Energy renovation of single-family houses in Denmark utilising long-term financing based on equity

Applied Energy 88 (2011) 2245–2253

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Energy renovation of single-family houses in Denmark utilising long-term financing based on equity J. Kragh a,b,⇑, J. Rose a a b

Danish Building Research Institute, Aalborg University, Department of Energy and Environment, Dr. Neergaards Vej 15, 2970 Hørsholm, Denmark Danish Knowledge Centre for Energy Savings in Buildings, Gregersensvej 1, Building 2, 2630 Taastrup, Denmark

a r t i c l e

i n f o

Article history: Received 11 June 2010 Received in revised form 10 December 2010 Accepted 18 December 2010 Available online 15 January 2011 Keywords: Energy savings Energy renovation Single-family houses Equity Assessed public property value Long-term mortgage loans

a b s t r a c t This paper aims to present an economic overview of the opportunities for energy renovation of singlefamily houses in Denmark financed over the long term. The paper focuses on the economic difference between energy savings and the repayment of investment. Taking out the average remaining 20% equity in long-term property mortgage loans and utilising it for extensive energy renovation improves both the economy and the extent of included measures. Approximately 30% of energy consumption in Denmark is used for space heating. The existing 1 million single-family houses account for approximately half of this, thus making energy renovation a key factor for the reduction of CO2 emissions. The conclusions were that in average the possible budget for renovation varied between €20,000 and 40,000 per single-family house. The equity of the house was particularly dependant on geographical location and construction period. Different energy renovation measures were analysed in terms of economy showing that a wide range of specific measures had a positive economic balance for the homeowner from year 1. The economic balance between saved energy and repayment of the investment is however very dependent on the assumed future energy price. An example showed that a typical house from 1925, still in its original form, could yield annual savings for the homeowner of approximately €2600, assuming a future energy price of 0.2 €/kW h. At the current energy price level of 0.1 €/kW h energy renovation in general is almost economically neutral for the homeowner. Ó 2010 Elsevier Ltd. All rights reserved.

1. Introduction It is the ambition of the Danish government to become a fossilfuel-independent nation. In spite of relatively strict Building Regulations governing energy consumption, the existing building stock still offers an enormous potential for achieving energy savings. Over 30% of Denmark’s energy consumption is attributable to private households [1]. Breakthroughs in this area will be crucial in supporting the governmental goal of reducing the energy consumption. In 2008, the households’ climate-adjusted energy consumption amounted to 200 PJ, where 165 PJ were for space heating and hot water production and 35 PJ for electric appliances [2]. The existing 1 million single-family houses account for approximately half of this energy consumption, thus making energy renovation of these buildings a key factor for the Danish reduction of CO2 emissions. ⇑ Corresponding author at: Danish Building Research Institute, Aalborg University, Department of Energy and Environment, Dr. Neergaards Vej 15, 2970 Hørsholm, Gregersensvej 1, Building 2, 2630 Taastrup, Denmark. E-mail address: [email protected] (J. Kragh). 0306-2619/$ - see front matter Ó 2010 Elsevier Ltd. All rights reserved. doi:10.1016/j.apenergy.2010.12.049

Several studies have analysed the Danish building stock with regard to energy saving potential. In [3] three scenarios with different levels of saving ambition have been described. Taking out the results for single-family houses in the three presented scenarios, the annual energy savings were found to be 15, 25 and 35 PJ respectively. In [4] an economically profitable saving potential of 80% was found, over a period ending in 2050, to be similar to the Danish government’s time perspective. As in this article, long-term financing was also recommended to improve the economy of the renovation measures. One of the most important barriers to reducing the heat consumption in houses is financing. Even with the increases in energy prices that have occurred over the past decade, the cost effectiveness or the payback time for energy renovation of old buildings is still considered too long by many homeowners. This is one of the barriers regarding energy use that slows down the process of improving the existing building stock. The cost effectiveness and the problem of assessing the economic efficiency of energy saving measures are described in [5] and a proposal for a twofold benefit criterion taking into account the renovation of the building/element is also given.

