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Comparative cost-benefit analysis of upgrading existing office buildings in

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Comparative cost-benefit analysis of upgrading existing office buildings in European climates

Sara A. Sharbaf1, Roland Reitberger2, Patricia Schneider-Marin1

1
Department of Architecture and Technology, Norwegian University of Science and Technology
(NTNU), Trondheim, Norway
2
Institute of Energy Efficient and Sustainable Design and Building, Technical University of
Munich, Munich, Germany

Abstract the most significant factors in the implementation of

upgrading strategies in buildings (Xue et al., 2022).
Geographical locations can significantly impact the Previous research on environmental and economic
economic viability of building upgrading strategies. assessments has yielded conflicting results regarding
However, previous research on comparative assessments whether decarbonization measures result in additional
of these strategies failed to consider the ecological and expenses or cost savings (Schaltegger & Synnestvedt,
financial differences across various European countries 2002; Wagner et al., 2002).
accurately. To address this gap, this study employs the
Economic evaluation is a technique that attempts to
cost-benefit analysis (CBA) approach to examine the
examine the profitability of applying upgrading measures
impact of climatic conditions, building’s thermal
in buildings. Within the literature, global cost calculation
properties, and financial indicators on the CBA of
(Salem et al., 2020), life cycle costs (LCC) (Rabani et al.,
upgrading measures, using a representative European
2020), and CBA (Bleyl et al., 2019) are widely-used
office building as a case study. Findings show that
methods to evaluate the economic performance of a
upgrading windows is a highly economically viable
building. The CBA is a systematic method, commonly
solution in two locations while implementing PV panels
used in project investment, to assess the feasibility and
is not feasible in all regions. The results also indicate the
economic viability of a project through a life cycle
high influence of pricing strategy, economic indicator,
perspective (Šuman et al., 2020). Šuman et al. (2020)
and remaining service life of the upgrading measures on
proposed a novel framework for the renovation of a
the benefit-cost ratio (BCR). Comparative CBA can
sustainable office building using CBA and green building
inform decision-makers about the most compatible
rating systems. The research aimed at introducing the best
upgrading measures in different geographical locations.
package of renovation strategies for current office
Highlights buildings in Slovenia. They calculated net present value
• BCRs of European office buildings upgrades are (NPV) both for financial and economic analysis and
compared. showed the importance of considering multiple project
• Local economic conditions significantly affect CBA benefits in economic evaluation. In another study
results. conducted by Valancius et al., (2013), CBA was used in
• Country-level social cost of CO2 reduction does not the context of retrofitting an office building in Lithuania
influence BCRs. which aimed at improving the indoor climate condition
and reducing energy consumption.
• Upgrading windows result in BCR>1 in two regions.
• PV panels are not economically viable in this study. Various environmental and economic benefits resulting
from building upgrading have been discussed in the
Introduction literature. Energy cost saving is one of the highly
Office buildings in the European Union (EU) serve as mentioned ones (Duran & Lomas, 2021; Karunaratne &
workplaces for a substantial and growing number of De Silva, 2019), while CO2 emissions cost saving
employees. They are the largest group of non-residential (Awaleh et al., 2022), and residual value (Šuman et al.,
buildings with 30% of the floor area on average 2020) have been less discussed in the literature. Among
(Commission, 2013). Hence, it is crucial to take measures those studies that focused on CBA of upgrading measures
to decrease their consumption of fossil fuels and mitigate in office buildings, only very few have compared case
their environmental effects. In this regard, upgrading studies in different countries to explore the impact of the
activities are recognized as crucial strategies for reducing corresponding climatic conditions, building typologies,
the environmental impacts of existing buildings, and financial indicators. For instance, Gustafsson et al.
enhancing the well-being of occupants, and adding (2017) analyzed the economic and environmental aspects
economic value to properties. of energy renovation measures for European office
To identify the most suitable upgrading measures, the buildings, but with the same costs, economic and
impact of geographical locations on their environmental environmental parameters for all locations. This article
and economic evaluation must be considered. Besides hence provides a novel starting point for comparative
climate compatibility, financial barriers represent one of CBA in European cities.

