High-Rise project >> Assessing the Situation > Current potential >

On this page:

Base buildings
> Energy savings
> CO2 savings
Base regions
Key points

Base buildings

• Energy savings

Figure 1 outlines the heating demand reductions achievable in each base building. It can be seen that the savings vary considerably between warmer (buildings A to C) and colder countries.

Figure 1: Heating demand reduction – all measures

The reductions in heating demand achievable are between 70 and 80 per cent. Naturally, the costs of including these measures in refurbishment vary considerably as a result of different labour and capital costs in the base regions, as Figure 2 illustrates.

Figure 2: Annualised investment cost

The capital costs are also partially determined by the standard of the energy saving measures included in the refurbishment – usually the better the thermal properties, the more costly. Unsurprisingly window replacement and wall insulation (where external) are the highest-cost measures per m2 of heated floor area; for the former this is due to the sophistication of the product compared, and for the latter it is due to the large wall surface area. Base buildings D and G are the most costly to refurbish overall, but are also in the regions with the highest per capita income. Figure 3 compares the energy-related investment cost illustrated in Figure 2 with what it would cost to improve energy efficiency separately from general refurbishment; it can be seen that the cost approximately doubles.

Figure 3: Energy-related and retrofit investment cost

The cost-effectiveness of the package of measures in terms of energy savings can be calculated in two ways. The first divides the annualised investment cost per m2 (Figure 2) by the energy savings per m2 per year (Figure 1); this is illustrated by the “gross annualised cost of energy saved” bars in Figure 4. The second calculation of cost-effectiveness additionally takes energy prices and reduced household energy expenditure into account, giving the “net annualised cost of energy saved” (also in Figure 4).

Annualised investment cost implies that the energy efficiency measures are financed over the course of their economic lifetimes, as would be the case if householders take out a loan to finance the investment. Not taking energy prices and expenditure into account, the most cost-effective investment can be made in base buildings C, E, F and H. These are the EU10 (excluding Cyprus and Malta) and AS3 countries. Initially fairly low energy efficiency standards combined with low capital and labour costs are the main reason.

Figure 4: Energy prices and cost of energy saved

Taking energy prices and reduced energy expenditure into account, cost-effectiveness is completely turned around. From this perspective, the most cost-effective refurbishment then can be made in base buildings A, D and G. All others are also cost-effective (i.e. negative cost in Figure 4), but A, D and G are the ones that yield the greatest net financial benefit for each kWh heating energy saved over the lifetime of the measures. In high-rise building A, representative of warm climate EU15 countries, the large net benefit is caused by a combination of the highest heating energy prices (electricity being the main fuel), relatively low investment cost and a poor initial energy efficiency standard. For base buildings D and G – moderate and cold climate EU15 countries – the net benefit per kWh saved is primarily due to high energy prices, but also a result of fairly poor initial standards for base building D and the cold climate of base region G respectively.

Returning to buildings C, E, F and H, there is a substantially lower net financial benefit when taking energy prices and reduced energy expenditure into account. Despite low investment costs, these base buildings now yield less cost-effective energy savings than the other buildings because of the very low heating energy price in each of these base regions. Figure 4 also shows the net annualised cost of energy saved in the case of carrying out energy efficiency improvements as a separate retrofit rather than being integrated into the refurbishment process – which would reduce cost-effectiveness all round. Only base buildings A, D and G would still yield a net financial gain under this scenario.

Energy price rises have assumed to be uniform across all base regions at 1.5% annually in real terms across all base regions over the lifetime of the energy saving measures. However it can be argued that, given the eventual liberalisation of the energy markets and the removal of state subsidies in EU10 and AS3 countries, this rate is likely to be exceeded in this group of base regions, investment in which may then yield larger financial gain. Figure 5 illustrates a conceivable scenario where energy prices in EU15 countries rise by 1.5% a year as before, but by 3% annually in EU10 and AS3 countries. It is clear that the cost-effectiveness increases for these base buildings, but is still well behind the EU15. This poses deeper questions about likely energy price rises in these countries, and how these will compare to the old Member States.