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A European analysis of energy renovation of the residential building stock in Switzerland is presented in [6]. Here it is concluded that building renovation in particular, but also the construction of new buildings, offers large potential to comparatively low or even negative marginal costs. Another Swiss study [7] of energy renovation found that there are two relevant factors in economic assessment of energy renovations. These factors are the energy price and a supportive financial energy policy. It is also concluded that it would be economically wrong to renovate a house without simultaneous investment in energy efficiency as this is a highly attractive investment for homeowners or other investors. A similar study of the economy and evaluation of various energy saving measures in the building sector was made in [8], focusing on a domestic detached house in Greece. It is found that many energy measures can be realised with a positive economy for the homeowner.

In Denmark the property mortgage loan system allows up to 80% of the property market price to be financed by relatively cheap long-term loans through national mortgage loan providers. In average, the remaining property mortgage loan for single-family houses in Denmark is approximately 60% (2008) of the property market price [11]. This paper focuses on the possibilities of taking out the remaining 20% equity in long-term property mortgage loans and spending them on energy renovation. The Danish building stock is unique regarding data registration. Three Danish building databases were used to perform the analysis; the Building Stock Register (BBR) and the Assessed Public Property Value (for property taxes) were linked in order to calculate the equity of single-family houses, and the Energy Labelling Register of Residences was used to evaluate the energy performance.

2.1. The Building Stock Register – BBR 1.1. The Danish knowledge centre for energy savings in buildings The Danish Knowledge Centre for Energy Savings in Buildings [9] was established in 2009 to serve building professionals in their effort to convince their costumers to make energy renovations. Among other things the Centre has developed approximately 30 different fact sheets, Energy Solutions, for single-family houses. In a few pages the Energy Solutions describes how different constructions and installations should be energy renovated in a flexible way and what the expected energy saving would be. In general insulation levels are like they would be in a new low-energy building 2010. The Energy Solutions assumes that the constructions are in good condition with regard to mould, strength, etc. To speed up the process of executing energy renovations, a package solution of Energy Solutions is also suggested with roofing or window replacement as the key parameters. The benefits of using package solutions is firstly that different measures can be integrated from the start and secondly that it provides the opportunity of utilising total financing by means of the mortgage loan system. Roofing and windows differ from other building envelope constructions as they are typically replaced or as a minimum renovated every 20–30 years. Walls, ceilings and floors are longlasting and rarely changed. However, the recurring renovation or replacement of windows or roofing provides an opportunity to include other improvements with emphasis on energy renovation. 2. Methodology and data In the literature energy renovation has been economically evaluated using different methods. The most commonly used methods are the Net Present Value (NPV), the Internal Rate of Return (IRR), the Savings to Investment Ratio (SIR), Cost of Conserved Energy or the most simple, the payback time. In this paper the different measures were evaluated by the annual economic difference between the saved energy and the repayment of the investment. Determination of the energy savings of the different renovation measures was given in the Energy Solutions produced by the Danish Knowledge Centre for Energy Savings in Buildings.

Since 1976 all buildings and housing in Denmark have been registered in a national database called BBR [12]. Today this database contains information on all 1.6 million buildings and housing units in Denmark. The BBR register contains detailed information on each building e.g. heated area, number of stories, type of heating installation, type of owner, etc. Table 1 presents some key parameters of Danish residential buildings. It is evident from Table 1 that single-family houses account for approximately half of the total heated area in residential buildings, 98% of which are privately owned. These privately owned singlefamily houses therefore represent a significant energy saving potential in Denmark. Table 2 shows the distribution of single-family houses on construction periods representing typical styles of building tradition. As it appears from Table 2, the majority of the single-family houses in Denmark were constructed before 1930 and during the 1960s and 1970s. Table 3 presents an extract of the typical heating supply systems used in single-family houses supplemented with average energy prices (November 2010). The energy price varied both between the types of energy sources (district heating, natural gas, oil and electricity) and also geographically owing to different distribution companies.