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Research questions PV panel
The main objective of this research is to compare benefit- Installation of PV panels is a method for incorporating
cost ratios (BCRs) of upgrading activities in European renewables into electricity consumption. Electricity
office buildings based on the conditions of each location generated by the PV panels is calculated based on the
in terms of climate, building’s thermal properties, and efficiency of the panel, the solar radiation in each
financial aspects. To this end, the following research location, and the performance ratio. The optimal tilt
questions are formulated and need to be answered further: angles of the panels in each location are determined using
• To what extent do climatic data, building properties, a specialized open tool called Photovoltaic Geographical
and economic indicators of the selected cities affect Information System (PVGIS) ver. 5.2 (Commission,
the CBA results? 2022) as detailed in Table 3. Monocrystalline silicon is
• What are the BCRs of applying the selected passive assumed for the PV technology, and a 3 kW installed peak
PV power is used (based on a panel area of 1.6 m 2 and an
and active measures, separately, in these locations?
efficiency of 19%). Subsequently, Ladybug Tools
Methods (Roudsari & Pak, 2013) is used to calculate the annual
The CBA approach is applied to different climatic incident solar radiation on tilted panels in kWh. No feed-
conditions representing the three European climate zones in tariff for electricity to the grid was assumed.
Nordic, Continental, and Mediterranean. A representative The financial indicators are illustrated in Table 4. To
case study for existing European office buildings is placed calculate NPV in this study, a discount rate of 3% is
in the respective locations to generate an in-depth employed, which aligns with the acceptable rate
understanding of results in real-life situations (Figure 1). recommended by the EU (Commission, 2014). To achieve
The physical and thermal properties of the building a more accurate projection of LCC, the inflation rate is
systems and facades are modified according to the also taken into account, considering the average values
regional characteristics of each location. Tables 1-2 over the past five years for each respective location
display the general and country-specific specifications for (Eurostat, 2022c). Electricity and gas prices of these
the energy simulation of the base case, respectively. An countries are extracted from (Eurostat, 2022a, 2022b). All
active and a passive intervention are evaluated by the financial information mentioned in this study is based
assessing the addition of photovoltaic (PV) panels and the on 2022 cost data.
upgrading of windows, respectively. General Table 1: Base case specifications in the selected locations
specifications of the base case are from (Birchall et al.,
Properties Unit Value
2016; Boyano et al., 2013; Roman & Saqib, 2016;
Construction year - 1961-1990
Standard, 2007). The information related to Norway,
Germany, and Italy is extracted from (Grøndahl, 1969), Total floor area m2 1620
(Stein & Hörner, 2015), and (Caldera et al., 2016; Operating hours 7-17 during weekdays
People load Per/m2 0.11
Gustafsson et al., 2017), respectively.
Lighting load W/m2 11
Window replacement Equipment load W/m2 7.5
Windows are a critical component of the building Infiltration m3/s/m2
0.0003 & 0.00015
envelope that significantly impacts energy performance. (Base & upgraded) façade
Two key window specifications that require upgrading in Setpoint ◦C 21 (heating) 25 (cooling)
renovation plans are the solar heat gain coefficient WWR 30%
(SHGC) and the thermal transmittance value (U-value)
(Chiradeja & Ngaopitakkul, 2019). In the base case, the Table 2: Country-specific U-values for the base case
U-values of windows are assumed based on the building’s [W/m².K]
thermal properties of each region, as shown in Table 2. Building part Norway Germany Italy
However, in the upgrading plan, the maximum value Exterior wall 1.04 1.67 1.09
defined in each location's building regulation is Floor 0.58 0.96 1.35
considered. The minimum SHGC values required for each Roof 0.52 0.90 1.44
region have also been determined and listed in Table 3. Window 3.14 4.30 5.36
Additionally, other crucial parameters, such as investment
costs and lifespan, have been extracted for each country.

