Easing the perceived pain of retrofitting payback
The simple payback period calculation for retrofitting (amount spent / annual savings) misses nuance
Summary: Retrofitting can improve the operational efficiency and emissions profile of existing buildings and infrastructure. However, the approach to funding and implementation will depend on the kind of infrastructure, the owner / user and the location. The most common source of resistance to retrofitting and upgrading is the perceived long payback period for the investment made. That is particularly acute where it is an individual homeowner or individual commercial property owner. The simple calculation of 'amount spent to complete the upgrade/retrofit' divided by the annual savings may be too simplistic and miss nuance that can bring that payback period down - and this can greatly impact the decision to proceed. For some householders, however, the payback period could still be too long or they simply don't have the means to fund the initial outlay. This is where place-based investment comes in.
Why this is important: Communities are important stakeholders for almost every business. As a sustainability professional, understanding the nuances of decision making for individuals and businesses can be helpful in designing appropriate strategies.
The big theme: The built environment, encompassing residential and commercial buildings, communal areas such as parks, and supporting infrastructure such as energy networks, mobility, and water supply, is an important sustainability theme. It is an integral part of societal existence and a major resource consumption problem (40% of global raw materials) and decarbonisation problem (as much as 40% of energy-related GHG emissions) that needs investor, government, business and consumer attention.
The details
Why retrofit?
The built environment is a key focus area for decarbonisation. It is one of the biggest sources of energy-related carbon emissions (~40%)
Making homes and commercial property more energy efficient can help with both affordability and more energy secure in addition to reducing incremental greenhouse gas emissions.
Restating the law of conservation of energy: Generation = Consumption; or in other words the energy generated upstream is consumed downstream in the built environment.
If we can lower consumption, then we can lower generation which in turn should lower harmful emissions (even before we talk about the mode of power generation).
Furthermore, we can subdivide Consumption: Consumption = Usage + Wastage; or in other words what we use usefully and what is lost to the universe (or used up 'un-usefully').
Usage and Wastage can both be lowered through improvements in efficiency which can be both active and passive, and through behavioural changes (for example, resetting what we assume to be a comfortable temperature).
When designing and building new properties and infrastructure there is much that can be done to improve both the embedded carbon footprint, which is created when taking raw materials and turning them into buildings, and operational carbon footprint (created through the running and operating of the building.
But what about existing buildings?
We previously discussed a number of ways in which existing structures can be repurposed when they reach the end of their useful operational life or even while they are still operational, their overall efficiency can be improved. This can involve retrofitting more modern, low carbon, energy efficient technologies and features or even reusing materials and elements from existing structures that have themselves come to the end of their lives.
You can read that Deep Dive here 👇🏾
Sandy Jayaraj
For an individual homeowner, for an upfront investment, they could save money on their energy bills every year, so why don't more homeowners jump at the chance?
Jon Fletcher, founder of big clean switch, a market-leading employee energy benefits provider, illustrated the problem in a LinkedIn post with an example from a home they recently completed an energy assessment on.
An Energy Performance Certificate or EPC tells you how energy efficient a building is rating from A (very efficient) to G (inefficient) and this particular home's most recent EPC from 2022 highlighted that to move from a D to a B rating the homeowners/occupiers would need to spend up to £30,150. Most if not all of that would likely be upfront. The first problem then is how would one fund that upfront cost?