2.2. Energy labelling database Since 1997, Danish law has stipulated that all property for sale should be inspected by a trained energy consultant. The inspection is mandatory for both new and existing buildings. The energy consultant should prepare a short report with an energy label on an A– G scale supplemented with suggestions for cost-efficient energy renovation measures. All the information registered by the consultant is accumulated in the Energy Labelling database [15]. This means that the labelling database increases all the time and in December 2009 the database contained 60,000 energy labels of single-family houses, i.e. enough to perform a representative analysis of the building stock in regard to building envelope insulation levels.

Table 1 The Building Stock Register – Danish residential buildings [12].

Single-family house Block of flats Row house Farmhouse Total

Number of buildings ( )

Average heated area (m2)

Total heated area (m2)

Share of total heated area (%)

946,572 81,204 203,951 106,662 1338,389

143 950 154 182 –

134,989,900 77,160,734 31,376,945 19,435,181 262,962,760

51 29 12 8 100

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J. Kragh, J. Rose / Applied Energy 88 (2011) 2245–2253 Table 2 Key values for Danish single-family houses in typical construction periods [12]. Single-family house Building period

Number of buildings –

Total built-up area (m2)

Residence heated area (m2)

Business heated area (m2)

Total heated area (m2)

Part of total (%)

Average heated area (m2)

Before 1930 1931–1950 1951–1960 1961–1972 1973–1978 1979–1998 1998–2009 Total

250,952 122,388 104,357 270,044 144,904 122,587 73,631 1088,863

27,723,542 11,893,540 11,174,218 37,354,139 20,956,136 17,135,781 12,568,539 138,805,895

37,258,013 16,049,520 12,740,267 38,426,279 22,069,540 17,739,105 11,969,656 156,252,380

426,556 125,724 83,562 185,944 86,622 57,461 23,476 989,345

37,684,569 16,175,244 12,823,829 38,612,223 22,156,162 17,796,566 11,993,132 157,241,725

24 10 8 25 14 11 8 100

150 132 123 143 153 145 163 144

Table 3 Key values of heating systems in single-family houses [12–14].

District heating Natural gas Oil Electricity

Number ( )

Part of total (%)

430,000 236,000 233,000 80,000

44 24 24 8

Avg. energy price winter 2009/2010a (DKK/kW h)

(€/kW h)

0.66 0.74 0.93 1.75

0.09 0.11 0.13 0.24

a [14], assuming an energy consumption of a standard reference house and standard efficiency of the boiler. The energy price includes VAT, but not the fixed taxes, maintenance costs and repayment of heat supply investment.

Table 4 The area-weighted U-value and the 25th percentilea of the U-value of different envelope constructions in Danish single-family houses. Calculated from the energy labelling database December 2009 [15].

a b

U-value (W/m2 K)

Ceiling

Building period

Area-weighted

25th Percentile

Area-weighted

25th Percentile

Area-weighted

25th Percentile

Before 1930 1931–1950 1951–1960 1961–1972 1973–1978 1979–1998 After 1998 BR 2010 maintenance or replacementb

0.35 0.39 0.30 0.28 0.26 0.19 0.11 0.15

0.20 0.22 0.19 0.20 0.20 0.17 0.10

0.69 0.70 0.64 0.51 0.37 0.29 0.20 0.20

0.33 0.37 0.34 0.36 0.30 0.25 0.18

0.58 0.62 0.53 0.36 0.31 0.26 0.14 0.12

0.26 0.30 0.30 0.27 0.23 0.20 0.11

Wall

Floor

The 25th percentile represents the limit where 25% is below and 75% is above. Requirement in Building Regulations 2010 for maintenance or replacement of building envelope constructions [16].

