Deep energy renovation strategies: A real option approach for add-ons in a social housing case study

In this paper, a techno-economic evaluation method for deep renovation of buildings is introduced. We study the validation of an integrated design methodology based upon the creation of an additional volume on existing buildings (Add-Ons) intended as roof-top or aside extensions, enclosures, parasites or façade transformations. Energy price uncertainty is modeled through a mean-reverting stochastic process, which well fits the data for natural gas prices, and the proposed evaluation method is based on real-option theory, which is an advancement of standard cost-benefit analysis, to be employed whenever uncertainty has a significant impact on the investment option. The new method to evaluate the economic feasibility of the Add-ons strategy for Deep Energy Renovation is tested through design experiments on a real case study of social housing in Reggio Emilia (Italy).