Civil Engineering Reference
In-Depth Information
σ
v
=
0.1
σ
v
=
0.2
σ
v
=
0.5
I
m
$20
[i=$5 million/year]
[i=$2 million/year]
$16
$16
$12
$12
$8
$8
$4
$4
$0
$0
0
1
2
0
1
2
3
4
5
m (Years)
m (Years)
Fig. 5
Multistage investment without option to abandon (Menassa
2011
)
These results indicate that V* decreases with the decrease in time period for the
same level of uncertainty, indicating that most of the project has been completed in
prior periods and uncertainty does not affect the value of the refurbishment project
toward the end of the investment period. On the other hand, V* increases with the
increase in uncertainty for a specific time period, indicating that investment
decision is more stringent with higher uncertainty at a given time period. Finally,
V* in the left-hand side of Fig.
5
is greater than V
min
in Fig.
4
for ($5-$5) million
cases, indicating that staging the investment with the option to abandon provides
more flexibility in terms of the value of expected benefits because the building
stakeholders can abandon the NZER project and still benefit from the refurbish-
ments made in the previous stages. The option to stage alone requires a higher
expected value of benefits for the investment to be undertaken under uncertainty
because the stakeholders will not be able to use the building unless all refur-
bishments are completed.
7 Conclusion
As discussed in this chapter, high uncertainty characterizes the NZER investment
and creates financial barriers that affect the investment decisions of the building
stakeholders. These uncertainties are obstacles that remain in the way of con-
vincing large institutions to invest in energy efficiency financing projects such as
NZEB and NZER. In order to make financing companies and others see the
business value of NZEB or NZER, strategies to manage these uncertainties need to
be developed. After identifying the uncertainties associated with NZER, the next
logical step is to develop a financial model that will help building stakeholders
manage these uncertainties. By this way, the technical challenges that characterize
NZER will be addressed. Another important challenge to address is improving the
benchmarks about the actual performance of NZER and its systems after the
design phase. In this chapter, a framework to evaluate NZER investments is
developed to account for three main scenarios encountered in refurbishment
projects, including single-stage investment, multistage investment with option to
