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

Panel: 6. Buildings policies, directives and programmes

This is a peer-reviewed paper.

Jan W. Bleyl, Energetic Solutions, Austria
Markus Bareit, Swiss Federal Office of Energy (SFOE)
Miguel Casas, Energinvest
Johan Coolen, Factor4
Benjamin De Bruyn, Factor4
Albert Hulshoff, AHB Consultancy
Sarah Mitchell, EfficiencyOne
Mark Robertson, EfficiencyOne


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.


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