Low‐energy versus conventional residential buildings: cost and profit

Abstract

Purpose-The purpose of this paper is to investigate the commercial aspect of "green" building construction and whether increased investment costs are profitable taking the reduction in operating costs into account. The investment viability is approached by comparing investment in conventional and "green" residential building, particularly passive houses, using real construction and post-occupancy conditions. Design/methodology/approach-The key data were obtained by surveys and personal interviews. The first survey was directed to the companies which had experience of building low-energy housing and the second survey to housing companies that actively manage operation of low-energy houses. Findings-Findings indicate that low-energy buildings are considered an interesting and sound business opportunity, and investment analysis indicates that low-energy houses (particularly passive houses) can be more attractive investments than conventional residential buildings. The long-term strategy of building low-energy buildings can give competitive advantages. The government initiative and the construction regulations are found to be necessary in eliminating the initial barrier to energy-efficient projects and achieving long-term environmental goals. Originality/value-This paper provides insights into the investment decisions and contributes to the understanding of the construction, operation and profitability of energy-efficient residential buildings.

Green housing: Toward a new energy efficiency paradox?

“…Indeed, cost-effectiveness of energy supply (Eshraghi, Narjabadifam, Mirkhani, Khosroshahi, & Ashjaee, 2014;Ouyang, Ge, & Hokao, 2009), and moderate growth rates of energy price (Ouyang, Lu, Li, Wang, & Hokao, 2011), negatively affect economic feasibility of energy efficiency measures. Moreover, if it is possible to deal with volatility and forecast a strong upward trend in the coming years, then the return on investments in efficient buildings significantly increases (Zalejska-Jonsson et al, 2012). Conversely, economic evaluation based on real option approach shows that uncertainty about trend of energy supply cost increases the value of waiting, so it makes more profitable and rational to postpone investments (Kumbaroglu & Madlener, 2012).…”

“…Even if certain energy retrofit interventions appear to be profitable, particularly in the residential sector, sensitivity analysis highlights that Net Present Value (NPV) of an investment may fall below zero, due to minor changes in the input variables (Zalejska-Jonsson, Lind, & Hintze, 2012). Moreover, positive outcomes imply the willingness to accept a moderate return on investment (Copiello, 2015), sometimes only a few tens of basis points higher than threshold represented by the gross yield of government bonds (Sadineni, France, & Boehm, 2011;Zalejska-Jonsson et al, 2012). In turn, this means a low risk premium rate, hence doubts may arise whether or not it is out of the market, with respect to property investment.…”

“…Investment costs are to be incurred to improve the energy performance of buildings, while operating savings are expected on energy bills. To deal with this aim, the most suitable methodological framework is found to be the Discounted Cash Flow approach (DCF), which is adopted in relevant references (Amstalden et al, 2007;Brotman, 2014;Kumbaroglu & Madlener, 2012;Zalejska-Jonsson et al, 2012). Several authors recognize the research carried out by Downs (1966), Ratcliff (1972), and Dilmore (1971) as a pioneering fundamental basis, which has introduced and contributed to the evolution of DCF in the field of real estate appraisal.…”

Achieving affordable housing through energy efficiency strategy

“…Even if several research show satisfactory results, in terms of positive Net Present Value (Verbeeck and Hens, 2005), short Payback Period and high Internal Rate of Return (Nikolaidis et al, 2009), sensitivity analysis underlines that empirical findings are strongly affected by marginal changes of input variables (Zalejska-Jonsson et al, 2012). Another recent study highlights that savings on energy supply side may be not enough to justify additional investment cost, assuming the latter to be repaid through a long-term mortgage (Moore et al, 2014).…”

Practical Resilience: Low‐Tech Plug‐and‐Play Innovation in the SU+RE House

“…Using the professionally estimated cost, the team's narrative was that the local realestate market for the project had evolved quickly over recent decades, creating very high-priced plots holding older, sub-code buildings that are due for expensive renovation to bring them in line with current codes. Leveraging this fact and including energy savings and higher durability as part of the square-foot costs (monthly costs = mortgage + utilities + maintenance), 4 it was posited that the project could be constructed at costs competitive with renovated market comparables. This would essentially deliver project energy savings and resilience features for free -an argument that convinced the professional jury and resulted in the SU+RE House team winning the Marketability contest.…”