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

摘要

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 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 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 CO_2 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. Furthermore, the approach supports policy makers to develop policy measures needed to achieve 2050 goals.