New article on decarbonization strategies for real estate portfolios considering retrofitting investments and policy conditions
90% of the European existing building stock is expected to still be standing by 2050, making it vital to cost-effectively decarbonize it. The new paper by Ivalin Petkov, Alicia Lerbinger, Georgios Mavromatidis, Christof Knoeri, and Volker Hoffmann presents a new approach for navigating the large decision-space of when to do which retrofitting project (what), on which building (where), and how that impacts economic and environmental performance in future conditions.
Retrofitting existing buildings is crucial for achieving Net Zero emissions. Institutional real estate owners play a key role because of their significant ownership, especially of large buildings. We utilize an interdisciplinary approach to evaluate cost-optimal decarbonization conditions for three Swiss real estate portfolios owned by a global institutional investor. We leverage a bottom-up optimization framework for building asset retrofitting, scaled to the portfolio-level, to study the effect of policy scenarios and implementations. Results indicate that achieving Net Zero necessitates significant investments, largely through thermal energy efficiency measures and low-CO2 energy systems, as early as possible to avoid locked-in emissions. Owners will be challenged to smooth long-term capital investments, pointing to a potential liquidity crisis. Consequently, hard-to-decarbonize assets are unable to reach regulatory benchmarks largely because of lingering embodied emissions. To lower transition risk, we recommend that policymakers move toward average CO2 benchmarks at the real estate portfolio-level, emulating automotive fleets.
The article was co-authored by SusTec alumnus Ivalin Petkov and SusTec's Alicia Lerbinger, Dr.Georgios Mavromatidis, Dr. Christof Knoeri and Prof. Dr. Volker Hoffmann.
It is available in open access Downloadhere.