Is Deep Retrofit Financially Viable? Evaluating New Business Models for Decarbonising Residential Buildings

Deep retrofits are essential to reducing energy consumption and emissions, aligning with the European EPBD's goals for energy-efficient buildings. However, the financial viability of such interventions remains uncertain. The aim is to assess the financial feasibility of extensive retrofits using the MESA business model, with a focus on off-site production processes, a unique feature of the Energiesprong. Energiesprong is a pioneering approach to residential building energy retrofit that maximises time and operating costs by utilising off-site renovation technologies and long-term energy performance contracts. The research evaluates two primary demand profiles in two urban contexts with distinct real estate dynamics, using net present value (NPV) analysis to assess the financial feasibility relative to initial investment costs. The findings indicate that, despite notable benefits such as value proposition for higher energy efficiency, deep retrofits are not financially viable under current costs and technologies without upfront external contributions. The research further incorporates the impacts of economies of scale and technological learning, which are central to the MESA-Energiesprong model. It suggests a learning curve that links reduced construction costs to the growing number of renovated buildings. The dynamic evaluation highlights the value of the construction cost at which the retrofit becomes financially feasible and that, without government contributions, the financial viability of deep retrofits could improve over time as the sector scales. These findings provide policymakers with valuable insights, aiding the development of more effective public policies that promote building efficiency through off-site construction and optimise contributions distribution based on regional variations.