Figure 1: Research structure for the CBA of an active and a passive upgrading measure in different European climates

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 Table 4: Financial indicators
Financial indicators related to Norway, Germany and
Indicator Unit Norway Germany Italy
Italy are extracted from (Norconsult, 2022; Norwegian
Ministry of Local Government, 2017), Electricity price €/kWh 0.20 0.33 0.31
(Baukosteninformationszentrum Deutscher Gas price €/kWh - 0.04 0.07
Architektenkammern, 2022; Energy, 2013; Federal Country-level social €/ton
2.36 14.41 9.76
Institute for Research on Building, 2023), and (Caldera et cost of carbon CO2
al., 2016; Corrias et al., 2021; Ministero dello Sviluppo Inflation rate 3.1 2.9 2.3
Economico, 2015), respectively. Discount rate 3
Environmantal indicators including global warming Energy price change % 10
rate
potential (GWP) of a window (Saadatian et al., 2021) and
Carbon cost change
a PV panel (AB, 2022), besides the equivalent CO2 Same as inflation rate
rate
emissions intensity of electricity (Electricity Map, 2022)
and gas (UNI/CT, 2016) are also mentioned in Table 5.
The energy consumption cost saving
Table 3: Upgrading measures properties
The annual energy demands for each location are
Unit Norway Germany Italy calculated using Ladybug Tools (Roudsari & Pak, 2013),
Window taking into account the local climate and building’s
Material cost 308.17 486 285.52 thermal properties. Weather files related to Oslo, Munich,
Dismantling and Rome are used to perform energy simulation in each
30.63 29 19.86
cost €/m2
location. Lighting and electrical loads are assumed to be
Installation
136.85 73 100.31 consistent across all regions and thus, are not factored into
cost
the results. Subsequently, two upgrading measures –
Lifetime Year(s) 30 40 30
replacement of windows and PV panel installation – are
Minimum
- 0.6 0.6 0.4 modelled in the software, and their impact on annual
SHGC value
energy consumption is calculated. To determine the cost
Maximum U- savings related to energy consumption reduction, the fuel
W/m2.K 1.2 1.3 1.5
value types used for heating and cooling demands are
% of considered. For example, in Norway, electricity is used
Maintenance
investm 1 for both heating and cooling, while natural gas and
cost
ent cost electricity are commonly used for heating and cooling in
PV panels Germany and Italy, respectively.
Material cost 7690.84 7137 7155
Table 5: Environmental indicators
Installation €/unit
1073.27 1836 1225 Indicator Unit Norway Germany Italy
cost
Lifetime Year(s) 25 20 20 GWP of PV
gCO2/m2/Wp 120
Optimal tilt (A1-A3)
Degree 44 38 36 GWP of
angle
window gCO2/m2 37400
% of
Maintenance (A1-A3)
investm 1
cost CO2
ent cost
emission
Efficiency % 19 gCO2e/kWh 25 504 447
intensity of
System loss
% 14 electricity
ratio
CO2
Total area m2 144
emission
Installed power kWp 3 gCO2e/kWh - 235 197
intensity of
gas
The LCC of upgrading measures includes capital
expenditures, maintenance costs, and costs associated
The social cost of GHG emissions
with replacing products at the end of their lifetime.
Capital expenditures encompass material and labor costs Assessing the value of carbon is a crucial factor in policy
necessary for implementing the upgrades and are derived discussions and evaluations. The social cost of carbon
from national construction cost books. For window (SCC) methodology, also known as the marginal damages
replacement measures, the cost of dismantling old approach, provides a monetary estimate of the potential
windows is also included in the labor costs. This study social impacts resulting from a minor increase (1 metric
uses a 30-year period (2022-2052) for NPV calculations, ton) in GHG emissions in a given year. This approach is
in accordance with EN 15459-1:2006 (European widely recognized as the most accurate means of
Standard, 2006). For this study, a public office building quantifying the costs of damage (Yao et al., 2020). Ricke
is selected as the case building, and the following benefits et al. (2018) in a study explored the country-level SCC
are taken into account: and provided a database explorer (Ricke et al., 2018b).
This tool has been utilized in our study to estimate the

