Deep energy retrofit (DER) of the existing building stock is a meaningful strategy to reduce fossil fuel consumption and CO2 emissions. However, the investment volumes required to undertake DER are enormous. In Europe, cumulative demand for DER is estimated at close to 1,000 billion EUR until 2050. Public expenditures and political measures can help to stimulate DER, but substantial private investments are required to achieve significant results.
In this presentation, we analyze the economic and financial implications for investors 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 Benefits’ (MB) concept to identify project-based co-benefits of DER, to make the business case more attractive. We categorize the identified MBs in: 1) monetary, 2) un-quantified project, and 3) societal benefits.
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 MBs identified are increased rents, real estate values, (employee) productivity, and maintenance costs and CO2 savings, in addition to societal benefits.
Compared to simpler economic modeling, the dynamic LCCBA cash flow model provides solid grounds 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 MBs can offer meaningful monetary contributions, and also help to identify strategic allies for project implementation; however, the ‘split incentive’ dilemma is still present/ requires differentiation between tenants and different types of investors. Furthermore, the approach supports policy makers to develop policy measures needed to achieve 2050 goals.
Speaker: Jan W. Bleyl, Energetic Solutions, Austria
The hospital sector has not been studied in depth in terms of exploring its large energy efficiency and behaviour change potential. This field research trial in one of the largest hospital networks in North America shows how a collective impact approach and collaborative co-design of behavioural interventions can lead to big, measurable savings of up to 20% on a year-to-year basis.
The Carolina Healthcare System (CHS) in the Carolinas is among the leading, and largest healthcare organisations in the U.S., employing 62,000 people in 940 care locations. The system has 7,500 beds and over 12 million patient encounters every year. In its commitment to energy management, efficiency and conservation, the organisation is pursuing strategies to decrease its energy use. One such strategy is implementing programmes that encourage building facilities staff to change their behaviour. The first phase in the CHS behaviour change program, Energy Connect, is an intervention that encourages operators to detect and act on energy inefficiencies within the buildings they are responsible for. Building operators account for a small percentage of people in each building, but have a disproportionally high impact on energy use. Therefore, if they were to change their behaviours, they could dramatically reduce overall energy use. IEA DSM Task 24 and ACEEE’s Behavior and Human Dimensions of Energy Efficiency program helped the Sustainability Director of CHS to co-create a highly collaborative behaviour change field trial.