Energy Efficiency Investments In Buildings Research Articles

Economic and regional spillovers of energy efficiency investments in buildings

This paper explores whether the policy of mitigating climate change through energy-efficient retrofitting supports more balanced development or increases regional disparities. The issue is explored through the estimation of the socioeconomic effects of energy-efficient renovation across Croatian regions. The regional input–output model is applied to identify direct, indirect, and induced effects of building retrofit investments on gross value added and employment. In the Croatian case, over three-quarters of the total economic effects of energy-efficient retrofitting is distributed to the more developed region of Continental Croatia. Economic activity in the Adriatic region is strongly dependent on tourism with insufficient local production of the manufacturing products required in energy renovation projects, and a certain proportion of spillover effect of the investment is transferred to Continental Croatia. The positive economic effects induced by retrofit investments are most present in construction, manufacturing, trade, and transport. Results suggest that climatic conditions and regional economic specialisation have an impact on the dispersion of the economic effects of retrofit measures in different regions.

Risk analysis of energy efficiency investments in buildings using the Monte Carlo method

Demonstrating the economic rationality of investments in energy efficiency is a necessary step in reducing the energy consumption of buildings. Generally, financial instruments are evaluated according to both the return on investment and the risk. However, many previous studies of energy efficiency investments in buildings are based on deterministic scenarios and do not evaluate the risk levels of these investments. Therefore, in this study, we clarify the risk involved in an energy-saving investment by calculating the probability distribution of the energy reduction and evaluating the result using financial engineering methods. We first develop a stochastic model of various conditions that affect the energy consumption of a building. These conditions include weather processes, office worker behavior, tenant characteristics, and tenant replacements. Next, we construct a prediction model of a building's energy consumption, and we use our stochastic model to create the boundary conditions of this prediction model. By repeatedly performing energy consumption predictions using the Monte Carlo method, we can obtain the probability distribution for building energy consumption. Finally, given this probability distribution, we evaluate energy efficiency investments using financial engineering methods. Based on the discounted cash flow distribution, we calculate the risk premium of each energy efficiency investment, and, based on the variance and covariance matrix of the internal rate of return of each energy efficiency investment, we find the optimal investment ratio.

Cost curves of energy efficiency investments in buildings – Methodologies and a case study of Lithuania

This paper aims to calculate potential energy savings for space heating and hot water by 2030 for the Lithuanian building sector by implementing energy efficiency solutions. Policy recommendations are derived by showing which buildings and energy efficiency measures should be addressed in order to determine the full energy saving potential in the most effective way. Different cost curves for energy savings potential are applied, and these curves show the investor perspective and overall economic perspective. Final energy demand can be reduced by 56% by year 2030 if the least-cost energy efficiency solutions for each building type are selected. Energy performance class A implementation for the apartment buildings built before 1990 and supplied by district heating is the most cost-effective measure. If we consider the overall economic perspective, energy performance class A++ (deep renovation) for the same buildings is the most cost-effective measure. The results call for (I) policies to support building renovation that address buildings with low energy performance instead of subsidising energy prices and (II) policies promoting deep renovation (A+, A++) in order to avoid lock-in effects and ensure the transition of the Lithuanian building stock towards nearly zero-energy buildings (nZEBs).

Estimating the Value of Price Risk Reduction in Energy Efficiency Investments in Buildings

This paper presents a method for calculating the value of price risk reduction to a consumer that can be achieved with investments in energy efficiency. The value of price risk reduction is discussed to some length in general terms in the literature reviewed but, so far, no methodology for calculating the value has been presented. Here we suggest such a method. The problem of valuating price risk reduction is approached using a variation of the Black–Scholes model by considering a hypothetical financial instrument that a consumer would purchase to insure herself against unexpected price hikes. This hypothetical instrument is then compared with an actual energy efficiency investment that reaches the same level of price risk reduction. To demonstrate the usability of the method, case examples are calculated for typical single-family houses in Finland. The results show that the price risk entailed in household energy consumption can be reduced by a meaningful amount with energy efficiency investments, and that the monetary value of this reduction can be calculated. It is argued that this often-overlooked benefit of energy efficiency investments merits more consideration in future studies.

Life cycle cost analysis of energy-efficient buildings subjected to earthquakes

A new life cycle cost (LCC) analysis method is presented to evaluate the long-term cost-effectiveness of energy-efficiency features in buildings by accounting for the future costs associated with earthquake-induced damages in such features. Buildings situated in a seismic zone are possibly attacked by earthquakes over lifetime and their nonstructural elements such as energy-efficiency features may suffer from various levels of damage, requiring repair or replacement to restore a satisfactory level of building energy efficiency. However, existing LCC analysis methods have overlooked such earthquake-related cost, potentially leading to unreliable cost-effectiveness assessment of energy-efficient buildings. To address this problem, we propose a method to rigorously quantify the expected cumulative future cost due to the repair/replacement of earthquake-damaged energy-efficiency features and then integrate this cost into the LCC analysis. The new method is illustrated using a medium-sized office building located in a high seismic region with a Mediterranean climate. Costs associated with the initial installation as well as future energy consumption, environmental impacts, and seismic damages of two alternative types of window assembly with different levels of energy efficiency are calculated and compared. It is found that, with seismic damage cost considered, the cost-effectiveness of energy-efficiency features can be noticeably reduced and, equivalently, the payback time for building energy efficiency investment is prolonged.