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SCC savings associated with energy-saving measures. higher quality windows followed by Italy and Norway
Considering a growth-adjusted discounting method, long- with a similar decrease of 23%. These variations in the
run damage function, and sustainability as the main socio- reduction rate can be attributed to the different heating
economic challenge, the SCCs are extracted and sources used in each country.
mentioned in Table 4.
The residual value Table 6: Energy demands and delivered energy
(kWh/m2) in each location (BS= Base case; W = window
The residual value of a building or its component can be
exchange; P= PV panel installation)
regarded as an economic benefit that occurs at the end of

for heating and cooling

the calculation period. The value is determined by several

Total delivered energy

Total energy demand

Delivered energy for

Delivered energy for

Energy demand for

Energy demand for

factors, including the initial capital expenditure of the
component, its lifespan, the calculation period, and the

Location

Scenario

cooling

cooling
heating

heating
discount rate used (European Standard, 2006). Equation
(1) is used to calculate the final value of a component.
(𝑛+1)∗𝐿𝑝 −𝑡
𝑅𝑏 = (𝑀𝑐 + 𝐼𝑐 ) × (1 + 𝑗)𝑅𝑡∗𝐿𝑝 × [ ]×
𝐿𝑝
1 (1)
BS 25.4 62.3 87.8 7.3 17.8 25.1

Norway
(1+𝑖)𝑡
W 31.3 36.0 67.2 8.9 10.3 19.2
Where, Mc, Ic, Mac, and Rc are material, installation
P 16.6
(labor), maintenance, and replacement cost, respectively.
Rt, Lp, j, and n refer to replacement time, product lifetime, BS 31.4 56.6 88.0 9.0 56.6 65.6
the inflation rate, and the calculation period, respectively. Germany W 35.7 34.8 70.5 10.2 34.8 45.0
By taking into consideration all the costs and benefits, the P 25.5
BCR can be calculated using equation (2) as follows: BS 68.0 11.0 79.0 19.5 11.0 30.39
𝐸 + 𝐺𝑏 + 𝑅𝑏
Italy

∑𝑛𝑡=0 𝑏 W 61.3 5.9 67.1 17.5 5.9 23.4

(1 + 𝑖)𝑡
𝐵𝐶𝑅 = (2) P (1.4)
𝑀𝑎𝑐 + 𝑅𝑐
𝑀𝑐 + 𝐼𝑐 + ∑𝑛𝑡=0 𝑡
(1 + 𝑖)
Where, Eb, Gb, and Rb are benefits related to energy Implementing PV panels on the roof area is the active
savings, GHG emissions savings, and residual value of upgrading measure that is evaluated in this study.
the product. Accounting for differences in annual solar radiation
across each location, electricity generation by PV panels
Results ranged from the highest amount in Italy (40,047 kWh) to
This section presents the results of a comparative CBA the lowest in Norway (26,871 kWh). In this study,
that examines the implementation of an active and a electricity produced by PV panels is considered solely for
passive measure in the specified locations. Table 6 the self-consumption of the building, and no feed-in tariff
displays the annual energy demands and delivered energy for electricity to the grid is assumed. The amount of
for cooling and heating in each location. Prior to the electricity produced in the case study located in Italy
upgrades, the annual energy demand for the case studies exceeds the amount of delivered energy by 2,196 kWh.
in Germany and Norway are approximately equal, at 88.0 Table 6 provides an overview of the impact of PV panel
and 87.8 kWh/m2, respectively. This similarity can be electricity generation on reducing the annual delivered
explained by more hours below the heating setpoint in energy of each case study.
Norway and higher façade’s U-values in Germany. The Energy cost savings resulting from the installation of PV
annual energy demand for heating and cooling in Italy is panels and the upgrading of windows are calculated for
79.0 kWh/m2. To calculate the delivered energy, the use the first year based on the respective electricity and gas
of a heat pump with a coefficient of performance (COP) prices in each region. The estimated energy cost saving
of 3.5 for heating and cooling in Norway, and an air and production for the following years is calculated using
conditioner with an energy efficiency ratio (EER) of 3.5 an energy price change rate of 10%, which is the average
for cooling in Germany and Italy are assumed. rate of the most recent 5 years (2018-2022). While
Consequently, the case study located in Germany has the upgrading windows results in a highest amount of
highest annual delivered energy at 65.6 kWh/m2, while delivered energy reduction in Germany and Italy, the
the lowest amount is observed for the case study in energy cost saving by upgrading windows in Norway is
Norway at 25.1 kWh/m2. the highest of the three locations. This can be attributed to
After upgrading the windows, the largest reduction in the fact that upgrading windows has a greater impact on
annual energy demand occurs in Norway, where it reducing heating loads compared to cooling ones in
decreases by 23%. This significant change can be general. Additionally, the price of electricity, the main
attributed to the high impact of heat loss through windows source of heating in Norway, is higher at 0.20 €/kWh than
in colder climates. In contrast, the case study conducted the cost of gas in Germany and Italy, which is 0.04 €/kWh
in Germany experiences the most significant annual and 0.07 €/kWh, respectively (Table 4).
delivered energy reduction (31%) after implementing