Table 4 presents the area-weighted U-value calculated for the each building period supplemented with the 25th percentiles of the U-value, as this gives good indication of the general insulation level. Also the matching U-value requirement stipulated by the current Danish Building Regulations [16] is shown in Table 4. The Building Regulations operates with a specific requirement in case of maintenance or replacement of building envelope constructions. From Table 4 it can be concluded that for single-family houses built before 1998, 75% of the constructions do not comply with the present Building Regulations and the area-weighted U-value is approximately twice as high, or higher, as that required in the Building Regulations 2010 for maintenance or replacement. 2.2.1. Windows and ceilings Fig. 1 combines the present level of ceiling insulation in mm and the windows U-value in W/m2 K for single-family houses distributed on selected construction periods. The U-value requirement for windows according to the Building Regulations 2008 was 1.5 W/m2 K. If it is assumed that 200 mm ceiling insulation represents a U-value of approximately 0.2 W/m2 K, it is clear that almost no buildings from before 1998 have windows or ceiling insulation that comply with the requirements.

Fig. 1 illustrates the insulation level of the ceilings in mm and the U-value of the windows in W/m2K. 2.3. Financing properties in Denmark In Denmark the property mortgage loan system allows up to 80% of the property market price to be financed by relatively cheap loans obtained by national credit institutions. Table 5 presents a typical property mortgage loan as offered by national credit institutions in December 2010 [17]. 2.3.1. Assessed Public Property Value and equity The owner of a building in Denmark must pay a yearly tax on the assessed value of the property [18], and the property value is determined by the authorities and adjusted every other year. Previously, the property market prices were considerably higher than the property value determined by authorities; however, in the winter of 2009/2010 the economic crisis caused the property market price to reach levels corresponding to the assessed property value registered in 2007. Therefore, the Assessed Public Property Value from 2007 can be used for determining the equity with reasonable accuracy.

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Fig. 1. Data of the insulation level of ceiling constructions and windows in six specific construction periods. The U-value of the ceilings has been converted into a corresponding insulation thickness with a thermal heat conductivity of 0.036 W/mK.

In 2008 the average remainder (Loan-to-value) of the property mortgage loan in Denmark was approximately 60% for single-family houses [19]. This resulted in a potential renovation

budget of 20% of the property market price. The typical financing situation of single-family houses in Denmark is illustrated in Fig. 2.

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J. Kragh, J. Rose / Applied Energy 88 (2011) 2245–2253 Table 5 Property loan offered by national credit institutions in December 2010 [17].

a b

Loan type

Term (years)

Expense ratioa (%)

Annual cost before tax (€/€ loan)

Annual cost afterb tax (€/€ loan)

Fixed rate (4% bond)

20 30

6.6 6.1

0.09 0.07

0.07 0.05

Total Annual Fund Operating Expenses. 33% of the interests have been deducted from the taxable income.

Scenario

Equity per house

Average per house (€/m2)

Equity 1 Equity 2

€20,000 €40,000

156 312

The future development of energy prices will have a huge influence on the economic performance of the renovation measures. Therefore three sub-scenarios of the energy price are used: Energy price scenario A: Energy price scenario B: Energy price scenario C:

0.10 €/ kW h 0.15 €/ kW h 0.20 €/ kW h

Current energy price winter 2010 (Table 3) Future level 1–50% increase Future level 2–100% increase

The annual cost of the loan was assumed to be 0.070 €/€ mortgage loan corresponding to a fixed rate (4% bond, 20 year) as shown in Table 5. 4. Results – economic performance of energy renovation measures

Fig. 2. Illustration of the property financing for a typical single-family house.

