42 / 56
42
• Minimum cost scenario
- A simplistic
way is to assume that since these
systems are severely out-dated, it is
likely that they are near the end of
their life-cycle anyway. Upgrading to
the current code minimum cannot be
considered as an additional cost – hence
the abatement cost over a period of 5
years is simply : [zero investment cost –
(energy savings over 5 years)] /[energy
savings over 5 years]= -$5/kWh.
• Maximum cost scenario
- On the
other hand, for the unfortunate
(thankfully fictional) few who have
relatively recently installed new systems
but are still 35% less efficient than the
code minimum benchmark, they might
be required to install a completely new
set of building services that meet the
minimum requirement, and the cost will
thus be the entire set of systems!
• Typical scenario
- These two extreme
cases are used to illustrate the upper
and lower bounds of the costs, and the
real cost curve must lie somewhere in
between the two. The typical retrofit
scenario is used to illustrate a situation
where the systems are not new nor near
the end of its service life, and we only
need to partially upgrade the system to
achieve the required energy benchmark,
it is based on current project data (albeit
from 2014 not 2030).
• More than half of the retrofitting
initiatives have payback periods
of less than 5 years – a 20%
rate of return (ignoring the
effects of inflation). This is
a favourable financial proposition,
for comparison, an unsecured loan
to a typical property developer/
management company yields an
interest rate of about 5%. Given
the overall size of the market, it
is potentially feasible for financial
institutions to develop structured
products to fund the retrofitting.
• An equally important point to
note is that, without other forces
to shift the market, it is necessary
to resort to measures that may
not be financially feasible to
achieve the 35% reduction. Hence
in the future, additional market
measures may be necessary - tax,
rebates, trading to make these
proposition financiallyattractive.
This is obviously a fictional scenario
(unfortunately, we do not have access to
energy/cost data in 2030), but it points the
way towards how we might begin to analyse
the retrofit market in the future.
There are many different ways to look at the cost of these retrofits.