The valuation of buildings energy retrofitting: A multiple-criteria approach to reconcile cost-benefit trade-offs and energy savings

Abstract

Directive 2018/844/EU promotes long-term renovation strategies to achieve the 2050 EU-wide energy and climate targets. As the building sector accounts for 40% of final energy consumption and 36% of CO2, buildings energy retrofitting and the valuation of related investments play a fundamental role in the successful implementation of the energy transition. The economic evaluation of buildings’ energy retrofit projects is usually performed by implementing the Life Cycle Cost approach. Nonetheless, due to increased social awareness and environmental concerns, homeowners may be willing to invest in more energy-efficient solutions, rather than in the least-cost solution. This paper aims to provide a valuation framework to identify cost-effective and cost-optimal strategies of intervention, which match technological innovation in buildings energy renovations with environmental concerns and social awareness. In detail, we complement the Life Cycle Cost method with the Net Present Value rule and determine the best retrofit project by implementing a two-criteria (i.e., reduction in primary energy consumption and increase in the present value of net benefits compared to the status quo), additive-value decision model. We also propose a graphical approach, which provides a straightforward identification of the best compromise solution between Net-Present-Value maximizing and energy-saving maximizing buildings’ energy retrofit projects. We tested the proposed approach on a real-world case study and found that it is less sensitive than other methodologies to uncertainty over discount rates and future energy prices.