In order to calculate the equity for single-family houses, the Building Stock Register and the Assessed Public Property Value Register were linked. Even though Denmark is a small country, the assessed property value is very dependent on the geographical location and on building age. Geographically Denmark is divided into five regions as shown in Fig. 3. Table 6 shows how the 25th percentile of the calculated equity (20% of the property value 2007) differs between the five regions and the building age. From Table 6 it is clear that the equity for single-family house is very dependent on the region and the building period. However, the table also shows that 75% of all single-family houses have more than €13,000 equity and on average the equity is between €20 and 40,000 i.e. the amount available for significant energy renovation. 3. Scenarios for energy renovation The lifetime of windows and roofing are short compared with other building envelope constructions and they are typically replaced with no regard to investment payback time. Therefore replacement of windows or roofing is suggested as the key in creating a connection to the homeowners in order to initiate an energy renovation process. Combining the results from Tables 3 and 6, two scenarios for energy renovation budgets are assumed in the following analysis.

To optimise the saving potential each energy renovation measure was evaluated separately based on the annual balance between savings and cost. Due to the long-term financing, the evaluation was made by comparing the annual savings of each measure with the annual cost of the long-term property loan. The investment prices for the different energy renovation measures were found either by price books [20] or by market investigation. All prices included tax and were assumed to be valid for 2010/11. Based on Table 7, it was concluded that the economic balance was positive for adding insulation to existing ceiling insulation thicknesses of 150 mm or less, irrespective of energy price scenario. For existing insulation thicknesses of 200 mm, the economic balance was negative applying energy price scenarios A and approximately neutral in scenario B. In general ceiling insulation was found to be a good investment for the homeowner, who would achieve a positive economic balance starting from the first year after the renovation (see Table 7). In general the economic balance for replacing existing windows with low-energy double- or triple-glazed windows was found to be negative. Windows are typically replaced for other reasons, i.e. being run-down or decomposed and therefore the economic balance is not crucial to the decision of replacement (see Table 8). 4.1. Supplementary energy renovation measures Table 9 presents supplementary energy renovation measures for typical single-family houses. The different measures were supposed to be included in a package solution and therefore also financed through the long-term mortgage loan.

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Fig. 3. The five Danish regions.

Table 6 The 25th percentile of the calculated equity value for single-family houses assuming 60% mortgage loan and 20% equity of the public property value 2007 [18]. 25th Percentile of the equity (€)

Building period

Regions of Denmark Capital Zealand South Jutland Central Jutland North Jutland

Before 1930 39,000 20,700 16,400 17,200 13,000

1931–1950 52,400 23,900 18,300 18,500 14,000

1951–1960 51,100 25,800 18,300 18,300 15,300

1961–1972 49,700 30,900 21,500 23,700 19,400

1973–1978 49,700 33,600 24,200 25,500 21,800

1979–1998 49,700 36,300 26,900 29,600 25,300

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J. Kragh, J. Rose / Applied Energy 88 (2011) 2245–2253 Table 7 Economic analysis of ceiling insulation using three scenarios for future energy price development. The energy savings do not include heat supply efficiency. Total annual energy savings (kW h/m2) Insulation (mm) After renovation Existing 300 50 44 100 24 150 14

400 46 26 16

Assumptions Energy Solution – ceiling energy renovation [9]

Investment (€/m2) Insulation (mm) 50 100 150

300 23.6 21.0 18.4

400 28.9 26.3 23.6

Assumptions Fixed-price insulation work + unit price insulation Annual repayment

10.50 €/m2 0.05 €/m2 per mm 0.070 €/€

Annual repayment (€/m2) Insulation (mm) 50 100 150

300 1.70 1.50 1.30

400 2.00 1.80 1.70

Annual economic balance (savings – repayment) (€/m2) Scenario A Insulation (mm) 300 50 2.70 100 0.90 150 0.10

