Taking care of many measures simultaneously in energy investments is difficult, but bundling can make it easier. It enables one to combine many small measures into one package, which can increase the profitability of an investment and make it look more attractive to potential investors.
One of various ways of approaching bundling is combining Total Concept Method (TCM) and Total Tool, which can help illustrate the economic profitability of individual measures.
Being cost-effective and helping understand energy investments, bundling can also be used as a standard in energy audits, and it can help find an optimal funding source and receive financial aid.
Let's understand the problem
Energy efficiency measures often consist of many small investments. They can be so technical that decision makers can have problems understanding them. An energy audit may result in a long list of possible measures in many fields.
The risk of “cherry picking” (choosing individually most profitable solutions) is high, and many building managers have confirmed expieriencing it when facing decision makers.
Picking low-hanging fruits often results in sub-optimal solutions, since it is cheaper to use several measures at the same time in a building. Furthermore, measures are often interlinked, one measure depending on another – and vice versa.
Creating a set of several energy efficiency measures is one solution. Another one is grouping less profitable measures into a larger package and not justifying them individually.
Such an “energy efficiency package” would prevent the risk of cherry picking, since decision makers do not have to learn all the details about these measures.
Not only is such an approach easier to communicate, but also it can give a better overview, thereby helping focus the discussion on a strategy rather than on details. Such an energy efficiency package can be presented along with other investment needs.
Thus, building managers need methods for bundling investments, but also training to learn how to use them. Some bundling tools were developed by previous projects, and then adopted and implemented in EFFECT-4buildings.
Bundling is a way to merge many small investments into a large investment package. Thus, instead of choosing a single energy efficiency solution, bundling makes it possible to make large-scale investments or deep renovations, thus creating possibilities for larger scale renovations and retrofitting.
This makes bundling a perfect option for, when considering different ways how to accelerate and encourage the implementation of energy efficiency measures.
Bundling can be carried out with the Total Concept Method (TCM), which aims to improve energy performance in buildings in terms of assuring the maximum profitable energy savings. TCM and feasibility calculations are based on increasing the implementation of energy efficiency investments.
TCM helps building owners understand the financial benefits and opportunities of energy retrofitting, making it possible to go much further with energy improvements.
Implementing all measures separately increases design and construction work and other overhead costs, compared to a bundled investment package. By forming an action package, both single cost-efficient measures (“low hanging fruits”) and more costly ones are considered.
The most economically profitable measures will assist less profitable ones, making the complete action package fulfil profitability frames. Bundling as a tool is based on deep understanding of Total Concept Method and Total Tool.
TCM has been proven a handy and workable in several implementation cases in diverse public buildings and other premises.
It facilitates local building managers to provide a realistic feasibility assessment on how to implement an extended energy efficiency measures package and how to convince decision makers to make the final implementation decision.
For these purposes a comprehensive and convenient training material presentation of TCM and Total Tool has been gathered to increase the awareness of main target group and other stakeholders.
The work process of the total concept is divided into three steps:
- Step 1: Creating the action package
- Step 2: Carrying out the measures
- Step 3: Following up
TCM provides an action plan comprising a package of energy efficiency improvement measures that as a whole fulfils the property owner’s profitability requirements.
The profitability assessment in TCM is based on the internal rate of return (IRR) method, which assesses each investment by the actual profit it creates, expressed as an internal rate of return.
These IRR values vary between single measures, which in practice means that the most economical and the most profitable measures, as shown in figure 1, will assist the funding and implementation of less profitable measures.
Operating this way, the complete action package will fulfil the profitability frames set by the building owner.
Basic principles of TCM and Total Tool should be clearly explained—preferably, using data visualization— to the decision makers and all other essential stakeholders involved in the energy efficiency implementing process. In some cases, however, charts like Figure 2 can be particularly useful.
For example, this chart can be used to clarify the profitability and IRR values of each single measure included in the package, thereby helping the target group to analyze and understand the material and all the calculations provided by Total Tool.