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The installation of PV panels results in higher benefits for with higher CO2 savings and the residual value of
the case studies located in Italy and Germany, generating windows, the percentage of these two benefits amounts to
values of 12,475 € and 10,362 €, respectively for the first 3% and 9%, respectively.
year, while the lowest benefit is found in Norway at 5,358
€. This can be attributed to two factors: Electricity
production in Norway is the lowest because of the
availability of solar radiation, whilst at the same time
electricity prices are higher in Germany and Italy (Table
4)
This study also considers the benefits resulting from the
reduction in the amount of CO2 emissions, with the SCC
used as the basis for calculation Table 4. The difference
in SCC could be due to a variety of factors including the
structure of the energy market and the environmental and
economic conditions in each country. For instance,
countries with high emissions levels, large populations,
and high levels of economic activity may have higher
SCC than countries with lower emissions and smaller
economies.
The residual values of the upgrading measures are based
on the initial investment cost, remaining service life
(RSL), calculation period, inflation, and discount rate. In
this study, the average lifetime of windows in Norway and
Italy is assumed to be 30 years, which is equivalent to the
calculation period. However, German national regulations Figure 2: NPV of costs and benefits of upgrading
suggest a longer lifetime of 40 years, resulting in a windows in each location
residual value of 19,309.63 € for the windows, which is Window replacement in Norway yields the highest BCR
approximately 24% of the initial investment cost. The of 2.05, with Italy following at 2.03 and Germany trailing
lifespan of a PV panel in Norway is 25 years, while in behind with 0.92 (Figure 4). This implies that in the
Germany, and Italy 20 years is assumed. Consequently, country with the highest price for heating (Norway), BCR
the residual values of PV panels in Norway, Germany, is the highest, whereas the lowest price for heating causes
and Italy are determined to be 1,314,225 €, 694,417 €, and a low BCR (Germany). Additionally, higher investment
576,873 €, representing 80%, 50%, and 50% of the costs in Germany than in Italy add to the difference
replacement costs, respectively. between these two countries. While factors such as
To determine the BCR of the upgrading measures in the window lifetime, SCC, and electricity prices may also
selected locations, the NPV of the LCC - which includes have an impact on the BCR, their influence is negligible
material, installation, maintenance, and replacement costs in this context (Figure 2).
- and the NPV of the obtained benefits - including energy PV panels
cost savings or generation, CO2 emission cost savings,
Figure 3 shows the NPV of costs and benefits for PV
and residual value - are calculated and presented in Figure
panel installation in each location. It is evident that the
2 and Figure 3. In addition, the ratios obtained by dividing
total benefits of installing PV panels are significantly
the NPV of benefits by the NPV of costs are the values
lower than the associated costs. In addition to the high
considered in this study and presented in Figure 4.
material and installation costs of PV panels, Figure 3
Window upgrading indicates that the replacement of PV panels accounts for
Figure 2 illustrates the NPV of different costs and benefits 41 to 44% of NPV of costs, since a one-time replacement
related to the upgrading of windows in all locations. The is necessary in all countries. Maintenance costs hold the
results reveal that upgrading windows in Germany has a third position, constituting 12 to 13% of the NPV of
higher NPV of LCC, compared to the two other locations. expenses.
Additionally, initial investment costs are higher (77 % to When comparing the NPV of costs, it is worth noting that
79 %) than the total maintenance costs throughout the since the initial investment costs of PV panels and
building’s lifetime. inflation rate are higher in Norway and Germany than in
On the other hand, upgrading windows in Norway Italy, the NPV of LCC is also higher in these two
resulted in significantly higher NPV of benefits compared locations. Conversely, the lower NPV of costs in Italy is
to the other regions, as is explained. The reason behind directly linked to the lower inflation rate and the initial
this difference has been explained already. The benefits investment costs in this country. The case study
obtained from CO2 savings and residual values from conducted in Italy resulted in higher benefits of PV
window upgrades are negligible in both Norway and Italy installation than in the other two locations, because
when compared to energy cost savings (Figure 2). electricity generation is higher in Italy's climate. This
However, in Germany, due to the higher SCC coupled accounted for 82% of the total benefits in that location.

