The Economic Viability of a Progressive Smart Building System with Power Storage

Eerika Janhunen, Niina Leskinen and Seppo Junnila
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Eerika Janhunen: Department of Built Environment, Aalto University, 14100 Aalto, Finland
Niina Leskinen: Department of Built Environment, Aalto University, 14100 Aalto, Finland
Seppo Junnila: Department of Built Environment, Aalto University, 14100 Aalto, Finland

Sustainability, 2020, vol. 12, issue 15, 1-18

Abstract: The increased smartness of the built environment is expected to contribute positively to climate change mitigation through energy conservation, efficient renewable energy utilization, and greenhouse gas emission reduction. Accordingly, significant investments are required in smart technologies, which enable the distributed supply of renewables and increased demand-side energy flexibility. The present study set out to understand the cash flows and economic viability of a real-life smart system investment in a building. The data collection process was threefold: First, a case building’s level of (energy) smartness was estimated. Second, the semi-structured interviews were held to understand the building owner’s motives for a smart investment. Third, the investment’s profitability was analyzed. The study found that the progressive smartness investment was technically feasible, and surprisingly also economically profitable. The original EUR 6 million investment provided over 10% return-on-investment and, thus, increased the property value by more than EUR 10 million. Moreover, the commercial partners also emphasized the strategic value gained by renewable energy and environmental performance. The high level of smartness with a good return on investment was accomplished mainly through new income generated from the reserve power markets. However, the results implied that financial profitability alone was not enough to justify the economic viability of a smart building system investment.

Keywords: smart building; smart energy system; renewable energy resources; energy storage; reserve power system; investor motives; investment profitability; smart readiness indicator; discounted cash flow analysis (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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