400 2.60 0.80 0.10

Assumptions Energy price scenario A

0.10 €/kW h

Scenario B Insulation (mm) 50 100 150

300 4.90 2.10 0.80

400 4.90 2.10 0.70

Assumptions Energy price scenario B

0.15 €/kW h

Scenario C Insulation (mm) 50 100 150

300 7.10 3.30 1.50

400 7.20 3.40 1.50

Assumptions Energy price scenario C

0.20 €/kW h

Table 8 Economic analysis of window replacement using different scenarios of the energy price development in the future. The existing window is assumed to be with double glazing without low-emission coating. Total annual energy savings (kW h/m2) Old window with double glazing – replaced with: Thermal transmittance, Uw (W/m2 K) Solar energy transmittance, gw ( ) Annual savingsa (kW h/m2 per year)

Window with double low-energy glazing 1.4 0.5 145

Window with triple low-energy glazing 0.9 0.4 172

Investment and repayment (€/m2) Total Investment Annual repayment

538.00 37.80

605.00 42.50

23.30 16.00 8.70

25.30 16.70 8.10

Annual economic balance (€/m2) Scenario A Scenario B Scenario C a

Assumptions old window Uw-value, window gw-value, window

2.70 W/m2 K 0.50

Assumptions Unit price, window Triple glazing, add Annual repayment

538 €/m2 67 €/m2 0.070 €/€

Energy price Energy price Energy price

0.10 €/kW h 0.15 €/kW h 0.20 €/kW h

The annual energy saving is calculated as the difference between the energy balance (Eref) of the old and new windows [10].

In practice the total energy savings would decrease if different measures were combined. This is due to a reduction in the utilisation factor of the solar gains and internal heating gains from people and equipment. 4.2. Example of energy renovation of single-family houses Tables 10 and 11 present examples of the economy of a package solution for an extended energy renovation of two single-family houses from 1925 and 1970, respectively. The insulation conditions of the buildings were assumed to be the same as when they were erected.

4.2.1. Single-family house from 1970 The owner wished to replace the roofing and to include other renovation measures. The total financing budget using equity scenario 1 was assumed to be €20,000. The cost of the roofing replacement was assumed to be €10,000 resulting in an energy renovation budget of the remaining €10,000. From Table 10 it could be concluded that the economy of a package solution for an energy renovation was highly dependent on the energy price scenario. At the current energy price level the annual economic balance is slightly negative or nearly neutral. However, taking into account the scenario C for a future energy price of 0.20 €/kW h and using long-term financing led to annual

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Table 9 Economic analyses of supplementary renovation measures using different scenarios of the future energy price development and an annual repayment of 0.070 €/€ (20 year). Building envelope

Total investment (€/m2)

a

a b c d

Annual cost loan (€/m2)

Annual savings (kW h/m2)

Annual economic balance Energy price scenario A (€/m2)

B (€/m2)

C (€/m2)

Outer walls – cavity insulation Outer walls – external insulation (+125 mm)b Floors – Demolish and rebuild Hatches in ceiling/walls – insulate (+150 mm) [21] Glazing – replace with double low-energy glazing with warm edgec Heating pipe in unheated cellar/crawl space – insulated

16.80 134.40 94.10 40.30 293.40 40.30

1.20 9.40 6.60 2.80 20.60 2.80

92 17 27 148 140 29

8.00 7.70 3.90 12.00 6.60 0.10

12.60 6.90 2.60 19.40 0.40 1.60

17.20 6.00 1.20 26.80 7.40 3.00

Installations Circulation pump (heating + domestic hot water) – Replace Boiler (gas/oil) – replaced in poorly insulated house Hot water tank – replace Solar heating (domestic hot water) (4 m2) – Install Solar heating (domestic hot water/space heating) (6 m2) – install

(€) 400 6720 1080

(€) 28 472 76

(kW h) 325 5035 1000

(€) 5 32 24

(€) 21 283 74

(€) 37 535 124

5380 7390

378 519

2960 4440

66 147

214 369

82 75

The cavity wall U-value is assumed to be 1.60 W/m2 K before and 0.67 W/m2 K after [9,22]. The U-value of the wall is assumed to be 0.38 W/m2 K before and 0.21 W/m2 K after (+125 mm insulation) [9]. The energy saving is calculated as the difference between the energy balance (Eref) of the old and new glazing [10]. Units in (€/m and €/kW h).

