A comparison between cost optimality and return on investment forenergy retrofit in buildings - a real options perspective.

tEuropean Union (EU) regulations aim to ensure that the energy performance of buildings meets thecost-optimality criteria for energy efficiency measures. The methodological framework proposed in EUDelegated Regulation 244 is addressed to national authorities (not investors); the optimal cost level iscalculated to develop regulations applicable at domestic level. Despite the complexity and the large num-ber of possible combinations of economically viable efficiency measures, the real options for improvingenergy performance available to decision makers in building retrofit can be established. Our study con-siders a multi-objective optimization approach to identify the minimum global cost and primary energyneeds of 154,000 combinations of energy efficiency measures. The proposed model is solved by the NSGA-II multi-objective evolutionary algorithm. As a result, the cost-optimal levels and a return on investmentapproach are compared for a set of suitable solutions for a reference building. Eighteen combinations ofretrofit measures are selected and an analysis of the influence of real options on investments is proposed.We show that a sound methodological approach to determining the advantages of this type of investmentshould be offered so that Member States can provide valuable information and ensure that the minimumrequirements are profitable to most investors