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 windows than on PV panel installation due to the fact that
the total benefit of window exchange is more dependent
on energy cost saving rather than other benefits.

Figure 3: NPV of costs and benefits of installing PV

panels in each location
In addition, residual values of PV panels represent an Figure 5: Sensitivity analysis of BCRs to energy price
important benefit in Norway. Since the replacement time change rate (W = window exchange; P= PV panel
for PV panels is later in Norway (25th year) than in Italy installation)
and Germany (20th year), the PV panels implemented in
Norway were less degraded and retained more residual Discussion
value at the end of the calculation period. Similar to the Calculating BCRs is a straightforward method for
upgrading of windows in Norway and Italy, the SCC decision-makers to assess the economic viability of
savings, in comparison to other benefits, is found to be building upgrading options. However, assumptions,
negligible in all three locations. particularly regarding temporal factors such as RSL,
inflation rate, and energy price change rate, can greatly
impact the ratios. The changes in the BCRs emphasize the
fact that how country-specific data when not compared to
other countries could skew results.
Besides temporal factors, initial investment cost is a
critical parameter in CBA. While this study selected two
relatively expensive measures, there may be more
economically viable cheaper alternatives. Therefore, it
would be more effective to consider a range of active and
passive upgrading measures and weigh the costs against
the benefits.
Figure 4: BCR for upgrading measures in each location
This study also shows the importance of considering
country-specific data in a comparative CBA of upgrading
BCRs of implementing PV panels in the selected
measures in different locations. This data could
locations are lower than 1, indicating that these measures
encompass various factors, including climatic conditions,
may not be profitable (Figure 4). The BCRs vary from
building’s thermal properties, and financial indicators.
0.86 in Italy to 0.68 and 0.57 in Germany and Norway,
However, further sensitivity analyses are necessary to
respectively. However, looking at the balance between the
assess the effectiveness of each data set on the final
NPVs of costs and benefits in Figure 3, it is evident that
results.
the BCRs could change significantly if PV panels were
not replaced during the building's lifetime. Although this Due to the nature of this research which involves
would mean deteriorating electricity production, it might comparative analysis, country-level SCC is considered for
be a viable option, not only from an economic standpoint each location. However, the benefits derived from GHG
but also in terms of natural resource demand. emissions reduction do not play a role compared to the
energy cost saving. This emphasizes the ineffectiveness
Since the energy price appears to be a decisive factor in
of current policies in defining country-level SCC. Based
determining BCRs of upgrading measures, and energy
on the research used for extracting SCC (Ricke et al.,
prices have fluctuated highly recently, a sensitivity
2018a), the global SCC can be significantly higher (about
analysis of BCRs to energy price change rate is also
40 to 260 times depending on the location) than their
performed (Figure 5). The result shows that this indicator
country-level values and alter the results considerably.
has a much higher influence on the BCRs of upgrading
Given the urgency of global warming, further research

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