Is investing in energy efficiency worth it? Evidence for substantial price premiums but limited profitability in the housing sector
Room: Polytech, B2 - C204
Speaker: Edda DONATI
Edda is an architect and graduate in Architecture and innovation at the IUAV University of Venice in 2020.
After a short working experience, she became a PhD candidate in January 2022 at the IUAV University of Venice with a scholarship on the additional PON green thematic area. Her PhD thesis focuses on Innovative business models for the circular economy in the construction market.
Her research activity concentrates on the circular economy, the real estate market and the energy efficiency of existing real estate assets.
Abstract: The profitability of investing in building energy efficiency is investigated using distinct approaches. Firstly, a spatial autoregressive model is applied to housing price data in Padua, North-eastern Italy, and compared to a traditional hedonic price model in order to estimate the price premium - if any - commanded by the energy performance.
The spatial dynamic model outperforms the hedonic one. In comparison to the energy rating band G, substantial price premiums are found to characterize the A-B bands and, to a lesser extent, the C-D bands. Secondly, the marginal benefit of building energy efficiency is derived from the price premium and compared to the marginal cost as estimated in previous studies. Investing in building energy efficiency turns out to be economically viable up to a certain extent. Outdated housing in the worst energy rating bands can be profitably refurbished up to an energy performance index of about 50 kWh/m2 y - namely, the B energy rating band on average. The same outdated housing can be profitably refurbished up to an energy performance index of about 40 kWh/m2 y provided the government does not withdraw current tax incentives in the near future.
Source: S. Copiello, E. Donati. Energy & Buildings, 2021, 251, 111371
Keywords: Energy performance certificates, Building energy efficiency, Real estate market, Housing, Spatial autoregressive model, Economic viability.