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Key Publication: Building deep energy retrofit: Using dynamic cash flow analysis and multiple benefits to convince investors

25 July 2017

Presented at the eceee Summer Study 29 May–3 June 2017, Presqu’île de Giens, France

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Abstract

Deep energy retrofit (DER) of existing buildings is a meaningful strategy to reduce fossil fuel consumption. However, investment volumes required for DER are enormous. In Europe, cumulative demand 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 paper, 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 a multi-parameter sensitivity analysis to analyze impacts of parameter deviations. In the second part, 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) unquantified 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% CAPEX and 15% interest cost share. Pecuniary MBs identified are increased rents, real estate values, productivity, maintenance costs and CO2 savings.

Compared to simpler economic modeling, the dynamic LCCBA cash flow model provides solid grounds for business case analyses, project structuring and financial engineering, but also for policy design. CF 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. Furthermore, the approach supports policy makers to develop policy measures needed to achieve 2050 goals.


Task 24 ST6&7 – Background for Green Leases in Commercial Office Buildings in Sweden

8 May 2017

This work was based on a literature review and interviews with commercial office property landlords and tenants, following the decision to focus on green leases in commercial office buildings as the top DSM priority for Sweden.


Task 24 – Subtask 6 & 7 Case Study Analysis – ICT Use in higher Education – Netherlands

28 April 2017

This is the comparative case-study analysis of two cases focusing on information and communication technology (ICT) use in the higher-education sector, at the Universities of Cambridge and Utrecht. It complements and contrasts Subtask 6 & 7 work on developing an ICT intervention with the University of Groningen.


IEA DSM Task 17 – Subtask 13: Conclusion and Recommendations

12 October 2016

Executive Summary

Use cases for combining application of DG-RES, DR and storage technologies in commercial and grid operation for providing demand side flexibility on various timescales and aggregation levels have been assessed in IEA DSM Task 17 Phase 3. Technologies have been also investigated in terms of financial and technological implementation potential as well as their availability.

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IEA DSM Task 17 – Subtask 12: Best Practices and Lessons Learned

12 October 2016

Executive Summary

This document is the third report of the Task 17 deliverables. Real-world implementations are analyzed and lessons learned are captured. Based on collected information from pilots that were presented during conferences and workshops organized by the Task 17 team, the results and findings of these finished projects are further analyzed in terms of effectiveness. The analysis is in terms of the local context of the participating country and the benefits of aggregation in real-world living lab environments with different types of individual demand response technologies. There are a number of lessons learned from these experiences.

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IEA DSM Task 17 – Subtask 11: Valuation Analysis of Residential Demand Side Flexibility

12 October 2016

Executive Summary

The document starts with background about the ongoing transition of the energy system and demand response integration. Use cases on how flexibility can create value are discussed in details with respect to each actor and their corresponding roles, with some examples given. These use cases are markets, network operators, customers and the society. Coordination schemes and their introduction and design of markets are presented and analyzed.

A detailed study on existing valuation schemes and cost-benefit analysis frameworks with a summary and overview of boundary conditions and scenarios is part of chapter 4. This is supported by an extensive number of existing valuations of smart grid projects with a particular focus on residential demand response.

The document continues on the subtask 10 deliverable that describes actors and their roles, as well as potentials which can be further translated into commercial and grid operation cost/benefit analyses.


IEA DSM Task 17 – Subtask 10: Roles and Potentials of Flexible Consumers and Prosumers

12 October 2016

Executive Summary

Use of active end-user flexibility in electricity demand, supply or storage at the residential level is still in its infancy. User acceptance issues, market design and regulation, grid and market operational constraints, technical issues with communication protocols and response automation and, as a result of that, the lack of appropriate sound business models form tantalizing challenges for DSM. With the new world-wide de-carbonization agreements, new additional objectives and constraints are added to the supply/demand optimization schemes for the electricity system to include environmental and resiliency targets.

This document is the first in a series to introduce how value creation in power systems of end user flexibility can be enhanced. It functions as a preface by describing the interfaces, roles, and potentials of providing flexibility services. The role of residential end-user equipment in buildings in providing flexibility services in the future energy system is identified. Technical potentials (kW and kWh) of distributed energy resources (distributed generation, storage, and responsive load) are also included in this analysis. Moreover, identified technologies are assessed regarding their potential applicability and maturity in the context of different technical and commercial frameworks.

The document is the prelude to the subtask 11 deliverable that describes how these potentials can be further translated into commercial and grid operation cost/benefit analyses.


Task 25 – Deliverable 4: Effective business model design and entrepreneurial skills for energy efficiency services

25 July 2016

A comparative international analysis (work in progress: July 2016)


Task 24 – Subtask 8: The Behaviour Changer Framework

24 July 2016

This peer-reviewed publications explains the Subtask 8 Behaviour Changer Framework – our ‘magic carpet’ for collective impact assessment and collaboration. It will be presented at the 2016 ACEEE summer study and BEHAVE conferences.


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