Table 10 Example of an extended package solution for energy renovation of a single-family house assuming equity scenario 1. Example – single-family house from 1970–1 storey Ceiling/floor area

(m2)

120

Assumptions Annual repayment Renovation budget Total investment

a

c

Saved energy

Energy price scenario B

C

Building envelope

Before

After

(€)

(€)

(kW h)

(€)

(€)

(€)

Ceiling insulation Boiler (gas/oil) – replacea

100 mm Oldb

Add 300 mm Newc

3160 6720

216 472

3120 3300

312 330

468 500

624 660

9880

688

6420

642 50

968 280

1284 600

Total Annual economic balance b

Annual cost loan

0.070 €/€ €10,000

A

The energy saving of the boiler is reduced due to the reduction of the total energy consumption. Old boiler from 1970s [22]. New condensing boiler [22].

Table 11 Example of a package solution for energy renovation of a single-family house – equity scenario 2. The savings are calculated using Tables 7–9. Example – single-family house from 1925–1½ storeys Floor/ceiling area Outer wall area Window area Hatches in ceiling/walls

100 m2 105 m2 38 m2 1.5 m2

Assumptions Annual repayment Renovation budget

0.070 €/€ €40,000

Total investment

Annual cost loan

Saved energy

A

B

C

Building envelope New windows Ceiling Outer walls – cavity insulation Hatches in ceiling

Before Double glazing 100 mm No insulation No insulation

After Low-energy Add 300 mm Add 75 mm Add 150 mm

(€) 20,440 2630 1760 60

(€) 1436 180 126 4

(kW h) 5520 2600 9660 220

(€) 552 260 966 22

(€) 828 390 1449 33

(€) 1104 520 1932 44

Installations Boiler (gas/oil) – replacea Solar heating (domestic hot water/ space heating))6 m2) – install

Oldb Non

Newc Newc

6720 7390

472 519

4300 4440

430 440

650 670

860 890

39,000

2737

26,720

2668

4017

5346

70

1280

2610

Total energy renovation Annual economic balance a b c

Economic balance Energy price scenario

The energy saving of the boiler is reduced due to the reduction of the total energy consumption. Old boiler from 1970s [22]. New condensing boiler, new standard hot water tank and standard solar heating system [22].

J. Kragh, J. Rose / Applied Energy 88 (2011) 2245–2253

savings of approximately €600 when the annual cost of the loan had been paid. The total annual energy saving was more than 6400 kW h. 4.2.2. Single-family house from 1925 A homeowner wished to install new windows and to include other energy renovation measures. The financing budget using equity scenario 2 was assumed to be €40,000. From Table 10 it could be concluded that the current economy of a package solution for energy renovation that used long-term financing was slightly negative, if using energy price scenario A. However, it should be pointed out that the window replacement should have been carried out regardless of energy savings and therefore the result should be evaluated in that perspective. Taking into account the energy price scenario C led to annual savings of approximately €2600 when the annual cost of the loan had been paid. 5. Other aspects In the economic evaluation we did not consider that some of the renovation measures improved the indoor climate. Installing lowenergy windows or increasing the insulation level is often found to reduce draft and mould problems and thus to enhance the indoor climate significantly. However, the value of improved indoor climate is difficult to appraise, even though this is an important argument in the recommendation of an energy renovation measure. Also the renovation of the building constructions and thereby the economic value of the building was not included in the evaluation of energy saving measures. Both aspects would obviously improve the evaluation of the energy renovation measure. 6. Conclusions One of the most important barriers to the introduction of energy renovation in the existing building stock is financing. Even with the increases in energy prices that have occurred over the past decade, the payback time for energy renovation of old buildings is still considered too long by many homeowners. If this barrier is to be overcome, the annual cost of energy renovation investment should at least be equal to the annual savings on energy. The present work analysed the possibilities of utilising the remaining equity in single-family houses. Taking advantage of the relatively cheap long-term mortgage loans to finance energy renovation, investment using equity could be a way to make energy renovation economically attractive to homeowners. The cheap financing made it possible for the homeowner to actually achieve a positive economic balance already from the first year after the energy renovation. The economic evaluation showed that the balance between the annual cost of the loan and the annual energy savings was positive for a wide range of different energy renovation measures using different scenarios of the energy price in

