Cost-effectiveness of large-scale deep energy retrofit packages for residential buildings under different economic assessment approaches

Abstract In this study we present a method for the assessment of the economic potential of deep energy retrofit packages for a national building stock, based on three main economic assessment approaches: 1) full investment cost and energy savings (approach FULL), 2) an approach only considering the cost of energy efficiency improvement and the related energy savings (approach IMPROVEMENT) and 3) an approach which is in line with the IMPROVEMENT approach but additionally assigns a residual value to each building element (approach DEPRECIATION). These three economic assessment approaches allow to assess the cost-effectiveness of large-scale retrofit packages according to different strategies, i.e. profit-oriented in the case of FULL, retrofitting only at end of lifetime in the case of IMPROVEMENT and pursuing a balance between environmental/energy and economic aspects in the case of DEPRECIATION. A case study for Switzerland shows that deep energy retrofit packages offer a technical energy saving potential of 55% to 86% and a technical greenhouse gas abatement potential of 50% to 80% (compared to current levels). The different approaches result in economic energy saving potentials of 3% (FULL), 14% (DEPRECIATION) and 50% (IMPROVEMENT). The respective marginal levelized costs for reaching a 50% reduction in final energy demand amount to 120 CHF/MWh (FULL), 40 CHF/MWh (DEPRECIATION) and 1 CHF/MWh (IMPROVEMENT). The results show an economic greenhouse gas saving potential of 1% (FULL), 13% (DEPRECIATION) and 65% (IMPROVEMENT) with respective marginal levelized costs for a 50% reduction of 350 CHF/t CO2eq., 90 CHF/t CO2eq. and -40 CHF/t CO2eq. The findings indicate that, without subsidies or with rather low subsidies, large-scale deep energy retrofit is economically viable only if it is part of the regular refurbishment cycle (IMPROVEMENT approach). Since full alignment with regular refurbishment cycle is not practically possible across the building stock, policy design is recommended to rather follow the DEPRECIATION approach according to which a subsidy of 40 CHF/MWhsaved (or 90 CHF/ t CO2, avoided) would be needed in order to achieve a 50% final energy and greenhouse gas emission reduction in the building stock.