Calculation of investment and returns in passive house and retrofit projects

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1 Calculation of investment and returns in passive house and retrofit projects Assoc. Prof. Nerija Banaitiene Vilnius Gediminas Technical University IP Erasmus - Sustainable Refurbishment, Retrofit, Energy Management in Housing Vilnius, April 5, 2013

2 Content 1. Overview of Lithuanian housing sector 2. Retrofit economic analysis - key financial parameters such as financial savings, discounted payback periods, net present values, and internal rates of return of the investments

3 Lithuania Population: 3.37 Mio. Number of multi-family buildings: 38,000 Total number of flats: 1.3 Mio. Number of flats in multi-family buildings: 800,000 Number of flats per 1000 inhabitants: 385 Ownership share: 97% Structure of buildings by years: 26% built before % % after 1990

4 Living conditions and social protection HOUSING STATISTICS

5 EU-27 Euro area Latvia Estonia Spain Greece Lithuania Italy Germany Czech Republic Slovakia Malta Poland Bulgaria Austria Sweden Romania Portugal France Luxembourg Finland Hungary Denmark Slovenia Cyprus Belgium Netherlands United Kingdom Ireland Switzerland Iceland Croatia Norway Type of dwelling 100% Distribution of population by dwelling type, 2010 (% of population) 75% 50% 25% 0% Source: Eurostat, 2012 Flat Detached house Semi-detached house Other 57 % of Lithuania's population lived in flats

6 EU-27 Euro area Romania Lithuania Bulgaria Slovakia Latvia Poland Slovenia Estonia Hungary Malta Czech Greece Cyprus Italy Spain Portugal Ireland France Austria Finland Belgium Luxembou United Germany Denmark Netherlan Sweden Croatia Norway Iceland Switzerland Tenure status 100% Population by tenure status, 2010 (% of population) 75% 50% 25% 0% Tenant - reduced price or free Tenant - market price Owner occupied, with mortgage or loan Owner occupied, no outstanding mortgage or housing loan 93.1 % of Lithuania s population lived in owner-occupied dwellings Source: Eurostat, 2012

7 EU-27 Euro area Latvia Romania Poland Bulgaria Hungary Lithuania Slovakia Estonia Slovenia Greece Italy Czech Republic Portugal Austria Sweden France Luxembourg Denmark United Kingdom Germany Finland Belgium Malta Spain Ireland Cyprus Netherlands Croatia Iceland Switzerland Norway Housing quality (1) Overcrowding rate, 2010 (% of specified population) Total population Population at-risk-of-poverty (1) (1) Population below 60 % of median equivalised income. The highest overcrowding rates were registered in Latvia (57.1 %), Romania (54.9 %), Poland (47.5 %), Bulgaria (47.4 %), Hungary (47.2 %) and Lithuania (46.4 %). Source: Eurostat, 2012

8 EU-27 Euro area Romania Latvia Hungary Slovenia Bulgaria Lithuania Poland Estonia Greece Italy Portugal Czech Austria Slovakia France United Luxembourg Germany Belgium Sweden Spain Denmark Malta Cyprus Finland Ireland Netherlands Croatia Iceland Norway Switzerland Housing quality (2) Severe housing deprivation, 2010 (% of specified population) % of the population in Lithuania faced severe housing deprivation. Source: Eurostat, 2012

9 Energy consumption (1) Total household energy consumption, % by fuel and energy type Heat, 33.1% Electricity, 14.5% Firewood and wood waste, 37.8% Natural gas, 9.0% Liquefied petroleum gases, 2.7% Hard coal, 2.5% Other fuel, 0.3% Fuel oil, 0.1% Source: Statistics Lithuania, 2011

10 Energy consumption (2) Household energy consumption by purpose 70,7% Space heating Hot water Cooking Other 11,7% 7,2% 10,4% In 2009, the energy consumed for heating a dwelling (except for the preparation of hot water) amounted, on average, to 9650 kwh, which accounted for 71 per cent of total household energy consumption. Source: Statistics Lithuania, 2011

11 Energy consumption (3) Average energy consumption by dwelling type, kwh All types of dwellings (average heated area 63 m2) One-dwelling building and a dwelling in a two-dwelling building (average heated area 81 m2) Dwelling in a multi-dwelling building (average heated area 51 m2) Other fuel Firewood and wood waste Electricity Heat Source: Statistics Lithuania, 2011

12 Energy consumption (4) Dwellings by heated area 53% 8% 3% 1% Up to 20 m² m² m² m² 150 and above m² 35% Average heated area: 63 m2 One-dwelling building 81 m2 Dwelling in a multi-dwelling building 51 m2 Source: Statistics Lithuania, 2011

13 Energy consumption (4) 5,5% 1,9% Dwellings by year of construction 10,2% 22,5% 21,5% 38,4% Iki Source: Statistics Lithuania, 2011

14 Energy consumption (4) Rented 3.4% Dwellings by form of ownership Own 96.6% Source: Statistics Lithuania, 2011

15 EU-27 Euro area Germany France Belgium Luxembourg (2) Sweden Austria Italy Slovenia Netherlands Spain Ireland Hungary Portugal Slovakia Czech Republic Cyprus Finland Poland (3) Denmark United Kingdom Estonia Lithuania Latvia Switzerland (3) Norway Economy and finance (1) Household saving rate (gross), 2011 (1) Bulgaria, Greece, Malta and Romania, not available. (2) (3) The largest reductions in the rate of savings between 2010 and 2011 were observed in Lithuania and Cyprus (both -4.8 points) and Latvia (-4.2 points); changes in the other EU Member States ranged from a decrease of 2.1 points to an increase of 1.6 points Source: Eurostat, 2012

of proper management Inefficient heating systems and

16 Lithuanian housing More than 57% of households are not satisfied with their houses: Most in poor condition Lack of proper management Inefficient heating systems and engineering equipment Bad quality windows, roofs, seals between panels

Average heat costs Cost of district heat supply in Vilnius: 29.65 ct/kwh = 296.5 Lt/MWh = 85.9 Euro/MWh (1 Lt = 100 ct, 1 Euro = 3.