Figure 5: Energy prices and cost of energy saved assuming 3% annual increase in EU10 and AS3 prices

Under the baseline scenario , using simple payback time as the indicator of cost-effectiveness – calculated by offsetting the present total (not annualised) investment cost against the value of energy savings as illustrated in Figure 6 – there is more visible net benefit for every base building because it is (in most cases substantially) less than the economic lifetime of 20 years assumed for the shortest-lived measures. Figure 6 also shows that simple payback of 20 years is (in some cases substantially) exceeded for buildings C, F and H – AS3 and cold climate EU10 countries – if energy efficiency improvements are carried out as a separate retrofit. For comparison, the simple payback times for both energy-related investment and retrofit cost are shown assuming a 3% annual price rise in EU10 and AS3 countries. For buildings C, F and H, this reduces simple payback for the assessed measures in a retrofit context to between 15 and 20 years.

Simple payback is only applicable as a measure of cost-effectiveness if the investment cost can be paid in total at the point of refurbishment, an option that is very rarely financially feasible for owners or occupiers. This strongly supports the argument in favour of public subsidy or grant support for energy efficiency improvements.

Figure 6: Simple payback, for integration into refurbishment and separate retrofit

Crucially, whichever methods of financing the requisite investment are considered, the investment cost needs additionally to be balanced against wider benefits – especially avoided CO2 emissions (see below), but also - see the section on wider benefits - deferred or avoided investment in energy supply infrastructure, the possibility of job creation and the improvements in comfort and wellbeing to which energy efficiency in the refurbishment of high-rise residential buildings can contribute.

• CO2 savings

Figure 7 shows the CO2 savings achievable in each base building m2 per year as a result of the energy efficiency improvement packages. The main determinant apart from the achievable energy saving for each building is the CO2 emissions factor per kWh.

Figure 7: CO2 savings per m2 per year

The cost of CO2 mitigation cannot be balanced against the benefit of households’ reduced energy expenditure because households do not formally or directly appropriate the benefits of reduced CO2 emissions. In a formal sense, governments stand to gain from CO2 mitigation as this contributes to their greenhouse gas emissions reduction objectives. For governments, reduced CO2 emissions should only be balanced against the cost of the investment. The according CO2 mitigation cost is illustrated in Figure 8, which shows that it is lowest for base buildings C, E, F and H (i.e. in EU10 and AS3 countries apart from Cyprus and Malta).

Figure 8: CO2 mitigation cost

Ideally, for CO2 mitigation that is the result of energy efficiency improvement, reduced energy subsidy expenditure should be taken into account. The IEA has defined energy subsidies as “any government action that concerns primarily the energy sector that lowers the cost of energy production, raises the price received by energy producers or lowers the price paid by energy consumers” . Furthermore, any government attempt at internalising a positive externality of energy by reducing prices, as well as a failure to internalise negative externalities by not increasing the energy price can be considered a subsidy.
In EU10 and AS3 countries, in particular in Central and Eastern Europe, energy subsidies – in particular of the price paid by consumers – are likely to be relatively high, in particular because the energy market liberalisation process has not developed as far as in EU15 countries. Only rough estimates of the levels of subsidies exist; in CEE EU10 and AS3 countries subsidy may lie between one third and one half of the energy price paid by consumers. This implies that as long as these subsidies exist, actual CO2 mitigation cost in these countries is even lower than in Figure 8, widening the gap between these and EU15 countries.

Base regions

With respect to overall CO2 emissions from high-rise buildings, there is scope for substantial reductions. Figure 9 illustrates the annual CO2 savings possible from the high-rise stock according to the European Housing Ministries respondent to the VROM-commissioned survey, based on their estimates of energy saving potential.

Figure 9: CO2 savings potential according to national housing ministries [MtCO2]

The highest energy saving potential is in Eastern Europe; 39% in base region E and 34% base region H. Europe-wide, the energy saving potential is 28%, implying a reduction of Europe’s total final energy demand of 1.5%, and a corresponding approximate emissions reduction of 35 MtCO2.

Key points

• The achievable energy savings are substantial, ranging from 70% to 80% of heating demand.
• Energy prices are much higher in EU15 countries than in EU10 and AS3 countries.
• The required investment in energy efficiency improvement is lowest in EU10 and AS3 countries.
• Carrying out energy efficiency improvements as separate retrofit rather than as part of general refurbishment costs approximately twice as much.
• Taking reduced energy expenditure for households into account, there is a net benefit as a result of investment for all base buildings; the net benefits are highest in EU15 countries.
• Net CO2 mitigation costs (i.e. after taking reduced household energy expenditure into account) are lowest in EU15 countries; more importantly, from a policy-maker’s perspective, gross CO2 mitigation costs are lowest in EU10 and AS3 countries.