The importance of life-cycle based planning in maintenance and energy renovation of multifamily buildings

Highlights

• Systematic approach to cost-optimal energy renovation planning.

• The importance of long-term planning in property management.

• The financial benefits of condition-based maintenance scheduling.

Abstract

Improving the energy performance in the real estate sector has become increasingly important and drawn a lot of attention during the past few decades. Despite all the technological developments, the energy efficiency measures are yet expensive and when implemented only to improve the energy performance, are rarely economically justified. To lower the costs of energy performance improvements, an alternative is to combine energy efficiency measures with already required renovation measures. The problem with renovation on the other hand, is that its planning is not strategic; it is mainly opportunistic, short-term and with the focus on the capitalization of newly-discovered opportunities, meaning that renovation measures are coupled when one or more of the rather costly building components have reached failure. The take on an opportunistic approach, however convenient, results in loss of value which is most often neglected in the economic evaluation of renovation projects. The lack of strategic planning and the subsequent loss of value become more important in less-attractive markets, where there are both budget constraints and socio-economic issues. Energy performance and/or living standard are often sacrificed through improper distribution of resources as the choice of renovation measures are often influenced by the return of investment. Therefore, a proper evaluation of renovation alternatives not only can satisfy the technical and financial requirements but also help maintain proper living standard and improve the energy performance in multifamily buildings. In a prior study, authors have proposed a systematic approach to cost-optimal maintenance and renovation planning by combining the deterioration function of building components with respective service-life cycle costing. This paper presents an extension of that methodology to include the energy efficiency option pricing as an optimization criterion. The extended methodology is meant to provide support for housing owners in building management in forms of technical and economic evaluation of possible energy-renovation scenarios under time/budget constraints. To demonstrate the application of the methodology, maintenance/renovation plans are devised for three building components with sharing fixed costs (windows, faöade and roof) in both new and existing multifamily buildings.

Introduction

The real estate sector is the largest consumer of energy in Europe, accounting for almost 40% of the total energy use and 36% of the greenhouse gas emissions (IEA, 2015). Considering the low energy performance of the existing buildings, the lower than expected rate of renovation and the continuous growth of the total global energy demand in this sector, buildings are expected to add substantial pressure on the primary energy supply in near future (Atanasiu & Kouloumpi, 2013). That is why energy renovation has gained a lot of attention and became of quite importance to the real estate sector in recent years. Energy renovation measures are important not only to improve the buildings’ energy performance but also to help them comply with current living standards and regulations. In this regard, the European Union has adopted number of directives to promote energy renovation such as: the Energy Performance of Building Directive (EPBD), the Ecodesign Directive and the Labeling Directive; however the increased investment risks due to lack of information and transparency have stagnated the energy renovation progress (Fabbri, Groote, & Rapf, 2017).

Building owners generally have to face multiple barriers to invest in energy renovation in their portfolio. Apart from the financial constraints, lack of knowledge in the renovation process is often a crucial hindrance. To facilitate the renovation progress, information specially in regulatory compliance, planning, cost management, operation and maintenance, insurance and investment need to be systematically collected and become available to the decision makers (Sesana & Salvalai, 2018).

The introduction of the Energy Performance Certificates (EPCs) in 2002 by the Energy Performance of Building Directive (EPBD) (European Commision, 2002) as a mandatory requirement for the EU member States was an attempt toward eliminating the knowledge barrier. However, the EPCs’ general recommendations without specific information and lack of important indicators related to the thermal and visual comfort or the air quality that are important benefits of a building renovation practice resulted in the low acceptance of the EPCs’ by the users and consequently limited market penetration.

In order to provide tailor-made and understandable information about renovation potentials the EPC’s needed to be developed into individual renovation roadmaps, which would follow buildings throughout the service life and facilitate the realization of consistent customized renovation recommendations. This resulted in the evolution of the EPCs into Building Renovation Passports (BRPs) (Fabbri, De Groote, & Rapf, 2016).

The BRPs in addition to providing information regarding the energy performance, support building owners with personalized instructions (roadmaps) on renovation alternatives quantifying the potential energy savings and related costs of the potential measures (Sesana & Salvalai, 2018). In this regard, the BRPs can push the renovation market forward by providing necessary knowledge to the building owner and reducing the investor’s risks.

