EVALUATING IRREVOCABLE EE HOUSING INVESTMENTS UNDER UNCERTAINTY: A CASE STUDY
MOHAMED AL MARCHOHIa, BART JANSSENSb, AVIEL VERBRUGGENa
a University of Antwerp, Department Environment, Technology and Technology Management, Belgium
b Artesis College of Architectural Sciences – Henry Van de Velde Institute, Belgium
ABSTRACT
When constructing a house, many decisions have to be taken. One of the decisions is the energy performance level of the building. The constructor or owner may choose to construct conform the minimum legal requirements (‘standard building’) or construct a house with a higher energy performance level. In the latter case, a ‘low energy building’ or a ‘passive building’ can be constructed. Although passive houses enjoy a lot of attention recently and governments stimulate their construction through subsidization, only a marginally small amount of people chooses for the passive house formula. The main cause is the perceived high extra initial cost of high energy performance buildings. In the simplest financial calculations concerning this issue, uncertainty, the full life cycle and irrevocability’s are not taken into account or not well enough. The main question here is which of the energy performance levels is economically optimal? We analyze this problem statement by comparing the three energy performance levels through a full cost analysis over the full life cycle. We start from a massive brick building as a case of which we construct three equivalents (representing the three energy performance levels) virtually. The financial data is compared based on the Total Present Costs (TPC) methodology. These results are very dependent on the initial assumptions concerning the ‘uncertain future prices’. To counter this problem we implement a sensitivity analysis to evaluate the robustness of the results. In a further stage, we perform a Monte Carlo simulation where we vary all input parameters of the model to obtain a probability density function for the different options. These density functions represent the risk profile of each choice and contain more information than a simple TPC-comparison and a basis sensitivity analysis. Conclusions will be drawn based on these final results.
