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--- basics:affordability:investing_in_energy_efficiency:economy_and_financing_of_efficiency_new_buildings_renovation_and_step_by_step_retrofit [2016/02/17 09:04] – kdreimane
+++ basics:affordability:investing_in_energy_efficiency:economy_and_financing_of_efficiency_new_buildings_renovation_and_step_by_step_retrofit [2019/03/20 11:06] – cblagojevic
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 •	 Proper attribution of investment costs: only (additional) investments that are imputable to energy efficiency may be accounted for in the economic analysis. Although this seems obvious, the calculation including all the measures’ costs which are often many times higher than the additional investment costs for energy efficiency, is very often the reason for a wrong economic assessment result.
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 •	Life cycle of the measures: make sure that revenues (e.g. saved energy’s costs) yielded after the end of the pay back time are not forgotten. Total life cycle results 	are what counts.\\
 •	When calculation periods are longer than the life cycle of the measure or the component, replacement costs must be considered. However, when they are shorter (which is often the case for buildings), residual values must be regarded at the end of the calculation period – instead they are  often forgotten. Depending on the lifetime span, the calculation period and the discount rate, residual values can easily be up to 30% or more of the original investment.\\
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 The expected rates of return are the calculatory interest rates (or discount rates) in the dynamic economic assessment. We have seen that the present value of future payments decreases with high interest rates and depreciates the investment. But high interest rates are coupled with high risks. On the capital market, it is not possible to earn high interests with risk free investments. However, energy saving investments are risk free or even risk reducing - as long as the building they belong to are not in question. Which buildings should be kept in the stock and upgraded is a decision concerning the real estate portfolio management. However, once the decision to proceed with the retrofit has been made, it is always advantageous to include the energy efficiency investment, reducing the risk of higher energy prices that might affect the market. Since risky investments with the chance of higher ROI's are not comparable with energy efficiency investments, they are not eligible alternative assets to measure the economic success. For low risk investments, however, a "risk premium" cannot be expected. They can be financed by credits though, and they should when equity is expected to yield high rates of return.\\
-|{{:picopen:18pht_ebel_fig_5.png?500}}|
+|{{:picopen:18pht_ebel_fig_5.png?500}}| **Figure 5**: Risk and return. Risk premium on the capital market is the additional expected rate of return attributed to the risk.|
-Figure 5: Risk and return. Risk premium on the capital market is the additional expected rate of return attributed to the risk.|
 ===== Cost optimality =====
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 ===== Documented projects =====
-[{{:basics:affordability:investing_in_energy_efficiency:18pht_ebel_fig_7.png?500}}|//**Figure 7**: Comparison of life cycle costs of renovation: a real case. The realized EnerPHit variant was cost optimal. Since 2008 the prices of Passive House Components are reduced and the refurbishment with Passive house components looks even more advantageous. Shown costs    =  total energy relevant  costs over 20 yrs.//]
+| {{ :picopen:comparison_of_life_cycle_costs_of_renovation.png?500}}|//**Figure 7**: Comparison of life cycle costs of renovation: a real case. The realized EnerPHit variant was cost optimal. Since 2008 the prices of Passive House Components are reduced and the refurbishment with Passive house components looks even more advantageous. Shown costs = total energy relevant  costs over 20 yrs.//|
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 A solid basis for all cost evaluations are well documented retrofit projects, including  achieved savings and thorough analysis of the investment costs for all building components. A main issue though, is to separate extra costs for energy efficiency from usual retrofit investment costs.\\