Renovating Houses in The Netherlands to nearly Zero Energy standard- Important drivers of economic feasibility

Abstract

The European Union through its Roadmap 2050 has mandated nearly zero energy as the standard for all building stock. While newly built buildings will be of nearly zero energy standard by 31 December 2020 (public-owned buildings after 31 December 2018), new buildings form only 1% of the addition to the existing building stock which implies that to attain nearly zero energy standard for all building stock, large-scale renovations must be performed. However, the renovation to the nearly zero energy standard is not yet cost optimal. To improve the economic feasibility, it is important to find the parameters that have an impact on the cost-optimality of nearly zero energy renovations and the extent of their impact, the results of which can be used to drive the renovation to the nearly zero energy standard in an economically feasible manner. The primary objective of this thesis is the identification of the most important drivers of the economic feasibility of renovating houses in The Netherlands to nearly zero energy standard. The parameters were deduced from a framework available in the literature. The extent of influence was determined by performing partial sensitivity analysis and Monte Carlo analysis. Five key parameters had an impact on the NPV- energy price, energy consumption (presented as four separate sub-parameters: electricity and gas consumption both before and after renovation), renovation cost, project life cycle and discount rate. In absolute terms, gas consumption before renovation had the highest impact followed by, renovation cost, electricity consumption after renovation, discount rate, a shift of energy price to the low price scenario, life cycle of the project and electricity consumption before renovation. The gas consumption after renovation and the shift of energy price to the high prices scenario did not have a significant effect on the NPV. The most important drivers of economic feasibility of nearly zero energy renovations are reduction in the renovation cost, discounting the benefits at a lower (social) discount rate until the end of the service life of the house, increasing the retail price of natural gas, decreasing the retail price of electricity and regulation of user behavior in reducing rebound effect (the reduction in the expected energy savings primarily due to occupant’s behavior such as requirement of further comfort). Based on the obtained results, policy recommendations were provided to the Government. Suggestions for further studies include listing all parameters and determining their effect on the NPV, identifying the complete list of indirect benefits that accrue to the citizens of The Netherlands and their valuation using contingent valuation techniques, and performing a cost benefit analysis at the macroeconomic level which will not only consider wider benefits such as infrastructure savings, but also reflect the true value of indirect benefits through reduced externalities and improvement in the productivity of the people on the economy.