Coolen, Johan
AU - Hulshoff, Albert
AU - Lohse, Rüdiger
AU - Mitchell, Sarah
AU - Robertson, Mark
AU - Ürge-Vorsatz, Diana
N1 - Publisher Copyright:
© 2018, The Author(s).
PY - 2019/1/3
Y1 - 2019/1/3
N2 - Deep energy retrofit (DER) of the existing building stock is a meaningful strategy to reduce fossil fuel consumption and CO 2 emissions. However, the investment volumes required to undertake DER are enormous. In Europe, cumulative demand for DER is estimated at close to 1000 billion EUR until 2050. Public expenditures and political measures can help to stimulate and guide DER, but substantial private investments are required to achieve significant results. In this paper, we analyze the economic and financial implications for renovating an office building to the “Passive House” standard. This is achieved by applying a dynamic Life Cycle Cost & Benefit Analysis (LCCBA) to model the cash flows (CF). The model also includes an appraisal of debt and equity financing implications, and a multi-parameter sensitivity analysis to analyze impacts of input parameter deviations. In the second part of the paper, we use the “multiple project benefits” (MPB) concept to identify project-based co-benefits of DER (with a focus on productivity), to make the business case more attractive. Results show that the DER project cash flow over a 25-year period achieves a 21-year dynamic payback with an IRR of below 2%. Levelized Cost of Heat Savings is 100 EUR/MWh with a 70% capital expenditure and 15% interest cost share. The Loan Life Cover Ratio comes out to 1.2. To make the business case more attractive, pecuniary MPBs identified are increased rents, real estate values, (employee) productivity, maintenance costs, and CO 2 savings, in addition to societal benefits. Compared to simpler economic modeling, the dynamic LCCBA cash flow model provides solid grounds not only for DER business case analysis, project structuring, and financial engineering, but also for policy design. CFs from future energy cost savings alone are often insufficient in convincing investors. However, they can co-finance DER investments substantially. Consideration of project level MPBs can offer meaningful monetary contributions, and also help to identify strategic allies for project implementation; however, the “split incentive” dilemma requires differentiation between tenants and different types of investors. Furthermore, the approach supports policy-makers to develop policy measures needed to achieve 2050 goals.
AB - Deep energy retrofit (DER) of the existing building stock is a meaningful strategy to reduce fossil fuel consumption and CO 2 emissions. However, the investment volumes required to undertake DER are enormous. In Europe, cumulative demand for DER is estimated at close to 1000 billion EUR until 2050. Public expenditures and political measures can help to stimulate and guide DER, but substantial private investments are required to achieve significant results. In this paper, we analyze the economic and financial implications for renovating an office building to the “Passive House” standard. This is achieved by applying a dynamic Life Cycle Cost & Benefit Analysis (LCCBA) to model the cash flows (CF). The model also includes an appraisal of debt and equity financing implications, and a multi-parameter sensitivity analysis to analyze impacts of input parameter deviations. In the second part of the paper, we use the “multiple project benefits” (MPB) concept to identify project-based co-benefits of DER (with a focus on productivity), to make the business case more attractive. Results show that the DER project cash flow over a 25-year period achieves a 21-year dynamic payback with an IRR of below 2%. Levelized Cost of Heat Savings is 100 EUR/MWh with a 70% capital expenditure and 15% interest cost share. The Loan Life Cover Ratio comes out to 1.2. To make the business case more attractive, pecuniary MPBs identified are increased rents, real estate values, (employee) productivity, maintenance costs, and CO 2 savings, in addition to societal benefits. Compared to simpler economic modeling, the dynamic LCCBA cash flow model provides solid grounds not only for DER business case analysis, project structuring, and financial engineering, but also for policy design. CFs from future energy cost savings alone are often insufficient in convincing investors. However, they can co-finance DER investments substantially. Consideration of project level MPBs can offer meaningful monetary contributions, and also help to identify strategic allies for project implementation; however, the “split incentive” dilemma requires differentiation between tenants and different types of investors. Furthermore, the approach supports policy-makers to develop policy measures needed to achieve 2050 goals.
KW - Building deep energy retrofit
KW - Business case
KW - Cash flow analyses
KW - Cost benefit analyses
KW - Multiple benefit
UR - http://www.scopus.com/inward/record.url?scp=85050274839&partnerID=8YFLogxK
U2 - 10.1007/s12053-018-9707-8
DO - 10.1007/s12053-018-9707-8
M3 - Article
AN - SCOPUS:85050274839
SN - 1570-646X
VL - 12
SP - 261
EP - 279
JO - Energy Efficiency
JF - Energy Efficiency
IS - 1
ER -