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Building owners who do not occupy a building themselves or housing corporations can profit from additional revenue opportunities after undertaking investments for energy efficient measures if they are allowed to charge higher rent from their tenants after the renovation. The higher rent takes the tenant’s energy savings into account. This helps overcome the barrier of split incentives, i.e. the lack of incentives to realize building improvements when owner and occupant are different parties.
This business model is based on a regulation that allows such rent increases and is being introduced in a number of countries. Such regulation is possible in situations where a legislation on maximum rents and/or maximum allowable rent increases exists. This is usually the case in the social housing sector, but it may also exist in the wider residential rental sector where buildings are owned by private persons or property companies.
As this business model is based on a change in legislation regulating the rental sector, its attractiveness for the building owner directly depends on the details of the legislation, e.g. how much of the energy savings or of his up-front investment a building owner is allowed to recover. It is unlikely that being able to charge higher rents to tenants will be the sole driver for a property owner’s decision to undertake renovation measures. However, the higher rents may still play a significant role in the decision. It is expected that in its current form the business model is mostly applied for the implementation of energy efficiency measures which are usually more cost-effective than renewable energy technologies. But theoretically the business model may also be applied for the implementation of renewable energy technologies (RET), e.g. for the installation of a heat pump which reduces energy costs for the tenant. There are only few new business models and innovative policy instruments which specifically address the barrier of split incentives. This implies that this business model, potentially supported by additional incentives, may play an important role in catalyzing energy improvements of the existing building stock in the large rental sector.
The application of the business model is limited to countries or regions that have a regulated rental sector. In this sector, mostly large property owners are active, such as social housing corporations which frequently have the long time horizon, access to capital and technical expertise required to plan and undertake renovation measures.
RentalCal is an international research project funded by the European Union under the H2020 framework. The project aims at developing a methodology for the profitability assessment of energy efficient refurbishment investments in the rental housing sector. The second objective of RentalCal aims at providing comparable and transparent information on the profitability of energy efficiency investments that can be used both for the assessment of investment decisions, and for the comparative analysis of existing barriers in the private rental housing stock of participating countries. RentalCal specifically aims to prepare the ground for investment in the existing rental housing stock, all across EU.
The renovation of Torrelago district was implemented in the framework of the FP7 funded CITyFiED project (http://www.cityfied.eu/) .
Torrelago district involves 31 private multi-property residential buildings (1488 dwellings) that were constructed in the 1970s–1980s, more than 140,000 m2 and 4000residents involved. Former conditions of the district were very low in terms of efficiency, comfort and costs, which fostered the intervention. Main energy measures implemented at the building scale are buildings external insulation (Composite System-ETICS, ventilated façade), connection to district heating (twelve new heat exchange substations at building level), individual metering to raise users’ awareness.
The E2VENT system directly targets a special typology that correspond to suburban multi-storey residential buildings built in the 60’s 70’s that are characterized by a high energy consumption, bad air quality due to the lack of air renewal motorized system, and with low architectural interest. To tackle all those problems with one refurbishment strategy, E2VENT offers an innovative yet simple modular and adaptable system.
The E2VENT system is an external thermal building refurbishment solution with external cladding and air cavity that embeds different breakthrough technologies that will ensure its high efficiency:
- A Smart Modular Heat Recovery Ventilation (SMHRV) for the air renewal allows the heat recovery from the extracted air using a double flux exchanger. Indoor Air Quality is ensured while limiting the energy losses.
- A Latent Heat Thermal Energy Storage (LHTES) based on phase change materials provides a heat storage system for heating and cooling peak saving.
- A smart management that controls the system on a real time basis targeting optimal performances
- An efficient anchoring system that limits thermal bridges and allows an easy and durable installation.
To know more: http://systems.e2vent.eu/
The project STUNNING aims at building up a stakeholder community around a Renovation Hub designed as a knowledge sharing platform, providing information on innovative solutions for building renovation and novel business models (illustrated through case studies) for their adoption and large scale replication. The provided solutions involve affordable and adaptable refurbishment packages, taking into consideration the whole renovation value chain.
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