Economic Evaluation of Financial Incentive Schemes for Energy Retrofit Projects in Residential Buildings

Abstract

Even if the EU has made important progress towards meeting its climate and energy targets for 2020, the effects of financial instability due to the economic crisis are still apparent, especially in the southern European countries, acting as a great obstacle for residents to invest in energy retrofit projects in order to improve their house energy performance. EU Member States striving to limit the risks that such investments entail and to aid with high upfront costs, are using financial incentives in the form of funding schemes, grants, tax exemptions/reductions etc. as a way of spurring investments in energy efficient services and technologies. Within this framework, the current study deals with the financial attractiveness of incentive schemes for energy retrofitting of residential buildings that are set in three European countries (Cyprus, Greece and UK).

The methodology followed uses, as a first step, three case studies of typical residential buildings, one for each country, for the computation of pre-retrofitting and post-retrofitting energy demands. Material and labor costs that apply in each country together with energy costs and economic parameters are taken into account in order to sum up the initial energy upgrade budget for each case. The second step regards the computation of investment criteria such as NPV and IRR and the analysis is formed for a 30-year period to account for the life-cycle of a building using economic parameters such as Discounting and Inflation Rates. Then, the particulars of each country’s funding scheme are incorporated into the economic model to reveal their benefits and evaluate their attractiveness. The final output of the study comprises a comparative analysis of the current funding schemes using Present Worth as an indicator for the evaluation of their application in each country.

DOI: http://dx.doi.org/10.5755/j01.sace.16.3.16200