Office building deep energy retrofit: life cycle cost benefit analyses using cash flow analysis and multiple benefits on project level

Abstract

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 BPassive 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 Bmultiple project benefits^(MPB) concept to identify project-based cobenefits of DER (with a focus on productivity), to make Energy Efficiency (2019) 12:261-279 https://doi.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 Bsplit 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.

Application of Fuzzy Modelling to Predict Construction Projects Cash Flow

“…They used metaheuristic algorithms such as Tabu search and simulated annealing, and in their research duration of activities has been considered stochastic. Bleyl et al [41] analyzed the implementation of deep energy retrofit (DER) at office buildings and utilized cash flow in order to calculate cost-benefit analysis. They believed that DER can reduce fossil fuel consumption in the world.…”

Life-Cycle Assessment and Monetary Measurements for the Carbon Footprint Reduction of Public Buildings

“…Once integrated into the DCFA, the valuation of the environmental externalities from the building energy retrofit provides a cost-benefit analysis (CBA) [53,54]. The socio-economic externalities could be the external costs from the CO 2 emissions, or the external benefit from the reduction of CO 2 emissions.…”

A Methodological Framework for Sustainable Office Building Renovation Using Green Building Rating Systems and Cost-Benefit Analysis

“…However, sustainable building renovation projects should also consider other project benefits such as increased building values or tenant rates, which is why the benefit assessment is introduced as a so-called economic analysis. Accordingly, Bleyl et al [38] identified multiple project benefits (MPB) for the energy-efficient renovation of office buildings such as increased rents, real estate values, and (employee) productivity as well as savings in maintenance costs and CO 2 . The authors also provide the approaches to the monetization MPB and their monetary values.…”

“…However, more sophisticated methodologies are also used such as decision-making (DM) techniques [24][25][26][27][28][29][30], Delphi, investment analysis [31,32], simulation-based sensitivity analyses [33], etc, while some studies deal with residential buildings [34] and some with commercial buildings [35,36]. Some studies [30,[37][38][39][40] have dealt with the economic assessment of sustainable building renovation. In addition, evaluating the degree of sustainability of buildings using green building rating systems is also based on a quantitative multi-criteria assessment approach [10][11][12].…”