Buildings thermal retrofit investment under ESCO formula : a case study from Poland

Abstract

PURPOSE: The goal of analyzing investments carried out under the ESCO formula is to determine, implement and apply an optimal set of retrofitting technologies in order to reduce facility’s energy costs borne by its public owner, maintain a satisfactory level of building thermal parameters while upholding the economic profitability of the investment for the private partner. The purpose of this article is to show the investment evaluation process, which consists of determining the scope and method of investment undertaken to achieve the goals mentioned above.

DESIGN/METHODOLOGY/APPROACH: A case study approach has been used to assess the profitability of building retrofit investment. The research procedure includes: (1) assessing the characteristics of the selected buildings; (2) collecting data; (3) developing retrofit alternatives, (4) evaluating project profitability of the project.

FINDINGS: The empirical results show that the monthly costs of energy supply to buildings that would be borne by the municipality in case of realizing term modernization investment in ESCO formula would be lower than the cost of commercial loan taken for the total value of the investment in case the municipality would conduct the thermal retrofit on its own.

PRACTICAL IMPLICATIONS: Research findings may be relevant for those municipalities in Poland which for some reason, have not decided to improve the technical condition of their buildings on their own.

ORIGINALITY/VALUE: The empirical results presented in this paper show that thermal modernization of buildings carried out in the ESCO formula can make this investment financially profitable for the private partner while reducing the cost and risks of the public partner.