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Cost-effective retrofitting of Swedish residential buildings: effects of energy price developments and discount rates

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Abstract

This paper investigates how the cost-effectiveness of different energy-saving measures (ESMs) in buildings is dependent upon energy prices and discount rates. A bottom-up modelling methodology is used to assess the profitability of different ESMs for Swedish residential buildings. The cost-effectiveness and total techno-economical potential for energy saving of each ESM are calculated for three different scenarios of energy prices up to year 2050 and for different discount rates, including an estimate of the market potentials derived by applying the implicit discount rates given in the literature. The three energy-price scenarios give similar techno-economical reductions of delivered energy (by 31–42 %), as well as a similar ranking for the investigated cost-effective ESMs. This means that there are cost-efficient opportunities for energy reductions in Swedish households for any future developments of the energy prices investigated in this work. The energy price developments have lower impacts than interest rates on the techno-economical potentials of the different ESMs. Thus, increasing energy prices cannot be expected to promote significantly the adoption of ESMs, whereas facilitating the financing of investments in ESMs and reducing other consumer barriers should play key roles in the implementation of ESMs. The importance of allaying stakeholders’ reservations is further stressed by the fact that the estimated market potentials for the ESMs are significantly lower than the techno-economical potentials, underscoring the need for policy actions that accelerate the achievement of the identified techno-economical potentials.

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Notes

  1. As the literature on this topic is extensive, we cite here the 4th IPCC Report, which contains a compilation of the estimates from bottom-up studies conducted worldwide.

  2. The technical potential is the amount by which it is possible to reduce energy use and CO2 emissions by implementing already demonstrated technologies and practices without specific reference to costs (definition adapted from Levine et al. 2007 and Ürge-Vorsatz and Novikova 2008).

  3. In this paper, a simplified interpretation of the societal discount rate is used, which is based on the standardised procedures for economic evaluation of energy systems in buildings (EC 2012a, b; EN 15459, 2007; Rushing et al. 2010). A broader environmental interpretation, not used in this paper, is the focus of an unsettled debate about discounting as intergenerational equity and linked to the theoretical concept of sustainability (as reviewed in Price and Nair 1985; IPCC 1995; Almansa Sáez and Calatrava Requena 2007; Sterner and Persson 2008).

  4. According to a review of what different European countries propose for the life-cycle cost assessment of their public projects (Cruz Rambaud and Muñoz Torrecillas 2005), and in line with the key reference rates set by the European Central Bank and national central bank, which for the period 2001–2012, were in the range of 1.5–5.0 % (EC 2014).

  5. Adapted from the 4th IPCC Report (Levine et al. 2007), which defines the market potential as the level of GHG mitigation that occurs under forecast market conditions, including policies and measures based on private unit costs and discount rates.

  6. Given the geographical and regulatory scope of this work, energy performance-related definitions are taken from the EPBD (EC 2012b) as primary energy, delivered energy, energy use and energy need. In the literature, delivered energy is also referred to as final energy or secondary energy.

  7. Other work conducted by the authors also assesses efficiency improvements in the building technical systems and the supply from on-site renewable energy sources. Thus, in that work (Mata et al. 2014), we denoted these measures and the ESMs applied in the present work as “energy conservation measures” (ECMs).

  8. According to the Swedish building energy code, there are three distinct climate regions in Sweden, with the number of degree days ranging from approximately 3,500 in the southern regions to 6,000 in the northern regions.

  9. Although only the averaged U values of the building envelope are used as input to the model, the detailed knowledge of the sample buildings allows differentiation between several types of retrofitting strategies for cellars (floor above crawlspace, flat floor on ground, floor above unheated basements, basement wall above ground, basement wall below ground), facades (ventilated walls with different cover materials, brick facades) and roofs (attic joists, knee walls, sloped roof, flat roof) (for a detailed description, see NBHBP 2009 and Mattsson 2011).

  10. The production of different types of incandescent light bulbs has been gradually phased out during the period of 2009–2012. The incandescent light bulbs still in stock will be sold (SEA 2011b).

  11. This includes the 5.4 TWh required to increase ventilation rates in SFDs to meet what the Swedish Ministry of Health recommends as the level needed to ensure adequate indoor quality (Mata et al. 2013b; Mattsson 2011). It should be noted that measurements have proven that Swedish SFDs currently have substandard ventilation rates (NBHBP 2009).

  12. “Billion” is used in the sense of 109. The exchange rate used is 1 € = 10 SEK.

  13. Cost savings (besparingskostnad, in Swedish) were used as the basis for the first Swedish energy-saving plan and have subsequently been used in all Swedish energy efficiency assessments.

  14. In addition to the 4 % used in the baseline calculations in this paper.

  15. For the entire energy-saving potential of all the ESMs, not only that of the profitable part of the potential of each ESM.

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Acknowledgments

This work was funded by the AGS project “Pathways to Sustainable European Energy Systems” and FORMAS grants for research and development projects. Erik Axelsson, Ulrika Claeson Colpier, Mikael Odenberger, Thomas Unger and Eoin Ó Broin are gratefully acknowledged for their contributions. We also thank Laurent Deleersnyder and Thomas Boermans for discussions of EPBD-related issues, as well as three anonymous reviewers for their suggestions and comments.

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Mata, É., Sasic Kalagasidis, A. & Johnsson, F. Cost-effective retrofitting of Swedish residential buildings: effects of energy price developments and discount rates. Energy Efficiency 8, 223–237 (2015). https://doi.org/10.1007/s12053-014-9287-1

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