IRIER: A Decision-Support Model for Optimal Energy Retrofit Investments

Abstract

The importance of energy efficiency investment has grown substantially in recent decades, although research into the decision-making processes under energy saving uncertainties has been fairly limited. The main objective of this study is to create and test a multicriteria risk-based decision-support model for investment in energy efficiency projects under uncertainty of building energy retrofits: Integrated Risk-based decision-support model for investment in energy retrofits (IRIER). The results of a risk assessment are used in the modeling framework to help render optimal investment decisions from both energy and financial standpoints through advanced knowledge about uncertainties. The IRIER model accomplishes this by adopting a multicriteria analysis through stochastic simulations. An illustrative case study clearly shows that full-cost investment would not be optimal in the presence of uncertainty when considering both energy-saving and financial outcomes, in terms of the project’s total energy savings and the investment’s internal rate of return. The IRIER model can assist building owners and investors with assessing various investment scenarios in energy retrofits, thus enabling them to choose the most economical investment strategies that account for the level of risk.