Stephen Berry and Kathyrn Davidson on the economics of #NZEBs in Australia

Stephen Berry and Kathyrn Davidson, Zero energy homes – Are they economically viable?, Energy Policy 85 (2015) pp 12-21

This article estimates the additional cost, compared with measurements of subsequent energy consumption, of 53 new three and four bedroom houses on Lochiel Park, an estate in Adelaide, South Australia, which were built to a “net zero energy” standard.

The region has a “Mediterranean” climate.

Net zero is defined as an energy efficient building that generates sufficient energy on-site over the course of a year to supply all expected on-site energy services for the building users. The standard has the following elements:

  • energy consumption (including renewable energy?) of no more than 16 kWh/m2/year
  • (gas-boosted) solar thermal water heating
  • 1 kWp of PV per 100 m2
  • energy efficient appliances; CFLs or LEDs for lighting
  • air conditioning capacity limited to 4 kVA (input)
  • ceiling fans in living spaces and bedrooms
  • in-home energy feedback display
  • requirement for living spaces to be north facing

The cost is estimated compared to the building energy regulatory standard of NatHERS 5 Stars (<125 MJ/m2 [35 kWh/m2] per annum) otherwise applied at the time these homes were approved for construction. The additional cost of achieving the net zero standard is estimated at €2200 for tbe building envelope, €1100 for the water heater and €5200 for the PV, offset by a reduction of €125 in the cost of the heating and cooling system (using an exchange rate for the Australian dollar against the euro of 0,63).

In accordance with guidance from the Australian government, an annual real discount rate of 7% is used, with sensitivity analysis at 3% and 10%. Retail electricity and gas prices are assumed to remain at present-day levels in real terms (these are high: 21 eurocents/kWh for electricity and 9 for gas) as does the price for electricity exported to the grid (4 eurocents/kWh).

The financial impacts estimated are:

  • energy costs
  • income for exported PV
  • increased value of the house on resale (proxied by a discount of 1% of the value of the house at the moment of first occupation)
  • reduced cost for energy distribution infrastructure (estimated at €150 per year)

(It can be noted that all except the last accrue to the home-owner.)

It is assumed that the houses are constructed over a period of ten years.

Results: from year five, annual benefits exceed annual costs. Overall, the benefit-cost ratio is 1.9 with a 10% real discount rate, 2.4 with 7% and 3.5 with 3% – so the answer to the question in the title is “yes, zero-energy homes are economically viable”. The building envelope measures are barely so; the solar thermal does well; the PV does best of all.

The authors also remark that:

  • improvements in the building energy performance assessment tools, particularly their expansion beyond thermal comfort calculators, will facilitate industry learning about net zero energy homes, with associated cost reductions 
  • [s]eparate evidence from householder experiences at Lochiel Park suggests that any proposed change to the water heater standard may benefit from a parallel industry education and training programme to ensure improved installation and commissioning processes.

Published by

Paul Hodson

Head of Unit "EnergyEfficiency" at European Commission, Directorate-General for Energy

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