VAT) Heating costs of 60 m2 area (including VAT) Dwellings in Lithuania 3.

18 Average heat costs Cost of district heat supply in Vilnius: ct/kwh = Lt/MWh = 85.9 Euro/MWh (1 Lt = 100 ct, 1 Euro = Lt) Type of dwelling Photo Heat consumption for heating Average heating costs (including VAT) Heating costs of 1 m2 (including VAT) Heating costs of 60 m2 area (including VAT) Dwellings in Lithuania 3. Multidwelling building (the old building) a huge consumer of heat 25 kwh/m2/month 60 m2 area: 1500 kwh ct/kwh = 7.41 Lt/m = Lt 390,000 flats, 1.17 Mio inhabitants 55.7%

19 Refurbishment of multi family Refurbishment of multi family buildings to Passive House Standard buildings to Passive House Standard (1)

20 State support Support to low income families: with downpayment and payment of insurance fee (~0.4% annually) with repayment of the loan and interest rate if loan is taken (according to the law low income families can also receive State support by covering expenses for a heat, hot and cold water)

21 Refurbishment of multi family buildings to Passive House Standard (1) Multi-family buildings maintenance and administration are compulsory: by establishing Home owners associations (~17%) by creating a Joint activity agreement (~3%) If there is no established home owners associations or created a joint activity agreement, the municipality shall appoint the administrator of a multi-family building for maintenance and administration (~80%)

22 Refurbishment of multi family buildings to Passive House Standard (2) The Programme for refurbishment of multi family buildings (2004) The financial crisis has led to slowdowns of investments According of ownership structure of multi-family buildings, the decision-making on investments require a majority of votes and the design of support programmes is to ensure sufficient incentives. In terms of panel buildings in the residential sector the issue of ownership is a key barrier for investments.

23 Passive house 1. Exceptionally high level of thermal insulation. 2. Well-insulated window frames with triple low-e glazing. 3. Thermal-bridge-free construction. 4. Airtight building envelope. 5. Comfort ventilation with highly efficient heat recovery.

24 isover.com Passive house

Heat recovery of passive house Heat losses through the envelope with ventillation (the exchange of air between the building and the surrounding area through the windows and through the gaps).

25 Heat recovery of passive house Heat losses through the envelope with ventillation (the exchange of air between the building and the surrounding area through the windows and through the gaps). Heat gains the solar radiation through the windows (so called passive solar energy) the energy of the electricity supply, which is converted into "internal heat sources" in the building. This adds to the heat radiated from persons inside the building. Heat losses = Heat gains

26 Retrofit economics ECONOMIC ANALYSIS

27 Economic analysis Standard evaluation indicators are monitored: Net present value Simple payback/discounted payback period Return of investment Financial indicators vary significantly depending on the type of retrofitting investments

28 Net Present Value (NPV) Net Present Value (NPV) = Initial Investment + Sum of the Present Values of the Estimated Energy Savings (Life of the Project)

29 Costs and Savings Costs = difference in capital cost - savings in capital through indirect effects Savings = energy savings + demand savings + operational or maintenance savings + savings through indirect effects

30 Retrofit costs Investment: Initial contribution (own funds) at least 10% of total investment Subsidy on investment: 15% of investment If efficiency measures have reduced energy consumption at least 40% - 30% of investment Loan term to 20 years Annual interest rate (bank) 3% JESSICA (~15%) Other financial instruments Retrofit costs

31 Simple Payback (1) Payback period = Estimated project cost / Estimated energy saving per period (years, months)

32 Simple Payback (2) 1. Energy savings continue for the life of the equipment or project life - payback does nor take into account the life of the equipment. 2. A safe Euro is worth more than a risky one - payback does not allow comparison of the option with other investments. 3. An Euro today is worth more than an Euro tomorrow - payback does not take the time value of money into account.

33 Discounted payback Discounted payback = Time required, after startup, to recover the fixed capital investment, FCIL, required for the project with all cash-flows discounted back to time zero.

34 Return on Investment (ROI) ROI = (Total Energy Savings (For Life of Project) - Estimated Project Cost) / Estimated Project Cost) x 100

35 Calculation of investment and returns in passive house and retrofit projects Calculation of investment. Calculation of savings. Economic analysis/cost-benefit analysis

36 Thank you for your attention! Contacts: L513A room

37 References Heating costs: Costs of district heat supply in Vilnius Construction estimating software (in Lithuanian): Sistela ProSama Payback period: Microsoft Excel Project management: Microsoft Project OpenProj International Passive House Association Active for more comfort: The Passive House A. Versele, B. Vanmaele, H. Breesch, R. Klein, B. Wauman. n.d. Total cost analysis for passive houses. Catholic University College Ghent, Department of Industrial Engineering es_5b_2009_.pdf

EU BUDGET AND NATIONAL BUDGETS

DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT ON BUDGETARY AFFAIRS EU BUDGET AND NATIONAL BUDGETS 1999-2009 October 2010 INDEX Foreward 3 Table 1. EU and National budgets 1999-2009; EU-27