One important guiding principle in developing BRPs relate directly to the suggestion of the right timing and sequencing of actions in energy renovations (Sesana & Salvalai, 2018). In energy renovation planning, a common approach to the cost-effective energy performance improvements is to combine energy efficiency measures so that the lower cost-to-saving ratio of the cheaper measures compensate for the more expensive measures (Rysanek & Choudhary, 2013; Terés-Zubiaga, Campos-Celador, González-Pino, & Escudero-Revilla, 2015; Verbeeck & Hens, 2005). Moreover, there are great saving potentials in combining energy efficiency measures with already required renovation measures as the investment costs can be reduced to only the marginal costs. Consequently, there has been an increase in the relative importance of the deep-renovation¹ practice where most renovation measures are carried out at the same time in order to save on the sharing fixed and logistic costs.

One problem with the deep-renovation practice is that the economic evaluations are usually not made in a life cycle perspective. The main underlying reasons are: lack of expertise, complexity of the problem and also that the renovation plans are often opportunistic therefore short-term (both in terms of planning and payback time) with the focus on the capitalization of newly-discovered opportunities (Mjörnell, Boss, Lindahl, & Molnar, 2014). Renovation processes in general are complex and uncertain in terms of decision-making and planning (Economidou, Laustsen, Ruyssevelt, & Staniaszek, 2011; Femenías & Fudge, 2010; Reyers & Mansfield, 2001; Rosenfeld & Shohet, 1999). Renovation planning becomes even more complex when market conditions are not in favour of the building owners and incautious actions can result in financial repression and socio-economic issues (Farahani, 2017). For example, an expensive deep-renovation can result in either increased vacancy or gentrification whereas renovation to lower standards can reinforce segregation, result in poor relative living standard and low energy performance. To avoid these consequences, there is a need for a systematic approach to strategic renovation planning through which life cycle costs can be minimized and sustainability values be taken into accounts.

In this regard, the energy and economic performance metrics can directly benefit towards sustainable renovation by means of providing better living standards and help diminishing socio-economic segregation. An economically justified renovation which results in higher energy performance, improved indoor condition and better living standard not only benefits the housing owners by means of creating a more attractive living space for prospective tenants but also help existing tenants by stabilizing the rent levels.

However, as mentioned earlier, current planning procedures for renovation practices follow mainly on an opportunistic deep-renovation approach. In this approach, costly renovation measures are carried out at once when one or more of the rather expensive building components have reached or is reaching failure. Even though deep-renovation leads to reduced fixed- and logistic costs, in many cases the take on an opportunistic approach and the lack of long-term planning result in an unrecognized loss of value in building components. The loss of value in component level corresponds to the costs of nonutilized service life in respective components. Available maintenance and renovation budgeting tools do not include this loss of value in the economic evaluation of renovation projects (Brandt & Wittchen, 1999; Caccavelli & Gugerli, 2002; Flourentzou, Genre, Roulet, & Caccavelli, 2000; Flourentzou, Brandt, & Wetzel, 2000). This is partly due to the complexity and uncertainty involved in estimating the life expectancy of building components under different in-use conditions (ISO15686-8, 2011).

In a prior study (Farahani, 2018) a systematic approach to strategic renovation planning was introduced that helps decision makers take advantage of the deep-renovation benefits while avoiding the loss of value in the respective components. Based on that approach, a model was developed to optimize the life expectancy of building components by subjecting the respective components to different maintenance regimes. The model uses time-condition performance and budget constraints criteria in the optimization process. Since, energy efficiency measures are carried out together with already renovation measures, changes in the life expectancy of building components change the time for energy performance improvements hence the savings made through energy use reductions. And so, in order to be able to fairly evaluate renovation alternatives these savings need to be taken into account.

Therefore, this study presents an extension of the model (Farahani, 2018) to include energy performance improvement as an optimization criterion. The addition of energy performance improvements, includes both the marginal investment costs of implementing energy efficiency measures and the reduced costs of operation (savings made through energy use reductions) in the economic evaluation of energy-renovation plans. The outcome is the cost-optimal energy-renovation year (along with its respective maintenance plan) for the given combination of building components. The expected total investment savings are meant to lower the budgetary pressure on both the housing owners and the existing/prospective tenants with respect to the implementation of energy efficiency measures and maintaining the affordable rent levels. The resulting long-term renovation plans can create opportunities for the owners to elevate living standards (specially in less-attractive markets) and improve the energy performance at lower costs.