Evaluation of building energy efficiency investment options for the Kingdom of Saudi Arabia

In this paper, economic and environmental impacts of energy efficiency programs associated with new and existing buildings are evaluated for the Kingdom of Saudi Arabia (KSA). In particular, the analysis considers optimized designs for new buildings as well as different energy retrofit programs for existing buildings are considered in the bottom-up analysis using archetypical building energy models located in five sites representing a wide range of KSA climates. In particular, the analysis presented in this paper provides specific estimations to the extent of the energy and demand savings that could be achieved in the building sector even under highly subsidized energy prices. It is found that even a basic energy retrofit program using low-cost energy efficiency measures implemented to the existing building stock can provide significant economic and environmental benefits. Indeed, a level 1 energy efficiency retrofit program targeting only the existing residential building stock could reduce electricity consumption by 10,054 GWh/year and peak demand by 2290 MW and carbon emission by 7.611 million tons/year.

Modeling the energy retrofit decision in commercial office buildings

Retrofitting existing buildings has emerged as a primary strategy for reducing energy use and carbon emissions, both nationally and in cities. Despite the increasing awareness of retrofitting opportunities and a growing portfolio of successful case studies, little is known about the decision-making processes of building owners and asset managers with respect to energy efficiency investments. Specifically, the research presented here examines the effects of ownership type, tenant demand, and real estate market location on building energy retrofit decisions in the commercial office sector. This paper uses an original, detailed survey of asset managers of 763 office buildings in nineteen cities sampled from the CBRE, Inc. portfolio. Controlling for various building characteristics, the results demonstrate that ownership type and local market do, in fact, influence the retrofit decision. Overall, this analysis provides new evidence for the importance of understanding ownership type and the varying motivations of differing types of owners in building energy efficiency investment decisions. The findings of both the survey analysis and the predictive model demonstrate additional support for the targeting of energy efficiency incentives and outreach based on ownership entity, local market conditions, and specific physical building characteristics.

Economic and environmental impacts of community-based residential building energy efficiency investment

A systematic framework for evaluating the local economic and environmental impacts of investment in building energy efficiency is developed. Historical residential building energy data, community-wide economic input–output data, and emission intensity data are utilized. The aim of this study is to show the comprehensive insights and connection among achieving variable target reductions for a residential building energy use, economic and environmental impacts. Central to this approach for the building energy reduction goal is the creation of individual energy models for each building based upon historical energy data and available building data. From these models, savings estimates and cost implications can be estimated for various conservation measures. A ‘worst to first’ (WF) energy efficient investment strategy is adopted to optimize the level of various direct, indirect, and induced economic impacts on the local community. This evaluation helps to illumine opportunities to establish specific energy reduction targets having greatest economic impact in the community. From an environmental perspective, short term economy-wide CO2 emissions increase because of the increased community-wide economic activities spurred by the production and installation of energy efficiency measures, however the resulting energy savings provide continuous CO2 reduction for various target savings.

Transaction Costs (Tcs) Framework to Understand the Concerns of Building Energy Efficiency (BEE) Investment in Hong Kong

Factors, such as split incentive, information asymmetry, opportunistic behavior, ill-informed users, and institutional transitions, etc., incur different levels of Transaction costs (TCs) and affect the stakeholders’ willingness to take part in building energy efficiency (BEE). A better understanding of the nature and structure of TCs is essential to improve the market mechanisms for BEE investment. It covers three dimensions of TCs: specific investment, frequency and uncertainty. The paper provides a framework to understand BEE barriers in general and the TCs concerns of stakeholders in particular. In-depth interviews questions are designed to be conducted with the real estate representatives and architects, using a case of Hong Kong, where real estate developers are chosen to be the study object as they are the initiative and dominate force. The study focuses on how to smooth BEE transactions and lessen TCs involved. It indicates that TCs are the key factors impeding BEE market penetration, and will provide references to design a governance structure as well as to design policy packages to promote BEE.

A multiple objective optimisation model for building energy efficiency investment decision

A multiple objective optimisation model is formulated to help decision makers to make an optimal decision when investing in energy-efficient building retrofitting. The objectives are to maximise the energy savings and minimise the payback period for a given fixed initial investment. The model is formulated as a multi-objective optimisation problem with the net present value (NPV), initial investment, energy target and payback period as constraints and it is solved using genetic algorithms (GAs). The optimal decision is reached by choosing the most optimal actions during energy retrofit in buildings. The model is applied to a case study of a building with 25 facilities that can be retrofitted that illustrates the potential of high energy savings and short payback periods. The sensitivity analysis is also performed by analysing the influence of the auditing error of the facilities, wrongly specified energy savings, the initial investment, changes in interest rate and the changes of electricity prices on the payback period, the maximum energy saved and NPV of the investment. The outcome of this analysis proves that the model is robust.

REAL ESTATE DEVELOPERS' CONCERNS ABOUT UNCERTAINTY IN BUILDING ENERGY EFFICIENCY (BEE) INVESTMENT—A TRANSACTION COSTS (TCS) PERSPECTIVE

Buildings account for 40% of global energy consumption and nearly one-third of global CO2emissions; and the resulting carbon footprint significantly exceeds that of all forms of transportation combined. Attractive opportunities exist to reduce buildings' energy use at lower costs and higher returns than in other sectors. This paper analyzes the concerns of uncertainty, in terms of transaction costs, to the real estate developers when they make decisions about investing in Building Energy Efficiency (BEE). To solicit views of developers regarding BEE investment, in-depth interviews were conducted with 15 executives and architects who work in big real estate development firms covering 80% of real estate activities in Hong Kong. This research applies transaction cost economics (TCE) to study the underlying reasons resulting from uncertainty that cause market reluctance to accept BEE by choice. It provides a detailed analysis of the current situation and future prospects for BEE adoption through studying the impacts from three aspects: economic, market and policy uncertainties. It delineates the market and suggests possible policy solutions to overcome the uncertainties and to attain the large-scale deployment of energy-efficient building techniques. The findings establish the groundwork for future studies on how to choose a particular policy package and what roles government should play to solve the existing problems in BEE development.