Testing Applicability of European Financial Models for Sustainable Building Renovation in a Middle Eastern Context

Abstract

With the current climate challenges that we currently face, we also need to take a look at the existing operation of the systems to which we are so accustomed. Within the EU, there are policies to make the housing stock energy neutral by 2050. However, this sentiment is not shared internationally. Within the EU, there are several options made available for making renovation of existing stock more financially feasible, with models provided by initiatives such as STUNNING, REVALUE, or ABRACADABRA to name a few. Though the EU has options made available, this is not the case for the rest of the world. The research focuses on the applicability of the aforementioned options available in the EU to a Middle Eastern context through the creation of a scenario building using aggregation methods and using a sensitivity and Monte Carlo analysis to check the performance of each financial model. The research also combines the
financial with other technical frameworks such as finding optimum insulation thicknesses and its influence on the pay back periods. The research works in 4 parts, creating a model building through aggregate modeling and frameworks, running the financial dashboard based on the characteristics of the model building and doing a sensitivity and Monte Carlo analysis, then finally an interview is conducted with experts, showing them the data of the model building and then asking about the limitations of said financial models. The applications are reviewed in a foreign context, in this case Kuwait, and
in addition, the effects of the large scale application of these models are examined in the literature review. The results show that financially speaking, it is completely feasible to apply these models within Kuwait, and in fact they work better than they do in western contexts because of the avoidance of the landlord-tenant conflict since landlords are responsible for paying utility fees. On average, given Kuwait’s current inflation rates, electricity prices, water prices and average rental rate per m2, we are seeing an average of a 4 year payback period on a major rehabilitation, without even the need for a real estate reevaluation. The micro economic results are also compared with studies made on macro-economic knock on effects of mass renovation within the country, and it was found that it was feasible. Through the interviews, however, it was found that though there are few barriers in the financial sense, there is a lack of understanding and need for a larger investigation into the sociological and behavioral barriers found within this context.