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the future. The economy of the energy renovation was shown to be very dependant on the future energy price development. At 0.10 €/kW h, the current Danish energy price level (winter 2010/ 2011), the economy of the energy renovation was shown in two typical building examples to be slightly negative for the presented measures; however only a minor increase in energy prices would make the energy renovation investment positive. With the expectation of a more significant increase of energy prices in the future, an example of a standard single-family house built in 1925 and renovated for €40,000 showed a positive economic balance of approximately €2600 per year when the annual cost of the loan was paid and assuming an energy price in the future of 0.20 €/ kW h. Acknowledgements This work was initiated by the Danish Knowledge Centre for Energy Savings in Buildings. The Knowledge Centre was established to serve building professionals. References [1] The Danish ministry of climate and energy. Energy policy report; 2009. [2] The Danish energy agency. Energistatistik; 2008. [3] Wittchen KB. Potential energy savings in existing residential buildings. In: SBi 2009:05. Danish Building Research Institute, Aalborg University, Department of Energy and Environment; 2009 [in Danish]. [4] Tommerup H et al. Energy savings in Danish residential building stock. Energy Build 2006;38:618–26. [5] Martinaitis V et al. Criterion to evaluate the ‘‘twofold benefit’’ of the renovation of buildings and their elements. Energy Build 2004;36:3–8. [6] Jakob Martin. Marginal costs and co-benefits of energy efficiency investments the case of the Swiss residential sector. Energy Policy 2006;34:172–87. [7] Kost Michael et al. Economic potential of energy-efficient retrofitting in the Swiss residential building sector: the effects of policy instruments and energy price expectations. Energy Policy 2007;35:1819–29. [8] Nikolaidis Yiannis et al. Economic evaluation of energy saving measures in a common type of Greek building. Appl Energy 2009;86:2550–9. [9] Danish knowledge centre for energy savings in buildings, . [10] Nielsen TR et al. Energy performance of glazings and windows. Solar Energy 2000;69(Suppl.):137–43. 1–6. [11] Nykredit Realkredit Koncernen. Årsrapport; 2008 [in Danish]. [12] Danish enterprise and construction authority. The building stock register. Bygnings- og Boligregistret; 2008. [13] The Danish energy regulatory authority; 2010. [14] John Tang, Notat: Fjernvarmeprisen i Danmark. Dansk Fjernvarme. Merkurvej 7, DK-6000 Kolding; 2009. [15] Danish enterprise and construction authority. FEM-sekretariatet. The energy labelling database; 2009. [16] Danish enterprise and construction authority. Building regulations 2010. Bygningsreglement; 2010. [17] Realkredit Danmark, property mortgage loan online calculator; January 2010 . [18] Danish tax and customs administration – SKAT. Property value, Ejendomsvurdering; 2007. . [19] Nykredit Realkredit Koncernen. Annual Report; 2008. . [20] Byggecentrum. Price book, V&S prisdata, Renovering og Drift; 2010. [21] Danish standards, DS 418 – 6.udgave, Beregninger af bygningers varmetab. Calculation of heat loss from buildings; 2002. [22] Danish enterprise and construction authority. FEM-sekretariatet. Handbook for energy consultants; 2008.