I saw an interesting video on edie.net earlier on today. In it the chairman talked about some forthcoming research on the lock-in effect.

The lock-in effect is where once some basic energy efficiency measures have been taken, subsequent more comprehensive measures become less cost effective.

The first time this came to my attention was while showing visitors around Russell Smith’s award-winning Parity Projects house in Carshalton as part of London Open House weekend a few years ago. As Russell and I were talking before the arrival of the hordes, he talked about why he had chosen a property with solid walls rather than cavities. In part it was because solid wall insulation is a harder proposition to gain experience on, but the other reason illustrates the lock-in effect perfectly.

The fact of the matter is that a standard brick/cavity/brick wall with insulated cavities has a U value of around 0.49 W/m2K which is still significantly higher than that of a new build house. It is also worse than can be achieved with external or internal insulation.
However, once the cavity has been insulated the temptation to leave it at that is very strong. Due to the diminishing returns on investment for insulation, any further insulation will be less cost effective.

The Climate Change Committee has also published research which illustrates the point. The graph below comes from the Energy Use in Buildings and Industry chapter of “Building a low-carbon economy – the UK’s contribution to tackling climate change”.

They say that adding and upgrading loft insulation to 13 million houses in the UK would result in emissions reductions of 1 MtCO2 in 2020. However, while “in many cases this will give a saving of over £30 per tonne of CO2… ‘topping up’ existing insulation to the recommended thickness will yield a lower saving.”

This realisation applies just as well to non-domestic properties. If a company invests in upgrading its HVAC system, subsequent savings from improved insulation will be lower, and vice versa.

So what is the answer to this quandary? Well there are a few possibilities. Particularly for commercial properties, the greatest cost is of disruption to the normal use of the building. The obvious solution is to minimise that disruption by programming refurbishment works to run at the same time.

In a similar way, it is advisable to go beyond what you think is the optimal level of refurbishment as in cases of diminishing returns under conditions of uncertainty, the best option is to go too far rather than not far enough. This was shown by Bob Lowe in 1997, and I also came across it in my MSc thesis. The return on investment curves shown below for retrofitted roof insulation are asymmetric. The losses you suffer from over-specifying by a given thickness are lower than from under-specifying.

As an aside, this is even more true for carbon return on carbon investment. The CROCI as the graph below shows this. Fuel prices (or carbon prices) would need to be much higher or insulation costs much lower to push the financial optimal point to the same place as the carbon optimal point.

This means that just picking the low hanging fruit of immediately cost-effective measures is not always the best option, unless picking it doesn’t hamper the real effort which is to catch the meat in the sky of a deep green and truly sustainable built environment.

What policies and strategies might help to push the optimal point for ROI towards the optimal point for CROCI and pull that meat in the sky on down where we can reach it?

References

Lowe, RJ, Sturgess, JS & Hodgson, NJ, “Energy Analysis and Optimal Insulation Thickness”, 1997, Proc. 2nd International Conference on Buildings and the Environment, Paris